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of <h1>Writ petition dismissed following precedent on clubbing of show-cause notices; tax demand, interest and penalty left per prior ruling</h1> <h3>M/s. NSV Labour Contractor Versus The Assistant Commissioner (Central Tax), The Deputy Commissioner, Superintendent of Central GST, Coimbatore</h3> HC dismissed the writ petition by disposing it on the same lines as an earlier HC decision addressing clubbing/bunching of show-cause notices where tax ... Clubbing/bunching of SCN - Demand of tax with interest and penalty - HELD THAT:- Considering the fact that the legal issue involved in this Writ Petition has already been dealt with by this Court in SMT R ASHAARAJAA, J. RAJENDRAN, R. DEEPAK VIGNESHVAR AND OTHERS [2025 (7) TMI 1402 - MADRAS HIGH COURT], this Court is inclined to dispose of the present Writ Petition on the same lines. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether show cause notices and assessment/orders under the GST statute can be clubbed/issued for more than one financial year (bunching of show cause notices) or must be confined to the tax period as defined by returns filed. 2. Whether a show cause notice issued after filing of annual returns or after commencement of limitation must be framed with reference to annual returns for the relevant financial year rather than monthly returns. 3. Whether a writ petition is maintainable to quash or restrain a scrutiny notice in form ASMT-10 where the statutory remedy of filing a reply to the scrutiny notice remains available. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legality of clubbing show cause notices for multiple financial years Legal framework: The GST statutory scheme contemplates issuance of show cause notices and assessments with reference to tax periods determined by returns; assessments and demand proceedings are governed by the CGST/TNGST Act, 2017 (Section 73 invoked in the impugned order). Precedent treatment: The Court followed its prior decision rendered in a batch of writ petitions (operative directions dated 21.07.2025) addressing the same legal question and applied the holdings in the present matters. Interpretation and reasoning: The Court reasoned that the GST Act permits issuance of show cause notices based on the tax period. Where an annual return is filed, the entire financial year constitutes the tax period and the notice must be founded on the annual return. The statutory architecture thus precludes aggregating liabilities across more than one financial year into a single show cause notice. Clubbing notices for multiple years was held to be impermissible as it departs from the tax-period-based regime established by the statute and returns system. Ratio vs. Obiter: The holding that no show cause notice can be clubbed for more than one financial year and that such clubbed notices/orders are liable to be quashed is ratio decidendi; it is the operative legal principle applied to dispose of the petitions challenging multi-year notices. Conclusion: Show cause notices and consequent orders that impermissibly combine more than one financial year are quashed. The Department remains free to initiate separate proceedings for individual financial years in accordance with the statutory scheme. Issue 2 - Proper tax period reference when annual returns are filed or limitation has begun Legal framework: The GST return framework distinguishes monthly (or periodic) returns and annual returns; limitation and timing of issuance of show cause notices interplay with whether annual returns have been filed. Precedent treatment: The Court adopted the approach in its earlier decision that distinguishes between notices issued before and after filing of annual returns (and also addresses notices issued after commencement of limitation). Interpretation and reasoning: The Court set out a tripartite rule: (i) where annual return is filed, the entire year is the tax period and show cause notice shall be issued on the basis of annual returns; (ii) if a show cause notice is issued before filing of annual returns, the notice may be based upon monthly returns; (iii) if a show cause notice is issued after filing of annual returns or after commencement of limitation, the notice shall be based on annual returns for the relevant financial year. This interpretation flows from the statute's fixation of tax periods by returns and from the need to respect the evidentiary and substantive significance of annual returns once filed, as well as limitation constraints. Ratio vs. Obiter: The three-part rule is treated as ratio and operative guidance for future issuance of show cause notices under the GST scheme; it is applied directly to quash notices issued in breach of these principles. Conclusion: Notices must be framed with reference to the appropriate tax period determined by return filing timing; notices issued in contravention of this temporal/tax-period requirement are invalid insofar as they impermissibly aggregate periods or ignore the status of annual returns or limitation. Issue 3 - Scope of writ relief against scrutiny notices (ASMT-10) where statutory reply remedy exists Legal framework: Scrutiny proceedings in ASMT-10 under the GST regime require the recipient to respond; statutory procedure contemplates filing replies and engaging with the authority rather than immediate judicial intervention in every instance. Precedent treatment: The Court declined to grant preemptive relief by quashing or staying a scrutiny notice where the petitioner had not exhausted or attempted the available statutory response remedy; this approach aligns with the principle that interim judicial intervention is not warranted where efficacious administrative remedies exist. Interpretation and reasoning: The Court found no merit in entertaining the writ petition challenging the ASMT-10 scrutiny notice. It emphasized that the petitioner can and should file a reply before the authority and substantiate its case within the statutory process. Accordingly, judicial relief was withheld and the writ petition was dismissed with liberty to respond to the scrutiny notice within a stipulated period (four weeks). Ratio vs. Obiter: The conclusion that the writ petition challenging a scrutiny notice is not maintainable where the statutory reply remedy remains open is ratio in respect of the present petition; the Court's directive to file a reply within a specified time is an operative order rather than mere obiter. Conclusion: Judicial intervention to quash or restrain a scrutiny notice in ASMT-10 is inappropriate where the taxpayer can file a reply and pursue the statutory process; the petition was dismissed with liberty to respond to the scrutiny notice within a fixed period. Cross-references and Practical Consequences 1. Issues 1 and 2 are interrelated: the tax-period rule (Issue 2) supplies the legal basis for prohibiting clubbing of show cause notices across financial years (Issue 1). 2. The Court clarified that quashing of clubbed notices does not preclude the Department from issuing independent show cause notices in accordance with law for individual years or periods, provided such notices respect the tax-period/return-timing rules and limitation constraints. 3. Where a statutory mechanism to reply or to be heard exists (as with ASMT-10 scrutiny), the administrative remedy should ordinarily be exhausted before seeking judicial relief; urgent court interference is reserved for cases where administrative process is shown to be inadequate or unlawful on its face.
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