Legal Update: Allahabad HC Clarifies Rules on Composite GST Notices, Section 6(2)(b) Bar, and Mandatory Limitation Periods
In a significant judgment for the GST landscape, the High Court of Judicature at Allahabad has delivered a balanced ruling in the batch of petitions led by M/s SA Aromatics Pvt Ltd vs. Union of India [WTAX No. 7515 of 2025]. The Court addressed critical questions regarding the validity of composite Show Cause Notices (SCNs) spanning multiple years and the “hard” nature of statutory limitation periods.
Key Judicial Findings
1. Validity of Composite SCNs (Decided against Assessee)
The Court ruled that it is permissible for Revenue authorities to issue a single, composite SCN for multiple tax periods or Financial Years (FYs) under Sections 73 and 74.
• Adjudication vs. Assessment: The Court distinguished between “return-based assessments” (which are unit-based/FY-based) and “dispute-based adjudications” (which focus on specified tax amounts).
• Legislative Intent: The Court noted that the law permits the Proper Officer to serve statements for “other periods” involving the same dispute, regardless of FY boundaries.
2. Mandatory Nature of Limitation Periods (Decided in favor of Assessee)
The Court emphasized that the timelines prescribed under Sections 73(10) and 74(10) are fixed and mandatory, offering no room for relaxation.
• Individual FY Lapses: If a composite notice covers multiple years, the limitation starts from the earliest FY. If the deadline for the first FY passes, proceedings for that year lapse even if the notice for later years remains valid.
• Minimum Notice Period: The requirement to issue a notice at least 6 months (under Section 74) or 3 months (under Section 73) before the adjudication deadline is a “hard” limit. Any notice issued within this “buffer zone” is time-barred.
3. Prohibition of Parallel Proceedings u/s 6(2)(b)
The Court reaffirmed the bar on parallel proceedings by Central and State authorities on the same “subject matter.”
• Once an authority (State or Central) initiates an intelligence-based enforcement action or issues an SCN, the other authority is barred from initiating proceedings on the same dispute.
4. Single Notice, Single Order
The Court held that it is impermissible for one SCN to result in separate adjudication orders by different authorities (e.g., Meerut and Lucknow). An authority becomes functus officio once an order is passed, and proceedings cannot be split without a formal transfer order.