Kerala High Court: Separate Year-Wise SCNs Required for GST Proceedings

The Kerala High Court has reaffirmed that a single composite show cause notice (SCN) cannot ordinarily cover multiple financial years in GST proceedings. In Choice Color Coats v. Deputy Director, DGGI, the Court quashed a consolidated SCN covering multiple financial years and permitted the department to issue separate notices for each relevant year.

Case Details

• Case: Choice Color Coats v. Deputy Director, Directorate General of Goods and Services Tax Intelligence
• Court: High Court of Kerala
• W.P.(C) No.: 25600 of 2026
• Judge: Justice Ziyad Rahman A.A.
• Judgment date: 28 July 2026
• Subject: Validity of a composite GST show cause notice covering multiple financial years

The dispute concerned a consolidated SCN and its accompanying summary issued for multiple financial years. The petitioner challenged the notice on the ground that combining different assessment periods in a single proceeding was legally impermissible.

Kerala High Court's Decision

The Court accepted the petitioner's contention, relying on earlier Division Bench decisions of the Kerala High Court, particularly:

• Joint Commissioner (Intelligence & Enforcement) v. Lakshmi Mobile Accessories, [2025 KHC OnLine 149]
• Tharayil Medicals v. Deputy Commissioner, SGST Department, Thrissur, [2025 VIL 356 KER]

The Court held that the principle established in those decisions applied to the case before it. Consequently, the consolidated SCN and its summary were quashed.

Separate Notices for Separate Financial Years

The judgment reinforces an important procedural principle for GST proceedings: proceedings relating to different financial years should be initiated through separate notices rather than by combining multiple years into one composite SCN.

This distinction is significant because each tax period involves its own facts, records, computation of liability and applicable statutory limitation. A year-wise approach also provides the taxpayer with greater clarity regarding the specific period and issues under examination.

However, the judgment does not mean that the underlying tax issues have been decided in favour of the taxpayer. The Court expressly left all other contentions of the parties open.

Department Can Issue Fresh Notices

Importantly, the quashing of the consolidated SCN does not prevent the GST authorities from initiating fresh proceedings.

The Kerala High Court granted the department liberty to issue separate notices for the relevant financial years. Therefore, taxpayers should not assume that quashing of the composite notice permanently closes the proceedings.

The Court also directed that the period from the date of issuance of the composite SCN until the date on which the certified copy of the judgment is received should be excluded while computing the limitation period for initiating fresh proceedings.

Practical Implications for Taxpayers

The ruling is particularly relevant for businesses facing GST investigations, audits or demand proceedings covering more than one financial year.

Taxpayers should:

1. Examine whether a GST SCN relates to one or multiple financial years.
2. Check whether separate notices have been issued for each relevant period.
3. Review the statutory provisions and limitation applicable to each financial year.
4. Preserve the SCN, summary, supporting documents and correspondence with the department.
5. Seek professional advice promptly where a composite SCN has been issued.

The ruling also highlights the importance of procedural compliance by the tax administration. At the same time, taxpayers should assess each case on its own facts because the judgment primarily addresses the validity of the composite notice and leaves the substantive tax issues open.

Conclusion

The Kerala High Court's decision in Choice Color Coats reinforces the requirement for year-wise treatment of GST proceedings where separate financial years are involved. While the consolidated SCN was quashed, the department retains the liberty to commence fresh proceedings through separate notices, subject to applicable limitation provisions.

Businesses receiving GST notices covering multiple financial years should therefore carefully review the procedural validity of the proceedings as well as the underlying tax allegations.

For expert guidance on this topic, contact your tax professional today.