Single SCN under GST cannot be passed in relation to more than one tax period if Assessment is taken up before Due date for filing: Andhra Pradesh HC [Read Order]
The writ petitions are disposed of setting aside the aforesaid impugned orders leaving it open for the respondents to initiate fresh proceedings, for each assessment year separately
In a recent case, the Andhra Pradesh High Court held that single show cause notice (SCN) under Central Goods and Service Tax (GST) Act, 2017 cannot be passed in relation to more than one tax period if the Assessment is taken up before the Due date for filing of the annual return or for more than one year if the due date for filing of annual return has been reached.
The petitioners, who are registered persons under the GST regime, are challenging the orders of assessment, on the grounds of lack of signature and lack of DIN number. Apart from this, the petitioners also challenge the impugned orders on the ground that different assessment years have been bunched together and a composite show cause notice and a composite order had been issued in relation to different tax periods, and the same is impermissible and not in accordance with the provisions of the APGST Act, 2017.
The petitioners, after having raised various grounds of challenge, have sought a direction on the ground that a single assessment order passed, for more than one financial year, would be violative of the provisions of Section 73 and Section 74 of the GST Act, 2017, and consequently set aside the orders of assessment / appeals.
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The question of whether one assessment order can be passed in relation to more than one financial year had come up before various High Courts. The High Court of Karnataka, the High Court of Madras and the High Court of Kerala have held that a single, composite assessment order, cannot be passed for more than one financial year. On the other hand the High Court of Delhi as well as the Hon’ble High Court of Bombay had held that there can be one composite assessment order for more than one financial year.
The High Court at Madras dealt with this issue in Titan Company Ltd., vs. Joint Commissioner of GST and Central Excise, Salem . In this case, while dealing with the question of bunching of show cause notices for five different assessment years, the High Court at Madras, after referring to the judgment of a Constitution Bench of the Supreme Court in State Jammu & Kashmir and Ors., vs. Caltex India Ltd., , had held that a single show cause notice cannot be issued for more than one financial year. However, since the issue was before the High Court of Madras, at the stage of show cause notice, the respondents were directed to consider the application of the petitioner for splitting up the show cause notices. An appeal was filed against the said order and the said decision was not disturbed and directions were issued to essentially comply with the directions given by the Single Judge.
The aforesaid judgment of the High Court of Madras was followed by the High Court of Karnataka in M/s. Bangalore Golf Club vs. Assistant Commissioner of Commercial Taxes (Enforcement), which quashed the show cause notices issued in relation to five assessment years.
The scheme of the Act, is that GST is payable on supplies of goods and services, at the rates fixed under the schedules and notifications that would be issued by the GST Council. This GST is assessed and calculated as per the provisions set out in the Act. The provisions under Section 62 providing assessment of non-filers of returns and Section 63 providing assessment of unregistered persons etc., can be ignored for the purpose of this case. The primary provisions for determination of tax are Sections 73 and 74.
Section 73 is applicable where tax has not been determined and paid properly, for reasons other than fraud or willful-misstatement or suppression of facts. Section 74 applies to determination of tax where such tax has not been properly determined or tax not paid or calculated on account of fraud, willful-misstatement or suppression of facts. Both these provisions envisage issuance of notice to the registered person for bringing to his attention, the view of the competent authority that appropriate tax has not been disclosed and paid.
The question that has now arisen is whether such a notice has to be given only in relation to specified period or whether such a notice can be given for any period. The further question would be whether one order of assessment/penalty has to be passed for each specified period or whether it can be issued, in relation to any period.
Section 74(3) is in parimateria with Section 73(3). However, subsection (4) of Section 74 does not contain the term “such tax period”. This non mention would not, in our opinion, make any difference to the aforesaid interpretation. Apart from this, there are certain other provisions, which would also have to be considered. Any interpretation of an Act should not result in some of the other provisions becoming otiose or reduced in scope.
A division bench of Justice R Raghunandan Rao and Justice T.C.D.Sekhar held that a single show cause notice or a single composite assessment order cannot be passed in relation to more than one tax period of either a month if the assessment is taken up before the due date for filing of the annual return or for more than one year if the due date for filing of annual return has been reached.
The writ petitions are disposed of setting aside the aforesaid impugned orders leaving it open for the respondents to initiate fresh proceedings, for each assessment year separately.
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