Composite GST Assessment Order Spanning Multiple Years Is Invalid and Liable to Be Quashed

Composite GST Assessment Order Spanning Multiple Years Is Invalid and Liable to Be Quashed

Issue

Whether the revenue authorities can legally issue a single, composite Show Cause Notice (SCN) or assessment order covering multiple tax periods across different financial years under Section 73 of the Act.

Facts

• Context: The Petitioner-assessee was issued a single, composite assessment order by the respondent tax authority.

• Period involved: The impugned composite order covered a vast timeframe spanning multiple tax periods from July 2017 to February 2022.

• Legal Challenge: The petitioner filed a writ petition challenging the validity of the assessment, questioning whether the law permits a single composite order across multiple financial years.

• Precedent cited: The matter relied upon a prior Division Bench ruling in S J Constructions v. Asstt. Commissioner, which clarified the strict timelines and boundaries for issuing GST notices and orders.

Decision

• Composite Orders Held Invalid: The High Court held that a single composite assessment order spanning multiple years is legally unsustainable.

• Strict Statutory Timeline Applied: Relying on the S J Constructions precedent, the Court noted that a single SCN or assessment cannot extend beyond one tax period prior to the due date of the annual return. Post the annual return due date, a single order cannot exceed one financial year.

• Order Quashed: Because the impugned order was a composite mix across multiple financial years, the High Court set aside the assessment on this primary ground alone.

• Remand with Conditions: The Court permitted the respondents to initiate fresh, separate proceedings on a year-wise basis, subject to the petitioner making a pre-deposit of 20%. All other grounds of the dispute were left open.

Key Takeaways

1. No Multi-Year Consolidation: Tax authorities cannot consolidate multiple financial years into one single SCN or assessment order under Section 73. Each financial year constitutes a separate unit for adjudication.

2. Year-Wise Proceedings Are Mandatory: Following the annual return due date, the revenue department is statutorily mandated to split its demands and issue separate, year-specific notices and orders.

3. Conditional Quashing: While procedural errors like issuing composite orders will result in the assessment being struck down, courts will frequently grant the department the liberty to restart the process correctly, often pinning it to a conditional pre-deposit by the taxpayer.