Composite Show Cause Notices: Clubbing Multiple Financial Years Ruled Invalid

The Legal Issue

Can the GST Department issue a single, consolidated Show Cause Notice (SCN) for multiple financial years (e.g., FY 2017-18 to 2021-22), or does the statutory scheme of the CGST Act mandate year-wise notices?

Facts of the Case

The Notice: The CGST authorities issued a composite SCN under Section 74 (fraud/suppression category) proposing recovery for a continuous period of five years (July 2017 to March 2022).
Assessee’s Challenge: The petitioner filed a Writ Petition challenging the jurisdiction of such a notice. They argued that each financial year has its own “Tax Period,” its own “Annual Return” due date, and consequently, its own limitation period for issuing a demand.
Revenue’s Defense: The Department relied on an internal government communication/circular claiming that composite notices are permissible for administrative convenience.

The Decision

The High Court (following the Division Bench in Milroc Good Earth Developers) quashed the SCN, establishing the following principles:

Year-Wise Limitation: Sections 73(10) and 74(10) fix the time limit for passing an order based on the due date of the Annual Return for a specific financial year. Clubbing years collapses these distinct statutory timelines.
Prejudice to Taxpayer: A composite notice forces the taxpayer to defend multiple years at once, even if some years might be time-barred or have different factual foundations (e.g., different tax rates or exemptions).
No Statutory Scope for Consolidation: The Court held that the GST scheme does not contemplate “bundling” or “bunching” of multiple years. Administrative communications cannot override the clear year-wise framework of the Act.
Conclusion: The SCN was set aside as it was issued without jurisdiction. The Department was given liberty to issue fresh, separate notices for each year, provided they are within the legal time limits.

Key Takeaways for Taxpayers

Jurisdictional Objection: If you receive a notice covering more than one financial year, you have a strong ground to challenge its validity at the threshold (Notice stage) via a Writ Petition.
The “Fraud” Exception: Note that some Courts (like the Delhi High Court) have occasionally allowed composite notices in rare cases of “continuous fraud.” However, in Maharashtra and Goa, the Milroc ruling remains the binding precedent against such clubbing.
Section 74A (Effective from FY 2024-25): Be aware that for the period starting from 2024-25, the new Section 74A introduces a more unified limitation period, but for all prior years (2017-2024), the year-wise rule strictly applies.

HIGH COURT OF BOMBAY

Rite Water Solutions (India) Ltd.

Joint Commissioner, CGST & Central Excise, Nagpur^*

ANIL L. PANSARE and RAJ D. WAKODE, JJ.

WRIT PETITION NO. 466 OF 2025

NOVEMBER 28, 2025

Kapil Hirani and Deepak Gupta, Counsel for the Petitioner. Ms Ketki Jaltare – Vaidya and P.V. Navlani, Counsels for the Respondent.

ORDER

1. Challenge is to clubbing notices issued under Section 74 of The Central Goods and Services Tax Act, 2017 (for short “CGST Act, 2017”). The Counsel for the petitioner submits that respondent no.1 has issued notice dated 4/8/2024 calling upon the petitioner to show cause as to why tax amount of Rs.2,12,16,300/-should not be demanded and recovered from them under Section 74 read with Section 9 of CGST Act, 2017, and Section 20 of The Integrated Goods and Services Tax Act, 2017. The notice issued covers tax period from July -2017 to March – 2022.

2. The argument is that such clubbing of notices is not permissible. In support, the Counsel has relied upon the judgment of a Division Bench of this Court at Goa in Milroc Good Earth Developers v. UOI GSTL 45 (Bombay)/Writ Petition No. 2203/2025 decided on 9/10/2025], wherein, the Court held that if an authority lacks jurisdiction to have composite assessment for different tax periods/assessment years, then the formality of responding to show cause notice shall not be encouraged. While doing so, the Court considered various provisions of the CGST Act, 2017, and held as under :

“18. When we have perused the scheme of assessment and payment of tax, we find that the taxes payable under the Act commensurate with Return filed for ‘each tax period’ and this is may be in the form of selfassessment or provisional assessment as provided in the Act. However, what is important to note is that there is a prescription of period of five years of due date on which ‘annual Return’ is filed for the relevant financial year and provision of payment and recovery is also included in the statutory scheme in form of Section 73 and 74, which underwent significant amendment by the Act 15 of 2024 and the provision as per subsection (12) shall be applicable for determination of tax pertaining to the period up to Financial Year 2023-24 and for financial year 2024-25 and onwards, the provision under Section 74A will be relevant.

19. From the perusal of the entire Scheme, it is evidently clear to us that the statutory provision for assessment of tax for each financial year expect the Show Cause Notice to be issued at least 3 months prior to the time limit specified in Section 73(10) and 74(10) of the Act, for issuance of assessment order as sub-section (10) provide that the proper officer shall issue the order within a period of five years from the due date for furnishing of annual Return for the financial year to which the tax not paid/short paid or input tax credit wrongly availed or utilised relates to or within five years from the date of erroneous Return. Thus, there is limitation prescribed for demand of tax and its recovery.

The Act of 2017, therefore involve a definite tax period, based on the filing of the Return, which can be either monthly or annual Return and if the assessment is based on annual Return, the tax period shall be the relevant financial year.

In the light of the statutory scheme, we find that there is no scope for consolidating various financial years/tax period which is attempted by the impugned Show Cause Notices assailed in the Petition.”

3. As could be seen, the Division Bench has in categorical terms held that there is no scope for consolidating various financial years/tax period while issuing show cause notice under Section 74 of the CGST Act, 2017.

4. The Counsel for respondent nos. 1 and 2 has invited our attention to a communication dated 15/9/2025 issued by the Under Secretary to the Government of India in favour of Principal Chief Commissioners/Commissioners of CGST Zones indicating that composite show cause notice for multiple financial years are legally permissible.

5. This communication apparently runs contrary to the provisions of the CGST Act, 2017, as discussed by the Division Bench in the aforesaid judgment and, therefore, will be of no help to the respondents.

6. Accordingly, and since notice hereunder is admittedly issued consolidating five years, the same will have to be set aside. Hence, following order is passed :

ORDER

I] The petition is allowed in terms of prayer Clause (a), which reads as under :

“a. Quash and Set Aside impugned show cause notice dated 4/8/2024 having DIN -20240866vk000061826d & SCN No. 181/GRP-06/JC/2024-25 issued by Respondent No.1 i.e. Joint Commissioner, CGST & Central Excise, Audit Division, Civil Lines, Nagpur under section 74 of the Central Goods and Service Act, 2017″

II] The respondents, however, are at liberty to re-issue notice strictly in terms of Section 74 of the CGST Act, 2017, if there is no other legal impediment.

III] The petition is disposed of in above terms.