Transferring Show Cause Notices to Call Book (Keeping SCN in abeyance / pending) under the erstwhile Laws i.e. The Central Excise Act, 1944 and the Finance Act, 1994, was a common practice. Couple of instructions were also issued on the matter under the said Acts. However, under the GST Law, there was apparently no need for issuance of any specific instruction, due to specific provisions made under the Act, laying down a specific time limit to adjudicate the Show Cause Notices and also, for certain periods to be excluded while computing the time limit period, which is elaborated in detail, hereunder-
LEGAL BACKING –
Section 73(10) and 74(10) of the CGST Act specifies that once Show Cause Notice is issued under the said Sections, the same has to be adjudicated within three years and five years, respectively, from the date of furnishing of annual return for the financial year to which the tax demand pertains or within three years/ five years depending upon non-suppression or suppression cases, as the case may be, from the date of erroneous refund.
Section 75(1) of the Act prescribes that where the service of notice or issuance of order is stayed by an order of Court or Appellate Tribunal, the period of such stay shall be excluded in computing the period specified in sub-sections (2) and (10) of section 73 or sub-sections (2) and (10) of section 74, as the case may be.
Further, Section 75(11) of the CGST Act, provides that when an issue on which the Appellate Authorities, Tribunal, or High Court has given its decision that is prejudicial to the interest of revenue in some other proceedings and an appeal to the Appellate Tribunal, High Court, or Supreme Court against such decision is pending, the period spent between;
1. the date of the decision of the Appellate Authority and that of the Appellate Tribunal (or);
2. the date of the decision of the Appellate Tribunal and that of the High Court (or);
3. the date of the decision of the High Court and that of the Supreme Court;
shall be excluded in computing the period referred to in Section 73(10) or 74(10) on the condition that proceedings have been initiated by way of a show cause notice under the said sections.
Its noteworthy to point out that there could be many issues on which the Appellate Authorities could give its decision, which are prejudicial to the interest of revenue. Which issue is to be linked with the Show Cause Notice, for the purpose of excluding the interim period when the said issue attains finality, while computing the period referred to in Section 73(10) or 74(10), has not been specified in the said Section 75(11). On a coherent interpretation of the said provisions, it could be inferred to mean ‘Identical Issue’. One could also argue for inferring it as ‘similar issue’. Both the term has different connotation and implication. Probably, it could be better inferred as ‘identical issue’.
Secondly, a Show Cause Notice may contain many issues including that of limitation. Whether the reference to ‘an issue’ in Section 75(11) refers to any of the issues involved or just the main issue involved in the SCN, has also not been emphasised in the said sub-section. Again, on a coherent reading of the said provisions it could be inferred to mean ‘any issue’ involved in a Show Cause Notice, as was the practice followed under the said erstwhile Laws.
Thirdly, the reference to ‘other proceedings’ referred to in the said sub-section (11) to Section 75, whether it refers to the ‘same taxpayer’ or of ‘any taxpayer’ has also not be specified. Again, on a coherent reading of the provisions, it could be inferred to mean ‘any taxpayer’.
From the above provisions, the following is revealed –
1. there is a specific time limit of three years and five years from the relevant date prescribed, as the case may be, for adjudicating the issued Show Cause Notices.
2. If issuance of the order has been stayed, then such period of stay shall also be excluded in computing the time limit for issuance of order.
- If an appeal has been filed before a higher appellate forum (starting from Tribunal) by the Department on identical issue in some other proceedings, against an Order passed by a lower authority, which is prejudicial to the interest of revenue and the said appeal is pending, then the interim period between the dates of the final order passed by the said higher appellate authority and that of the appealed order of the lower appellate authority, on the said issue, is to be excluded.
In comparison, under the Central Excise Act and the Finance Act, no fixed time limit was prescribed for adjudication. For eg. Under the Finance Act, sub-section (4B) of Section 73 lays down a time limit of six months and one year from the date of notice, where it is possible to do so, in non-suppression and suppression cases, respectively. In other words, it is expected to adjudicate the notices within six months and one year, as the case may be. However, it is not mandatory. Whereas, under the GST Act, as could be seen, a specific time limit has been prescribed for adjudicating the notices issued. Further, it may be noted that Section 75(10) of the CGST Act, prescribes that the adjudicating proceedings shall be deemed to concluded, if the order is not issued within three years as provided for in sub-section (10) of section 73 or within five years as provided in sub-section (10) of section 74. In other words, the SCN becomes as good as set aside / becomes invalid, if Orders are not issued within the said prescribed time limit of three years and five years, as the case may be.
