Composite GST Notices Covering Multiple Assessment Years Unsustainable: Kerala HC Grants Liberty to Issue Fresh Year-Wise Notices [Read Order]

The Kerala High Court has held that there is no power under the Central Goods and Services Tax Act, 2017 and the State Goods and Services Tax Act, 2017 to issue composite GST notices and orders for multiple assessment years, quashing numerous relevant notices and orders while granting liberty to the officers to issue fresh notices separately year-wise.

Dhanlaxmi Bank Limited and several other petitioners filed writ petitions before the Kerala High Court challenging notices issued under Sections 73 and 74 of the CGST/SGST Act, 2017. The main challenge was against the practice of issuing a single composite show cause notice for multiple financial years, and in many cases passing composite orders also for multiple years.

The petitions were heard together as a batch since the same issue arose in all matters. The petitioners argued that the issue was already decided by a Division Bench of the Kerala High Court in Lakshmi Mobile Accessories v. Joint Commissioner (Intelligence & Enforcement) and Tharayil Medicals v. The Deputy Commissioner, where such composite notices were held to be unsustainable.

On the other side, the learned Special Government Pleader (Taxes) and the Senior Panel Counsel appearing for the Central Government opposed the writ petitions. They argued that there is no prohibition in the CGST Act against issuing a composite notice for multiple assessment years.

The counsel also argued that the scheme of Sections 73 and 74 is different from assessment or reassessment under earlier VAT laws, and the purpose of these provisions is to recover tax relating to specific instances of evasion, short payment, or wrongful availment of input tax credit.

The Government side also relied on decisions of the Delhi High Court which upheld composite notices, and argued that the Supreme Court had dismissed SLPs filed against those Delhi High Court judgments.

Justice Ziyad Rahman A.A. observed that the common issue in the batch was only about the sustainability of composite notices issued under Sections 73 and 74 for multiple assessment years. The Court observed that the Division Bench decisions in Lakshmi Mobile Accessories and Tharayil Medicals had already dealt with the prejudices caused to taxpayers by composite notices and also held that there is no provision in the CGST Act enabling officers to issue such composite notices.

The court found no scope for taking a different view since those decisions were binding.

On the argument based on Delhi High Court judgments and dismissal of SLPs, the court observed that dismissal of SLPs by non-speaking orders does not amount to a declaration of law under Article 141. The court referred to the Supreme Court decision in State of Orissa v. Dhirendra Sundar Das and other cases to explain this principle.

The court also observed that even if Lakshmi Mobile was under challenge before the Supreme Court, in the absence of any stay, it continues to be binding.

In view of this, the Kerala High Court quashed the impugned composite notices and composite orders issued for multiple years under the CGST/SGST Act. At the same time, it granted liberty to the assessing officers to issue fresh notices separately for the relevant assessment years and to complete proceedings in accordance with law.

The court also clarified that the period during which the writ petitions were pending before the High court can be excluded while computing limitation. All other contentions of the parties were left open.

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