One GST Notice for Multiple Years Struck Down: Karnataka High Court Rules Each Financial Year Constitutes a Distinct Cause of Action
Case Background
Case Name: Albatross Builders And Developers LLP Vs Assistant Commissioner of Central Tax
Court: Karnataka High Court
Provision Challenged: Section 74 of the Central Goods and Services Tax Act, 2017
A registered entity engaged in restaurant operations approached the Karnataka High Court challenging a show cause notice dated 22.07.2024 bearing F.No.GEXCOM/AE/INV/GST/6032/2022-AE-O/o COMMR-CGST-BENGALURU(S) and its corresponding summary dated 03.08.2024, Reference No.ZD290824012414G, both issued under Section 74 of the Central Goods and Services Tax Act, 2017.
The department alleged that the assessee had wrongly availed Input Tax Credit (ITC) spanning the period from January 2018 to August 2022 — a consolidated window of over four financial years — and sought recovery of the same through a single proceeding.
The Core Dispute
What the Department Did
The Assistant Commissioner of Central Tax issued a solitary show cause notice clubbing alleged ITC irregularities across multiple financial years into one unified demand. The total ITC amount disputed in the notice was Rs. 23,85,772/- [IGST Rs. 66,615 + CGST Rs. 11,47,722 + SGST Rs. 11,47,722 + Cess Rs. 23,713], availed through GSTR-3B filings during the period January 2018 to August 2022.
Paragraph 9 of the impugned show cause notice read as follows:
"9. Now, therefore, M/s Albatross Builders and Developers LLP (GSTIN: 29ABJFA4828J1Z2) at #45, 100 ft road, 15th Cross, JP Nagar 4th Phase, Bangalore, 560078 are hereby required to show cause to the Deputy/Assistant Commissioner of Central Tax, South Division 6, BMTC Bus Stand, TTMC, Banashankari Stage II, Bengaluru-560070, the Adjudicating Authority, as to why:
(a) Input Tax Credit (ITC) amounting to Rs.23,85,772/- [IGST 66615+ CGST 11,47,722 + SGST 11,47,722+ Cess 23,713] (twenty-three lakh eighty five thousand seven hundred seventy two only), availed in GSTR-3B Returns during the period Jan-18 to Aug-22 by them, should not be treated as ineligible ITC, as discussed supra; and demanded from them under Section 74(1) of the CGST Act, 2017 and relevant provisions under Karnataka GST Act, 2017;
(b) Interest, as applicable, on the Input Tax Credit demanded as mentioned at (a), should not be demanded from them under the provisions of Section 50 of the CGST/Karnataka GST Act, 2017 read with Section 74(1) of the CGST Act, 2017;
(c) Penalty as prescribed under Section 74(1) of the CGST/Karnataka GST Act, 2017 should not be imposed on them towards the demand proposed at (a) above;"