Madras HC Affirms Department’s Power to Issue Multiple SCNs for the Same Tax Period on Distinct Issues
Case Reference: Radiant Cash Management Services Ltd. Vs. The Commercial Tax Officer (Madras High Court)
Synopsis The Madras High Court has ruled that the GST Department is not barred from issuing multiple Show Cause Notices (SCNs) for the same financial year, provided the notices pertain to distinct discrepancies or subject matters. The Court clarified that the principles of res judicata or estoppel do not strictly apply to GST proceedings where the issues raised are factually different.
Key Facts
- Background: The taxpayer received a Show Cause Notice (Form GST DRC-01) for the tax period 2021-22. The taxpayer challenged this notice, arguing that an earlier intimation/notice for the same tax period had already been issued (and subsequently quashed/set aside by the Court in a previous writ).
- Taxpayer’s Contention: The taxpayer argued that multiple assessment proceedings for the same tax period are impermissible under Section 73 of the GST Act and violate the principles of natural justice.
- Department’s Stance: The Revenue contended that the issues raised in the second SCN were largely different from those in the first proceedings.
High Court’s Ruling The Court dismissed the writ petition and upheld the validity of the second SCN, observing the following:
- Distinct Issues: The Court compared the two notices and found that the discrepancies raised were “totally different,” except for a minor overlap regarding exempt supplies. The new SCN focused on turnover reconciliation and credit notes, whereas the earlier one dealt with excess ITC and Section 17(5) reversals.
- No Statutory Bar: The Court held there is no statutory bar under the GST enactments preventing the issuance of multiple SCNs for the same tax period if they address different subject matters.
- Scrutiny vs. Adjudication: The Court noted that scrutiny of returns under Section 61 does not amount to assessment or adjudication and thus does not preclude the initiation of proceedings under Section 73.
- No Double Jeopardy: Since the subject matters were different, the principle of res judicata (a matter already judged) did not apply. The Court relied on the Allahabad High Court’s decision in ALM Industries Ltd to support this view.
Key Takeaway for Businesses
- Scope of SCNs: Do not assume that receiving one SCN for a financial year closes the assessment for that entire period. The Department may issue subsequent notices if they uncover different issues (e.g., one notice for ITC mismatch, another for turnover under-reporting).
- Verify the Content: If you receive a second notice for a period already under dispute, carefully compare the specific allegations. If the issues are identical, it can be challenged. If the issues are different, you must respond to the notice on its merits.
- Action Required: Ensure comprehensive replies are filed for every SCN received. In this case, the taxpayer was directed to file a reply to the new SCN within 30 days