2024 (1) TMI 619 - HC - GST

Bunching of show cause notices under Section 73 found impermissible, directs splitting and separate adjudication per year

Bunching of show cause notices was questioned on whether a single combined notice for multiple years aligns with the principle that each assessment year ... Bunching of show cause notices - limitation under Section 73(10) of the CGST Act, 2017 - separate limitation for each assessment year - quashing of invalid procedural steps - directions to dispose representation before adjudicationBunching of show cause notices - limitation under Section 73(10) of the CGST Act, 2017 - separate limitation for each assessment year - Validity of issuing a single bundled show cause notice covering multiple assessment years under Section 73 of the Act - HELD THAT: - The Court held that Section 73(10) fixes a three-year limitation computed with reference to the due date for furnishing the annual return of the particular financial year and, therefore, the limitation for determination of tax runs separately for each assessment year. Issuing a bundled or 'bunched' show cause notice for multiple assessment years in order to circumvent or extend the statutory limitation is impermissible. The Court relied on the principle that where assessment encompasses different years, each year can be dissected and taxed separately, and observed that doing indirectly what the statute does not permit (i.e., extending limitation by clubbing years) is not allowable. [Paras 13, 14, 15]Bunching of show cause notices for multiple assessment years is contrary to the limitation scheme under Section 73(10) and is liable to be quashed.Directions to dispose representation before adjudication - quashing of invalid procedural steps - Whether the authority must consider and decide the petitioner's representation seeking split adjudication before proceeding with the adjudication of the bundled show cause notice - HELD THAT: - The Court directed that the representation dated 25.10.2023 seeking splitting of the show cause notices be disposed of by the first respondent in the light of the Court's finding that bunching is impermissible. In consequence of that conclusion, the Court ordered that proceedings under the bundled show cause notice be deferred until the representation is disposed of, thereby preventing further adjudication on the basis of the bunched notice until the authority gives separate consideration to splitting and separate adjudication for each year. [Paras 16]The first respondent is directed to dispose of the representation to split the show cause notices before proceeding with adjudication; all proceedings under the bunched notice are to be deferred until disposal of that representation.Limitation under Section 73(10) of the CGST Act, 2017 - computation of exclusion for stay period - Extension of time for completion of adjudication for Assessment Year 2017-18 and treatment of the court-granted stay period for limitation computation - HELD THAT: - The Court excluded the 26 days of stay previously granted by this Court from the computation of limitation for AY 2017-18 and extended the time for passing the adjudication order in respect of AY 2017-18 up to 26.01.2024, subject to other pending writ petitions. This direction was given while ordering disposal of the petitioner's representation and deferral of further proceedings. [Paras 16]Time for passing adjudication order for Assessment Year 2017-18 is extended to 26.01.2024, excluding the 26-day stay period; subject to orders in connected writ petitions.Final Conclusion: The Court held that bundling show cause notices across assessment years defeats the separate three-year limitation fixed by Section 73(10) and is impermissible; the authority was directed to decide the petitioner's representation to split the notices before adjudication, proceedings under the bundled notice were stayed pending that decision, and the time for adjudication in respect of AY 2017-18 was extended to 26.01.2024 excluding the earlier 26 day stay. Issues involved:The petitioner sought a Writ of Mandamus to direct the respondent to consider and pass orders on a representation before adjudicating a show cause notice. The main contention was the issuance of bunching of show cause notices for multiple assessment years, which the petitioner argued was impermissible under Section 73 of the CGST Act, 2017.Analysis of the Judgment:The petitioner's Senior Counsel argued that bunching of show cause notices violates Section 73 of the Act, which specifies a three-year limitation period for determining tax due for each financial year. The counsel contended that extending this period through bunching of notices would set a bad precedent and circumvent the statutory limitation.The Senior Counsel further referenced a GST council meeting's decision to extend limitation periods separately for each financial year, emphasizing the need to adhere to specific timelines for assessments. The counsel also cited legal precedents to support the argument against bunching of show cause notices.In response, the Standing Counsel for the respondents contended that there was no explicit prohibition on issuing bunching of notices under Section 73. However, the Court found merit in the petitioner's argument that bunching was contrary to the spirit of the Act and could lead to circumvention of statutory timelines.The Court held that issuing bunching of show cause notices for multiple assessment years was impermissible and ordered the respondent to consider the petitioner's representation and pass separate adjudication orders for each year. The Court also extended the time period for passing the adjudication order for the Assessment Year 2017-18, excluding the period of stay granted by the Court.In conclusion, the Court quashed the issuance of bunching of show cause notices and directed the respondent to defer all proceedings until the representation for splitting up the notices was disposed of. The Writ Petition was disposed of with these observations, and no costs were awarded.