Audit under Section 65 of CGST

[Veeresham Veerabomma]

Hi Sirs !!!

During the month of April and May, 2024 some of the Tax payers have been received Audit Notices under Section 65 of CGST Act for the year 2019-20, 2020-21 and 2021-22. Subsequent to audit findings tax payers received the adjudication orders only for the year 2019-20 under Section 73. Such piecemeal assessments /adjudications are valid ?

[Shilpi Jain]

As such no restriction in the law. Can be issued for each year as well.

[KASTURI SETHI]

SCN for the period 2019-20 for the normal period (Section 73) was required to be issued up to 31.05.24. This has been done to avoid time bar limit. Hence such SCN in piecemeal is valid in GST laws. In audit based SCN, Section 74 is not invokable inasmuch as every transaction and other entries are recorded in books of accounts. So the allegation of suppression of facts etc. cannot sustain. There are judgements of High Court to this effect.

[Alkesh Jani]

Shri,

I agree with the views expressed by our Experts and I am uncertain of the full relevance of this observation, but it is pertinent to mention the following case for consideration. In the matter of Titan Company, the Hon’ble High Court of Madras made an important observation:

The Court held that the practice of issuing bunches of show cause notices runs contrary to the intent of Section 73 of the Act. Furthermore, the Constitution Bench of the Hon’ble Supreme Court, in the case of State of Jammu and Kashmir and Others v. Caltex (India) Ltd. [1965 (12) TMI 125 - SUPREME COURT], established a crucial legal precedent. The Caourt ruled that when an assessment involves multiple assessment years, each year can and should be treated separately. The items of assessment can be isolated and taxed accordingly for different periods, as each assessment year has its own distinct period of limitation. This period begins independently for each year, which is why the Hon'ble Supreme Court emphasized the need for separating and dissecting the assessments.

Thanks,

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

You have enriched my knowledge by posting the judgement of Hon'ble Supreme Court here. Thank you very much. 

[Ganeshan Kalyani]

Yes, it is allowed to issue SCN for one year even though audit was conducted for three years.

[Veeresham Veerabomma]

Thank you all for the clarification requested. I want one toffee but in turn got two toffees by way of Supreme Court judgement by Alkesh Jani ji. Now the debate continues, surprisingly,  some of the Central Proper Officers passed single order for multiple years under the same Section 65 of the CGST Act. i.e., 2019-20, 2020-21 and 2021-22. Composit / single adjudication order for multiple years? Kindly clarify, sir/s.

[KASTURI SETHI]

As per Adjudication Manual based on Board's instructions, a single adjudication order (also called common adjudication order) for multiple SCNs can be passed, if the issue is same in all the SCNs. This practice is called bunching of SCNs for the purpose of adjudication but Board's circulars have no statutory force. This practice has been in force since long in the department.. This practice was adopted by the department to Govt.'s precious time.

During my service in the department common adjudication orders were passed for multiple SCNs where issue was the same. Most of the cases were dropped so there was no hue and cry.

[KASTURI SETHI]

(i) One SCN or more SCNs and common (single) adjudication order or separate adjudication order is not the issue to be contested. The main purpose of any adjudication order is to provide fair justice to the assessee/noticee and principles of natural justice are to be following by the Adjudicating Authority while passing an order.

(ii) The CBIC's circulars are, orders etc. are issued under Section 168 (1) of CGST Act. 

(iii) Hence the bunching of SCNs for the purpose of adjudication is allowed whether it is pre-GST era or post GST regime.

(iv) You should be concerned with natural justice and NOT with internal administrative mechanism of the department.

[KASTURI SETHI]

If there is overlapping, then taking shelter of Hon'ble Supreme Court (posted by Sh.Alkesh Jani Ji) can be very  very useful in this  scenario.

[Veeresham Veerabomma]

Thanks for getting back to me so quickly with the information I needed. I'm grateful for your rapid reply and the detailed information provided. Your quick action in providing the requested information is invaluable, thank you. Thank you for addressing my information request so promptly.

[KASTURI SETHI]

Sh. Veeresham Veerabomma Ji,

It gives me  immense pleasure to know that you are very much satisfied with OUR replies. 

Thanks a lot.

AI Summary

Debate on Audit Notices Under Section 65 of CGST Act: Piecemeal Assessments Valid, Referencing Supreme Court Judgment. A discussion on a forum addressed audit notices under Section 65 of the CGST Act for multiple years, with adjudication orders issued only for 2019-20 under Section 73. Participants debated the validity of piecemeal assessments, with consensus that such actions are permissible under GST laws. A referenced Supreme Court judgment supports treating each assessment year separately. Some officers issued single adjudication orders for multiple years, which is allowed if the issues are identical. The forum emphasized the importance of fair justice and natural justice principles over administrative practices. Participants expressed gratitude for the shared insights and information.