A Single SCN Consolidating Multiple Financial Years is Impermissible (Emmanuel Constructions (P.) Ltd. vs. Principal Secretary to the Govt. Finance Department)

A Single SCN Consolidating Multiple Financial Years is Impermissible (Emmanuel Constructions (P.) Ltd. vs. Principal Secretary to the Govt. Finance Department)

Issue: Whether the issuance of a single Show Cause Notice (SCN) in Form GST DRC-01, consolidating tax demands and orders across multiple distinct financial years, is legally valid and permissible under the provisions of the Central Goods and Services Tax Act, 2017 (CGST Act).

Facts:

• The petitioner, M/s Emmanuel Constructions (P.) Ltd., received a single SCN dated November 11, 2023, covering alleged non-compliance for two different Financial Years (FY) 2019-20 and 2020-21.

• Two different officers subsequently passed separate demand orders based on the same consolidated SCN, which the petitioner challenged as impermissible.

Decision:

The Karnataka High Court quashed the single consolidated SCN and its respective demand orders, holding that the issuance of a single SCN covering demands for different financial years is invalid and not in conformity with the CGST Act.

Key TakeDowns:

• Violation of Limitation Period: The core rationale is that under the GST Act, each financial year is a distinct tax period with its own specific time limit for assessment and issuance of the order (Section 73(10)). Consolidating demands into one notice undermines these statutorily prescribed limitation periods.

• Procedural Illegality: The ruling reaffirms that a consolidated SCN is a procedural illegality under the GST framework. The Court directs tax authorities to follow the rule of issuing separate SCNs for each financial year. * Contrasting View: The judgment notes that some other High Courts (like the Delhi High Court in the Ambika Traders case) have held that consolidated SCNs are permissible because Sections 73(3) and 74(3) use the phrase “for any period,” but the Karnataka HC relies on the distinction implied by Section 73(10).

• Liberty to Re-Issue: The Court granted the adjudicating authority liberty to issue a fresh notice to the petitioner and proceed further in accordance with the law, provided the limitation period for each year is respected.