Composite GST Notices and Orders Covering Multiple Assessment Years Are Invalid and Liable to Be Quashed

Composite GST Notices and Orders Covering Multiple Assessment Years Are Invalid and Liable to Be Quashed

Issue

1. Whether a single composite notice and order-in-original covering multiple financial years (2018–19, 2019–20, and 2020–21) is legally sustainable under the CGST/KGST Act.
2. Whether the taxpayer is entitled to Input Tax Credit (ITC) benefits under Section 16(5) of the CGST/KGST Act if the relevant returns were filed on or before 30.11.2021.

Facts

• The petitioner, a registered taxpayer under CGST/KGST, was issued a single base notice covering multiple financial years—2018–19, 2019–20, and 2020–21.
• Following the single notice, the adjudicating authority passed a single composite order-in-original (Ext. P2) across all three financial years, accompanied by a summary order (Ext. P2(a)).
• Under the Ext. P2 order, ITC claimed for certain months was denied by the authorities citing the time-bar provisions under Section 16(4).
• The petitioner filed a writ petition challenging the composite notice and order, asserting that multi-year composite proceedings are legally impermissible and contending that the relevant returns were submitted on or before 30.11.2021, making the taxpayer eligible for benefit under Section 16(5).

Decision

• Composite Proceedings Invalid [In favour of assessee]: Relying on binding Division Bench precedents (Tharayil Medicals and Lakshmi Mobile Accessories), the High Court held that issuing composite notices or passing composite orders across multiple assessment years is legally unsustainable.
• Quashing of Impugned Orders [In favour of assessee]: The High Court quashed the base notice, the Ext. P2 order-in-original, and the Ext. P2(a) summary order.
• Liberty for De Novo Year-Wise Action: The Revenue was granted liberty to initiate fresh adjudication proceedings separately for each individual assessment year.
• Benefit Under Section 16(5) [In favour of assessee]: The Court directed that while initiating fresh proceedings, the benefit of Section 16(5) must be extended to the petitioner if returns were verified to have been filed on or before 30.11.2021.
• Exclusion for Limitation: The period from the date of the Ext. P2 order until the receipt of a certified copy of the judgment was ordered to be excluded when computing time limits for fresh proceedings.

Key Takeaways

• Year-Wise Notice Requirement: Tax authorities cannot consolidate demands across multiple financial years into a single notice or order under GST law; separate proceedings must be initiated for each assessment year.
• Relief Under Section 16(5): Input tax credit claims previously denied under Section 16(4) must be re-evaluated to accord the statutory relaxation under Section 16(5) if GSTR-3B returns were furnished on or before 30.11.2021.
• Quashing with Liberty to Re-issue: Where proceedings are set aside on jurisdictional/procedural grounds like composite notices, the Revenue retains the right to issue fresh, separate notices while excluding the litigation period for limitation purposes.