The 3-Month Mandate: Analyzing the Bombay High Court’s Landmark Ruling on GST Adjudication Timelines

By CA Ankit Gulgulia (Jain)

Citation: A.M. Marketplaces Pvt. Ltd. vs. Union of India – 2026 (1) TMI 1454 – Bombay High Court Court: High Court of Judicature at Bombay (Nagpur Bench) Hon’ble Judges: Justice Anil L. Pansare and Justice Nivedita P. Mehta Date of Judgment: January 17, 2026

1. Executive Summary

In the complex landscape of Goods and Services Tax (GST) litigation, procedural fairness often battles with administrative expediency. A recurring grievance among taxpayers has been the “hurried” manner in which adjudication orders are passed—often within weeks of issuing a Show Cause Notice (SCN)—leaving the assessee with little to no time to defend themselves effectively.

The Bombay High Court, in a decisive ruling delivered in January 2026, has put a stop to this practice. In A.M. Marketplaces Pvt. Ltd. vs. Union of India, the Court held that the three-month gap between the issuance of a Show Cause Notice under Section 73(2) and the passing of an adjudication order under Section 73(10) is mandatory, not optional.

This ruling clarifies that the Revenue Department cannot “squeeze” the adjudication process into a short window, even if they are approaching the statutory deadline. If an order is passed in less than three months from the date of the notice, it is liable to be quashed for violating the statutory scheme and the principles of natural justice.

2. The Dispute: Facts of the Case

2.1 The Timeline of Events

The petitioner, A.M. Marketplaces Pvt. Ltd., a registered taxpayer, was subjected to scrutiny by the GST authorities. The dispute centered on the procedural timeline adopted by the Proper Officer (Respondent) in adjudicating the demand.

• 15 May 2024: The Proper Officer issued a Show Cause Notice (SCN) under Section 73(1) of the CGST Act, proposing a tax demand along with interest and penalty.
• 09 July 2024: The Proper Officer passed the final Adjudication Order under Section 73(9).

2.2 The Mathematical Gap

A simple calculation reveals the critical flaw in the Department’s approach:

• Time elapsed between SCN and Order: 1 month and 24 days.

2.3 The Petitioner’s Argument

The petitioner, represented by Advocate Mr. Anurag Soan, approached the High Court seeking a Writ of Certiorari to quash the order. Their primary contention was legal, not factual. They argued that Section 73(2) of the CGST Act explicitly mandates that the Proper Officer shall issue the notice at least three months prior to the time limit for passing the order.

The petitioner contended that this provision implies a minimum “cooling-off period” or adjudication window of three months. By passing the order in less than two months, the officer deprived the petitioner of the statutory time intended by the legislature for filing a reply, making representation, and availing the benefit of reduced penalties.

2.4 The Revenue’s Defense

The Department, represented by Advocate Ms. Ketki Jaltare Vaidya, argued that Section 73(10) only sets an “outer limit” (3 years). They contended that the requirement to issue a notice “3 months prior” serves only to ensure the department doesn’t issue a notice too late (i.e., on the last day of the 3-year period). They argued there is no bar on passing an order quickly if the notice is issued well within time.

3. The Statutory Framework: Section 73 Decoded

To understand the gravity of this judgment, one must look closely at the architecture of Section 73 (Determination of tax not paid… for reasons other than fraud).

3.1 Section 73(10): The Finish Line

“The proper officer shall issue the order under sub-section (9) within three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates…”

This subsection sets the Limitation Period. For example, for FY 2019-20, the original deadline (subject to extensions) defines the absolute last date by which an order must exist.

3.2 Section 73(2): The Starting Gun

“The proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order.”

This is the provision in question. On a plain reading, it dictates when a notice must be issued relative to the deadline. However, the Courts are now interpreting this as defining the minimum duration of the adjudication process itself.

3.3 The Interplay

The legislature deliberately created a gap between the deadline for the Notice and the deadline for the Order.

• For Fraud Cases (Section 74): The gap is 6 months (Notice must be issued 6 months prior to the 5-year deadline).
• For Non-Fraud Cases (Section 73): The gap is 3 months (Notice must be issued 3 months prior to the 3-year deadline).

The Bombay High Court questioned: Why does this gap exist? Is it for the benefit of the Officer, or the Taxpayer?

4. The Court’s Reasoning: Why 3 Months is Mandatory

The Division Bench provided a lucid rationale for why this timeline is sacrosanct.

4.1 The “Purpose” Test

The Court observed that the 3-month gap is not an arbitrary number. It is statutorily designed to accommodate specific rights granted to the taxpayer under the Act:

1. Right to Reply: The taxpayer needs time to gather invoices, bank statements, and legal precedents to draft a reply.
2. Right to Voluntary Payment (Section 73(5)): The Act allows a taxpayer to pay the tax + interest within 30 days of the SCN to avoid all penalties. If the order is passed in haste (e.g., within 20 days), this statutory right is extinguished.
3. Right to Personal Hearing (Section 75(4)): The law mandates a personal hearing if requested or if an adverse order is contemplated. A hurried order makes this hearing a farce.

