Section 74 of CGST, Goods and Services Tax - GST

[Vikas Dahiya]

Respected Sir/ Madam

I humbly seek your valuable suggestions to my query We have received a SCN u/s 74 pursuant to audit u/s 65 of the CGST Act. A single SCN is issued for two years FY 2019-20 to FY 2020-21. However, the summary of SCN in Form GST DRC-01 is issued only for one year FY 2019-20. The order is also passed for consolidated period of two years but the summary of order in DRC-07 is issued only for one year FY 2019-20. My query is - Whether legality of SCN and the Order can be challenged on this ground?

Posts / Replies

[KASTURI SETHI]

Yes, it is challengeable.

Summary of the SCN is not a substitute for SCN-----Gauhati High Court reported as 2024 (12) TMI 828 - GAUHATI HIGH COURT.

Also see the  judgments of Chhattisgarh High Court, A.P. High Court, Delhi High Court,, Telangana High Court and Jharkhand High Court.

Issue ID of 2024 (12) TMI 827 - GAUHATI HIGH COURT.

You will get sufficient legal material in your favour.

[Vikas Dahiya]

Thankyou very much Sir.

[Sadanand Bulbule]

Absolutely right Sir

[Vikas Dahiya]

Respected Sirs, 

Sorry for the inconvenience, it seems that I am not able to explain my query in a proper way.

My query is that a single SCN u/s 74 has been received on email covering two years FY 2019-20 to FY 2020-21 along with Summary of SCN uploaded on portal, but in the summary the period mentioned is only FY 2019-20. Although the amount of tax, interest, penalty as per SCN and Summary of SCN are same. Similarly, a single demand order has been issued for two years FY 2019-20 to FY 2020-21 along with Summary of Order, but in the summary the period mentioned is only FY 2019-20. Demand raised is matching.

So, can this be treated as a typo error or it has some legal implications.

[KASTURI SETHI]

It is a typo error and  not challengeable. 

Regarding a single SCN for multiple years the case laws have already  been mentioned above.

You are to examine yourself on the basis of above mentioned  judgements of High Courts. 

Another judgement :

 "A single consolidated SCN for multiple years is invalid-------Kerala High Court".

  TMI  ID :764339 - 2025 (1) TMI 401 - KERALA HIGH COURT

   My view : The department will not accept such  judgments  and the matter will travel to the Hon'ble Supreme Court.  Until and unless the issue is decided by the Supreme Court, such practice will continue.

[RAHUL MODI]

The CBIC Instruction No. 04/2023-GST (dated 23.11.2023) mandates that summaries of notices (GST DRC-01) and orders (GST DRC-07) must be uploaded electronically, ensuring procedural compliance. However, this instruction does not explicitly mandate separate SCNs for each financial year under Sections 73 and 74.

The requirement for separate SCNs per financial year is rooted in judicial precedents and statutory interpretation rather than this instruction. Courts, including the Kerala High Court, have ruled that each financial year is an independent assessment unit, requiring separate proceedings to ensure adherence to statutory timelines and the principles of natural justice.

The onus remains on taxpayers to contest such consolidated SCNs based on established legal grounds.

[KASTURI SETHI]

It is better to contest the case on merits rather than on such technical ground. 

[Vikas Dahiya]

Thankyou very much to all the experts for such a valuable and timely support.

Dear Sir, at the time of filing online appeal Form GST APL-01, there is a requirement to select option "Is the order pertaining to multiple financial years" and if "Yes" is selected then it further requires to fill the Order number issued by the adjudicating authority, which is available on the Summary of Order DRC-07.

Now, in my situation, the order u/s 74 pertain to multiple financial years FY 2019-20 to FY 2020-21 but Summary of Order DRC-07 pertain to one financial year FY 2019-20. Due to this, the system is not accepting the order number available on the Summary of Order when I select option"Yes" at the time of filing APL-01. But, when I select option "No", the system allows to proceed further.

Whether appeal filed against multiple year order by selecting option "No" is admissible or it will be rejected at later stage on this issue.

Please share your valuable suggestions.

[k.lakshmipati rao]

Dear Mr.Vikas Dahiya Ji.

I draw your attention to Rule 108(1)(ii) of CGST Rules 2017, relevant to "Appeal to the Appellate Authority" in FORM GST APL-01, reproduced herein below for your perusal.

Rule 108(1) of CGST Rules 2017: Provided that an appeal to the Appellate Authority may be filed manually in FORM GST APL-01, along with the relevant documents, only if -----

sub rule (ii) of 108(1) - the same cannot be filed electronically due to non-availability of decision or Order to be appealed against on common portal,

and in such case, a provisional acknowledgement shall be issued to the appellant immediately.

[Ramaswamy S]

You may refer to the Supreme Court decision in the case of State of Jammu & Kashmir vs Caltex (India) Limited - 1965 (12) TMI 125 - SUPREME COURT wherein it is held that where an assessment encompasses different years, each assessment year could be easily split up an 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 shall have a separate period of limitation and the limitation will start independently. This judgment was cited / referred by Madras High Court in the case of Titan Company Ltd reported in 2024 (1) TMI 619 - MADRAS HIGH COURT. Snippets below:

HELD THAT:- Issuing bunching of show cause notices is against the spirit of provisions of Section 73 of the Act and the Constitution Bench of the Hon'ble Apex Court in the decision reported in State of Jammu & Kashmir vs Caltex (India) Limited - 1965 (12) TMI 125 - SUPREME COURT 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.

