Case Law Details
X L Interiors Vs Deputy Commissioner (Intelligence) (Kerala High Court)
Conclusion: Since the word ‘period’ used in Sub Section (3) of Section 74 did not relate to any financial year but only to a period for which a notice to be issued under Sub Section (1) of Section 74, therefore, it was difficult to hold that the bunching of show cause notices was illegal and contrary to the provisions of Section 74 of the CGST Act. Bunching of show cause notices did not cause any prejudice to assessee as it was open to assessee to take up any contention peculiar to any particular year in the reply to the show cause notice.
Held: Assessee had approached this court being aggrieved by the fact that a single show cause notice had been issued invoking the provisions of Section 74 alleging suppression of turnover etc., in six financial years, namely, 2017-18, 2018-19, 2019-20, 2020-21, 2021-22 and 2022-23. Assessee was given a short time, i.e. till 21.10.2024, to reply to the show cause notice which amounted to violation of principles of natural justice. Authority contended that there was nothing in the wording of Sections 73 and 74 of the CGST/SGST Acts which would indicate that the contention of assessee that there could not be a consolidated show cause notice for several financial years was to be accepted. It was held that contention of authority that sub Section (3) of Section 74 do not indicate that the notice to be issued under Sub Section (1) of Section 74 must be for one particular year and on the contrary refers to a ‘period’. Therefore, it was difficult to hold that the bunching of show cause notices was illegal and contrary to the provisions of Section 74 of the CGST Act. Bunching of show cause notices did not cause any prejudice to assessee as it was open to assessee to take up any contention peculiar to any particular year in the reply to the show cause notice. Coming to the contention of assessee that assessee had been given a very short time to reply to the show cause notice which runs to 1622 pages (including the documents relied upon) it was concluded that some reasonable time must be permitted to assessee to file a reply to the show cause notice. Accordingly, it was directed that the time for filing a reply to Ext.P1 show cause notice should be extended till 21.11.2024. Since the extension of time was at the request of assessee, any limitation for passing orders for any of the financial years would also stand extended by similar period i.e. the period from 21.10.2024 (last date for filing reply as per show cause notice) till 21.11.2024 would stand excluded.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The petitioner has approached this court being aggrieved by the fact that a single show cause notice (Ext.P1) has been issued invoking the provisions of Section 74 of the CGST Act, alleging suppression of turnover etc., in six financial years, namely, 2017-18, 2018-19, 2019-20, 2020-21, 2021-22 and 2022-23. It is the case of the petitioner that Sections 73 and 74 of CGST Act do not contemplate the sending of a single consolidated show cause notice for more than one financial year.
2. The learned counsel for the petitioner placed reliance on a judgment of the Madras High Court in Titan Company Ltd v. The Joint Commissioner of GST and Central Excise and Another [WP No.33164 of 2023] and on a judgment of the Karnataka High Court in M/s. Banglore Golf Club Vs. Assistant Commissioner of Commercial Taxes, [WP 16500 of 2024] in support of this contention. The learned counsel also submits that the show cause notice reliance extensively on third party information and runs to 1622 pages including the documents relied upon. It is submitted that the petitioner has only be given a short time, i.e. till 21.10.2024, to reply to the show cause notice. It is submitted that the denial of proper opportunity to reply to the show cause notice amounts to violation of principles of natural justice.
3. The learned Senior Government Pleader submits that there is nothing in the wording of Sections 73 and 74 of the CGST/SGST Acts which would indicate that the contention of the petitioner that there cannot be a consolidated show cause notice for several financial years is to be accepted. The learned Senior Government Pleader also relied on the wording of Sub Section (3) of Section 74 to contend that the word ‘period’ used in Sub Section (3) of Section 74 does not relate to any financial year but only to a period for which a notice to be issued under Sub Section (1) of Section 74. It is submitted that the decision of the Madras High Court on which reliance is placed by the learned counsel for the petitioner relate to proceedings under Section 73 of the CGST/SGST Acts and where a specific contention of limitation was also raised.
4. Having heard the learned counsel appearing for the petitioner and the Senior Government Pleader, I am of the view that the petitioner has not made out any case for grant of relief on the ground that Ext.P1 show cause notice is a consolidated notice for several years mentioned above. The judgment of the Karnataka High Court, in M/s. Banglore Golf Club (supra) relied on the judgment of the Madras High Court in M/s. Titan Company Limited (Supra), where again the question considered was in relation to the proceedings under Section 73 of the GST Act. The court in M/s. Banglore Golf Club (supra) held as follows:-
“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 GST. 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. 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.”
5. The Karnataka High Court in Veremax Technologie Services Limited vs. Assistant Commissioner of Central Tax [WP 15810 of 2024] also takes the view that was taken by that court in M/s. Banglore Golf Club (Supra) The judgment of the Madras High Court in M/s. Titan Company Limited (Supra) on which reliance was placed by the Karnataka High Court in the judgment M/s. Banglore Golf Club (Supra) above also deals with proceedings under Section 73 and proceeds on the basis that by bunching the show cause notices (in the facts of the particular case) the Authorities were trying to do something that they could not directly as a question of limitation would have then arisen. It is in that context that the Madras High Court reached a conclusion that bunching of show cause notices is against the provisions of Section 73 of the Act. That apart the learned Senior Government Pleader submits that even if a consolidated show cause notice has been issued if different issues are involved for any of the years in question, such issues will be specifically considered and orders will be uploaded separately for each of the years following adjudication. The decisions of the Madras High Court and the Karnataka High Court on which reliance is placed by the learned counsel appearing for the petitioner do not apply to the facts of the present case for reasons already indicated.
6. The learned Senior Government Pleader is also right in contenting that the provisions of Sub Section (3) of Section 74 do not indicate that the notice to be issued under Sub Section (1) of Section 74 must be for one particular year and on the contrary refers to a ‘period’. Therefore, it is difficult to hold that the bunching of show cause notices is illegal and contrary to the provisions of Section 74 of the CGST Act. I am also of the view that the bunching of show cause notices does not cause any prejudice to the petitioner as it is open to the petitioner to take up any contention peculiar to any particular year in the reply to the show cause notice and I have no reason to believe that if such contention is taken specifically in relation to any particular year the same will not be considered by the adjudicating Authority.
Coming to the contention of the learned counsel for the petitioner, that the petitioner has been given a very short time to reply to the show cause notice which runs to 1622 pages (including the documents relied upon) I am of the view that some reasonable time must be permitted to the petitioner to file a reply to the show cause notice. Accordingly, it is directed that the time for filing a reply to Ext.P1 show cause notice shall be extended till 21.11.2024. Since the extension of time is at the request of the petitioner, any limitation for passing orders for any of the financial years will also stand extended by similar period i.e. the period from 21.10.2024 (last date for filing reply as per show cause notice) till 21.11.2024 will stand excluded.
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