Where Possible ’Clause Doesn’t Justify Unreasonable GST Adjudication Delay, One-Year Limit Must Be Respected: Patna HC [Read Order]

In a recent ruling, the Patna High Court ruled that the phrase “where it is possible to do so” in Section 73(4B)(b) of the Finance Act, 1994, places a duty on tax authorities to conclude proceedings within one year unless there are justifiable reasons, which were absent in this case.

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Karanveer Singh Yadav Enterprises Private Limited had filed a writ petition challenging Order-in-Original No. 41/ST/Aayukt/2024 dated 24.06.2024, issued by the Principal Commissioner of CGST and Central Excise, Patna. The order had imposed service tax liabilities and penalties for the financial years 2016–17 and 2017–18 (up to June 2017), based on a show cause notice issued on 12.10.2021.

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The petitioner’s counsel argued that the adjudicating authority failed to act on the notice for more than two years, with the first hearing scheduled only on 19.10.2023. They also argued that the delay violated Section 73(4B) of the Finance Act, which, while not imposing a strict limitation period, requires the authority to take timely action where possible. They pointed out that the department did not provide any explanation for the delay, nor did the official records reflect any activity or justification for the inaction during that period.

The department’s counsel produced the official file, which confirmed the delay but no explanation was offered in the counter affidavit or the records for the lack of progress between 2021 and 2023.

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The division bench led by Justice Rajeev Ranjan Prasad observed that keeping the matter in “cold storage” for such a prolonged period undermined the statutory objective of expeditious adjudication. Referring to precedents from the Delhi and Gujarat High Courts, as well as prior rulings of the Patna High Court itself, the bench reiterated that the authority is expected to act within the one-year period where circumstances permit.

Citing the Gujarat High Court’s observation in Siddhi Vinayak Syntex Pvt. Ltd. vs. Union of India, the Patna High Court explained, “When a matter is consigned to the call book and kept in cold storage for years together, it is not on account of it not being possible for the authority to decide the case, but on grounds which are extraneous to the proceedings.”

The court found that the unexplained delay rendered the proceedings procedurally defective. It allowed the writ petition and quashed the impugned order and all related tax demands. The bench also expressed concern over similar delays in other matters and directed the Principal Commissioner to review internal processes to prevent recurrence. The court set aside a service tax demand order issued by the GST Department due to an unexplained delay of over two years in adjudication.

To Read the full text of the Order CLICK HERE

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