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.
The bench has Court put an end to this practice of bunching assessment periods. The court relied on the Madras High Court’s judgment in Titan Company Ltd., where the practice of bunching SCNs was deemed faulty under the Goods and Service Tax (GST) laws.
Background
The petitioner/assessee is a Club. The assessee has challenged the show cause notice issued by the respondent/department for the tax periods 2019-20, 2020-21, 2021-22, 2022-23, and 2023-24.
The petitioner submitted that the notices, issued under Section 73 of the Central Goods and Services Tax (CGST) Act, 2017, are flawed due to the improper consolidation of multiple tax periods into a single show cause notice.
Arguments – GST Dept. Can’t Issue Single SCN For Multiple AYs
The assessee contended that the department cannot issue a common show cause notice by grouping the tax periods from 2019 to 2023-24. The petitioner asserts that under Section 73 of the CGST Act, a specific action must be completed within the relevant year, and the limitation period of three years applies separately to each assessment year.
The petitioner contended that clubbing multiple tax periods in a single notice is impermissible, and separate notices should have been issued for each assessment year under Section 73(1) of the CGST Act.
The petitioner relied on the judgement of the Madras High Court in the case of M/s. Titan Company Ltd. vs. Joint Commissioner of GST. The Madras High Court, while addressing a similar issue, relied on the Supreme Court’s decision in State of Jammu and Kashmir and Others vs. Caltex (India) Ltd.. The Apex Court held that where an assessment encompasses different assessment years, each assessment order can be distinctly separated and must be treated independently.
Conclusion
The court while allowing the petition held that the department erred in issuing a consolidated show cause notice for multiple assessment years, spanning from 2019 to 2023-24.
The court quashed the show cause notice and the summary of the show cause notice. However, did not preclude the department from issuing separate show cause notices for each assessment year in compliance with Section 73 of the entral Goods and Service Tax Act, 2017.
Author’s View
The period of assessment under GST corresponds to the financial year, and the limitation is calculated from the date of filing the annual return. GST department has often been biased in raising demands by invoking the extended period, even in the absence of jurisdictional ingredients, effectively bunching block 5 periods.
The Karnataka High Court’s ruling is beneficial for Show Cause Notices issued under Section 74, where the GST department bunched block periods to save limitations.
Case Title: M/S. Bangalore Golf Club Versus Assistant Commissioner Of Commercial Taxes
Case No.: Writ Petition No.16500 Of 2024 (T-Res)
Date: 07/08/2024
Counsel For Petitioner: M.N. Shankare Gowda
Counsel For Respondent: Harisha A.S.
