Tax authorities must issue separate show cause notices for each financial year under Section 74 of the CGST Act to ensure fairness and compliance with statutory timelines.

JUDGMENT :

A.K. Jayasankaran Nambiar, J.

The State, represented by the Joint Commissioner (Intelligence and Enforcement) and the Joint Commissioner, Tax Payer Services of the State GST Department are the appellants herein aggrieved by the judgment dated 28.01.2025 of the learned Single Judge in W.P. (C).No.2911 of 2025.

2. The brief facts necessary for disposal of this writ appeal are as follows:

The respondent herein had challenged Ext.P1 show cause notice that sought to invoke Section 74 of the Central Goods and Services Tax Act [hereinafter referred to as the “CGST Act”] to demand differential tax, interest and penalty from it on an allegation of suppression of turnover during the financial years 2017-18 to 2023-24. The main ground of challenge against Ext.P1 show cause notice in the writ petition was that inasmuch as the appellants herein had issued a single consolidated notice for six different financial years, the respondent was prejudiced in that the time limit for submitting its reply to the show cause notice in respect of each of the assessment years in question would be circumscribed by the time limit prescribed in Section 74(10) of the CGST/SGST Act for the earliest of the six financial years namely 2017-18. In particular, it was the case of the respondent/assessee that on account of the hasty action on the part of the appellants, the respondent/assessee was effectively denied an opportunity to cross-examine certain witnesses whose statements had been relied upon in the show cause notice issued to the respondent.

3. The learned Single Judge, who considered the matter, did not deem it necessary to entertain a challenge against the show cause notice on the ground of denial of opportunity to cross examine witnesses. In particular, it was noticed that although it was the contention of the respondent that an opportunity for cross examination was not being granted, there was nothing on record to assume that any procedure contrary to law would be adopted by the appellants herein. It was also observed that if an opportunity for cross examination, as required by law, was not granted, the same was a matter to be considered by the hierarchy of authorities under the CGST Act in adjudication proceedings before them. The learned Judge, however, found force in the contention of the respondent/assessee that issuing a composite order covering all the financial years from 2017-18 to 2023-24 would prejudice the respondent/assessee in relation to its contentions for those assessment yeas where the time limit prescribed under Section 74(10) of the CGST Act would not expire by 07.02.2025, which was the last date for passing orders in respect of assessment year 2017-18. The learned Judge therefore granted liberty to the appellants herein to pass appropriate orders for 2017-18 pursuant to Ext.P1 show cause notice within the period of limitation prescribed under Section 74(10) of the CGST Act, reserving the right to the authority to pass separate orders of determination for each of the other assessment years mentioned in the show cause notice after granting reasonable opportunity of hearing to the respondent/assessee in accordance with law.

4. In the appeal before us, the contention of the Department is essentially that the learned Judge ought not to have permitted the passing of separate orders for the financial years 2018-19 onwards since there is no provision envisaged under the CGST Act for issuing separate notices and orders for each financial year. It was further contended that in response to Ext.P1 show cause notice dated 29.07.2024, the respondent/assessee had filed replies only on 04.12.2024 along with statement of certain persons dated 03.12.2024, which statements were never recorded at the time of investigation. According to the appellants therefore, the request for cross examination of witnesses would only protract the proceedings and the learned Single Judge ought not to have permitted the passing of separate orders in relation to a