[Opinion] Clubbing vs. De-Clubbing of SCNs | Critical Analysis

CA Keshav Gupta & Keshav Agarwal – [2025] 170 taxmann.com 159 (Article)

1. Introduction

In the context of Goods and Services Tax (GST), Show Cause Notices (SCNs) are an important tool used by tax authorities to ensure compliance with tax laws. These notices are issued when the authorities suspect a taxpayer has violated the provisions of GST, such as underreporting tax liabilities or claiming incorrect input tax credits (ITC). A common question that arises is whether SCNs should be clubbed (combined) or de-clubbed (separated).

What are SCNs? A Show Cause Notice is a written notice issued by the GST authorities to a taxpayer, asking them to explain why a particular action or inaction should not result in penalties or legal repercussions. It is an essential part of the adjudication process under GST, ensuring that taxpayers have the opportunity to present their case before any punitive measures are taken.

2. Clubbing of SCNs

2.1 Definition

Clubbing refers to the practice of merging multiple SCNs into one. This is typically done when the issues raised in the notices are interrelated or concern the same tax period, set of facts, or circumstances. For example, if a taxpayer is facing several notices related to the same transaction or a similar issue, the authorities may decide to club them together.

2.2 Advantages of Clubbing SCNs

1. Efficiency in Legal Proceedings: Combining multiple SCNs into one notice reduces the number of hearings and eliminates repetitive arguments. The issues are addressed in one go, which simplifies the process.
2. Lower Legal Costs: Since fewer hearings are required, both the taxpayer and the authorities save on legal and administrative expenses.
3. Consistency in Rulings: Clubbing ensures that similar issues are treated uniformly, reducing the chances of receiving conflicting decisions from different officers.

3. De-clubbing of SCNs

3.1 Definition

De-clubbing refers to the separation of matters arising out of common proceedings into multiple notices. This is typically done when the issues raised are distinct, involve different legal grounds, or concern different periods or entities. For example, if a taxpayer is facing issues related to different tax periods or different kinds of violations, de-clubbing helps separate these cases for clearer adjudication.

3.2 Advantages of De-clubbing SCNs

1. Focused Attention: When issues are separated, each one can be examined in detail. This ensures that all facts and legal arguments are fully considered, and each issue is addressed properly.
2. Clearer Legal Process: De-clubbing avoids confusion when the issues or parties involved are unrelated. It ensures that each case is adjudicated independently, making the process clearer and more precise.
3. Compliance with Legal Requirements: In some cases, the law requires that certain issues be handled separately. De-clubbing ensures that the proceedings follow these legal guidelines.

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