Case Law Details
Chimney Hills Education Society Vs Additional Commissioner of Central Tax (Karnataka High Court)
The petition sought multiple reliefs, including the quashing of a show cause notice dated 05.08.2024 issued under Section 74 of the Act for the tax period from July 2017 to 2023, along with the summary of the notice (DRC-01), a notice of personal hearing dated 21.08.2024, and summons dated 16.05.2024. The petitioner challenged these proceedings and requested that they be set aside.
After hearing the learned senior counsel for the petitioner and the counsel for the revenue, and upon perusal of the material on record, the Court identified the central issue for determination. The primary question was whether the impugned show cause notice and its summary were invalid because they clubbed or consolidated tax demands for multiple financial years, specifically covering the period from 2017 to 2023, into a single notice, and whether such notices were liable to be quashed on this ground.
The Court examined an earlier judgment delivered by a co-ordinate Bench in a similar matter involving consolidated show cause notices issued for multiple assessment years. In that case, the petitioner had challenged notices covering tax periods from 2019–20 to 2023–24 on the ground that combining several financial years into one notice was impermissible under the statutory framework. It was argued that under the relevant provisions, actions must be completed within the prescribed time limits applicable to each assessment year, and that the limitation period applies separately to each year. Therefore, separate notices should be issued for each assessment year rather than a single consolidated notice.
The co-ordinate Bench had relied on judicial precedents, including a judgment of the Madras High Court and a decision of the Supreme Court, which held that assessments relating to different years are distinct and must be treated independently. It was observed that when an assessment involves multiple years, each year must be considered separately, and any action taken must conform to statutory timelines specific to that year. The Court further noted that statutory provisions mandate completion of actions within designated periods linked to individual financial years, and that combining multiple years into a single notice contravenes these requirements.
Based on these principles, the co-ordinate Bench had concluded that issuing a consolidated show cause notice covering multiple assessment years is fundamentally flawed and contrary to law. Accordingly, such notices were quashed, while granting liberty to the authorities to issue separate show cause notices for each assessment year in compliance with the statutory provisions.
In the present case, the Court found that the issue in dispute was directly and squarely covered by the reasoning and conclusions of the earlier judgment. The impugned notices similarly sought to consolidate tax demands for multiple financial years, spanning from 2017 to 2023, into a single proceeding. Applying the same legal principles, the Court held that such consolidation rendered the notices unsustainable.
Consequently, the Court allowed the petition and quashed the impugned show cause notice dated 05.08.2024 and its summary, along with all further proceedings arising from them. However, the Court clarified that this order would not preclude the authorities from taking appropriate action in accordance with law. Liberty was expressly reserved to the respondents to issue separate and independent show cause notices for each assessment year under Section 74 of the Act and to proceed further in accordance with law.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
In this petition, petitioner seeks for the following reliefs:-
“a) Issue a writ of Certiorari or direction in the nature of quashing the Show Cause Notice dated: 05.08.2024 issued under Section 74 of the Act for the tax period July 2017-2023 by the Respondent No.1 bearing DIN No. 20240857YX0000424474, having filed no. GEXCOM/AE/INV/GST/4583/2022-AE and SCN Ref No. 34/2024-25 herein marked as Annexure-A.
b) Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the DRC-01 dated; 05.08.2024 containing the summary of the show cause notice bearing DIN No. 202408577YX0000424474 issued by the Respondent No.1.Copy of the DRC-01 dated: 05.08.2021 is enclosed and marked as Annexure-B.
c) Issue a writ of Certiorari or direction in nature of a writ of certiorari quashing the Notice of personal hearing dated: 21.08.2024 bearing DIN No.2024857YX0000888C3F. A copy of the notice of personal hearing dated; 21.08.2024 is enclosed and marked as Annexure-C.
d) Issue a writ of certiorari or direction in nature of a writ of certiorari quashing the summons dated: 16.05.2024 bearing DIN No. 20240557YX00003833C6. a copy of the notice of personal hearing dated: 16.05.2024 is enclosed and marked as Annexure-D.
e) And pass such other orders as this Hon’ble court deems fit and proper in the interest of justice and equity.”
2. Heard learned Senior counsel for the petitioner and learned counsel for the respondents — revenue and perused the material on record.
