Karnataka High Court Quashes Composite GST Show Cause Notice
Covering Multiple Financial Years and Sets Aside Entire Adjudication
Proceedings
M/s M C R Marketing v. Assistant Commissioner of Central Tax
& Others / High Court of Karnataka / 20 January 2026 / W.P. No. 5739 of
2025 (T-RES)
Introduction
of the Case
The Karnataka High Court
in M/s M C R Marketing v. Assistant Commissioner of Central Tax & Others
dealt with an important issue relating to the validity of composite show cause
notices issued under Sections 73 and 74 of the CGST/KGST Acts covering multiple
financial years.
The petitioner challenged
a show cause notice, adjudication order, and consequential proceedings
initiated by the GST authorities on the ground that a single composite notice
covering several tax periods was impermissible in law. The case primarily revolved
around whether clubbing multiple financial years in one show cause notice
violated the statutory scheme of the GST law.
The judgment follows and
reinforces the earlier decisions of the Karnataka High Court in M/s Pramur
Homes and Shelters v. Union of India and M/s Lakshmi Venkateshwara Traders MS
Scrap v. Deputy Commissioner of Central Tax, wherein the Court had already declared
such composite notices to be invalid.
Facts of
the Case
M/s M C R Marketing, a
proprietorship concern registered under GST in Bengaluru, filed a writ petition
challenging the Order-in-Original dated 31.12.2024 passed under Section 74 read
with Sections 50(1) of the CGST Act and Section 20 of the IGST Act.
The petitioner also
challenged Form GST DRC-07 dated 16.01.2025, the show cause notice dated
18.06.2024, and Form GST DRC-01 dated 05.08.2024 relating to financial years
spanning from 2017-18 to 2021-22.
The grievance of the
petitioner was that the GST authorities had issued a single show cause notice
covering multiple tax periods and financial years together. According to the
petitioner, such clubbing of tax periods in one notice was contrary to law and
rendered the entire proceedings invalid.
Submissions
by the Petitioner
The petitioner argued
that issuance of a single show cause notice covering multiple financial years
from 2018-19 to 2021-22 was impermissible under the CGST/KGST Acts.
Reliance was placed upon
the earlier judgment of the Karnataka High Court in M/s Lakshmi Venkateshwara
Traders MS Scrap v. Deputy Commissioner of Central Tax, wherein the Court had
followed the landmark decision in M/s Pramur Homes and Shelters v. Union of
India.
The petitioner
specifically relied upon the findings recorded in Pramur Homes, where the Court
had framed the issue as to whether “clubbing/consolidation/bunching/combining
of multiple tax periods/financial years in a single/composite show cause
notice” was permissible under Sections 73 and 74 of the CGST/KGST Acts.
The petitioner contended
that the Karnataka High Court had already answered the issue in favour of
taxpayers by holding that such composite notices were illegal, invalid,
arbitrary, and without jurisdiction. Therefore, the petitioner requested the
Court to quash the show cause notice and all consequential proceedings.
Submissions
by the Respondents
The respondents defended
the proceedings initiated against the petitioner. However, the Court primarily
examined the issue in light of the binding precedents already rendered by
coordinate benches of the Karnataka High Court concerning composite show cause
notices.
Analysis
and Judgment of the Court
The Karnataka High Court
carefully examined the show cause notice issued to the petitioner and noted
that the notice covered tax periods spanning from April 2018 to March 2022.
The Court extensively
referred to its earlier decision in M/s Lakshmi Venkateshwara Traders MS Scrap
v. Deputy Commissioner of Central Tax, which in turn relied upon the detailed
judgment in M/s Pramur Homes and Shelters v. Union of India.
The Court reproduced the
findings recorded in Pramur Homes, where it had been categorically held that
clubbing, consolidation, bunching, or combining multiple financial years in a
solitary or composite show cause notice issued under Sections 73 or 74 of the
CGST/KGST Acts is illegal, invalid, impermissible, and contrary to the
statutory scheme of the GST law.
The Court observed that
the controversy involved in the present petition was directly covered by the
earlier judgments. Since the impugned notice in the present case also combined
multiple tax periods and financial years in one composite notice, the show
cause notice itself was defective and unsustainable in law.
The High Court further
held that once the foundational show cause notice was defective, the
adjudication order and all consequential proceedings arising from such notice
were also liable to be set aside.
Accordingly, the Court
quashed the Order-in-Original dated 31.12.2024, Form GST DRC-07 dated
16.01.2025, the show cause notices, Form GST DRC-01, and all consequential
proceedings initiated against the petitioner.
However, the Court
reserved liberty in favour of the GST authorities to initiate fresh proceedings
in accordance with law. The Court also clarified that all contentions of the
parties on merits were kept open.
Conclusion
The judgment in M/s M C R
Marketing v. Assistant Commissioner of Central Tax & Others is another
significant ruling by the Karnataka High Court on the issue of composite GST
show cause notices. The Court reaffirmed the legal principle that multiple financial
years or tax periods cannot be clubbed together in a single show cause notice
under Sections 73 or 74 of the CGST/KGST Acts.
The ruling strengthens
the procedural safeguards available to taxpayers and emphasizes that GST
authorities must strictly adhere to the statutory framework while initiating
adjudication proceedings. The decision also reiterates that if the foundational
show cause notice is defective, all consequential adjudication and recovery
proceedings arising from such notice are liable to be quashed.
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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