The Bombay High Court has delivered a landmark ruling reinforcing the procedural safeguards provided to taxpayers under the Goods and Services Tax (GST) regime. In the case of A.M. Marketplace Pvt. Ltd. v. The Union of India & Ors., the Court held that the three-month window between the issuance of a Show Cause Notice (SCN) and the final adjudication order is not merely a directory timeline but a mandatory requirement to ensure a “meaningful opportunity of hearing.”
Background of the Dispute
The petitioner, A.M. Marketplace Pvt. Ltd., challenged an adjudication order passed under Section 73 of the CGST Act, 2017. The core grievance was the compressed timeline of the proceedings:
SCN Issued: May 15, 2024
Final Order Passed: July 9, 2024
The Gap: Approximately 1 month and 24 days.
The petitioner argued that this truncated timeline violated Section 73(2) of the Act, which requires an SCN to be issued at least three months prior to the time limit for the final order specified in Section 73(10).
The Legal Tug-of-War
The Revenue (Respondents) contended that the three-month gap is only relevant in the context of the “outer limit” (the final deadline for the financial year). They argued that if a notice is issued well within the statutory deadline, the three-month gap between the notice and the actual order is not strictly applicable.
However, the Court rejected this narrow interpretation. Drawing inspiration from precedents set by the Delhi High Court (C.H. Robinson Worldwide) and the Andhra Pradesh High Court (Cotton Corporation of India), the Bench emphasized that the gap exists for a substantive reason.
The Rationale: Why the 3-Month Gap is Mandatory
The Court highlighted that the period between the SCN and the final order is not “dead time.” It is designed to accommodate several statutory rights of the taxpayer:
1. Right to Self-Assessment: Under Section 73(5), a noticee has the option to pay the tax via self-assessment within 30 days of the SCN to avoid penalties.
2. Right to Personal Hearing: Section 75(2) guarantees a hearing whenever an adverse order is contemplated.
3. Right to Adjournments: The Act allows for up to three adjournments for personal hearings.
4. Natural Justice: If the authorities rush the process in less than three months, these protections become “otiose” (pointless), depriving the taxpayer of a fair chance to defend their case.
The Verdict
The Division Bench, comprising Justice Anil L. Pansare and Justice Nivedita P. Mehta, ruled that the failure to maintain the three-month gap rendered the order unsustainable.
Key Directives:
- The SCN dated 15.05.2024 and the Order dated 09.07.2024 were quashed.
- The matter was remanded for fresh consideration.
- The Bank was directed to remove the lien on the petitioner’s current account, provided no other legal impediments existed.
Key Takeaways for Taxpayers
| Feature | Legal Requirement / Implication |
| Section 73(2) vs 73(10) | SCN must be issued at least 3 months before the final order deadline. |
| Mandatory Nature | The 3-month gap is mandatory even if the notice is issued well before the final statutory deadline. |
| Procedural Rights | The gap ensures time for 30-day payment windows, personal hearings, and up to 3 adjournments. |
| Judicial Remedy | Orders passed in “haste” (less than 3 months from SCN) are liable to be set aside by High Courts. |
Author Bio
