The Karnataka High Court has previously clarified in similar matters that consolidating multiple assessment years into a single SCN—whether under Section 73 or Section 74—violates GST provisions.
In a significant ruling, the Orissa High Court has stayed a Show Cause Notice (SCN) issued under Section 74 of the Odisha Goods and Services Tax (GST) Act, 2017. The SCN, which consolidated multiple assessment years (AYs), was stayed following a precedent set by the Karnataka High Court. The stay order was issued on January 3, 2024, by a bench comprising Justice Arindam Sinha and Justice M.S. Sahoo. The court has directed the department to submit its opposition by December 17, 2024.
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Case Overview
The case pertains to an SCN covering the period from July 2017 to March 2024, issued under Section 74 of the GST Act. The applicant’s counsel, Advocate P.K. Harichandan, argued that the SCN violates the statutory provisions under subsection (10) of Section 74, which prescribes a time limit for issuing notices. Specifically, the notice must be issued within five years from the due date of furnishing the annual return for the concerned fiscal year.
Applicant’s Arguments
- Time Limit Violation: The counsel argued that the notice—encompassing multiple fiscal years—breaches the statutory time frame.
- Irrelevance to Unregistered Dealers: The applicant, being an unregistered dealer during the relevant period, contended that the provisions under Section 74 do not apply.
- Reference to Karnataka HC Ruling: Advocate Harichandan relied on the Karnataka High Court’s decision in Veremax Technologies Services Ltd. v. Assistant Commissioner of Central Tax, where it was held that consolidating multiple AYs into a single SCN is contrary to the GST Act.
Department’s Counterarguments
The department’s counsel, Mr. Satapathy, argued that the term “tax period,” as defined under Section 2(106) of the GST Act, permits such consolidation. Furthermore, he pointed out that the applicant had obtained GST registration as of the SCN’s issuance date, rendering the SCN valid.
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Court’s Observations
The Orissa High Court observed the reliance on the Karnataka High Court’s judgments, particularly in the cases of Veremax Technologies Services Ltd. and Bangalore Golf Club v. Assistant Commissioner of Commercial Taxes. These rulings clearly stated that consolidating multiple AYs into a single SCN under Sections 73 or 74 of the GST Act contravenes the law.
The court deemed the writ petition worthy of further hearing and issued a stay on the impugned notice until the next hearing date. It also directed the department to furnish its opposition by December 17, 2024.
Precedent from Karnataka HC
The Karnataka High Court has previously clarified in similar matters that consolidating multiple assessment years into a single SCN—whether under Section 73 or Section 74—violates GST provisions. These rulings underscore the importance of adhering to statutory guidelines for each tax period.
Also Read: How to Challenge SCNs Under Section 74 of the CGST Act, 2017
Implications
This stay order reinforces the need for strict compliance with GST provisions regarding the issuance of SCNs. It emphasizes that consolidating multiple AYs into a single notice could be legally untenable, as highlighted in various judicial precedents.
The case will be closely watched for its outcome, as it may set a precedent impacting future GST litigations. Taxpayers and legal professionals must stay informed to navigate similar challenges effectively.
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