Consolidated SCN Involving Multiple Assessment Years can be Issued in Existence of  Common Period of Adjudication: Kerala HC [Read Order]

The Kerala High Court stated that consolidated show cause notice involving multiple assessment years can be issued when a common period of adjudication exists.

The Division Bench of Justices A.K. Jayasankaran Nambiar and Easwaran S observed that “Issuing a consolidated show cause notice covering various financial/assessment years would cause prejudice to an assessee who would not get the full period envisaged for adjudication under the Statute, if that period is circumscribed by the limitation period prescribed in relation to an earlier financial/assessment year” 

A show cause notice was issued to Lakshmi Mobile Accessories, the assessee/respondent. The department/appellant had issued a single consolidated notice for six different financial years. The assessee/respondent has challenged the show cause notice through a writ petition.

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The Single Judge, found force in the contention of the assessee that issuing a composite order covering all the financial years from 2017-18 to 2023-24 would prejudice the assessee in relation to its contentions for those assessment yeas where the time limit prescribed under Section 74(10) of the CGST Act would not expire by 07.02.2025, which was the last date for passing orders in respect of assessment year 2017-18. The department has challenged the order passed by the Single Judge.

The statutory period available for an assessee to put forth its contentions against the show cause notice in an effective manner cannot be curtailed by an unnecessary act on the part of the Department in issuing a consolidated show cause notice that includes therein a financial/assessment year in relation to which the period for passing a final order expires earlier, noted the bench.

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The bench stated that where, in a situation such as the present, the proximate expiry of the limitation period under Section 74(10) is only in relation to one of the six financial/assessment years, the contentions of the assessee and the opportunity available to an assessee for adducing evidence in relation to the other years cannot be rendered illusory by forcing upon the assessee the period of limitation prescribed under Section 74(1) for passing the final order in relation to the earliest financial/assessment year [2017-18].

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It was viewed that “If a consolidated notice for various financial/assessment years is issued, the total amount of tax, penalty etc. determined as payable by the assessee may increase exponentially depending upon the number of financial/assessment years included in the consolidated notice.  The determination of tax, penalty etc. would be in respect of all the financial/assessment years put together.  That would go against the provisions of sub sections (9) and (10) of Section 74 which specifically refer to the “financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates” while stipulating the last date for passing the adjudication order.”

While dismissing the appeal, the bench opined that a consolidated notice would also result in a consolidated adjudication order covering several financial/assessment years and in the event of it being adverse to the assessee, the fee/predeposit required to be paid by an assessee for preferring a statutory appeal would also be higher.

To Read the full text of the Order CLICK HERE

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