DUE INTIMATION TO THE TAXPAYER –
In a case before Bombay High Court [WP NO. 3671 OF 2021-Order dt. 24.3.2022], the petitioner, M/s. ATA FREIGHT LINE (I) P LTD., had alleged that during the period between 2011 and 2016, five SCNs were issued, against which they had duly filed reply, but no further communication was received from the Department. Thus, they were under the bonafide belief that submissions made by them had been accepted and thereby sought a closure report on 23rd Feb 2021. It was then that a communication was received from the Department that the said SCNs had been put in Call Book. Thereafter, the subject WP was filed.
In the said case, it was held that the respondents having issued the SCN, it is their duty to take the SCN to its logical conclusion by adjudicating upon the said SCN within a reasonable period of time. In view of gross delay on the part of the respondent, the petitioner cannot be made to suffer and having transferred the show cause notices to call book and kept in abeyance without communication to the petitioner for more than 7 to 11 years, the respondents cannot be allowed to raise alternate remedy at this stage…… the respondents cannot be now allowed to proceed with the show cause notice at such belated stage.
The above decision was upheld by the Hon’ble SC [SLP (Civil) Diary No. 828/2023 – Order dt. 10.2.2023].
The above decision makes it amply clear and logical too, that, it is very essential for the Department to intimate the taxpayer that it has kept the SCN under abeyance by transferring it to Call Book.
It could also be argued that the above matter pertains to Service Tax, wherein, under the Finance Act, as already pointed out, no mandatory time limit has been fixed under the said Law to adjudicate cases under the Finance Act. However, it’s quite possible that sometimes the matter for which the SCN has been kept in Call Book, might be taken up and finalised by the higher appellate forum, after a couple of years. Till then, if the taxpayer is kept in the dark without informing him, as such, will cause undue hardship, as already pointed out in the above ruling and he may also require to take necessary precaution for future transactions on the same matter. Its therefore of quite importance and an essential requirement that the taxpayer be duly informed of the case having been transferred to Call Book.
TABULAR REPRESENTATION –TIME LIMIT FOR ISSUANCE OF ORDER –
Since there is a mandatory time limit fixed for adjudicating the SCN’s issued under Section 73 and 74 of the GST Act, let’s take three hypothetical scenarios to understand the implication of the time limit prescribed under Section 73, for issuance of Order, in a situation where appeal pending on identical issue has attained finality. The same is represented in a tabular form, as under-
| SR. NO. | DETAILS | SCENARIO -1 | SCENARIO-2 | SCENARIO-3 |
| 1 | Date of SCN issued demanding tax under Sec 73 for the period 2017-18. | 01.04.2023 | 01.04.2023 | 01.04.2023 |
| 2 | Due date for adjudicating as per Sec 73(10) | 31.12.2023 | 31.12.2023 | 31.12.2023 |
| 3 | Period available for adjudication | 275 days | 275 days | 275 days |
| 4 | On Similar issue, matter pending in High Court. Date of decision of appealed Appellate Authority | 01.06.2020 | 01.06.2020 | 01.06.2023 |
| 5 | Date of decision of High Court | 30.06.2023 | 30.06.2024 | 30.06.2024 |
| 6 | Period to be excluded U/Sec 75(11) | 01.06.2020 to 30.06.2023 | 01.06.2020 to 30.06.2024 | 01.06.2023 to 30.6.2024 |
| 7 | Actual period excluded | 01.04.2023 to 30.06.2023 (91 days) | 01.04.2023 to 31.12.2023 (275 days) | 01.06.2023 to 31.12.2023 (214 days) |
| 8 | Revised due date for adjudicating U/Sec 73(10) | 31.03.2024 (91 days to be added to due date as per sr no.2.) | 01.04.2025 (275 days to be added to 30.6.2024 as per sr no. 5) | 30.01.2025 (214 days to be added to 30.6.2024 as per sr no. 5) |
As could be seen from Scenario-1, out of 275 days available for adjudication, in actual, 91 days got excluded from adjudication period, for transferring the case to Call Book and hence when the matter attained finality on 30.6.2023, the actual excluded days need to be added to the due date of issuance of Order, for arriving at the revised due date for adjudication. The same principle will apply to Scenario 2 and 3 as shown in the table. However, in the said two scenarios, the pending appealed issue gets finalised after the due date of issuance of Order. Hence the actual excluded period should be added to the day when the pending issue gets finalised.
