High Court quashed single combined GST SCN for multiple financial years against company for denying ITC based on GSTR-2A/3B mismatch

Karnataka High Court quashed the GST show cause notice, order and demand against the company for denying ITC based on GSTR-2A/3B mismatch, holding composite notices for multiple years illegal, but allowed authorities to initiate fresh proceedings lawfully.

The present writ petition has been filed in the Karnataka High Court by a company named Edge Solutions under Article 226 of the Constitution of India, challenging an order dated June 20, 2022, passed by the Joint Commissioner of Central Tax, Bengaluru, and demanding tax, interest, and penalty for the tax periods from July 2017 to March 2020.

The impugned order had denied the ITC claim of the petitioner only on the basis that there were discrepancies between GSTR-2A and GSTR-3B. The key argument of the petitioner was that the department had issued a single combined show cause notice (SCN) and a single order covering issues of multiple financial years. The petitioner stated that this clubbing of cases related to several financial years in a single notice/order is unfair or illegal as per the law.

When the court analysed the case, it noted that the same issue had already been decided earlier in the case of M/s Pramur Homes and Shelters vs. Union of India. In this case, the court had clearly clarified that issuing a single or composite show cause notice for multiple tax periods or financial years under Section 73 or 74 of the CGST/KGST Act is illegal as per the law.

Hence, relying on the same case, the High Court quashed the impugned SCN dated February 01, 2021, and the order dated June 20, 2022, along with all related proceedings. However, it directed the tax authorities that they are still allowed to begin fresh proceedings in accordance with the law, and the petitioner will have the right to contest again the same as per the law.