Single Composite Show Cause Notice for Multiple Tax Years Held Jurisdictionally Defective under Section 74

1. The Core Dispute: Bunching of Tax Periods

The Revenue issued a single, composite Show Cause Notice (SCN) under Section 74 covering five distinct financial years (2017-18 through 2021-22). The assessee challenged the validity of this notice, arguing that the GST law requires year-wise adjudication.

Assessee’s Stand: Each financial year is a separate unit for assessment. A “bunching” or “clubbing” of multiple years into one notice prevents a clear determination of limitation periods and specific demands for each year.
Revenue’s Stand: A single notice is more efficient for cases involving continuous fraud or suppressed facts spanning multiple years.

2. Legal Analysis: The “Year-Wise” Requirement

The High Court relied on the precedent set in Pramur Homes and Shelters v. Union of India [2025] to strike down the composite notice.

I. Separate Limitation Periods

Sections 73 and 74 have specific “limitation periods” (deadlines) for issuing notices and passing orders, which are calculated based on the Annual Return due date for each specific financial year.

The Conflict: By clubbing 2017-18 with 2021-22, the Revenue obscures these deadlines. A notice that might be “in time” for 2021-22 could be “time-barred” for 2017-18.

II. Adjudication is Annual

The Court clarified that the scheme of the GST Act—specifically regarding audit, annual returns, and the power to recover tax—is structured on a year-to-year basis.

The Ruling: An order of adjudication must be passed for a specific year. Consequently, the SCN preceding that order must also be year-specific. “Bunching” multiple years into a single notice is not just a procedural irregularity; it is a fundamental defect that goes to the root of the jurisdiction.

3. Final Verdict: Notice Held Defective

Following the “Pramur Homes” decision, the Court held that the Revenue cannot consolidate multiple financial years into one SCN.

Verdict: The single SCN issued for the period 2017-18 to 2021-22 was held to be defective and unsustainable.
Outcome: The proceedings based on the composite notice were set aside. The Revenue typically retains the liberty to issue fresh, separate notices for each year, provided they are still within the statutory limitation period.

Key Takeaways for Taxpayers

Check the Period: If you receive a GST notice, immediately check if it covers multiple financial years. If it does, you can challenge its validity based on this “Anti-Bunching” principle.
Limitation Defense: Bunching is often used by the Department to “save” time-barred demands from earlier years by mixing them with more recent ones. Breaking the notice down by year often reveals that the older years are beyond the legal deadline for recovery.
Pramur Homes Precedent: This Karnataka High Court ruling is a powerful tool for taxpayers facing composite demands, ensuring that the Revenue adheres to the strict year-wise discipline of the GST Act.

HIGH COURT OF KARNATAKA

MCR Marketing

Assistant Commissioner of Central Tax^*

S. Sunil Dutt Yadav, J.

WRIT PETITION NO. 5739 OF 2025 (T-RES)

JANUARY 20, 2026

Rajeev Channappa Nulvi, Adv. for the Petitioner. Shishira Amarnath, Adv. for the Respondent.

ORDER

1. The petitioner has called in question the Order-in-Original at Annexure-‘L’ dated 31.12.2024 passed by respondent No.3 under Section 74 read with Section 74(1), 50(1) and 20 of the IGST Act, 2017 and has also sought for setting aside of Form GST-DRC-07 at Annexure-‘L1’ dated 16.01.2025 for the Financial Years 2017-2018 to 2021-2022 and the show cause notice dated 18.06.2024. Further, the petitioner has sought for setting aside of Form GST-DRC-01 dated 05.08.2024 at Annexure-‘G’ for the tax periods 2017-2018, 2018-2019, 2019-2020, 2020-2021 passed by respondent No.3 Authority.

2. The petitioner has drawn attention to the show cause notice and further submits that the period in question is from 2018-2019, 2019-2020, 2020-2021, 2021-2022. It is further submitted that single show cause notice for multiple tax periods is impermissible.

3. Reliance is placed on the order of this Court dated 17.12.2025 passed in Lakshmi Venkateshwara Traders MS Scrap v. Deputy Commissioner of Central Tax [W.P. No. 22726 of 2025, dated 17-12-2025], wherein reference is made to the order of the Co-ordinate Bench dated 11.12.2025 passed in Pramur Homes and Shelters v. Union of India (Karnataka)/W.P.No.33081/2025.

4. The observations made in Lakshmi Venkateshwara Traders MS Scrap (supra) read as follows:-

Though several contentions have been urged by both sides in support of their respective claims, the issue in controversy between the parties is directly and squarely covered by the judgment of this Court in the case of Pramur Homes And Shelters (supra).

