Facts of the Case: In this case, An audit was initiated against the petitioner or the financial years 2017-18 to 2022-23 under Section 65 of the CGST Act, 2017. During the course of audit, the petitioner submitted replies and documents on various dates — 22nd February 2024, 19th April 2024, 6th September 2024, and 24th September 2024.. The petitioner also submitted its final reply on 11th October 2024 in response to clarifications sought on the draft audit report.

Subsequently, a pre-Show Cause Notice (pre-SCN) was issued on 25th November 2024, allowing the petitioner time till 28th November 2024 to respond. However, before expiry of the said period, the Show Cause Notice was issued on 27th November 2024.

While the writ petition challenging the SCN was pending, the Department finalized the audit report and communicated it on 13th February 2025, prompting another writ petition challenging the audit report as being time-barred under Section 65(4). Thus, two petitions were before the Court — one challenging the SCN and another challenging the audit report.

Issue: Whether the audit report dated 13th February 2025 was issued beyond the period of limitation prescribed under Section 65(4) of the CGST Act. Whether the issuance of the SCN before expiry of the time granted for filing reply to the pre-SCN violated the principles of natural justice.

Held that: The Court examined Section 65(4) and the Explanation thereto, holding that the commencement of audit occurs from the date the taxpayer makes available the records to the authorities. Since the petitioner submitted its final reply on 11th October 2024, the audit was deemed to have commenced from 12th October 2024. Therefore, the audit report dated 11th February 2025 and communicated on 13th February 2025 was within the permissible period of three months plus 30 days. Accordingly, the contention that the audit report was issued beyond limitation was rejected.

SCN Issued Prematurely — Violation of Natural Justice –  The Court noted that the pre-SCN had expressly allowed the petitioner to file submissions by 28th November 2024, but the department issued the SCN on 27th November 2024, before expiry of the permitted period. Such premature issuance was held to be in complete violation of the principles of natural justice, as it deprived the petitioner of the opportunity to respond. Accordingly, the SCN dated 27th November 2024 was set aside, and the matter was relegated to the pre-SCN stage. The petitioner was permitted to file its reply to the pre-SCN by 10th November 2025, and the department was directed to proceed thereafter in accordance with law.

The Court also directed that the period during which the writ petitions were pending shall be excluded while computing limitation for either party.

Case Name: Varian Medical Systems International India Pvt. Ltd. Versus Union Of India & Ors. dated 28.10.2025

To read the complete judgement 2025 Taxo.online 2755