Facts of the Case

The petitioner, Pohtireddy Venkata Reddy, a registered taxpayer under the GST law, challenged an Order-in-Original dated 24.09.2025 passed under Section 74 of the CGST/APGST Act, 2017. The impugned order covered the tax periods from FY 2021-22 to FY 2024-25 through a single composite assessment order.

The proceedings originated from a Show Cause Notice in Form GST DRC-01 dated 16.06.2025, also issued under Section 74, alleging differential GST liability relating to works contract services provided to the State Government. Subsequently, the authorities attached the petitioner's bank account, recovered ₹65.10 lakh, and placed a lien on the remaining demand.

Aggrieved by the composite adjudication, the petitioner approached the Andhra Pradesh High Court under Article 226 of the Constitution of India, seeking quashing of the assessment order, the show cause notice, and the consequential recovery proceedings.

Issues Involved

  1. Whether a single show cause notice and composite assessment order under Section 74 of the CGST/APGST Act can validly cover multiple financial years.
  2. Whether clubbing adjudication for four assessment years violates the statutory framework under Sections 73 and 74.
  3. Whether such composite proceedings violate the principles of natural justice.
  4. Whether recovery proceedings based on such an assessment order are sustainable.

Petitioner's Arguments

  • The assessment order covering four financial years through a single adjudication was contrary to the provisions of Sections 73 and 74 of the GST Acts.
  • The authorities failed to consider the petitioner's explanation before passing the assessment order.
  • The dispute regarding differential tax on works contract services was wrongly adjudicated through one consolidated proceeding instead of separate proceedings for each assessment year.
  • The composite assessment suffered from procedural irregularity, lack of jurisdiction, and violation of natural justice.
  • Consequently, the attachment of the bank account and recovery proceedings were also liable to be quashed.

Respondent's Arguments

  • The State defended the assessment proceedings initiated under Section 74.
  • It relied upon the assessment order and the consequential recovery proceedings.
  • However, during the hearing, the principal legal issue centred on the maintainability of a single composite assessment order covering multiple tax periods, particularly in light of earlier judicial precedents of the Andhra Pradesh High Court.

Court Order / Findings

The Andhra Pradesh High Court referred to its earlier decision in W.P. No.11028 of 2025 & batch, wherein it had categorically held that:

  • A single show cause notice or
  • A single composite assessment order

cannot be issued for more than one tax period. Where annual returns have become due, each financial year must be assessed separately.

Applying the above principle, the Court held that the impugned assessment order covering FY 2021-22 to FY 2024-25 through one composite order was legally unsustainable.

Accordingly, the High Court:

  • Set aside the assessment order dated 24.09.2025.
  • Remanded the matter to the GST authorities.
  • Granted liberty to initiate fresh assessment proceedings separately for each assessment year.
  • Directed that the petitioner shall deposit 20% of the disputed tax within six weeks.
  • Ordered that any amount already recovered shall be adjusted against the said 20% deposit.
  • Directed exclusion of the period between the original assessment order and receipt of the High Court order while computing limitation for fresh proceedings.
  • Left all other legal contentions of the petitioner open for consideration in the fresh proceedings.

Important Clarification

This judgment reiterates an important procedural safeguard under the GST law:

  • Each assessment year constitutes a separate tax period for adjudication.
  • GST authorities cannot issue a consolidated show cause notice or assessment order covering multiple financial years after the annual return due date.
  • If such composite proceedings are initiated, they are liable to be set aside.
  • However, the tax authorities retain the liberty to initiate fresh independent proceedings for each assessment year, subject to statutory limitation and the directions issued by the Court.
  • The Court balanced the interests of both the taxpayer and the Revenue by directing a 20% deposit of the disputed tax while remanding the matter.

Sections Involved

  • Article 226 of the Constitution of India
  • Section 74 of the Central Goods and Services Tax Act, 2017
  • Section 74 of the Andhra Pradesh Goods and Services Tax Act, 2017
  • Section 73 of the Central Goods and Services Tax Act, 2017
  • Section 73 of the Andhra Pradesh Goods and Services Tax Act, 2017
  • Form GST DRC-01

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1784870320_1934compressed.pdf

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