Supreme Court Upholds Validity of Consolidated GST Proceedings and Email Service for Multi-Year ITC Frauds
Introduction to Multi-Year GST Proceedings
In landmark rulings, the Supreme Court of India has affirmed the legality of consolidated proceedings issued under the Goods and Services Tax (GST) regime for multi-year Input Tax Credit (ITC) frauds. These developments reinforce the tax authority’s ability to probe and penalize fraudulent ITC claims spanning multiple financial years through a single show cause notice (SCN). The court also clarified the validity of service of notices via the registered GST email address, streamlining communication between tax authorities and taxpayers.
Consolidated SCNs for Multiple Financial Years: Legal Basis and Judicial Endorsement
Fraudulent availment and utilization of ITC often involve transactions covering several financial years, necessitating an efficient and comprehensive approach by tax authorities. The Delhi High Court and subsequently the Supreme Court upheld the issuance of consolidated SCNs covering multiple financial years under Section 74 of the Central Goods and Services Tax (CGST) Act, 2017.
The case of Ambika Traders vs. Additional Commissioner is illustrative, where a sole proprietorship facing allegations of fraudulent ITC availed claims amounting to over ₹83.76 crores for the period 2017-18 to 2021-22 received a consolidated SCN. The High Court dismissed writ petitions challenging this approach, and the Supreme Court dismissed Special Leave Petitions, affirming the consolidated notice’s validity to address ITC fraud effectively[1][3][7].
Key judicial observations include:
- Single consolidated SCNs covering multiple years are permissible to uncover and address fraudulent ITC.
- The approach supports the investigation’s practical necessities, given that fraudulent schemes often span multiple periods.
- The existence of separate remedies under the CGST Act allows taxpayers to challenge demands if so warranted.
Validity of Service of Notice by Email to Registered GST Address
Another major point of clarification is the mode of service of notices by the tax department. Section 169 of the CGST Act allows service by email to the address registered in the GST portal.
Delhi High Court, affirmed by the Supreme Court, recognized email communication to the registered GST address as valid and sufficient service for notices, summons, and orders. This was established in cases where notices were sent electronically to multiple parties linked to the GST registration.[2][4][6][7]
Important aspects of the court’s reasoning include:
- Email service is compliant with Section 169(1)(c) of the CGST Act.
- Even if emails “bounce” or the attachments are large, service is deemed complete as long as communication is sent to the registered address.
- This method improves efficiency and transparency of GST proceedings.
Implications for Taxpayers and Authorities
These rulings have substantial implications:
- Tax authorities are empowered to issue consolidated notices across multiple years, ensuring comprehensive investigations and avoidance of fragmented proceedings.
- Taxpayers must be diligent about their registered contact details in the GST portal since electronic service is valid and binding.
- Challenges to consolidated proceedings or service by email must consider the prevailing legal position that upholds these mechanisms.
However, courts recognize that taxpayers retain appellate remedies under the CGST Act to contest demands or penalties post-notice issuance, preserving judicial fairness.
Conclusion
The Supreme Court’s support for consolidated GST proceedings for multi-year fraudulent ITC claims and the validity of service by email strengthens regulatory enforcement while balancing taxpayers’ rights. This sets a clear precedent discouraging fraudulent ITC practices that exploit multiple financial years. Tax professionals and businesses must align compliance and communication practices to these judicial directives to avoid adverse consequences.
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