Composite SCN u/s 74 of GST Act for Multiple Assessment Years Not Permissible: Kerala HC [Read Order]

The Kerala High Court has held that the issuance of a composite show cause notice ( SCN ) under Section 74 of the Goods and Services Tax ( GST ) Act for multiple assessment years is not permissible.

The Court, while allowing a writ appeal filed by Tharayil Medicals, ruled that each financial year must be assessed independently and supported by separate show cause notices, given the distinct limitation periods and statutory conditions applicable to each year under the GST law. So that the assessee will get a chance to defend year by year.

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The appellant received a composite SCN dated 5.8.2024 under Section 74, covering five assessment years from 2017-18 to 2021-22, alleging incorrect HSN application and underpayment of GST amounting to ₹21,13,080.

The appellant argued that the clubbing of multiple years into one notice was contrary to the law, citing judgments from the Karnataka and Madras High Courts that held composite notices to be invalid.

The Division Bench of Justices Dr. A.K. Jayasankaran Nambiar and Easwaran S. concurred observed that each assessment year is governed by a distinct timeline under Section 74(10), and a composite notice would deprive the assessee of adequate time and clarity to respond effectively.

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Further, the bench observed that “learned Single Judge failed to take note of these intricate questions of law involved while interpreting the provisions of Section 73 read with Section 74 of the CGST/SGST Act and thus failed to appreciate the contentions of the appellants in its true perspective and therefore erred egregiously in dismissing the writ petition relegating the petitioner to prefer reply to the notice before the adjudicating authority. Thus, we are of the considered view that the appellant has made out a case for interference and hence entitled to succeed.”

The Court set aside the show cause notice for the assessment years 2018-19 to 2021-22 but upheld it for 2017-18, with a direction to complete the adjudication within one month. It also allowed the authorities to issue fresh and separate SCNs for the remaining years if deemed necessary, clarifying that the limitation period shall exclude the time spent during the court proceedings.

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To Read the full text of the Order CLICK HERE

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