Case Law Details
Kerala State Self-Financing B. Pharm College Management Association Vs Intelligence Officer (Kerala High Court)
The Kerala High Court examined a writ petition filed by an association of 36 self-financing pharmacy colleges challenging a show cause notice issued under Section 63 of the CGST/KGST Act proposing tax assessment and penalty. The petitioner contended that the notice was legally unsustainable on two primary grounds: first, it was a composite notice covering multiple assessment years; and second, it reflected a pre-determined conclusion that the petitioner was liable for GST registration and tax, despite the petitioner’s claim of exemption under entry 66(b)(iv) of Notification No. 12/2017 relating to services connected with admission or conduct of examinations.
The petitioner argued that the preliminary issue of whether it was required to obtain GST registration had to be decided before initiating assessment proceedings. However, the language of the notice indicated that the authority had already concluded that the petitioner was liable to register and pay tax and penalty. The respondent contended that the issue of registration and tax liability would be determined after examining relevant documents and the nature of services provided.
Upon consideration, the Court found that the show cause notice was a composite notice issued for multiple assessment years, which had already been held to be legally unsustainable by earlier Division Bench decisions. On this ground alone, the Court held that interference was warranted.
On the issue of registration, the Court observed that the requirement of registration must be examined by the competent authority based on the nature of services rendered. However, the wording of the notice created an impression of a pre-conceived conclusion, which is not permissible in a show cause notice. Relying on the Supreme Court’s observations in Oryx Fisheries, the Court emphasized that a show cause notice must provide a fair opportunity to respond and should not reflect a prejudged outcome. A notice must only propose action, with final conclusions to be reached after considering the taxpayer’s reply and supporting documents.
The Court held that the impugned notice failed to meet this standard, as it appeared to have already determined liability. Nevertheless, since the notice was being set aside as a composite notice, the Court refrained from further detailed findings on this aspect.
Accordingly, the Court set aside the show cause notice and granted liberty to the authorities to issue fresh, separate notices for each assessment year. It directed that such notices must adhere to principles laid down in judicial precedents and must avoid pre-judging issues. The Court further directed that adjudication be conducted by the appropriate jurisdictional authority in accordance with the applicable circular and only after proper scrutiny of documents and consideration of the petitioner’s submissions.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The petitioner is an association constituted by the managements of 36 Self-financing Pharmacy Colleges in Kerala, which is registered under the Societies Registration Act. According to the petitioner, it conducts a separate selection procedure for admission to Pharmacy courses in the member colleges, except for NRI seats and seats that may be set apart for allotment by the State and by the individual member colleges.
2. The challenge in this writ petition is raised against Ext.P1 Show Cause Notice under Sec.63 of the CGST/KGST Act, proposing to assess the petitioner to tax and to impose penalty. The challenge raised by the petitioner against Ext.P1 notice is mainly on two grounds. Firstly, it is contended that, the same is a composite notice issued for multiple assessment years and hence not legally sustainable. Secondly, it is contended that, going by the language used in Ext.P1, the respondent came to a conclusive finding that, the petitioner is an institution that is liable to get registration under the provisions of the Act, whereas, the specific case of the petition is that, taking note of the nature of the services rendered by the petitioner, it is exempt from the purview of the CGST Act and by virtue of entry 66 (b) (iv) of the Notification No. 12/20174, being a service relating to admission to, or conduct of examination.
Thus, the specific case of the petitioner is that, the preliminary question that has to be considered by the authority is whether, the petitioner is liable to take registration under the Act and only thereafter, the question as to whether the petitioner is to be assessed or not, is to considered. However in Ext.P1, the respondent had already arrived at a conclusion that, the petitioner is liable to take registration under the Act and is also liable to pay the tax and penalty, as proposed in Ext.P1.
3. I have heard Sri. K. Sreekumar, the learned Senior counsel appearing for the petitioner and Sri. Arun Ajay Shankar, the learned Government Pleader for the respondents.
4. The learned Senior counsel appearing for the petitioner vehemently contended that, the manner in which the proposals are made in Ext.P1, is with a pre-conceived notion that the petitioner is required to be registered under the provisions of the Act, even though, by virtue of entry 66 (b) (iv) of the Notification No. 12/20174, they are not liable to take the registration and therefore, exigible for tax.
