GST Dept. To Issue Separate Show-Cause Notices For Different Assessment Years: Kerala HC

The Kerala High Court has held that the goods and service tax (GST) department should issue separate show-cause notices for different assessment years (AYs).

The bench of Justice A.K.Jayasankaran Nambiar and Justice Easwaran S. has observed that in cases where the assessing officer finds that an assessee is liable to be proceeded either under Section 73 or under Section 74 for different assessment years, a separate show cause notice has to be issued. Still further, since proper officer need to issue a show cause notice prior to 6 months to the time limit prescribed under sub-section (10) of Section 74, if a composite notice is issued, the assessee will be prejudiced inasmuch as the availability of a lesser period to submit a proper and meaningful explanation. This also is a strong indicative factor which would prompt us to hold in favour of the assessee.

The appellant/writ petitioner was served with a show cause notice under Section 74 of the CGST/SGST Act dated 5.8.2024 proposing to initiate proceedings under Section 74(10) of the CGST/SGST Act for the assessment years 2017-2018, 2018-2019, 2019-2020, 2020-2021 and 2021-2022. In the aforesaid notice, the proper officer concluded that, for different assessment years, the appellant/writ petitioner had applied incorrect HSNs, and therefore, the rate of tax applied is incorrect and thus proposed a reassessment finding that there is a wrong application of tax rate at Rs.21,13,080.

The appellant questioned the show cause notice on the ground that, going by the decision of the Karnataka High Court in the case of M/s Bangalore Golf Club V. Assistant Commissioner of Commercial Taxes, it was held that a composite show cause notice is not permissible under law. The Single Judge disposed of the writ petition, relegating the petitioner to file a suitable reply to the show cause notice by taking up any issue specific to any year and also directed the authority to independently consider the said issue while passing the final order of adjudication. Aggrieved by the judgment, the intra-court appeal is preferred by the appellant/writ petitioner.

A cumulative reading of Section 74(1), (2) and (10) leaves no room for any doubt that each assessment year can be proceeded separately by the assessing officer or the proper officer as the case may be for the purpose of determining whether there is any willful misstatement or suppression of facts. The time limit prescribed under sub-section (10) of Section 74 of the Act shows that the order under sub- section (9) has to be issued within a period of five years from the due date of furnishing of the annual return for the financial year to which the tax is paid or short paid or input tax credit wrongly availed or utilised. This means that for each assessment year, the time limit prescribed for the completion of the proceedings is distinct and different.

The court held that there may be cases where proceedings are initiated in the guise of a show cause notice under Section 74 wherein, on facts, the case of the assessee will fall under Section 73 of the CGST/SGST Act. We find that insofar as the time limit prescribed under Section 73(10) of the CGST/SGST Act is concerned, it is three years instead of five years and further, the aspect of fraud, willful misstatement and suppression do not arise for consideration in proceedings under Section 73. Thus, by issuing a composite notice, the assessing authority cannot bypass the mandatory requirement of Section 73 to complete the assessment by falling back on a larger period of limitation under sub-section (10) of Section 74.

Case Details

Case Title: M/S. Tharayil Medicals Versus The Deputy Commissioner

Case No.: WA NO. 627 OF 2025

Date: 08/04/2025

Counsel For Petitioner: K.Krishna, Achyuth Menon, Nirmal Krishnan

Counsel For Respondent: Sr.GP VK Shamsudheen

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