In a major relief to the GST department, the Madhya Pradesh High Court has Dismissed Petition Challenging Single show cause notice (SCN) for multiple Assessment Years (AYs) in circular trading case, which is contrary to other High Court rulings.
The bench of Justice Vivek Rusia and Justice Binod Kumar Dwivedi has observed that the total period during which these fake ITCs were generated is from 2017 to 2022, therefore, a joint assessment is liable to be conducted of six companies / notice in the aforesaid period. In such types of circular trading matters, the assessment can be done by calling all the firms / companies involved in trading in the relevant years by the proper office. This matter cannot be proceeded individually in a given facts and circumstances under Section 74 of CGST Act, 2017.
The petitioner/assessee has challenged the validity of show-cause notice issued under Section 74 and 122 of Central Goods and Services Tax Act, 2017 (CGST Act, 2017).
The GST department received an information that few units were engaged in availing / passing of ineligible Input Tax Credit (ITC) to certain units without actual supply / receipt of goods by way of circular trading. Based on the said information, a search was conducted under Section 67(2) of the CGST Act, 2017. The first search was conducted on 07.01.2022 at the premises of M/s Namrata Trade Star and M/s Sagar Steels Suppliers.
The premises of M/s Panjon Limited was searched on 10.01.2022 and it was found that document / record regarding purchase invoice, sale invoice are being maintained at their Head Office at Panjon Farm House, Airport Road, Indore. The statement of proprietor and other concerned persons were recorded.
The investigation has revealed that 43 vehicles were declared used in transportation of goods amongst certain companies for circular trading, but few vehicles were found to be registered as two wheelers. Notices were issued to the owners of the vehicles.
The assessee contended that the High Courts of Andhra Pradesh, Karnataka and Orissa have categorically held that there cannot be common or joint show-cause notice for multiple assessment years, the authorities are required to issue a notice for each assessment year, therefore, this impugned notice is liable to be quashed however, the liberty can be granted to the respondent to issue fresh multiple notices.
The court while dismissing the petition held that in order to prove the circular trading the notice has rightly been issued and the joint assessment proceedings are liable to be undertaken under Section 74 of the CGST Act, 2017 by the proper officer. Hence, the petitioners cannot be singled out from this assessment proceedings by entertaining the writ petition.
Other HC’s Judgement Contrary To This Judgement
Practice Of Issuing Single/Consolidated Show Cause Notice For Multiple Assessment Years Contravenes Provisions Of CGST Act: Karnataka High Court
The Karnataka High Court has held that the practice of issuing a single, consolidated show cause notice for multiple assessment years contravenes the provisions of the CGST Act.
The bench of Justice S.R.Krishna Kumar has observed that Section 73(10) of the CGST Act mandates a specific time limit from the due date for furnishing the annual return for the financial year to which the tax due relates. The law stipulates that particular actions must be completed within a designated year, and such actions should be executed in accordance with the law’s provisions.
GST Dept. Can’t Issue Single SCN For Multiple Assessment Years: Karnataka High Court
The Karnataka High Court has held that the GST department’s practice of issuing a single and consolidated show cause notice (SCN) for multiple assessment years contravenes the provisions of the Central Goods and Service Tax Act, 2017 (CGST Act).
The bench of Justice Sachin Shankar Magadum while putting an end to the department’s practice of bunching assessment periods has observed that Section 73(10) of the CGST Act mandates a specific time limit from the due date for furnishing the annual return for the financial year to which the tax due relates. The law stipulates that particular actions must be completed within a designated year, and such actions should be executed in accordance with the law’s provisions.
Case Details
Case Title: M/S Rahul Steels Through And Others Versus Union Of India And Others
Case No.: Writ Petition No. 8015 Of 2024
Date: 17/12/2024
Counsel For Petitioner: L. C. Patne
Counsel For Respondent: Prasanna Prasad
