Kerala High Court: Consolidated Show Cause Notice Permissible Only When Common Adjudication Period Exists

Kerala High Court: Consolidated Show Cause Notice Permissible Only When Common Adjudication Period Exists

The Kerala High Court has held that a consolidated show cause notice covering multiple assessment years can be issued only when a common period of adjudication exists. The court emphasized that such a notice should not curtail the statutory period available to an assessee for presenting contentions effectively.

A Division Bench comprising Justices A.K. Jayasankaran Nambiar and Easwaran S. observed, "Issuing a consolidated show cause notice covering various financial/assessment years would cause prejudice to an assessee who would not get the full period envisaged for adjudication under the statute, if that period is circumscribed by the limitation period prescribed in relation to an earlier financial/assessment year."

In this case, the department had issued a single consolidated show cause notice to the assessee for six financial years (2017-18 to 2023-24). The assessee challenged this notice through a writ petition, arguing that it would unfairly restrict the time available to respond for certain assessment years.

A Single Judge ruled in favor of the assessee, holding that the consolidated notice could prejudice the assessee's ability to present contentions for years where the statutory time limit under Section 74(10) of the CGST Act would not expire by February 7, 2025— the last date for passing orders for the 2017-18 assessment year. The department subsequently appealed this decision.

The Division Bench upheld the Single Judge’s order, noting that the statutory period for an assessee to respond should not be curtailed due to a consolidated show cause notice. The court highlighted that in situations where the limitation period is nearing expiry for only one of multiple financial years, an assessee’s right to present contentions and evidence for other years should not be compromised.

The bench further pointed out that a consolidated notice could lead to a single adjudication order covering multiple years, potentially increasing the fee or pre-deposit burden for the assessee in case of an adverse ruling.

In light of these findings, the Kerala High Court dismissed the department’s appeal, reinforcing the principle that consolidated show cause notices should not undermine an assessee’s statutory rights.