5. On the other hand, the learned Government Pleader submits that, as far as the said issue is concerned, the same will be decided after going through the documents to be furnished and examining the nature of the service rendered by the petitioner. It is also submitted by the learned Government Pleader that, the question as to the requirement of registration would be decided by the adjudicating authority, and not by the 2nd respondent herein. Therefore, the learned Government Pleader opposes the reliefs sought in this writ petition.
6. After carefully going through the records and hearing the contentions raised from both sides, I find that, some interference is required in Ext.P1, particularly because, the show cause notice is a composite notice issued for multiple assessment years, which was found to be not legally sustainable by a Division Bench of this Court in Joint Commissioner (Intelligence & Enforcement) v. M/s. Lakshmi Mobiles Accessories [2025 KHC OnLine 149] and Tharayil Medicals v. Deputy Commissioner, Audit Division – IV [2025 VIL 356 KER] W.A.No. 627/2025. Therefore, to that extent, an interference is required.
7. When it comes to the question regarding the requirement of registration for the petitioner, it is a matter to be enquired into by the competent officer in this regard after examining the nature of the services rendered by the petitioner. Of course, it is true that, going by the language used in Ext.P1, one can get an impression that, the same is issued with a pre-conceived notion that, the services of the petitioner are compulsorily registerable under the Act.
8. The learned senior counsel for the petitioner placed reliance upon the decision rendered by the Hon’ble Supreme Court in Oryx Fisheries Private Limited v. Union of India [2011 (266) E.L.T 422 (SC)] where it was observed that,
“……. while reading a show-cause notice the person who is subject to it must get an impression that he will get an effective opportunity to rebut the allegations contained in the show cause notice and prove his innocence. If on a reasonable reading of a show-cause notice a person of ordinary prudence gets the feeling that his reply to the show cause notice will be an empty ceremony and he will merely knock his head against the impenetrable wall of prejudged opinion, such a show cause notice does not commence a fair procedure especially when it is issued in a quasi- judicial proceeding under a statutory regulation which promises to give the person proceeded against a reasonable opportunity of defence.”
9. I am of the view that, going by the language used in Ext.P1, the aforesaid observations have some relevance. As rightly pointed out by the learned senior counsel for the petitioner, it gives a clear impression that, the question as to the requirement of the registration of the petitioner is already decided in Ext.P1, which is not a permissible course in a show cause notice. What is required in a show cause notice is a proposal from the part of the authorities, based on the impression created in the mind of the authority from the documents available on record. A final conclusion as to the said proposals can only be made, after meticulously going through the documents to be produced by the party subjected to the proceedings and also considering the objections raised by such person, against such proposal. Therefore, the show cause notices issued to the parties should conform to the said requirement.
10. It is true that, in this case, as rightly pointed out by the learned senior counsel appearing for the petitioner, Ext.P1 is not worded in that manner, and impression that is created are with regard to the conclusion arrived at by the said authorities with respect to the question of requirement of registration and the tax/penalty to be imposed upon the petitioner.
11. However, I am of the view that, since I have already decided to set aside Ext.P1, being a composite notice, further observations in this regard are not necessary, as this Court expects that, when fresh show cause notices are issued, the same will be taken care of by the competent authority.
12. In such circumstances this writ petition is disposed of, granting liberty to the respondent herein or the competent authority to issue separate show cause notices for the relevant assessment years, taking note of the observations made by the Hon’ble Supreme Court in Oryx Fisheries (Supra) and this Court. The learned senior counsel appearing for the petitioner also pointed out that, the direction in Ext.P1 to the petitioner was to appear before the said officer, whereas, as per Ext.P2 circular, the adjudication has to be done by the Officer belonging to the respective jurisdictional assessment vertical. In such circumstances, it is further directed that, the proceedings shall be finalized by strictly following Ext.P2 circular and an order shall be passed, after proper scrutiny of the documents produced by the petitioner and also after meticulously examining the contentions raised by the petitioner.
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