Karnataka High Court on Invalidity of Consolidated GST Show Cause Notices Across Multiple Years

Background of the Dispute

The matter in Bangalore Gold Club Vs Assistant Commissioner of Commercial Taxes (Karnataka High Court) arose from a challenge to a show cause notice (SCN) and its summary issued under Section 73 of the Central Goods and Services Tax Act, 2017.

The impugned notices were:

  • Show cause notice dated 07.05.2024 (Annexure-F), and
  • Summary of show cause notice dated 08.05.2024 (Annexure-G).

These notices purported to cover GST liability for five financial years, namely:

  • 2019-20
  • 2020-21
  • 2021-22
  • 2022-23
  • 2023-24

The petitioner, a club, questioned the legality of issuing one consolidated SCN for all these years under Section 73, contending that such a course of action is inconsistent with the statutory framework.

The central question before the Karnataka High Court was:

Whether, under Section 73 of the CGST Act, 2017, the tax authorities are legally permitted to issue a single, combined show cause notice covering multiple financial years, or whether separate SCNs are mandatory for each assessment year.

The assessee’s stand was that the statutory scheme of Section 73 is year-specific, and any attempt to merge several years into one proceeding violates both:

  • The limitation provisions built into Section 73, and
  • The principle that each assessment year is an independent unit for adjudication and limitation purposes.

Assessee’s Contentions

Objection to Clubbing of Assessment Years

The petitioner argued that:

  1. Section 73 of the CGST Act prescribes a distinct limitation period that is calculated with reference to the annual return for each relevant financial year.
  2. Therefore, every financial year must be examined, noticed, and adjudicated independently, and
  3. The respondent could not lawfully issue a single composite SCN for tax periods spanning from 2019-20 to 2023-24.

According to the assessee, the statutory design mandates that:

  • Each financial year’s tax short-payment or non-payment must be the subject of a separate initiation, and
  • The Section 73(10) time limit applies individually to every such year.

Thus, consolidation of five years into one notice was alleged to be beyond jurisdiction and contrary to the mandatory structure of Section 73.

Reliance on Judicial Precedent

To support its position, the petitioner relied on:

  1. The judgment of the Hon'ble Madras High Court in
    • M/s. Titan Company Ltd. vs. Joint Commissioner of GST (W.P.No.33164 of 2023), and
  2. The decision of the Hon’ble Supreme Court in
    • State of Jammu and Kashmir and Others vs. Caltex (India) Ltd., AIR 1966 SC 1350.

The legal principle invoked from these rulings was that:

  • Where an assessment order or proceeding covers several assessment years,
  • Each year’s assessment is severable and must be treated independently, and
  • The law does not permit clubbing to dilute or bypass year-wise statutory requirements.

The assessee contended that this principle is equally applicable in the context of Section 73 proceedings under the CGST Act.

Court’s Analysis of Section 73 of the CGST Act, 2017

Nature and Scheme of Section 73