Whether the Bunching of SCN for multiple years is permissible under the GST Act?

By Adv. Bhargav Ganatra, Rajkot

Introduction: –

In GST, Many a time we have seen that CGST Department has a tendency to issue single SCN for multiple years. For Example, In a recent time, SCN u/s. 74 of CGST Act, 2017 had been issued for the period of July-2017 to November-2022 for the non-payment or short-payment of RCM on services received of “Services by way of grant of mineral exploration and mining rights.”

• Hence, A Key Question has been raised that, “Whether the Bunching of SCN for multiple years is permissible under the GST Act?” 

• What is the Time Limit to Issue SCN? –

• Before we get into further discussion, Let’s see the time limit to issue SCN u/s. 73 or 74 of CGST Act, 2017. For this, the relevant extract of Section 73 or 74 of CGST Act, 2017 is reproduced as under…

“Section 73. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any willful-misstatement or suppression of facts. – 

(2) The proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order.

 (10) The proper officer shall issue the order under sub-section (9) within three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund.

 Section 74. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any willful- misstatement or suppression of facts. –

 (2) The proper officer shall issue the notice under sub-section (1) at least six months prior to the time limit specified in sub-section (10) for issuance of order.

(10) The proper officer shall issue the order under sub-section (9) within a period of five years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within five years from the date of erroneous refund.” 

• In Nutshell, On the basis of due date of Filing of Annual Return, Each year have a different time limit to issue SCN u/s. 73 or 74 of CGST Act, 2017.
•  For Example,

• What is the Legal Precedent by Hon’ble Apex Court?

• As We all know that Hon’ble Supreme Court of India sets precedent that are binding on all courts in India, as stated in Article 141 of the Constitution. The doctrine of precedent ensures that the law is clear and consistent, and that similar cases are treated similarly. 

• Further, Hon’ble Apex Court in the judgement of State of Jammu and Kashmir and Others v. Caltex (India) Ltd has held that, “Where an assessment encompasses different assessment years, each assessment year could be easily split up and dissected and the items can be separated and taxed for different periods.”

• Hence, It is very clear that as per the precedent set by Hon’ble Apex Court, Bunching of SCN for multiple years shall not be permissible under the GST Act. 

• What are the Judgements under GST Act?

• Hon’ble Madras High Court in the judgement of Titan Company Ltd., Versus The Joint Commissioner of GST & Central Excise has held that, “issuing Bunching of Show Cause Notice is against the spirit provision of Section 73 of the Act and therefore Court find fault in the process of issuing of bunching of show cause notice and the same is liable to be quashed.”

• Hon’ble Karnataka High Court in the judgement of M/s. Bangalore Golf Club Versus Assistant Commissioner of Commercial Taxes (Enforcement) – 22 has held that,” this Court has reviewed the judgement of the Madras High Court and the scope of inquiry under Section 73 of the CGST Act. Based on the established legal principles and the precedent set by the Hon’ble Apex Court, this Court finds that the respondent erred in issuing a consolidated show cause notice for multiple assessment year, spanning from 2019 to 2023-24.”

• Hon’ble Karnataka High Court in the judgement of M/s. Chimney Hills Education Society Versus Additional Commissioner of Central Tax has held that, “Petition is hereby allowed and disposed of in terms of the judgement of this Court in the case of M/s. Bangalore Golf Club vs. Assistant Commissioner of Commercial Taxes – W.P. No. 16500/2024 dated 07.08.2024 and therefore the impugned Notices at Annexure-A and B both dated 05.08.2024 and all further proceedings pursuant thereto are hereby quashed.” 

• Conclusion: –

Hence, It is crystal clear that SCN u/s. 73 or 74 cannot be bunched for multiple years as each year have a separate period of limitation and therefore limitation will start independently. 

• However, whether similar principle or ratio shall apply to SCN u/s. 65 of CGST Act, 2017? In My Humble Opinion, It Won’t.

(Author is a young advocate practising at Rajkot on Indirect and Direct tax related matters)