VALIDITY OF SINGLE NOTICE COVERING MULTIPLE YEARS

Adjudication is the process of deciding an issue relating to tax matters through departmental authorities empowered to determine issues relating to classification, valuation, refund claim, tax or duty payable etc. The department raises demands by way of Show Cause Notices (SCNs) to the assessees when irregularities are observed or suspected.

Following provisions have been made under the CGST Act, 2017 for the proper officer to demand and recovery the tax:

1. Section 73 - Demand of tax not paid, short paid, erroneously refunded, wrong availment of input tax credit or wrong utilization of input tax credit by reasons other than fraud, willful misstatement or suppression of facts.
2. Section 74 - Demand of tax not paid, short paid, erroneously refunded, wrong availment of input tax credit or wrong utilization of input tax credit by reasons of fraud, willful misstatement or suppression of facts.

Time limit for order under section 73(10) of CGST Act, 2017

As per sub-section (3), the proper officer is required to pass an order within a period of 3 years from the

• due date for filing of Annual return for the year to which the short payment or non-payment or input tax credit wrongly availed or utilised relates
• date of erroneous refund

The demand proceedings launched under the provisions of section 73 are required to be concluded within a period of 3 years from the due date of filing the annual return or actual date of filing the annual return of the relevant period, whichever is earlier. 

In case the proceedings were started under section 73 of the CGST Act, 2017, but no order was issued within the prescribed period of 3 years of date of filing of annual return of relevant year, the proceedings will come to an end due to reason of expiry of limitation period. Any order issued after the expiry of limitation period of 3 years will be treated as defective order thus ineffective.

Time limit for order under section 74(10) of CGST Act, 2017

As per sub-section (3), the proper officer is required to pass an order within a period of 5 years from the:

• due date for filing of Annual return for the year to which the short payment or non-payment or input tax credit wrongly availed or utilised relates
• date of erroneous refund

The demand proceedings launched under the provisions of section 74 are required to be concluded within a period of 5 years from the due date of filing the annual return or actual date of filing the annual return of the relevant period, whichever is earlier. 

In case the proceedings were started under section 74 of the CGST Act, 2017, but no order was issued within the prescribed period of 5 years of date of filing of annual return of relevant year, the proceedings will come to an end due to reason of expiry of limitation period. Any order issued after the expiry of limitation period of 5 years will be treated as defective order and thus, ineffective.

Single notice for multiple years flawed

It has been the practice of the adjudicating authorities / proper officers to issue consolidated or single show cause notice (SCN) for multiple years, i.e., single notice being issued for more than one relevant year. Relying upon theTHE STATE OF JAMMU AND KASHMIR AND OTHERS VERSUS CALTEX (INDIA) LTD. - 1965 (12) TMI 125 - SUPREME COURT, this has been held to be invalid or flawed in recent judgments. It has been held that:

• GST Department or Revenue Authorities cannot issue a consolidated Show Cause Notice (SCN) to the assessee pertaining to multiple assessment years.
• If such notices are issued due to improper consolidation of multiple tax periods in a single / consolidated notice, it shall be considered as fundamentally flawed and in contravention of the GST law.
• Section 73(10) and 74(10) of the CGST Act, 2017 mandates a specific time frame linked to furnishing of annual return for the year to which such return relates.
• Thus, particular actions must be completed within a designated year in accordance with legal provisions.

Thus, the issue of show cause notice involving multiple years could be challenged and struck down as flawed or invalid tin contravention of the statutory provisions of sections 73 and 74 of the CGST Act, 2017. This could be one of the opening ground itself in the reply to show cause notice or written submissions.