Jurisdictional Bar on Composite Show Cause Notices for Multiple Financial Years

1. The Core Dispute: Consolidated vs. Year-Wise Notices

The Revenue issued a single, composite Show Cause Notice (SCN) under Section 74 covering a four-year block (April 2019 to March 2023). The notice alleged suppression of taxable value and wrongful availment of Input Tax Credit (ITC) across this entire period.

Assessee’s Stand: The petitioner challenged the SCN at the threshold, arguing that “clubbing” multiple financial years into one notice is a jurisdictional error. Since the GST law operates on a year-to-year basis, a consolidated notice prevents the taxpayer from raising year-specific defenses and bypasses statutory limitation periods.
Revenue’s Stand: The department often argues that “any period” in Section 74 allows for such bunching for administrative convenience, especially where the nature of the alleged suppression is continuous.

2. Legal Analysis: Why “Clubbing” is Impermissible

The High Court, following the landmark Milroc Good Earth and Rite Water Solutions rulings, identified six fundamental reasons why a composite notice lacks jurisdiction:

I. Annual Returns as the Anchor

The GST scheme is anchored by the Annual Return (GSTR-9). Even if tax is paid monthly, the finality of liability and the start of the “limitation clock” are tied to the due date of the annual return for that specific financial year.

II. Distinct Limitation Periods (Section 73 vs. 74)

The statute fixes a strict time limit to issue an order: 3 years for non-fraud (Sec 73) and 5 years for fraud (Sec 74). These limits run separately for each year.

The Risk: A composite notice collapses these distinct timelines into one, potentially reviving “time-barred” claims for earlier years by grouping them with a “live” year.

III. Definition of “Tax Period”

Under Section 2(106), a “tax period” is the period for which a return is required to be furnished. The law treats each Financial Year as a self-contained unit for the purpose of assessment, limitation, and recovery.

IV. Prejudice to Defense

Consolidation harms the taxpayer’s ability to respond accurately. Each year may involve different turnovers, changes in tax rates, or amendments in GST rules. Forcing a taxpayer to defend a 4-year block in a single reply violates the principles of Natural Justice.

3. Final Ruling: SCN Quashed

The Court ruled that the Revenue cannot ignore the year-wise structure of the Act for the sake of convenience.

Verdict: The composite Show Cause Notice covering 2019 to 2023 was quashed and set aside.
Liberty to Revenue: The department was granted the liberty to issue fresh, year-wise notices, provided they are within the statutory limitation period for each respective year.

Key Takeaways for Businesses

Challenge Early: If you receive a “bunched” notice covering multiple years, you can challenge its jurisdiction via a Writ Petition before even filing a reply on merits.
Limitation Check: Check if any of the years clubbed in the notice are already time-barred under the 3-year (Sec 73) or 5-year (Sec 74) rule.
Year-Wise Reconciliation: Always maintain your records (GSTR-1, 3B, and 9) with strict financial year-wise reconciliations to ensure your defense is ready if separate notices are issued.

HIGH COURT OF BOMBAY

Speedways Logistics (P.) Ltd.

Union of India^*

ANIL L. PANSARE and NIVEDITA P. MEHTA, JJ.

WRIT PETITION NO. 7419 OF 2025

FEBRUARY 6, 2026

H. N. Deshmukh, Adv. for the Petitioner. Mrs. Ketki Jaltare-Vaidya, Adv. for the Respondent.

ORDER

1. Heard.

2. Challenge is to the show cause notice dated 24/9/2025 issued under Section 74 of The Central Goods and Services Tax Act, 2017 (for short “CGST Act”) by respondent no.2 – Joint Commissioner, Central Goods and Services Tax, Audit Commissionerate, Nagpur. The notice issued pertains from April – 2019 to March – 2023, saying that the petitioner has, during this period, suppressed taxable value, and thereby made short payments of Central Goods and Service Tax and availed ineligible input tax credit.

3. The argument is that clubbing of period, while issuing notice under Section 74 of the CGST Act, is not permissible. The Counsel for the petitioner submits that the issue involved is covered by a judgment passed by the Division Bench of this Court at Goa in Milroc Good Earth Developers v. Union of India GST 596/[2026] 104 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 relevant provisions of the CGST Act, 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 self assessment 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 sub-section (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.”

4. 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.

5. The aforesaid judgment was then considered by the Division Bench of this Court in Rite Water Solutions (India) Ltd. v. Joint Commissioner, CGST & Central Excise [Writ Petition No. 466 of 2025, dated 28-11-2025], wherein, the Court reiterated that there is no scope for consolidating various financial years/tax period while issuing show cause notice under Section 74 of the CGST Act.

