Andhra Pradesh High Court: Composite GST Assessment Orders for Multiple Years Held Illegal
1. The Core Dispute: “Bunching” of Financial Years
The petitioner challenged a single, composite assessment order that covered a span of nearly five years (July 2017 to January 2022).
The Issue: The Revenue issued a single Show Cause Notice (SCN) and followed it with a single consolidated assessment order, effectively “bunching” multiple financial years into one adjudicatory exercise.
Assessee’s Stand: The GST scheme is fundamentally designed on a year-wise basis. Since the limitation for each year is different and the right to appeal applies to each tax period independently, a composite order is a jurisdictional error.
Revenue’s Stand: The Department argued for “administrative convenience,” claiming that if the issues are identical across years, a single order saves time and resources.
2. The Legal Ruling: Each Year is a “Distinct Unit”
The High Court, following the Division Bench ruling in S J Constructions, held that composite proceedings are impermissible under the GST Act.
I. Tax Period as the Adjudicatory Unit
The Court interpreted Sections 73 and 74 in light of Section 2(106), which defines a “tax period” as the period for which a return is required to be furnished.
Pre-Annual Return: If an assessment happens before the due date for the annual return, the “tax period” is the month.
Post-Annual Return: Once the annual return is due, the “tax period” becomes the financial year.
II. Protection of Statutory Rights
The Court identified that allowing composite orders would prejudice the taxpayer in several ways:
Appellate Rights: It interferes with the right to file separate appeals for each year under Section 107.
Penalty Relief: It prevents the assessee from availing of year-specific penalty waivers or amnesty schemes provided under Section 128.
Limitation Shield: Each financial year has a specific three-year (Section 73) or five-year (Section 74) limitation period calculated from the due date of its respective Annual Return. “Bunching” prevents the court from verifying if the demand for a specific year within the block is time-barred.
3. Final Order and Direction
Considering the settled legal position in the State of Andhra Pradesh, the Court quashed the multi-year proceedings.
Outcome: Both the Assessment Order and the Appellate Order were set aside.
Fresh Proceedings: The Revenue was granted the liberty to initiate fresh proceedings, provided they issue separate notices and pass separate orders for each assessment year independently.
Limitation Exclusion: The period during which this litigation was pending will be excluded when calculating the limitation for the new, separate notices.
Key Takeaways for Taxpayers
Check Your Notice: If you receive a notice clubbing more than one financial year (e.g., FY 2017-18 to 2019-20), it is a “composite notice” and is likely invalid according to the AP High Court.
Jurisdictional Strategy: Even if you have already lost an appeal, you can still challenge the “composite” nature of the order in a Writ Petition, as this goes to the very root of the authority’s jurisdiction.
Andhra Pradesh Precedent: This ruling aligns Andhra Pradesh with the High Courts of Madras, Karnataka, and Kerala, which have consistently struck down bunched GST demands.