Kerala High Court’s View on GST Show Cause Notice, Composite Orders & Procedural Fairness under Section 74

The Kerala High Court, in Lakshmi Mobile Accessories Vs Joint Commissioner, examined the legality of proceedings initiated under Section 74 of the Central Goods and Services Tax Act, 2017, particularly focusing on:

  • Challenge to a Section 74 show cause notice
  • Alleged denial of adequate opportunity of hearing and cross-examination
  • Concern over issuance of a composite adjudication order for multiple financial years
  • Impact of limitation period for passing orders

The writ petition was ultimately disposed of, but the Court laid down important observations on procedural safeguards, especially where a composite show cause notice covers several financial years.

Background of the Dispute

The assessee, Lakshmi Mobile Accessories, approached the Kerala High Court challenging:

  1. A show cause notice (Ext.P1) issued on 29.07.2024 under Section 74 of the Central Goods and Services Tax Act, 2017; and
  2. The proposed adjudication process for multiple financial years spanning 2017–2018 to 2023–2024.

Reliefs Sought by the Petitioner

The assessee requested the following:

  • Quashing of Ext.P1 show cause notice issued under Section 74
  • A direction that separate adjudication orders be passed for each financial year from 2018–2019 to 2023–2024
  • Sufficient additional time to file replies for financial years 2018–2019 to 2023–2024
  • An opportunity for cross-examination of witnesses relied upon by the Department

Nature of the Show Cause Notice

The show cause notice dated 29.07.2024:

  • Was issued under Section 74 of the Central Goods and Services Tax Act, 2017
  • Called upon the assessee to respond to proposals for:
    • Tax
    • Penalty
    • Interest
      based on reasons detailed in the notice
  • Fixed a personal hearing on 22.08.2024

However, the assessee did not respond within the time initially contemplated in the notice and instead filed a detailed reply only on 03.12.2024, covering the full period mentioned in the notice.

Petitioner’s Contentions

The assessee raised several apprehensions regarding the adjudication proceedings:

1. Fear of Composite Order for All Years

The assessee argued that:

  • The authority (second respondent) intended to pass a single composite order covering all financial years mentioned in the show cause notice.
  • Such a composite determination under Section 74 would be improper and contrary to law.
  • The authority was allegedly acting in undue haste to complete the proceedings.

2. Alleged Inadequate Opportunity of Hearing

Further, the assessee contended that:

  • Sufficient time was not being afforded to present its defence for each year separately.
  • The process was being rushed without allowing reasonable opportunity to respond and be heard.

3. Denial of Cross-Examination

It was also argued that:

  • An opportunity for cross-examination of persons whose statements might be relied upon in the proceedings was allegedly being denied.
  • This, according to the assessee, amounted to violation of principles of natural justice.

On the basis of the above, the assessee requested the Court to intervene at the show cause stage itself.

Stand of the Court on These Allegations

The Kerala High Court carefully examined whether these objections warranted interference at this stage of the proceedings.

No Concrete Material of Procedural Violation