A Single Show Cause Notice cannot be issued for multiple tax periods

[CA Bimal Jain]

The Hon’ble High Court of Karnataka in the case of M/S. VEREMAX TECHNOLOGIE SERVICES LIMITED VERSUS THE ASSISTANT COMMISSIONER OF CENTRAL TAX BENGALURU. - 2024 (9) TMI 1347 - KARNATAKA HIGH COURT held that single Show Cause Notice (“SCN”) cannot be issued for multiple tax periods because particular action must be completed within a designated year, and that same is consolidated in section 73(10) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) that prescribes a specific time limit for furnishing annual return for the Financial Year to which the tax due relates.

Facts:

M/s Veremax Technologies Services Limited (“the Petitioner”) were served SCN dated November 21, 2023 (“the Impugned Notice”) for tax periods 2017-18, 2018-19, 2019-20 and 2020-21 by the Assistant Commissioner (“the Respondent”).

The Petitioner contended that the Impugned Notice issued under Section 73 of the CGST Act are flawed due to the improper consolidation of multiple tax periods into a single SCN.

Hence, aggrieved by the Impugned Notice, the present writ petition was filed by the Petitioner

Issue:

Whether a single SCN can be issue for multiple tax periods?

Held:

The Hon’ble High Court of Karnataka in M/S. VEREMAX TECHNOLOGIE SERVICES LIMITED VERSUS THE ASSISTANT COMMISSIONER OF CENTRAL TAX BENGALURU. - 2024 (9) TMI 1347 - KARNATAKA HIGH COURT held as under:

• Relied on, the case of TITAN COMPANY LTD., REPRESENTED BY ITS AUTHORIZED SIGNATORY MR. P. MANIVANNAN VERSUS THE JOINT COMMISSIONER OF GST & CENTRAL EXCISE, THE ADDITIONAL COMMISSIONER OF GST & CENTRAL EXCISE - 2024 (1) TMI 619 - MADRAS HIGH COURT the Hon’ble Madras High Court further relied on, the Hon’ble Apex Court in the case of THE STATE OF JAMMU AND KASHMIR AND OTHERS VERSUS CALTEX (INDIA) LTD. - 1965 (12) TMI 125 - SUPREME COURT where an assessment encompasses different assessment years, each assessment order can be distinctly separated and must be treated independently.
• Noted that, the Respondent erred in issuing a consolidated SCN for multiple assessment years, spanning from 2017-18 to 2020-21.
• Observed that, Section 73(10) of the CGST Act mandates a specific time limit from the due date for furnishing the annual return for the financial year to which the tax due relates. The law stipulates that particular actions must be completed within a designated year, and such actions should be executed in accordance with the law's provisions. The principles enunciated in the judgment cited by the Hon’ble Supreme Court are directly applicable to the present case.
• Held that, the Impugned Notices issued by the Respondent are fundamentally flawed. The practice of issuing a single, consolidated SCN for multiple assessment years contravenes the provisions of the CGST Act and established legal precedents.

Our Comments:

Section 73 of the CGST Act governs “Determination of tax, pertaining to the period up to Financial Year 2023-24, not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful-misstatement or suppression of facts.” Section 73(10) of the CGST Act states that the proper officer shall issue the order under 73 (9) of the CGST Act within three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund.

The GST Council in its 49^th meeting recommended that it may not be desirable to extend the timelines in such a manner so that it may lead to bunching of last date of issuance of SCN/order made under Section 73 and 74 of the CGST Act for a number of financial years and they have extended the limitation period specified under Section 73(10) of the CGST Act, separately for each financial year and accordingly, the time limit is extended

Therefore, issuing bunching of SCN is against the spirit of provisions of Section 73 of the CGST Act and the Constitution Bench of the Hon'ble Apex Court in the decision reported in Caltex (India) Ltd.'s case (supra) has held that where an assessment encompasses different assessment years, each assessment year could be easily split up and dissected and the items can be separated and taxed for different periods. The said law was laid down keeping in mind that each and every Assessment Year will have a separate period of limitation and the limitation will start independently and that is the reason why the Hon'ble Supreme Court has held that each assessment year could be easily split up and dissected and the items can be separated and taxed for different periods. The said principle would apply to the present case as well.

The limitation period of three years would be separately applicable for every assessment year and it would vary from one assessment year to another. It is not that it would be carried over or that the limitation would be continuing in nature and the same can be clubbed. The limitation period of three years ends from the date of furnishing of the annual return for the particular financial year.

Similar, judgment was passed by the Hon’ble High Court of Karnataka in the case of M/S. BANGALORE GOLF CLUB VERSUS ASSISTANT COMMISSIONER OF COMMERCIAL TAXES, KORAMANGALA, BENGALURU - 2024 (10) TMI 116 - KARNATAKA HIGH COURT.

(Author can be reached at [email protected])