In the case of Varian Medical Systems International India Pvt. Ltd. v. Union of India & Ors., the Delhi High Court addressed issues surrounding the premature issuance of a show-cause notice (SCN) under the Goods and Services Tax (GST) framework. The petitioner, Varian Medical Systems, underwent an audit for the fiscal years 2017–18 to 2022–23, initiated on January 11, 2024. A pre-show-cause notice was issued on November 25, 2024, with a three-day period for the company to respond. However, the final SCN was issued on November 27, 2024, before the response period expired, and the final audit report followed on February 13, 2025.
The petitioner challenged the premature SCN and the audit report, citing violations of the Central Goods and Services Tax (CGST) provisions and principles of natural justice. The court examined whether the audit report was issued within the prescribed time under Section 65(4) of the CGST Act. The court found that the audit was conducted within the permissible timeframe, starting on October 11, 2024, and concluding by January 11, 2025. The audit report, dated February 11, 2025, was communicated within the 30-day period as required by Section 65(6).
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However, the court held that issuing the SCN before the reply period expired denied the petitioner natural justice. As a result, the SCN was invalidated, and the matter was remanded to the pre-SCN stage, allowing the petitioner to submit a reply by November 10, 2025. The court also stated that the time during which the writ proceedings were pending would not count towards the limitation period for either party.
Case Title: Varian Medical Systems International India Pvt. Ltd. v. Union of India & Ors.
Order Date: 28 October 2025
Facts -
- The petitioner company was subjected to an audit under Section 65 of the CGST Act for FY 2017–18 to 2022–23.
- The audit notice was issued on 11 January 2024, and subsequent correspondences sought documents from time to time.
- A pre-show-cause notice (pre-SCN) was issued on 25 November 2024, granting three days (until 28 November 2024) for reply.
- However, before expiry of the reply period, the Department issued the final SCN on 27 November 2024, followed by the final audit report on 13 February 2025.
- The petitioner challenged both the premature SCN and the audit report, alleging violation of the CGST provisions and principles of natural justice.
Issue -
- Whether the audit report was issued within the time limit prescribed under Section 65(4) of the CGST Act?
Order -
- The Court held that the audit was conducted within the permissible time as the process commenced on 11 October 2024 and was concluded by 11 January 2025.
- The audit report dated 11 February 2025, communicated on 13 February 2025, was deemed valid since the 30-day communication period under Section 65(6) was adhered to.
- The Court found that issuance of the SCN before expiry of the reply period amounted to denial of natural justice.
- Consequently, the SCN was set aside, and the matter remanded to the stage of pre-SCN, permitting the petitioner to submit a reply by 10 November 2025.
- The Court further clarified that the pendency of writ proceedings shall be excluded from the limitation period for both parties.
