Composite Show Cause Notice and Adjudication Order Covering Multiple Assessment Years Is Legally Impermissible
Issue
Whether the Revenue can issue a single, composite Show Cause Notice (SCN) and subsequent adjudication order under Section 73 spanning multiple financial years, or if tax periods must be initiated and adjudicated separately for each individual assessment year.
Facts
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The Consolidated Action: For the continuous tax periods stretching from 2017-18 to 2023-24, the second respondent (Proper Officer) issued a single, consolidated Show Cause Notice to the petitioner.
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The Composite Order: Following the composite notice, the officer passed a single joint adjudication order (marked as Exhibit P1) that calculated liabilities and confirmed demands for all those years collectively.
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Writ Challenge: The petitioner filed a writ petition in the High Court, challenging the legal validity of Exhibit P1 on the technical grounds that combining multiple distinct financial years into one single proceeding violates settled procedural law.
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Revenue’s Position: The Department attempted to defend the joint order as a matter of administrative convenience for tracking ongoing, non-fraud tax or Input Tax Credit (ITC) discrepancies.
Decision
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Held, in favor of the assessee: The High Court allowed the writ petition and quashed the composite adjudication order (Ext. P1).
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Mandate for Separate Proceedings: Following the binding legal principles settled by the Division Bench, the tax authorities are strictly mandated to conduct separate initiations and pass separate adjudication orders for each relevant assessment year. A composite initiation for multiple distinct years is completely impermissible.
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Liberty to Re-issue: The Court granted the Revenue the liberty to start fresh, correct proceedings by issuing individual, year-specific Show Cause Notices to the petitioner.
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Limitation Protection for Revenue: To ensure fairness, the court directed that the entire duration between the issuance of the original faulty composite SCN and the date the Department receives a certified copy of this judgment must be excluded when computing the statute of limitations for the fresh actions.
Key Takeaways
Annuality of Tax Assessments: Under GST law, each financial year constitutes a self-contained, independent unit of assessment. The Revenue cannot club distinct periods into a single macro-demand, as the deadlines, limitations, and underlying facts vary from year to year.
Procedural Error Erases the Demand: A composite notice or order suffers from an incurable procedural defect. Even if the tax calculations inside the order are mathematically correct, the structural consolidation itself invalidates the entire proceeding.
Balanced Justice on Remand: When a court strikes down an order on purely technical or procedural flaws, it routinely freezes the limitation clock. This prevents the taxpayer from using the court’s delay to escape fresh, properly formatted tax investigations.