Case Law Details
Albatross Builders And Developers LLP Vs Assistant Commissioner of Central Tax (Karnataka High Court)
The writ petition was filed challenging a show cause notice dated 22.07.2024 and its summary dated 03.08.2024 issued under Section 74 of the Central Goods and Services Tax Act, 2017. The notices were issued on the ground that the petitioner had allegedly availed erroneous Input Tax Credit (ITC) for the period from January 2018 to August 2022. Aggrieved by these notices, the petitioner approached the Court seeking their quashing.
The petitioner, a registered entity engaged in the restaurant business, contended that the respondent authority could not have issued a single show cause notice covering multiple financial years. It was argued that separate notices should have been issued for each financial year. The petitioner relied on previous decisions of the Court where similar consolidated notices were held to be impermissible. On this basis, it was prayed that both the show cause notice and its summary be set aside.
In response, the respondent submitted that although a single show cause notice was issued for the entire period from January 2018 to August 2022, the summary of the notice provided a breakup of the alleged erroneous ITC, along with the applicable interest and penalty. It was further contended that there is no express prohibition under the law against issuing a single show cause notice covering multiple financial years. On this ground, the respondent sought dismissal of the petition.
The Court identified the central question for consideration as whether the respondent could issue a single show cause notice covering several financial years.
While examining this issue, the Court referred to a decision of a co-ordinate Bench in a similar case. In that decision, the Court had held that issuing a consolidated show cause notice for multiple assessment years was erroneous. The reasoning was based on established legal principles and judicial precedents, including those of higher courts.
The Court observed that the liability of an assessee for each financial year constitutes a distinct cause of action. It further noted that the rate of tax, interest, and penalty may vary from one financial year to another. Additionally, the issue of limitation may differ across years, with some claims potentially being time-barred while others may not be.
In the present case, the Court found that the impugned show cause notice clearly covered the entire period from January 2018 to August 2022 as a single consolidated proceeding. This was evident from the contents of the notice, which called upon the petitioner to explain why the total ITC amount availed during the entire period should not be treated as ineligible and recovered along with interest and penalty.
Although the summary of the show cause notice provided a segregation of liability for each financial year, the Court held that this did not cure the defect in issuing a single consolidated notice. Relying on the earlier decision of the co-ordinate Bench and the reasoning provided therein, the Court concluded that such consolidated notices are not sustainable in law.
Accordingly, the Court held that the impugned show cause notice and its summary were liable to be set aside. The writ petition was allowed to this extent. However, the Court clarified that the respondent authority would not be precluded from initiating fresh proceedings. Liberty was expressly reserved to the respondent to issue separate show cause notices for each financial year and proceed in accordance with law.
The Court ultimately set aside both the show cause notice dated 22.07.2024 and the summary dated 03.08.2024, and disposed of the writ petition with the above observations and directions.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
1. Aggrieved by the show cause notice dated 22.07.2024, bearing F.No.GEXCOM/AE/INV/GST/6032/ 2022-AE-O/o COMMR-CGST-BENGALURU(S), issued by the respondent vide Annexure-A to the writ petition and the summary of show cause notice dated 03.08.2024, Reference No.ZD290824012414G, issued by the respondent vide Annexure-B to the writ petition under Section 74 of the Central Goods and Services Tax Act, 2017, the present writ petition is filed.
2. The petitioner is registered under the provisions of the Central Goods and Services Tax, 2017 and Karnataka Goods and Services Tax Act, 2017 and it is involved in the restaurant business. On the ground that the petitioner has availed erroneous Input Tax Credit for the period from January-2018 to August-2022, the aforementioned show cause notice and the summary of show cause notice have been issued. Aggrieved by the same, the present writ petition is filed.
3. The case of the petitioner is that the respondent could not have issued one single notice for the entire period between January-2018 and August-2022. They ought to have issued separate show cause notice for each financial year. It is further submitted, that in umpteen number of cases this court has held so. For the said reason, it is prayed that the show cause notice and the summary of show cause notice may be set aside.
4. Per contra, the learned counsel for the respondent submits that though one show cause notice has been issued for the period from January-2018 to August-2022, the summary of show cause notice (vide Annexure-B to the writ petition) spells out the Input Tax erroneously claimed by the petitioner and the interest and penalty that is attracted. It is further contended that there is no express prohibition in law for issuing one show cause notice for several financial years. On the said ground, it is prayed that the writ petition be dismissed.
5. The question that arises for consideration is:
Whether the respondent can issue one show cause notice for several financial years?
6. The Co-ordinate Bench of this Court, while examining the similar situation in W.P.No.15810/2024 (T-RES) in Paragraph No.4 has held as under:
“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 2017-18 to 2020-21.”
7. Such a decision is arrived at because the liability of the assessee for each financial year constitutes a different cause of action. The rate of tax, interest and the penalty may vary from one year to another year. Further, the notices issued for a particular financial year may be time-barred, while in respect of the others it may not.
8. Under the given facts and circumstances of the case, the impugned show cause notice (vide Annexure-A to the writ petition) has to be considered as one show cause notice for the entire period between January-2018 and August-2022. Perusal of Paragraph No.9 of the said show cause notice clarifies the same. It reads as under:
“9. Now, therefore, M/s Albatross Builders and Developers LLP (GSTIN: 29ABJFA4828J1Z2) at #45, 100 ft road, 15th Cross, JP Nagar 4th Phase, Bangalore, 560078 are hereby required to show cause to the Deputy/Assistant Commissioner of Central Tax, South Division 6, BMTC Bus Stand, TTMC, Banashankari Stage II, Bengaluru-560070, the Adjudicating Authority, as to why:
(a) Input Tax Credit (ITC) amounting to Rs.23,85,772/- [IGST 66615+ CGST 11,47,722 + SGST 11,47,722+ Cess 23,713] (twenty-three lakh eighty five thousand seven hundred seventy two only), availed in GSTR-3B Returns during the period Jan-18 to Aug-22 by them, should not be treated as ineligible ITC, as discussed supra; and demanded from them under Section 74(1) of the CGST Act, 2017 and relevant provisions under Karnataka GST Act, 2017;
(b) Interest, as applicable, on the Input Tax Credit demanded as mentioned at (a), should not be demanded from them under the provisions of Section 50 of the CGST/Karnataka GST Act, 2017 read with Section 74(1) of the CGST Act, 2017;
(c) Penalty as prescribed under Section 74(1) of the CGST/Karnataka GST Act, 2017 should not be imposed on them towards the demand proposed at (a) above;”
Though in the summary of the show cause notice there is segregation of the liability in respect of each financial year, in the light of the judgment of the Coordinate Bench of this Court in W.P.No.15810/2024 (T-RES) and for the reasons stated above, it does not come to the rescue of the respondent. Thus, it is appropriate to set aside the impugned show cause notices, reserving the liberty to the respondent to issue appropriate show cause notices for each financial year and proceed against the petitioner. Hence, the following:
ORDER
i. The show cause notice dated 22.07.2024, bearing F.No. GEXCOM/AE/INV/GST/6032/ 2022-AE-O/o COMMR-CGST-BENGALURU(S), issued by the respondent (vide Annexure-A) to the writ petition is hereby set aside;
ii. The summary of the show cause notice dated 03.08.2024, Reference No.ZD290824012414G, issued by the respondent (vide Annexure-B) to the writ petition is hereby set aside;
iii. Liberty is reserved to the respondent to issue a separate show cause notice for each financial year to the petitioner and proceed in accordance with law.
iv. The Writ Petition is hereby disposed of.
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