CBIC: Issue show cause within 2 yrs and 9 months of erroneous refund

The Central Board of Indirect Taxes and Customs (CBIC) has said that show-cause notices for tax not paid or short paid or input tax credit wrongly availed or demand for any penalty have to be sent within two years and nine months from the date of erroneous refund.

In a clarification issued to its field formations, the CBIC said if the refund demand or show-cause notice is sent beyond the stipulated period, the entire proceeding has to be dropped. "Where show cause notice under sub-section (1) of section 74 of CGST Act was issued for erroneous refund beyond a period of 2 years and 9 months from the date of erroneous refund, the entire proceeding shall have to be dropped," said a CBIC circular.

The rule will be applicable to those cases where the charges of fraud or any wilful misstatement or suppression of facts to evade tax have not been established against the person who received such notice.


The clarification was issued in light of some cases where show-cause notice was issued by the proper officer to a 'noticee' under sub-section (1) of section 74 of the CGST Act and the appellate authority had concluded that the notice is not sustainable as charges of fraud or any wilful misstatement or suppression of facts to evade tax have not been established against the notice.

Verify invoices

The CBIC has also asked tax officers to verify details of invoices to resolve mismatches in ITC claims during GST audit for 2017-18 and 2018-19. A large incidence of mismatch in ITC claims and details of outwards supplies has come to light during the audit for 2017-18 and 2018-19, following which show cause notices were issued.