ADJUDICATION OF MULTIPLE SHOW CAUSE NOTICES

[Dr. Sanjiv Agarwal]

Adjudication of any Show Cause Notice (SCN) is a specialized job which is quasi- judicial in nature and poses many challenges to the adjudicating authority. The process of adjudication becomes a little bit complex when multiple SCNs are involved.

Adjudication

It may be noted that ‘Adjudication’ is the process of deciding an issue relating to tax matters through departmental authorities empowered to determine issues relating to classification, valuation, refund claim, tax or duty payable etc. The department raises demands by way of Show Cause Notices (SCNs) to the assessees when irregularities are observed or suspected.

Adjudication pre-supposes issuance of a show cause notice (SCN) - an intimation to show cause, explain or defend the proposed action as mentioned in the SCN. Infact, SCN is the first limb of principle of natural justice i.e., no one should be condemned unheard. SCN should be clear, precise and unambiguous.

Adjudication has not been defined in the GST laws but according to www. wikipedia. org, “Adjudication is the legal process by which an arbiter or judge reviews evidence and argumentation including legal reasoning set forth by opposing parties or litigants to come to a decision which determines rights and obligation between the parties involved. Three types of dispute are resolved through adjudication:

• Disputes between private parties, such as individuals or corporations.
• Disputes between private parties and public officials.
• Disputes between public officials or public bodies.”

To adjudicate means to decide, determine or to settle. Literally, it means the act of adjudicating, the process of trying and determining a case judicially. The application of the law to the facts and an authoritative declaration of the result.

‘An adjudication in favour of natural rights’. A solemn or deliberate determination by the judicial power: the act of giving judgment.

Black’s Law Dictionary defines the term ‘adjudicate’ so as to mean ‘to settle in the exercise of judicial authority; to determine finally’.

Section 75 of CGST Act, 2017, provides for general provisions for determination of tax. This section provides that the period of stay, if any, would be excluded while calculating the time period for issuance of show cause notice or passing of order. The section further provides that the time period during which appeal is pending in any appellate for a would be excluded while calculating the time period for issuance of such notice or passing of order. This section also provides that no such notice needs to be issued for recovery of unpaid  self-assessed tax as per return and interest thereon. This section also provides that the adjudication proceedings shall be deemed to be concluded if the order is not issued within the statutory time limit.

Section 75 of CGST Act, 2017 sets out the general principles governing the adjudication under the GST law. It provides for the principles and norms to be observed by proper officer carrying out any adjudication under section 73 and 74 or any other provisions of the GST law.

Adjudicating Authority

As per section 2(4) of the CGST Act, 2017, ‘adjudicating authority’ means any authority, appointed or authorized to pass any order or decision under this Act, but does not include the Central Board of Indirect Taxes and Customs, the Revisional Authority, the Authority for Advance Ruling, the Appellate Authority for Advance Ruling, the National Appellate Authority for Advance Ruling, the Appellate Authority, the Appellate Tribunal and the Authority referred to in sub-section (22) of section 71.

In GST, generally it is the ‘proper officer’ who is adjudicating authority but delegation of powers for the purpose of adjudication can be notified in terms of section 167 of CGST Act, 2017. Accordingly, the Commissioner may delegate any power exercisable by any authority or officer which may be exercisable by another authority or officer subject to conditions as per notifications. There may be different adjudicating authorities based upon jurisdiction as also the monetary limits.

The adjudication is done by the departmental officers, and in this capacity they act as quasi-judicial officers. It is an important function of the officers and casts heavy responsibility on the officers invested with the powers of adjudication to use it with utmost care and caution, free from any prejudice or bias. It is important to know and understand the facts of the case, processing them properly and to apply correctly the sections and rules of law or Notifications that may be relevant to the facts of each case.

The law is silent on whether the officer issuing the order has to be the same person who had issued the show cause notice. There is no bar provided in the GST Act in this respect. The officer issuing the order could be the same officer who had issued the show cause notice. Even in the present taxation laws also there is no such bar.

Multiple Notices

Presently, the practice is that if multiple notices are issued to the same taxpayer on the same issue for different periods, the authority adjudicating the notice having the highest value shall adjudicate the other notices.

However, there can be situations wherein multiple taxpayers are identified to be involved with respect to a particular issue. In respect of show cause notices issued by officers of the Intelligence and Enforcement Vertical, there may be cases where the principal places of business of noticees fall under the jurisdiction of multiple adjudicating authorities. There can also be situations where multiple show cause notices are issued on the same issue to different noticees, having the same PAN but different GSTINs and their principal places of business fall under the jurisdiction of multiple adjudicating authorities.

To overcome such challenges, when such a situation arises, the present procedure followed is to transfer the case related to each taxpayer involved in the issue to the respective adjudicating authority after issuance of SCN by the proper officer concerned. This results in a scenario where multiple authorities adjudicate on the same issue, potentially leading to legal challenges.

Recent guidelines on Adjudication of Multiple SCN’s in GST – Kerala

Vide Circular No. 21/2024-Kerala SGST dated 18.11.2024 issued by Office of Commissioner, State Tax, Thiruvananthapuram State GST Department of Kerala has issued a guidelines on adjudication  of multiple Show Cause Notices (SCN’s) issued to same taxpayer or otherwise under different situations, viz,

• Multiple taxpayers are identified to be involved in a particular issue.
• Principal place of business of noticee falls under jurisdiction of multiple adjudicating authorities.
• Multiple SCNs are issued on same issue to different noticees having same PAN with different GSTNs and their principal place of business falls under jurisdiction of multiple adjudicating authorities.

Accordingly, to prevent legal challenges and inconsistency arising from multiple authorities adjudicating the to same issue, a single adjudicating authority shall handle all adjudications in such situations, ensuring uniformity and consistency in decision-making. These guidelines  provide for:

• The Joint Commissioners of taxpayer services are empowered with state-wide jurisdiction.
• When multiple taxpayers across the state are identified to be involved and interconnected in a single detected issue, such show cause notices may be adjudicated, regardless of the amount involved, by the Joint Commissioners of taxpayer services.
• The Show Cause Notices issued by any vertical which require a common adjudicating authority shall be made answerable to the Taxpayer Services Joint Commissioners in the following manner regardless of the amount involved.
• Where the principal place of business of the noticee, having the highest amount of demand of tax or penalty in the said show cause notice(s), falls in a particular district, then the notices issued to all other interconnected noticees, whose principal places of business may fall under the jurisdiction of multiple adjudicating authorities, shall be adjudicated by the. Joint Commissioner of Taxpayer Services of that specific district.
• Where multiple taxpayers involved in a single issue are identified to be located in the same district, but under the jurisdiction of different adjudicating authorities, to bring uniformity in adjudication, irrespective of the amount involved, all SCNs shall be adjudicated by the Joint Commissioner of Taxpayer Services vertical of that district.
• If any connected penalty notices have been issued under any section along with notices issued under sections 73/74/76 of the Kerala SGST Act, then those notices too shall be adjudicated by the common adjudicating authority.