4.2 “Otiose” Provisions

The Court used the legal doctrine that a statute should not be interpreted in a way that renders other provisions “otiose” (useless or redundant). If the Revenue were allowed to pass an order 10 days after issuing an SCN, the provision in Section 73(2) mandating a “3-month prior” issuance would become meaningless. The legislative intent was to ensure a minimum adjudication window.

4.3 Mandatory vs. Directory

The Revenue argued the timeline was “directory” (a guideline). The Court disagreed.

• Held: The language “shall issue the notice… at least three months prior” is mandatory.
• Consequence: Any order passed in violation of this minimum gap suffers from a jurisdictional defect. It is not just a procedural error curable by remand; it is a violation of the law itself.

5. Related Judgments and Legal Context

This judgment adds to a growing body of jurisprudence protecting taxpayers from “high-speed” assessments.

5.1 Tata Play Ltd. vs. Sales Tax Officer (Delhi High Court)

In a similar vein, the Delhi High Court had previously observed that the limitation period for issuance of notice is distinct from the limitation period for the order. The department cannot merge the two to the detriment of the assessee.

5.2 Titan Company Ltd. vs. Joint Commissioner (Madras High Court)

The Madras High Court dealt with the concept of “Reasonable Opportunity” under Section 75(4). The Court held that “opportunity of hearing” is not just about sending a Zoom link; it is about giving the assessee sufficient time to prepare. A notice issued on Friday for a hearing on Monday was held to be violative of natural justice.

5.3 Comparison with Section 74 (Fraud Cases)

The judgment implicitly reinforces the timeline for Section 74 as well.

• Section 74(2): Mandates notice 6 months prior to the order.
• Implication: Based on the A.M. Marketplaces ratio, any order passed under Section 74 (Fraud/Suppression) within less than 6 months of the SCN would legally be liable to be quashed.

6. Critical Analysis: Impact on Taxpayers

6.1 A New Ground for Appeal

Taxpayers currently fighting demand orders should immediately audit their case files.

• Action Item: Check the date of the SCN (form DRC-01) and the date of the Order (form DRC-07).
• The Litmus Test: Is the gap < 90 days?
• If YES, you have a strong ground for appeal citing A.M. Marketplaces Pvt. Ltd., arguing the order is void ab initio.

6.2 Protection Against Year-End Rush

We often see the Department issuing thousands of notices in December/January for time-barring periods (e.g., for FY 2019-20 or 2020-21).

• Previously, officers would issue a notice on Dec 31st and pass an order on Jan 15th to “clear the desk.”
• Now: If they issue a notice on Dec 31st, they cannot pass a valid order before March 31st (approx). If the statutory deadline for the order expires in February, the Department is in a deadlock—they cannot issue a valid order because they missed the SCN window.

6.3 The “Calendar Month” Nuance

The Court clarified that “Three Months” refers to calendar months.

• If SCN is issued on Jan 15, the 3-month period expires on April 15.
• It is not strictly “90 days” (which might be shorter or longer depending on February), but the general principle of statutory interpretation (General Clauses Act) applies.

7. Practical Guide for Tax Professionals

If you are a Chartered Accountant, Tax Advocate, or CFO, here is how you should operationalize this judgment:

Scenario A: You received an SCN recently.

1. Calculate the Deadline: Identify the 3-month date from the SCN.
2. Monitor the Officer: If the Officer presses for a final hearing or order before this date, submit a written representation citing this judgment.
3. Draft Letter: “We invite your attention to the Hon’ble Bombay HC judgment in A.M. Marketplaces… wherein it is mandated that a minimum period of 3 months must be allowed… We therefore request you to keep the adjudication proceedings in abeyance until [Date].”

Scenario B: You already have an Adverse Order (Appeal Pending).

1. Add Additional Ground: File an application to add an additional legal ground in your appeal (Form APL-01).
2. Cite Violation of Natural Justice: Argue that the order was passed in [X] days, violating Section 73(2), and is therefore liable to be set aside.

Scenario C: The “Remand” Risk.

Be aware that in A.M. Marketplaces, the Court remanded the matter back to the officer.

• Winning the Battle, not the War: The Court did not say the tax demand is gone forever. They said the order is bad. The officer may be directed to hear you afresh.
• Strategic Advantage: However, if the Limitation Period (3 years) has already expired by the time the High Court hears your case, the Department may be time-barred from passing a new order entirely. This is the “Checkmate” scenario.

8. Conclusion

The judgment in A.M. Marketplaces Pvt. Ltd. vs. Union of India serves as a crucial check on the powers of the revenue authorities. It reinforces the principle that efficiency cannot come at the cost of equity.

By mandating a strict 3-month gap, the Bombay High Court has ensured that the “Show Cause Notice” remains a meaningful instrument of dialogue between the taxpayer and the state, rather than a mere formality preceding an inevitable demand.

Final Takeaway: Time is of the essence in GST, but it cuts both ways. While taxpayers must file returns on time, the Department must respect the time required for justice to be done.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Taxpayers are advised to consult with professional counsel regarding their specific facts.

CA Ankit Gulgulia (Jain)

FCA, CWM (AAFM-US), CBV, CIFRS, R-ID, B.COM (H), RV* (IBBI)

Practising Chartered Accountant in Delhi NCR Since 2011. He can be contacted at ankitgulgulia@gmail.com or +91-9811653975.