3. A perusal of the material on record will indicate that though several contentions are urged by both sides in support of their respective claims, the main / primary issue that arises for consideration is, whether the impugned Notices at Annexures-A and B both dated 05.08.2024 are vitiated on account of the fact that the same purport to club / consolidate / group the demand for more than one financial year i.e., for the tax period from 2017 to 2023 and as to whether the impugned Notices deserve to be quashed on this ground. The said issue came up for consideration in the case of M/s. Bangalore Golf Club vs. Assistant Commissioner of Commercial Taxes — W.P.No.16500/2024 dated 07.08.2024, in which, the co-ordinate Bench of this Court held as under:-
” In this writ petition, the petitioner, a Club, challenges the impugned show cause notice dated 07.05.2024, as detailed in Annexure-F, and the summary of the show cause notice dated 08.05.2024, as outlined in Annexure-G, issued by the respondent for the tax periods 2019-20, 2020-21, 2021-22, 2022-23, and 2023-24. The petitioner contends that these notices, issued under Section 73 of the Central Goods and Services Tax (CGST) Act, 2017, are flawed due to the improper consolidation of multiple tax periods into a single show cause notice.
The petitioner’s primary argument is that the respondent cannot issue a common show cause notice by grouping the tax periods from 2019 to 2023-24. The petitioner asserts that under Section 73 of the CGST Act, a specific action must be completed within the relevant year, and the limitation period of three years applies separately to each assessment year. Consequently, the petitioner contends that clubbing multiple tax periods in a single notice is impermissible, and separate notices should have been issued for each assessment year under sub-Section (1) of Section 73.
3. The petitioner relies on the judgment of the Hon’ble Madras High Court in the case of M/s. Titan Company Ltd. vs. Joint Commissioner of GST1. The Madras High Court, while addressing a similar issue, relied on the Hon’ble Supreme Court’s decision in State of Jammu and Kashmir and Others vs. Caltex (India) Ltd.,2. The Hon’ble Apex Court held that where an assessment encompasses different assessment years, each assessment order can be distinctly separated and must be treated independently.
4. This Court has reviewed the judgment of the Madras High Court and the scope of inquiry under Section 73 of the CGST Act. Based on the established legal principles and the precedent set by the Hon’ble Apex Court, this Court finds that the respondent erred in issuing a consolidated show cause notice for multiple assessment years, spanning from 2019 to 2023-24.
5. 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.
6. For the reasons aforementioned, this Court concludes that the show cause notices issued by the respondent are fundamentally flawed. The practice of issuing a single, consolidated show cause notice for multiple assessment years contravenes the provisions of the CGST Act and established legal precedents.
7. Accordingly, this Court proceeds to pass the following:
ORDER
(i) The writ petition is allowed;
(ii) The impugned show cause notice dated 07.05.2024 (Annexure-F) and the summary of the show cause notice dated 08.05.2024 (Annexure-G) issued by the respondent for the tax periods 2019-20, 2020-21, 2021-22, 2022-23, and 2023-24 are hereby quashed;
(iii) This order, however, does not preclude the respondent from issuing separate show cause notices for each assessment year in compliance with Section 73 of the CGST Act, 2017.”
4. As is clear from the aforesaid judgment of this Court, the issue in controversy involved in the present petition is directly and squarely covered by the aforesaid judgment and consequently, the impugned Notices deserve to be quashed by reserving liberty in favour of the respondents to issue separate / independent Notices for each assessment year in terms of *Section 74 of the CGST Act, 2017.
5. In the result, I pass the following:
ORDER
(i) Petition is hereby allowed and disposed of in terms of the judgment of this Court in the case of M/s. Bangalore Golf Club vs. Assistant Commissioner of Commercial Taxes W.P.No.16500/2024 dated 07.08.2024.
(ii) The impugned Notices at Annexures-A and B both dated 05.08.2024 and all further proceedings pursuant thereto are hereby quashed.
(iii) Liberty is reserved in favour of the respondents to issue separate / independent notices for each assessment year in terms of *Section 74 of the CGST Act, 2017 and proceed further in accordance with law.
Notes:
1 W.P.No.33164 of 2023
2 AIR 1966 SC 1350
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