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of <h1>Quashing of single SCN and two adjudication orders; relief on retrospective/prospective effect of Rules 42(1)(f) and 42(3) CGST</h1> <h3>M/s. Emmanuel Constructions Private Ltd., Versus The Principal Secretary to The Govt. Finance Department Bengaluru, Deputy Commissioner of Commercial Taxes (Audit) -4. 9, Bengaluru, The Assistant Commissioner of Commercial Taxes (Enforcement) -21 Bangalore.</h3> The HC allowed the petition, quashing two adjudication orders and the impugned show-cause notice issued in November 2023, and issued consequential ... Issuance of single SCN for multiple assessment years - issuance of SCN by one single officer wheras the impugned orders are passed separately by two different officers - explanation to Rules 42(1)(f) and 42(3) of the Central Goods and Services Tax (CGST) Rules, 2017 were inserted w.e.f. 01.04.2019, prospective or retrospective in nature - HELD THAT:- It is deemed just and appropriate to dispose of this petition by quashing the impugned adjudication order at Annexure-A bearing No. DCCT(Audit)-4.9/GST/DRC-7/T.No./2024-25, dated 31.08.2024 and another adjudication order dated 19.07.2024 at Annexure-H bearing No. JCCT/DGSTO-4/ACCT (AUDIT)-4.6/GST/U-73/T/2024-25 and the impugned Show cause notice dated 23.11.2023 at Annexure-C bearing No. ADCOM/ENF/ACCT-21/DRC-01/INS 1547/2023-24 and by issuing directions. Petiiton allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a single show cause notice in Form GST DRC-01 encompassing two assessment years/tax periods (2019-20 and 2020-21) is permissible under the GST framework. 2. Whether issuance of a single show cause notice by one officer and issuance/passing of separate adjudication orders by different officers for the same notice is legally permissible. 3. Whether the Explanation to Rules 42(1)(f) and 42(3) of the CGST Rules, 2017 (inserted w.e.f. 01.04.2019) could be relied upon retrospectively for the purpose of adjudication in the tax periods in question. 4. Whether quashing the impugned show cause notice(s) and adjudication order(s), with liberty to issue fresh notice(s) and exclusion of the period from 23.11.2023 till date for limitation under Section 73(10) of the KGST Act, 2017, is appropriate relief. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of a single show cause notice covering multiple assessment years/tax periods Legal framework: The GST procedural regime contemplates issuance of show cause notices in prescribed forms (Form GST DRC-01) addressing specific tax periods and taxable events; statutory and rule-based requirements regulate the scope and particulars of notices. Precedent treatment: No specific prior judicial precedent is referred to or applied in the judgment to permit or prohibit multi-period notices; the Court considered the statutory scheme and practice as reflected in the record. Interpretation and reasoning: The Court accepted the petitioner's contention that the impugned show cause notice encompassed two assessment years/tax periods (2019-20 and 2020-21), which was characterized as impermissible in law. The reasoning endorses the principle that a show cause notice must be appropriately confined to the matters and periods it purports to address so as to preserve clarity of cause, opportunity to reply, and procedural regularity. Ratio vs. Obiter: Ratio. The Court treated the multi-period character of the notice as a fundamental infirmity warranting quashing of the notice and consequential proceedings. Conclusions: The impugned show cause notice in Form DRC-01 that encompassed two tax periods was quashed as impermissible; the defect was considered substantial enough to invalidate subsequent adjudication orders premised on that notice. Issue 2: Legality of different officers passing separate adjudication orders arising from a single notice issued by one officer Legal framework: Administrative adjudication under GST requires adherence to principles of delegated authority, proper issuance of notice, and consistent exercise of adjudicatory power by competent officers; procedural fairness and service of notice are central. Precedent treatment: The Court did not cite or follow any specific authority allowing the splitting of adjudicatory responsibility between officers in respect of a single notice; it treated the practice as impermissible on the facts. Interpretation and reasoning: The Court accepted the petitioner's contention that although the show cause notice was issued by a single officer, the impugned orders were passed separately by two different officers. This disjunction