The Kerala High Court quashed composite GST show cause notices issued across multiple financial years, including to actress Honey Rose, holding that authorities cannot club different assessment years in a single notice under the CGST and SGST Acts, 2017.
KERALA: The Kerala High Court recently annulled numerous composite show cause notices issued by the Goods and Services Tax (GST) authorities spanning multiple financial years to various taxpayers, including actress Honey Rose.
Justice Ziyad Rahman AA delivered a unified ruling on over a hundred petitions from several taxpayers, including one from the actress, all contesting the composite GST notices sent for various assessment years.
The Court ruled that tax authorities are prohibited from issuing a combined notice that encompasses multiple assessment years under the Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) Acts of 2017.
The Court pointed out that such consolidated notices were legally untenable, lacking support from the statutory frameworks outlined in Sections 73 and 74 of the GST laws, and were deemed unfair to the taxpayers.
Sections 73 and 74 concern the recovery of taxes that have not been paid, have been short-paid, or where input tax credits were incorrectly claimed, with or without fraud.
The Court referred to prior rulings by a Division Bench in cases such as M/s Lakshmi Mobile Accessories v Joint Commissioner (Intelligence & Enforcement) and Tharayil Medicals v The Deputy Commissioner, which established that separate notices must be issued for each year under the GST system.
Justice Rahman stated,
“In Lakshmi Mobile (supra) and Tharayil Medicals (supra), the prejudices caused to taxpayers in various ways due to the issuance of composite notices have been addressed in detail, noting that there is no provision in the CGST Act allowing the relevant officers to issue a composite notice. Findings were made by this Court that such notices/orders exceed the powers of the officers involved. After thoroughly reviewing the observations and rationale in those judgments, I find no basis for a different conclusion. Moreover, those decisions are binding on this Court,”
The petitions challenged a practice where GST authorities issued a single show cause notice and a single assessment order covering several financial years.
The petitioners contended that these composite notices were legally invalid, as each assessment year within the GST framework operates independently and necessitates a separate adjudication process.
In opposition, the State and Central governments argued that no statutory restriction exists against issuing a common notice for multiple years and referenced the Supreme Court’s dismissal of Special Leave Petitions (SLPs) challenging decisions from the Delhi High Court that had upheld the validity of composite proceedings.
They also noted that the Court could adopt a different stance on composite notices than that of the High Court’s Division Bench.
However, the Court dismissed this claim, clarifying that the Supreme Court’s dismissal of an SLP without a reasoned order does not establish a binding precedent.
The Court explained that the earlier Division Bench decisions clearly articulated why officers are not authorized to issue consolidated notices for multiple years, as doing so exceeds their authority within the GST framework.
The High Court subsequently granted the writ petitions and annulled the show cause notices and orders issued to the petitioners.
Nonetheless, it allowed tax authorities to initiate new proceedings by sending separate notices for each financial assessment year in accordance with the law, and indicated that the time during which the writ petitions were pending would not count towards the limitation period for issuing new notices.
Case Title: Dhanlaxmi Bank Limited v State of Kerala & ors and connected cases
Read Attachment:
FOLLOW US FOR MORE LEGAL UPDATES ON YOUTUBE
