Kerala High Court Sets Aside Composite GST Show Cause Notice Issued Under Section 63 of CGST/KGST Act
Background and Overview
The Kerala High Court recently adjudicated a significant writ petition involving an association comprising managements of 36 self-financing pharmacy colleges operating in the State of Kerala. The association, registered under the Societies Registration Act, challenged a show cause notice issued by the Intelligence Officer under Section 63 of the CGST/KGST Act, which proposed both tax assessment and imposition of penalty upon the petitioner.
The case — Kerala State Self-Financing B. Pharm College Management Association Vs Intelligence Officer (Kerala High Court) — raises fundamental questions about the legal validity of composite show cause notices spanning multiple assessment years and the standard of fairness required in quasi-judicial proceedings under GST law.
Nature of the Petitioner and Its Activities
The petitioner is an umbrella body formed by the managements of 36 Self-financing Pharmacy Colleges in Kerala. It administers a distinct selection and admission procedure for candidates seeking entry into Pharmacy programmes at its member institutions. This selection mechanism operates independently from NRI seat allotments and seats reserved either by the State government or by individual member colleges on their own account.
The petitioner's core argument rested on the nature of its services — specifically that its activities relating to admission procedures and conduct of examinations fall within the scope of the exemption provided under entry 66(b)(iv) of Notification No. 12/2017, which excludes from GST liability services connected with admission to, or conduct of, examinations.
The Impugned Show Cause Notice — Two Primary Challenges
The petitioner mounted its challenge against the show cause notice (Ext.P1) on two distinct and independent grounds:
1. Composite Notice Covering Multiple Assessment Years
The petitioner argued that Ext.P1 was a composite show cause notice — a single notice addressing liability across several assessment years simultaneously. This form of notice has already been held to be legally unsustainable by earlier Division Bench decisions of the Kerala High Court. Accordingly, the petitioner contended that the notice was bad in law on this ground alone, irrespective of the merits of the tax or registration dispute.
2. Pre-Determined Conclusion Embedded in the Notice
The petitioner's second objection went to the substantive content and language of the notice. According to the association, a careful reading of Ext.P1 revealed that the issuing authority had already arrived at a conclusive determination that the petitioner was obligated to obtain GST registration and was liable to pay tax and penalty — before even affording an opportunity to respond.
The petitioner's position was that the threshold question — whether it was at all required to obtain registration under the CGST/KGST Act given its claimed exemption — had to be examined and resolved first. Only if that preliminary question were answered against it could the question of assessment and penalty arise. Instead, Ext.P1 bypassed this sequencing entirely and proceeded directly to conclusions.
Arguments Advanced by Both Sides
Petitioner's Submissions
Senior Counsel for the petitioner contended that: