Quashed

M/S Albatross Builders and Developers LLP v. Assistant Commissioner of Central Tax

Karnataka HC14 Nov 2024WP/23731/2024

Case brief

AI extract

What is this about?

High Court held that a single consolidated show cause notice issued under Section 74 of the CGST Act for multiple financial years is erroneous. Quashing the notice, the Court reserved liberty for the respondent to issue separate notices for each financial year.

What did the court decide?

The show cause notice dated 22.07.2024 and the summary dated 03.08.2024 are set aside. Liberty reserved to issue separate notices for each financial year.

M/S Albatross Builders and Developers LLP Vs… — GST and Indirect Tax | Karnataka HC (2024)

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1 - NC: 2024:KHC:46369 WP No. 23731 of 2024

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 14^TH DAY OF NOVEMBER, 2024

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BEFORE

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THE HON'BLE MR JUSTICE M.I.ARUN WRIT PETITION NO. 23731 OF 2024 (T-RES)

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BETWEEN:

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M/S. ALBATROSS BUILDERS AND DEVELOPERS LLP, UNDER THE INDIAN PARTNERSHIP ACT REPRESENTED BY ITS PARTNER SRI. SHARATH H.P, AGED ABOUT 38 YEARS, NO. 45, 100 FT RING ROAD, OPP. TO MANDAVI MOTORS, J.P. NAGAR 4TH PHASE, BENGALURU - 560 078.

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…PETITIONER

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(BY SRI. SHANKARE GOWDA M.N, ADVOCATE)

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Digitally signed by CHAITHANYA K Location: High Court of Karnataka

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AND:

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ASSISTANT COMMISSIONER OF CENTRAL TAX (A.E), BENGALURU SOUTH COMMISSIONERATE, CR BUILDING, 5TH FLOOR, HEADQUARTERS PREVENTIVE UNIT, BENGALURU - 560 001.

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…RESPONDENT

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(BY SRI. ARAVIND CHAVAN, ADVOCATE)

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THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE SHOW CAUSE NOTICE DATED 22.07.2024 IN F NO.

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NC: 2024:KHC:46369 WP No. 23731 of 2024

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GEXCOM/AE/INV/GST/6032/2022-AE-O/o COMMR-CGSTBENGALURU (S) U/S 74 OF THE CGST ACT ISSUED BY THE RESPONDENT (ANNEXURE-A) AND SUMMARY OF THE SHOW CAUSE NOTICE DATED 03.08.2024 IN FORM GST DRC-01, REFERENCE NO. ZD290824012414G (ANNEXURE-B) U/S 74 OF THE CGST ACT ISSUED BY THE RESPONDENT FOR THE TAX PERIODS 2017-18, 2018-19, 2019-20, 2020-21, 2021-22 AND 2022-23 AS INVALID AND PASSED WITHOUT AUTHORITY OF LAW IN THE PETITIONERS CASE AND ETC.,

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THIS PETITION, COMING ON FOR ORDERS THROUGH VIDEO CONFERENCING / PHYSICAL HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

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CORAM: HON'BLE MR JUSTICE M.I.ARUN

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ORAL ORDER

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Aggrieved by the show cause notice dated 22.07.2024, bearing F.No.GEXCOM/AE/INV/GST/6032/ 2022-AE-O/o COMMR-CGST-BENGALURU(S), issued by the respondent vide Annexure-A to the writ petition and the summary of show cause notice dated 03.08.2024, Reference No.ZD290824012414G, issued by the respondent vide Annexure-B to the writ petition under

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NC: 2024:KHC:46369 WP No. 23731 of 2024

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Section 74 of the Central Goods and Services Tax Act, 2017, the present writ petition is filed.

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The petitioner is registered under the provisions of the Central Goods and Services Tax, 2017 and Karnataka Goods and Services Tax Act, 2017 and it is involved in the restaurant business. On the ground that the petitioner has availed erroneous Input Tax Credit for the period from January-2018 to August-2022, the aforementioned show cause notice and the summary of show cause notice have been issued. Aggrieved by the same, the present writ petition is filed.

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The case of the petitioner is that the respondent could not have issued one single notice for the entire period between January-2018 and August-2022. They ought to have issued separate show cause notice for each financial year. It is further submitted, that in umpteen number of cases this court has held so. For the said reason, it is prayed that the show cause notice and the summary of show cause notice may be set aside.

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4 - NC: 2024:KHC:46369 WP No. 23731 of 2024

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Per contra , the learned counsel for the respondent submits that though one show cause notice has been issued for the period from January-2018 to August-2022, the summary of show cause notice (vide Annexure-B to the writ petition) spells out the Input Tax erroneously claimed by the petitioner and the interest and penalty that is attracted. It is further contended that there is no express prohibition in law for issuing one show cause notice for several financial years. On the said ground, it is prayed that the writ petition be dismissed.

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The question that arises for consideration is:

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Whether the respondent can issue one show cause notice for several financial years?

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The Co-ordinate Bench of this Court, while examining

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the similar situation in W.P.No.15810/2024 (T-RES) in Paragraph No.4 has held as under:

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"4. This Court has reviewed the judgment of the Madras High Court and the scope of inquiry under

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5 - NC: 2024:KHC:46369 WP No. 23731 of 2024

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Section 73 of the CGST Act. Based on the established legal principles and the precedent set by the Hon'ble Apex Court, this Court finds that the respondent erred in issuing a consolidated show cause notice for multiple assessment years, spanning from 2017-18 to 2020-21."

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Such a decision is arrived at because the liability of the assessee for each financial year constitutes a different cause of action. The rate of tax, interest and the penalty may vary from one year to another year. Further, the notices issued for a particular financial year may be timebarred, while in respect of the others it may not.

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Under the given facts and circumstances of the case, the impugned show cause notice (vide Annexure-A to the writ petition) has to be considered as one show cause notice for the entire period between January-2018 and August-2022. Perusal of Paragraph No.9 of the said show cause notice clarifies the same. It reads as under:

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"9. Now, therefore, M/s Albatross Builders and Developers LLP (GSTIN: 29ABJFA4828J1Z2) at #45, 100 ft road, 15th Cross, JP Nagar 4th Phase,

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NC: 2024:KHC:46369 WP No. 23731 of 2024

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Bangalore, 560078 are hereby required to show cause to the Deputy/Assistant Commissioner of Central Tax, South Division 6, BMTC Bus Stand, TTMC, Banashankari Stage II, Bengaluru-560070, the Adjudicating Authority, as to why:

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(a) Input Tax Credit (ITC) amounting to Rs.23,85,772/- [IGST 66615+ CGST 11,47,722 + SGST 11,47,722+ Cess 23,713] (twenty-three lakh eighty five thousand seven hundred seventy two only), availed in GSTR-3B Returns during the period Jan-18 to Aug-22 by them, should not be treated as ineligible ITC, as discussed supra; and demanded from them under Section 74(1) of the CGST Act, 2017 and relevant provisions under Karnataka GST Act, 2017;

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(b) Interest, as applicable, on the Input Tax Credit demanded as mentioned at (a), should not be demanded from them under the provisions of Section 50 of the CGST/Karnataka GST Act, 2017 read with Section 74(1) of the CGST Act, 2017;

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(c) Penalty as prescribed under Section 74(1) of the CGST/Karnataka GST Act, 2017 should not be imposed on them towards the demand proposed at (a) above;"

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Though in the summary of the show cause notice there is segregation of the liability in respect of each

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7 - NC: 2024:KHC:46369 WP No. 23731 of 2024

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financial year, in the light of the judgment of the Coordinate Bench of this Court in W.P.No.15810/2024 (TRES) and for the reasons stated above, it does not come to the rescue of the respondent. Thus, it is appropriate to set aside the impugned show cause notices, reserving the liberty to the respondent to issue appropriate show cause notices for each financial year and proceed against the petitioner. Hence, the following:

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ORDER

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i. The show cause notice dated 22.07.2024, bearing F.No.GEXCOM/AE/INV/GST/6032/ 2022-AE-O/o COMMR-CGST-BENGALURU(S), issued by the respondent (vide Annexure-A) to the writ petition is hereby set aside;

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ii. The summary of the show cause notice dated 03.08.2024, Reference No.ZD290824012414G, issued by the respondent (vide Annexure-B) to the writ petition is hereby set aside;

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NC: 2024:KHC:46369 WP No. 23731 of 2024

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iii. Liberty is reserved to the respondent to issue a separate show cause notice for each financial year to the petitioner and proceed in accordance

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with law.

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iv. The Writ Petition is hereby disposed of.

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Sd/(M.I.ARUN) JUDGE

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List No.: 1 Sl No.: 24 CT: BHK

M/S Albatross Builders and Developers LLP v. Assistant Commissioner of Central Tax

Case brief

What is this about?

What did the court decide?

M/S Albatross Builders and Developers LLP v. Assistant Commissioner of Central Tax

Case brief

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