In the said judgment, this Court formulated two points for consideration, which reads as under:

(i)

Whether clubbing/consolidation/bunching/ combining of multiple tax periods/ financial years in a Single/Composite Show cause notice issued under Section 73 / 74 of the CGST/ KGST Act, 2017 is permissible and valid in law?

(ii)

Whether the impugned Show cause notice dated 30.09.2025 issued by the 4^th respondent to the petitioner for the tax periods/financial years from 2019-20 to 2023-24 under Section 74 of the CGST/ KGST Act, 2017 warrants interference by this Court in the present petition?

Issue No.1 was answered by this Court in favour of the petitioner by holding as under:

Point No.(i) is accordingly answered in favour of the petitioner/tax payer/assessee by holding that clubbing/ consolidation/ bunching/ combining of multiple tax periods/financial years in a Solitary/Single/Composite Show cause notice issued under Section 73/74 of the CGST/KGST Act is illegal, invalid, impermissible and without jurisdiction or authority of law and contrary to the provisions of the CGST/KGST Act.

So also point No.2 was also answered by this Court in favour of the petitioner by quashing the impugned Show Cause Notice by holding as under:

“Re: Point No.(ii);

9. While dealing with Point No. (i) supra, I have already come to the conclusion that clubbing / consolidation / bunching/ combining of multiple tax periods/financial years in a Solitary/Single/ Composite Show cause notice issued under Section 73 / 74 of the CGST / KGST Act is illegal, invalid, impermissible and without jurisdiction or authority of law and contrary to the provisions of the CGST / KGST Act. In the instant case, a perusal of the impugned Show cause notice dated 30.09.2025 will indicate that the same encompasses and pertains to multiple tax periods/financial years, viz., from 2019-20 to 2023-24, which is impermissible in law and consequently, the impugned Show cause notice and all further proceedings pursuant thereto are also vitiated and deserve to be quashed reserving liberty to the respondents to initiate any action/proceedings in accordance with law.

Point No.(ii) is also accordingly answered in favour of the petitioner/tax payer/assessee by holding that the impugned Show cause notice dated 30.09.2025 issued by the 4^th respondent to the petitioner for the tax periods/financial years from 2019-20 to 2023-24 under Section 74 of the CGST/KGST Act is illegal, invalid, impermissible, arbitrary and without jurisdiction or authority of law and contrary to the provisions of the CGST/KGST Act and the impugned show cause notice and all further proceedings, orders, notices pursuant thereto deserve to be quashed by reserving liberty in favour of the respondents to initiate proceedings in accordance with law.

10. In the result, I pass the following:

ORDER

(i)

Petition is hereby allowed.

(ii)

The impugned show-cause notice at Annexure-A dated 30.09.2025 issued by respondent No.4 and all further proceedings, orders, notices etc., pursuant thereto initiated/to be initiated by the respondents are hereby quashed.

(iii)

The respondents are however reserved liberty to initiate appropriate proceedings in accordance with law and if such proceedings are initiated by the respondents, petitioner would be entitled to contest / defend the same in accordance with law.”

The issue in controversy involved in the present petition also relates to clubbing/consolidation/bunching/combining of multiple tax periods/financial years/block periods in a Single/Composite Show cause notice, which has already been held to be invalid and illegal by this Court in Pramur Homes And Shelters’s case referred to Supra.

Under these circumstances, the impugned show cause notices both dated 31.03.2022 at Annexures- F and F1 passed by respondent No.1 deserve to be quashed.

In the result, I pass the following:

ORDER

(i)

Petition is hereby allowed and disposed of in terms of Pramur Homes And Shelters (supra).

(ii)

The impugned show cause notices both dated 31.03.2022 at Annexures- F and F1 passed by respondent No.1 and all further proceedings, orders, notices etc. , pursuant thereto initiated/to be initiated by the respondents are hereby quashed.

(iii)

5. Taking note of the show cause notice issued in the present case at Annexure-‘G’, which relates to the period spanning between April 2018 to March 2022 as well as on perusal of the order of adjudication, which happens once in a year and the tax period spans from 2017-2018 to 2021-2022 and in light of the decision in Pramur Homes and Shelters (supra), the show cause notice issued is defective. If that were to be so, the order of adjudication requires to be set aside.

6. Accordingly, the Order-in-Original at Order-in-Original at Annexure-‘L’ dated 31.12.2024, Form GST-DRC-07 at Annexure-‘L1’ dated 16.01.2025, show cause notice dated 18.06.2024, dated 31.01.2025 and Form GST-DRC-01 dated 05.08.2024 at Annexure-‘G’ are set aside as well as the consequent proceedings. The respondents are however reserved liberty to initiate appropriate proceedings in accordance with law as regards which show cause notice was issued. All contentions are kept open.