was treated as a procedural irregularity incompatible with lawful adjudication, undermining the continuity and integrity of proceedings initiated by the original notice. Ratio vs. Obiter: Ratio. The Court held that the splitting of adjudication between different officers in respect of a single notice is a ground for quashing the resultant orders. Conclusions: The impugned adjudication orders passed by different officers pursuant to a single notice were quashed as impermissible procedural action. Issue 3: Reliance on Explanation to Rules 42(1)(f) and 42(3) of the CGST Rules, 2017 (inserted w.e.f. 01.04.2019) and question of retroactivity Legal framework: Amendments and explanations to rules have prospective application unless expressly made retrospective; reliance on amendments for adjudication of earlier periods raises questions of retrospectivity and legal validity. Precedent treatment: No prior authority was cited to validate reliance on the Explanation retrospectively; the Court considered the temporal operation of the Explanation in light of the periods under adjudication. Interpretation and reasoning: The petitioner contended the Explanation inserted w.e.f. 01.04.2019 could not be relied upon if it operated retrospectively. The Court noted this contention as a asserted ground for quashing the impugned order, finding that reliance on the Explanation for purposes of adjudication in the relevant periods was impermissible (on the facts and submissions), and thus constituted an additional basis for quashing. Ratio vs. Obiter: Mixed. The Court relied on this ground in quashing the order on the facts, but did not lay down a broad doctrine on every instance of reliance on post-insertion Explanations; the holding is ratio as applied here but limited to the particular circumstances. Conclusions: The impugned adjudication order could not lawfully rely on the Explanation to Rules 42(1)(f) and 42(3) as applied in the adjudication impugned, and this was a valid ground supporting quashment. Issue 4: Appropriateness of relief - quashing notices/orders, reserving liberty to issue fresh notices, and exclusion of period for limitation under Section 73(10) KGST Act Legal framework: Judicial review remedies include quashing of defective administrative orders; courts may grant liberty to reinitiate proceedings lawfully; limitation statutes (here Section 73(10) KGST Act, 2017) allow exclusions of certain periods where justice requires and where statute contemplates such exclusion. Precedent treatment: The respondents expressly reserved the right to issue fresh notice(s) and agreed to exclusion of the specified period for limitation; the Court adopted a remedial course consistent with principles of fairness, procedural regularity, and statutory limitation provisions. Interpretation and reasoning: Considering mutual submissions, the Court found it just to quash the impugned show cause notice and adjudication orders (dated 23.11.2023, 19.07.2024 and 31.08.2024) and to permit respondents to issue fresh notice(s) in accordance with law. The Court ordered exclusion of the period from 23.11.2023 till date for limitation purposes under Section 73(10) KGST Act, 2017. The petitioner was granted liberty to contest any fresh proceedings on all grounds except the limitation ground, consistent with the period exclusion. Ratio vs. Obiter: Ratio. The remedial course ordered (quashment with liberty to reissue and exclusion of specified period under Section 73(10)) constitutes the operative disposition and is binding as applied to these proceedings. Conclusions: The Court quashed the impugned notice and adjudication orders, reserved liberty for issuance of fresh notice(s) and proceedings in accordance with law, excluded the period from 23.11.2023 till date for limitation under Section 73(10) KGST Act, 2017, and entitled the petitioner to contest any fresh proceedings on all grounds except limitation (given the exclusion). Cross-References and Interrelationship of Issues The procedural defects identified in Issues 1 and 2 (multi-period notice and splitting of adjudication between different officers) and the impermissible reliance on the Explanation (Issue 3) were treated cumulatively as justifying quashment. The remedial directions in Issue 4 flow directly from the conclusions on Issues 1-3: quashment was ordered to cure the procedural and substantive infirmities, while liberty to reissue and exclusion of limitation period preserve the respondents' ability to proceed lawfully and the petitioner's right to fair adjudication.
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