Issuance of Consolidated SCN for Multiple Years  Allowable u/s 74 of CGST: Kerala HC [Read Order]

In a recent case, the High Court of Kerala viewed 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.

M/S. X L Interiors, the petitioner has approached the 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.

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The counsel for the petitioner placedreliance 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 No.16500 of 2024]  in support of this contention. The counsel also submitted that the show cause notice reliance extensively on third party information and runs to 1622 pages including the documents relied upon.

It was argued 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.

The  Senior Government Pleader submitted 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  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.

The single bench viewed 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 Court has reviewed the judgment of theMadras High Court and the scope of inquiry under Section 73 of the CGST Act.

It was viewed by the court that 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.

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The court viewed 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 .Coming to the contention of the 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 and it is reasonable to give time to the petitioner to file a reply to the show cause notice.

The Single bench of Justice Gopinath P directed that the time for filing a reply to 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.

To Read the full text of the Order CLICK HERE

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