6. The Counsel for respondent nos. 1 to 4 opposed the contentions by saying that clubbing of notice is permissible. She referred to the judgment of the Division Bench of the High Court of Delhi in Mathur Polymers v. Union of India GSTL 72 (Delhi)/[W.P.(C) 2394/2025 decided on 26/8/2025], wherein, the Court referred to its earlier judgment, and held as under :

“22. Thus, this Court is of the opinion that in cases involving allegations of fraudulent availment of ITC, where the transactions are spread across several years, a consolidated notice may in fact be required in such cases in order to establish the illegal modality adopted by such businesses and entities. The language of the legislation, itself, does not prevent issuance of SCN or order for multiple years in a consolidated manner.”

7. The Counsel for respondent nos. 1 to 4 submits that the judgment of the Delhi High Court was tested before the Hon’ble Supreme Court in Mathur Polymers v. Union of India (SC)/Special Leave Petition (Civil) Diary No. 50279/2025, wherein, the Supreme Court declined to interfere with the impugned judgment. Accordingly, the Counsel argued that the law laid down by the Delhi High Court has attained finality.

8. True it is that the judgment of the Delhi High Court has attained finality, however, concept of merger of judgment will not apply here because the Hon’ble Supreme Court has dismissed the petition in limine and not on merit.

9. There is another reason why we find that the judgments of the High Court of Bombay will prevail. In the case of Milroc Good Earth Developers (supra) and Rite Water Solutions (India) Ltd. (supra), following amongst others were the reasons why the Court held that show cause notice consolidating various financial years/tax periods is not permissible.

I] The GST Scheme is based on annual returns for each financial year (even if returns are filed monthly in practice, the liability is tied to a specific financial year).

II] The statute fixes a five year time limit for demanding and recovering tax from due date for furnishing annual return for that year or from the date of erroneous return (Sections 73(10) and 74(10) of the CGST Act as applicable). This limit runs separately for each year.

III] If issued a single SCN covering multiple years, you would be aggregating different tax period with different due dates and different limitations, which the statute does not permit.

IV] Tax period is defined (Section 2(106) of the CGST Act) as the period, for which the return is required to be furnished. Return can be monthly or yearly, but the statute treats each financial year as a separate tax period for the purpose of assessment and recovery (Sections 39, 44, 37, 50, etc. ).

V] Time limit operate year by year. Section 73(10) and 74(10) of the CGST Act fix the time limit to issue an assessment order within three years (Section 73) or five years (Section 74) from the last date for filing annual return for the year to which the tax dues relate. VI] Consolidation would collapse these years, specific steps and grounds, harming the tax payers’ ability to respond year by year and violating the explicit year wise structure of the statute. These niceties, in our view, were not considered by the Delhi High Court.

10. The Division Bench of this Court in Commissioner of Income-tax, Vidarbha and Marathwada, Nagpur v. Smt. Godavaridevi Saraf Tumsar [1978 (2) ELTJ 624 Bombay] held that until a contrary decision is given by any other competent High Court, which is binding on Tribunal in the State of Bombay, it has to proceed on the footing that the law declared by the High Court, though of another State, is the final law of land.

11. In the present case, since this Court has, subsequent to decision of the Delhi High Court, taken a different view, the authorities below will be bound by the subsequent judgments. The Hon’ble Supreme Court has neither stayed nor overruled the view taken in above two cases. The argument of Counsel for respondent nos. 1 to 4, therefore, cannot be accepted.

12. The Counsel for respondent nos. 1 to 4 submits that to the best of her knowledge, a proposal to challenge the judgments in Milroc Good Earth Developers (supra) and Rite Water Solutions (India) Ltd. (supra), is under consideration. Thus, it is suggested that judgments in both cases are likely to be challenged before the Hon’ble Supreme Court.

13. If that be so, the purpose will be served if the respondents are given opportunity to revive the petition, if the judgments passed by the High Court of Bombay in aforesaid two cases, are set aside.

14. With the above liberty, and for the reasons set out in Milroc Good Earth Developers (supra) and Rite Water Solutions (India) Ltd. (supra), the petition is partly allowed. The show cause notice dated 24/9/2025 issued by respondent no.2 is quashed and set aside. The respondents, however, are at liberty to re-issue notice strictly in terms of the provisions of Section 74 of the CGST Act, if there is no other legal impediment.

15. The petition is disposed of in above terms.

No order as to costs.