2024 (1) TMI 619 - HC - GST

Bunching show cause notices covering multiple financial years violates Section 73 and constitutional principles

Titan Company Ltd., Represented by its Authorized Signatory Mr. P. Manivannan Versus The Joint Commissioner of GST & Central Excise, The Additional Commissioner of GST & Central Excise

The Madras HC held that bunching of show cause notices covering multiple financial years violates Section 73 provisions and constitutional principles. ... Bunching of show cause notices - Scope of section 73 - SCN is to be issued for each financial separately or bunching for 5 years is valid - Applicability of period of limitation - Seeking issuance of Writ of Mandamus directing the first respondent to consider and pass orders on the representation dated 25.10.2023 submitted by the petitioner before proceeding with the adjudication of show cause notice dated 28.09.2023 - HELD THAT:- Issuing bunching of show cause notices is against the spirit of provisions of Section 73 of the Act and the Constitution Bench of the Hon'ble Apex Court in the decision reported in State of Jammu and Kashmir and Others v. Caltex (India) Ltd [1965 (12) TMI 125 - SUPREME COURT] has held that where an assessment encompasses different assessment years, each assessment year could be easily split up and dissected and the items can be separated and taxed for different periods. The said law was laid down keeping in mind that each and every Assessment Year will have a separate period of limitation and the limitation will start independently and that is the reason why the Hon'ble Supreme Court has held that each assessment year could be easily split up and dissected and the items can be separated and taxed for different periods. The said principle would apply to the present case as well. There are no force in the submission made by the learned Senior Standing Counsel appearing on behalf of the respondents - there are fault in the process of issuing of bunching of show cause notices and the same is liable to be quashed. However, since the petitioner has made an representation before the authorities concerned for splitting up of the show cause notices and pass separate adjudication order, directions issued for disposal of the representation of the petitioner to split up the show cause notices for each year separately. petition disposed off. 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.