The Kerala High Court has held that consolidated show cause notices under GST covering multiple financial/assessment years can be issued only in circumstances where common period for initiation and completion of the adjudication.
The bench of Dr. Justice A.K.Jayasankaran Nambiar and Justice Easwaran S. has observed that if a consolidated notice for various financial/assessment years is issued, the total amount of tax, penalty etc. determined as payable by the assessee may increase exponentially depending upon the number of financial/assessment years included in the consolidated notice. The determination of tax, penalty etc. would be in respect of all the financial/assessment years put together. That would go against the provisions of sub sections (9) and (10) of Section 74 which specifically refer to the “financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates” while stipulating the last date for passing the adjudication order.
The respondent/assessee challenged show cause notice that sought to invoke Section 74 of the Central Goods and Services Tax Act to demand differential tax, interest and penalty from it on an allegation of suppression of turnover during the financial years 2017-18 to 2023-24.
The main ground of challenge against show cause notice in the writ petition was that inasmuch as the appellants herein had issued a single consolidated notice for six different financial years, the respondent was prejudiced in that the time limit for submitting its reply to the show cause notice in respect of each of the assessment years in question would be circumscribed by the time limit prescribed in Section 74(10) of the CGST/SGST Act for the earliest of the six financial years namely 2017-18.
In particular, it was the case of the assessee that on account of the hasty action on the part of the appellants, the assessee was effectively denied an opportunity to cross-examine certain witnesses whose statements had been relied upon in the show cause notice issued to the respondent.
The Single Judge, who considered the matter, did not deem it necessary to entertain a challenge against the show cause notice on the ground of denial of opportunity to cross examine witnesses. In particular, it was noticed that although it was the contention of the respondent that an opportunity for cross examination was not being granted, there was nothing on record to assume that any procedure contrary to law would be adopted by the appellants herein.
The Single Judge observed that if an opportunity for cross examination, as required by law, was not granted, the same was a matter to be considered by the hierarchy of authorities under the CGST Act in adjudication proceedings before them. However, found force in the contention of the respondent/assessee that issuing a composite order covering all the financial years from 2017-18 to 2023- 24 would prejudice the respondent/assessee in relation to its contentions for those assessment year where the time limit prescribed under Section 74(10) of the CGST Act would not expire by 07.02.2025, which was the last date for passing orders in respect of assessment year 2017-18.
The Judge therefore granted liberty to the appellants herein to pass appropriate orders for 2017-18 pursuant to show cause notice within the period of limitation prescribed under Section 74(10) of the CGST Act, reserving the right to the authority to pass separate orders of determination for each of the other assessment years mentioned in the show cause notice after granting reasonable opportunity of hearing to the respondent/assessee in accordance with law.
The department contended the Judge ought not to have permitted the passing of separate orders for the financial years 2018-19 onwards since there is no provision envisaged under the CGST Act for issuing separate notices and orders for each financial year.
The court held that issuing a consolidated show cause notice covering various financial/assessment years would cause prejudice to an assessee who would not get the full period envisaged for adjudication under the Statute, if that period is circumscribed by the limitation period prescribed in relation to an earlier financial/assessment year.
The court while dismissing department’s appeal held that in a situation such as the present, the proximate expiry of the limitation period under Section 74(10) is only in relation to one of the six financial/assessment years, the contentions of the assessee and the opportunity available to an assessee for adducing evidence in relation to the other years cannot be rendered illusory by forcing upon the assessee the period of limitation prescribed under Section 74(1) for passing the final order in relation to the earliest financial/assessment year [2017-18].
Case Details
Case Title: Joint Commissioner Versus M/S. Lakshmi Mobile Accessories
Case No.: W.A.NO.258 OF 2025
Date: 5/02/2025
Counsel For Petitioner: Muhammed Rafiq
Counsel For Respondent: K.S.Hariharan Nair
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