Guwahati High Court Quashes Time-Barred Service Tax Demand

The Guwahati High Court, presided over by Justice Kaushik Goswami delivered its judgement, In the case of Mahesh Kumar Channani and Anr. The Case across where the petitioner, a proprietorship firm engaged in works contracts, challenged a Demand- Cum-Show Cause notice dated 11 April 2022 and the subsequent adjudicating orders stated 24 April 2024 issued by the Assistant Commissioner of the centre’s GST and Exercise Guwahati Division II

The government wanted roughly Rs 26.57 lakh in service tax for 2016–17, but the firm said their services were exempt under the Mega Exemption Notification in the Finance Act, 1994.

The company didn’t stop there. They argued that the notice came way too late. Under Section 73(1) of the Finance Act, 1994, authorities can issue such notices only within 18 months or five years if there’s fraud or suppression so, the firm insisted the whole thing was invalid. They pointed to earlier Supreme Court decisions, like Whirlpool Corporation v. Registrar of Trade Marks and Calcutta Discount Company Ltd. v. ITO, which make it clear limitation isn’t just a box-ticking exercise, it actually affects whether an authority has power to act at all.

Now, the government’s lawyer pushed back. He said, to look the proper way to challenge this was to appeal under Section 107 of the CGST Act, 2017, as higher courts have said statutory remedies should come first.

Justice Goswami saw things differently. He agreed that, usually, appeals are the way to go. But he stressed that’s not a hard rule. If the authorities act with no legal basis like here, when they’re out of time the High Court can step in under Article 226. In his view, the limitation period in Section 73(1) is a real check on government power. Once it runs out, they’re done. The show cause notice and the order that followed had no legal legs to stand on.

In the end, the High Court said the notice from April 11, 2022, was too late, the follow-up order from April 24, 2024, did not count, and both were invalid. The company won the case, and the court dismissed the government’s order; no costs were awarded to either side.