Court says Sections 73 and 74 of CGST/SGST Act require year-wise proceedings; non-speaking Supreme Court dismissal of SLPs does not override binding Kerala precedents.
The Kerala High Court has quashed a large batch of GST notices and orders issued in a consolidated form for multiple assessment years, holding that such composite proceedings under Sections 73 and 74 of the CGST/SGST Act are unsustainable in law.
Justice Ziyad Rahman A.A., while disposing of more than 100 writ petitions filed by taxpayers and entities including Dhanlaxmi Bank Limited, ruled that tax authorities cannot issue a single show-cause notice covering several financial years unless the statute expressly permits it. The Court said the GST law contains no enabling provision for composite notices spanning multiple years, and such a practice causes serious prejudice to assessees.
The Court relied heavily on its earlier Division Bench decisions in M/s. Lakshmi Mobile Accessories v. Joint Commissioner (Intelligence & Enforcement) and Tharayil Medicals v. Deputy Commissioner, which had already held that year-wise adjudication is required under the GST framework. It noted that the limitation period under Section 74 varies from year to year, depending on the due date for filing the annual return, and a combined notice can wrongly curtail the time available to a taxpayer to defend later years.
According to the Court, composite notices also create other disadvantages for taxpayers. They may lead to consolidated adjudication orders involving larger tax and penalty demands, and in turn increase the pre-deposit amount required for filing appeals. The Court observed that this goes against the fairness expected in taxation proceedings.
The State had argued that Sections 73 and 74 are meant to detect specific instances of tax evasion or wrongful input tax credit, and that the Act does not expressly prohibit common notices. It was also contended that the Delhi High Court had upheld similar notices and that the Supreme Court had dismissed the Special Leave Petitions against those rulings.
Rejecting that argument, the Kerala High Court held that a non-speaking dismissal of an SLP does not amount to a declaration of law under Article 141 of the Constitution. The Court referred to Supreme Court rulings including Kunhayammed, Indian Oil Corporation, and State of Orissa v. Dhirendra Sundar Das to explain that dismissal of an SLP without reasons does not create binding precedent.
The Court also said that even if the Delhi High Court had taken a different view, the Kerala High Court remained bound by its own Division Bench rulings, especially since no stay had been granted against them. It therefore refused to depart from Lakshmi Mobile Accessories and Tharayil Medicals.
In the result, the High Court quashed the impugned composite notices and orders issued for multiple years under the CGST/SGST Act. However, it granted liberty to the assessing officers to issue fresh notices separately for the relevant assessment years and proceed in accordance with law. The Court further directed that the period during which the writ petitions were pending before it would stand excluded while computing limitation for issuing fresh notices and completing proceedings.
Bottom Line :
GST - Composite show cause notices and orders under Sections 73 and 74 of the CGST/SGST Act for multiple assessment years are unsustainable - Such consolidated proceedings cause prejudice to taxpayers, curtail effective opportunity of defence, affect limitation year-wise, and increase appellate pre-deposit burden - Dismissal of SLP against contrary Delhi High Court view by non-speaking order does not amount to declaration of law under Article 141.
Statutory provision(s): Sections 73 and 74 of the Central Goods and Services Tax Act, 2017 / State Goods and Services Tax Act, 2017, Article 141 of the Constitution of India
Dhanlaxmi Bank Limited v. State of Kerala, (Kerala) : Law Finder Doc id # 2855829
