Allahabad High Court Declines To Quash Composite GST Notices To Multiple Assessees

The Allahabad High Court has recently declined to quash composite show cause notices issued under Sections 73 and 74 of the Central and Uttar Pradesh GST Acts to multiple assessees (taxpayers), holding that whether such clubbing is permissible is a mixed question of fact and law that must ordinarily be examined during statutory proceedings.

A Division Bench of Justice Saumitra Dayal Singh and Justice Indrajeet Shukla observed, “Wherever it may be disputed that multiple noticees have been wrongly roped in together, that issue by very nature, would remain a mixed question of fact and law. Evidence would have to be led before any firm conclusion may be drawn, i.e. whether the dispute is such as may involve more than one noticee. It may normally be examined during statutory proceedings.”

The bench was dealing with a batch of writ petitions led by S.A. Aromatics Pvt Ltd and other assessees challenging proceedings initiated under Sections 73 and 74 of the GST laws. Section 73 applies where tax is alleged to have been short paid without fraud, while Section 74 applies in cases involving allegations of fraud, willful misstatement, or suppression of facts.

The authorities had conducted searches over different tax periods and issued consolidated show cause notices covering more than one noticee and, in some instances, more than one financial year.

The petitioners argued that the GST framework is built around defined tax periods and annual returns and that each financial year and each assessee must be dealt with separately. They contended that composite notices were legally impermissible. They also relied on Section 6(2)(b) of the Acts to argue that parallel proceedings by different authorities cannot be purused for same sunject matter.

Rejecting the principal challenge, the Court referred to Section 74(12) and held that the statutory scheme contemplates proceedings involving more than one person. “Once the legislature clearly contemplates issuance of one notice with respect to disputed quantified demand, there survives no room to consider that submission any further,” the bench stated.

It also noted that there was no challenge to the validity of Section 74(12). The court declined to interfere at the writ stage and clarified that all factual and jurisdictional objections may be raised before the adjudicating authority.

The court, however, also clarified that parallel proceedings by Central and State authorities would be barred under Section 6(2)(b), and granted relief where such duplication was established.

The batch of petitions was disposed of accordingly.