Very recently, Karnataka High Court citing the Madras High Court decision and the Apex Court in the case of Albatorss Builders - 2024 (12) TMI 656 - KARNATAKA HIGH COURT has set aside the consolidated SCN.

Regards

s ramaswamy, 9008015293

[KASTURI SETHI]

Issuing a consolidated SCN for multiple years was a common practice in pre-GST era and  is also in post-GST regime and this practice is still going on.  The department may file appeal against the judgements of various High Court with the Hon'ble Supreme Court.

[KASTURI SETHI]

During my 33 years of service in the department, a large number of consolidated SCNs for multiple years were issued. These were not issued without any basis or without any authority of law.

Now the law is being interpreted differently and on the basis of practice being followed as per  Income Tax  Act.

[Ramaswamy S]

Dear Sir,

Agree to your views. The Central GST may go for appeal but I do not think so the state will.

My submission here is as under:

Pre GST, it was under a CE law wherein the Department unilaterally issued a consolidated SCN whereas the VAT/ Sales Tax the assessment was for a financial year. This is the basis.

The High Court decision in the case of Titan Company Ltd reported in 2024 (1) TMI 619 - MADRAS HIGH COURT is based on the Apex Court ruling. The Apex Court ruling is right wherein it is clearly dissected the matter.

No matter would advise to file the appeal based on these HC decisions. 

Regards

s ramaswamy

[KASTURI SETHI]

Dear Sir,

          Happy to see you  back in Discussion Forum.

  New issue has been triggered. Interpretational dispute. Such dispute will be solved by Hon'ble Supreme Court. Matter of time only. 

          Restricting myself to opine further.

[Ramaswamy S]

Dear Sir,

Thank you.

Please refer to Section 73(10) CGST Act which reads as :

"The proper office shall issue the order under sub rule (9) within 3 years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or ITC wrongly availed or utilised relates to or within three years from the date of erroneous refund."

The law is clearly stated that the order is wrt financial year. The time limit of three years is stated. 

There is no ambiguity. The order to be issued for each financial year pertaining to the notice issued under sub section 9 of Section 73.

Similarly, sub section (10) of Section 74 talks about five years from the due date of furnishing of annual return for the financial year.

Thus, the notice issued is for a financial year and not a consolidated scn/ order. This is the limitation which has the precedent in the Supreme Court decision.

Regards

s ramaswamy

[KASTURI SETHI]

Dear Sir,

Different CGST Offices and Different SGST Offices from different States are issuing a consolidated SCN for multiple years. In the last week I came across two such SCNs issued to the tax payers. This practice is still going on.

[Ramaswamy S]

Dear Sir,

Yes Sir.

We also have received a consolidated order for a consolidated SCN from CGST. Have filed the appeal citing the decision of the jurisdictional HC (Karnataka HC). The authorities are bound by the decision of the jurisdictional HC.

However, for the other units that are under SGST jurisdiction, the assessment / notices / orders are restricted only to a financial year.

Regards

s ramaswamy

[KASTURI SETHI]

2025 (1) TMI 518 - BOMBAY HIGH COURT - M/S. RIOCARE INDIA PRIVATE LIMITED VERSUS ASSISTANT COMMISSIONER CGST AND C. EX. & ORS.

Issuance of one SCN for multiple years - petitioner argued that separate notices should have been issued for each financial year within this period - wrongful availment of ITC - HELD THAT:- There is nothing in Section 74 and more particularly 74 (1) which would prohibit the Authority from issuing a notice calling upon the assessee to pay tax that has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised, by reason of fraud, or any wilful misstatement or suppression of facts to evade tax. At least prima facie, a notice under Section 74 (1) can be issued for any period provided said notice is given at least 6 months prior to the time limit specified in sub-section (10) of Section 74 for issuance of the order.

In the present case, admittedly there is no issue of limitation as contemplated under Section 74(10). In these circumstances, at least prima facie we are not satisfied that this Writ Petition ought to be entertained and which is challenging the show cause notice. The Petitioner will have to face the show cause notice and can canvass all arguments before the authority concerned, including the issues raised in the present Writ Petition.

[DEEPANSHU AGARWAL]

Can a single SCN for 2017-18, 2018-19 & 2019-20 be issued on 05-08-2024 (within time limit for 2017-18) u/s 74 to multiple parties by Superintendent CGST Anti Evasion to cover multiple parities and annexing the list of parties in the Annexure of one single notices (as addresses) and the search parities (fraudulent suppliers) as second annexure in the said notice.

Thereby issuing a single SCN U/s 74 for 2017-18, 2018-19 & 2019-20 to more than 50 parties. Is such notice valid ??

[Yash Shah]

According to rule 142(1)(a) of the CGST Rules 2017, The proper officer shall serve, along with the notice inter alia u/s 74, a summary thereof electronically in form DRC-01.

Further, according to sub-rule 5 of the said rule, a summary of the order issued inter alia u/s 74 shall be uploaded electronically in form DRC-07, specifying therein the amount of tax, interest and penalty, as the case may be, payable by the person concerned.

In this case, since DRC-01 & DRC-07 are not uploaded electronically with respect to notice & order for FY 2020-21, therefore, legality of SCN & Order can be challenged on this ground.

Moreover, since a single SCN is issued for multiple years, therefore, SCN can also be challenged on the ground that separate notice needs to be issued for each FY.