INSTRUCTIONS ISSUED IN THE MATTER –
No instruction appears to have been issued by the Central Board regarding transfer of show cause notices, issued under Section 73/74, to Call Book.
Administrative Grounds -However, on administrative grounds, a Circular is seen to have been issued by CBEC, vide Circular no.CBEC-20/01/08/2019-GST dated 18.9.2020, whereby, SCNs issued on gross tax payable by field formations was instructed to be kept in Call Book till the retrospective amendment in Section 50 of the CGST Act is carried out.
How far such an arrangement has legal backing, is not clear. However, since the Section was retrospectively amended and due date for adjudication of cases has also been extended, the issue has settled on its own.
Kerala State GST Circular– Recently, Kerala State GST has issued a Circular no.13/2023 dated 22.6.2023 on Maintenance of Call Book. It has relied on the provisions of Section 75(1) and 75(11) of the Act to call for maintenance of Call Book by field formations. It has further directed that Show Cause Notices issued as per Sections 73(1) and 74(1) to be transferred to Call Book in such cases with the approval of immediate supervisory authority, until a finality on the issue is either arrived at or the matter is admitted by the department. It has pointed out two grounds for transferring cases to call book- i) cases where Dept has gone in appeal on identical issue and ii) cases where an injunction has been issued by SC, HC, GSTAT, etc., which is based on the provisions of Section 75(1) and 75(11) of the Act.
It has also clarified that a SCN cannot be transferred to a Call Book on grounds other than those specifically mentioned (the two grounds) without the prior approval of the supervisory officer. Now, what could be the other grounds and what could be the legal backing for the same, is not clear. Probably, the situations, like the Circular issued on administrative grounds may be covered.
It has also highlighted the importance of immediate intimation to be given to the taxpayer concerned regarding the transfer of the SCN to Call Book and that failure to do so may be fatal for the SCN.
However, the Circular has not clarified as to how the due date for issuance of Order under Section 73(10) and 74(10) is to be computed after excluding the period of stay or the period of time period to be excluded when the matter on similar issue reaches finality, as the case may be.
CLARIFICATION REQUIRED –
An effort has been made to explain the due time for issuance of Order, on the matter attaining finality, by hypothetically considering three scenarios and making a tabular representation. There are bound to be different interpretations. A clarification by the Board on the matter is thereby essential, in order to avoid undue litigation in the matter.
Similarly, the aspect of ‘an issue’ and ‘other proceedings’ referred to above, also, need to be suitably clarified.
CONCLUSION– Departmental officers need to be vigilant and take due care to keep track of the status of the cases, due to which the show cause notice has been transferred to Call Book or kept in abeyance and once the said case attains finality, immediate action to be taken up to adjudicate the Show Cause Notice within the time limit prescribed under Section 73(10) and 74(10) as the case may be, subject to the exclusion period, lest, it gets hit by the provision of Section 75(10) of the Act.
On the other hand, the taxpayers should seek details from the Department of the reasons for which the cases have been transferred to Call Book or kept in abeyance and apart from readying itself with supporting matter justifying their case, be also aware of the time limit within which the Department is supposed to adjudicate the said Show Cause Notice and if they falter to issue Order, in the prescribed time, to claim benefit of the provision of Section 75(10) of the GST Act.
The taxpayer could also explore the possibility that the issue based on which the SCN has been kept in Call Book or in abeyance is not identical, which could lead to a situation, whereby, the SCN has been adjudicated beyond the time limit prescribed under Section 73(10) or 74(10), as the case may be and could thereby claim that the Order is hit by the provision of Section 75(10) of the GST Act.
Author Bio
Very exhaustive analysis. Call Book cases has been very sensitive matter all along. Also having no effective communication platform available for Departmental officers to know the exact status of matters under litigation and the current status of the same, transferring cases to Call Book would be risky business- for both the sides