2024 (12) TMI 656 - HC - GST

Consolidated show cause notice for multiple financial years invalidated; respondent may issue separate notices for each year.

Challenge to a consolidated show cause notice issued under GST for multiple financial years: the consolidated issuance was found improper because ... Consolidated show cause notice for multiple financial years - different cause of action for each financial year - time barred notices - show cause notice under Section 74 of the CGST Act - liberty to issue separate show cause notices for each financial yearConsolidated show cause notice for multiple financial years - different cause of action for each financial year - time barred notices - Validity of a single show cause notice issued for the period January-2018 to August-2022 - HELD THAT: - The Court held that liability for each financial year constitutes a distinct cause of action because rate of tax, interest and penalty and the question of limitation may vary year to year. Relying on the Coordinate Bench's reasoning in W.P.No.15810/2024 (T-RES), a consolidated show cause notice spanning multiple financial years is impermissible in the circumstances explained, and therefore the impugned single notice covering January-2018 to August-2022 cannot be sustained. The segregation in a subsequent summary did not cure the vice of issuing one notice for several years. [Paras 6, 7, 8]The consolidated show cause notice for the entire period January-2018 to August-2022 is set aside.Show cause notice under Section 74 of the CGST Act - liberty to issue separate show cause notices for each financial year - Consequent relief and directions regarding fresh proceedings - HELD THAT: - The Court, after setting aside the impugned consolidated show cause notice and its summary, preserved the respondent's right to proceed afresh. The respondent is granted liberty to issue appropriate separate show cause notices for each financial year and to proceed in accordance with law, thereby permitting re adjudication on a year by year basis subject to applicable legal limits including limitation. [Paras 8]Impugned show cause notice and its summary are quashed, with liberty to the respondent to issue separate show cause notices for each financial year and proceed according to law.Final Conclusion: The writ petition is allowed in part: the consolidated show cause notice dated 22.07.2024 and its summary dated 03.08.2024 are set aside; liberty is reserved to the respondent to issue separate show cause notices for each financial year and proceed in accordance with law; the writ petition is disposed of. Issues:1. Can the respondent issue one show cause notice for several financial yearsRs.Detailed Analysis:The petitioner, involved in the restaurant business and registered under the Central Goods and Services Tax Act, 2017, challenged a show cause notice alleging erroneous Input Tax Credit availed from January 2018 to August 2022. The petitioner contended that separate notices should have been issued for each financial year, citing past court decisions supporting this argument. The respondent, however, defended the consolidated notice, stating no legal prohibition against it and detailing the erroneous claims and penalties in the summary notice.The primary issue before the court was whether the respondent could issue a single show cause notice covering multiple financial years. Citing a previous decision in a similar matter, the court highlighted that each financial year's liability constitutes a distinct cause of action due to varying tax rates, interests, and penalties. The court emphasized that notices for different years could have different time limitations, justifying the need for separate notices.The court analyzed the impugned show cause notice, clarifying that it indeed covered the entire period from January 2018 to August 2022. Despite the summary segregating liabilities by financial year, the court relied on precedent and held that a consolidated notice was impermissible. Consequently, the court set aside the show cause notices, granting the respondent the liberty to issue separate notices for each financial year and proceed lawfully against the petitioner.In the final order, the court explicitly set aside the original show cause notice and its summary, reserved the respondent's right to issue separate notices for individual financial years, and disposed of the writ petition, thereby concluding the legal proceedings on this matter.