Interim protection granted against composite demand-cum-show cause notice u/s 74 CGST Act, following consistent precedents

HC, dealing with a challenge to a composite demand-cum-show cause notice issued u/s 74 of the CGST Act, 2017 for multiple tax periods, held that the matter requires further consideration. Noting that a coordinate bench had earlier granted a reasoned interim order on the same issue and no contrary view existed, and that three other HCs had decided similarly in favour of assessees, the HC applied the rule of consistency and granted interim protection to the petitioner and similarly placed matters. The interim application was accordingly disposed of.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the challenge to a combined / composite demand-cum-show cause notice under Section 74 of the Central Goods and Services Tax Act, 2017, covering multiple tax periods and alleged to lack year-wise / item-wise break-up, raises a substantial legal issue warranting consideration.

1.2 Whether, in the presence of a prior reasoned interim order by a coordinate bench on the same legal issue and supportive decisions from other High Courts, interim protection from coercive recovery ought to be granted in the present and connected matters, despite a contrary view of another High Court.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Legality and justiciability of a combined / composite demand-cum-show cause notice under Section 74 CGST Act

Legal framework (as discussed)

2.1 The Court notices that the impugned combined demand-cum-show cause notices have been issued under Section 74 of the Central Goods and Services Tax Act, 2017 for multiple financial years, and that in an earlier writ petition on the same point, specific objections were raised to (i) issuance of a combined notice without disclosing year-wise / item-wise tax liability on various kinds of sales, and (ii) invocation of Section 74 itself.

2.2 The Court takes note that, in the earlier matter, while the authority cursorily stated that there was no legal infirmity in invoking Section 74, it did not advert to or deal with the specific objection relating to the impermissibility of issuing a composite notice.

2.3 The Court records that a Division Bench of another High Court (Kerala) has held that issuance of a composite notice could not have been the scheme of the statutory provisions, which are expected to adhere to principles of fairness in taxation, and that three other High Courts (Madras, Karnataka and Bombay) have taken a similar view favouring the assessee, while another High Court (Delhi) has taken a contrary view in favour of the revenue.

Interpretation and reasoning

2.4 The Court observes that the issue concerning validity of a combined / composite notice under Section 74, particularly one not disclosing year-wise / item-wise tax liability, is already engaging the attention of the Court in earlier writ petitions where a reasoned interim order has been passed, and is supported by multiple High Court decisions favouring the assessee.

2.5 The Court notes that no contrary order has been passed by any other bench of the same Court on this legal question and that, prima facie, the issue is "purely legal" and requires deeper consideration on merits.

Conclusions

2.6 The Court concludes that the legality of the impugned combined / composite demand-cum-show cause notice under Section 74, and allied objections to the mode and manner of initiation of proceedings, raise substantial legal issues that "require consideration", justifying admission and detailed hearing along with the previously instituted writ petitions.

Issue 2 - Grant of interim protection and application of rule of consistency

Interpretation and reasoning

2.7 The Court notes that in an earlier writ petition involving the same legal issue, a coordinate bench has already "entertained that writ petition and granted interim protection" by staying recovery pursuant to the order-in-original, after taking into account the Kerala High Court judgment and the nature of objections raised to the composite notice.

2.8 The Court further notes that in at least one other connected writ petition, interim stay of recovery pursuant to the order-in-original was also granted, and in the remaining connected matters, stay applications remain pending without any interim protection having been granted or rejected.

2.9 The Court observes that, on the same legal issue, three High Courts (Kerala, Madras, Karnataka, Bombay) have taken a view in favour of the assessee, whereas another High Court (Delhi) has taken a contrary view in favour of the revenue; nevertheless, within this Court, there exists already a reasoned interim order granting protection, and "no contrary order has been passed by any other bench."

2.10 Emphasising the "rule of consistency" as a means to ensure transparency in court proceedings, the Court holds that, so long as there is no contrary view within the same Court, it is appropriate and necessary to follow the earlier reasoned interim order on the same legal issue in similarly situated cases.

Conclusions

2.11 The Court holds that "matter requires consideration" and, having regard to (i) the prior reasoned interim order by a coordinate bench on the same issue, (ii) the supportive views of multiple other High Courts, and (iii) the need for consistency and transparency, a case for interim protection is made out in the present writ petition and the similar petitions listed.

2.12 The Court directs that all such matters be connected and listed together on a specified date in the "top ten" with a clear indication that, subject to time availability, further adjournment of hearing may not be granted.

2.13 The Court grants interim relief by directing that, till the next date of listing, "no coercive measures may be adopted against the petitioner pursuant to the impugned show cause notice," thereby staying coercive recovery steps in respect of the impugned proceedings under Section 74.

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