CBIC Seeks Comments/Inputs on the Legality of Bunching of Multiple Financial Years into a Single Demand Notice under the GST Act
Issue: To address the numerous writ petitions filed across various High Courts challenging the practice of issuing a single, consolidated GST demand notice that covers non-compliance across multiple financial years (bunching), and to establish a standard policy response for field formations.
Facts:
Numerous writ petitions have been filed before different High Courts challenging the legality of issuing a consolidated demand notice covering multiple financial years.
Petitioners contend that Sections 73 and 74 of the CGST Act, 2017 do not permit such consolidation and that it violates the principles of natural justice.
The CBIC’s GST Policy Wing analyzed the issue, referencing language in Sections 73(1), 73(3), 74(1), and 74(3).
Decision (CBIC’s Policy Stance):
The CBIC issued a letter and Annexure (standard policy comments) clarifying its stance that composite Show Cause Notices (SCNs) for multiple financial years are legally permissible under Sections 73 and 74 of the CGST Act.
Key TakeDowns:
No Statutory Restriction: The CBIC argues that a conjoint reading of the relevant sections implies that the statute does not prescribe any restriction on the period covered by a demand notice.
Administrative Efficiency: Consolidated SCNs are viewed as beneficial because they promote administrative efficiency, reduce duplication of proceedings, and are advantageous to the taxpayer who is required to appear only once for adjudication.
Limitation Period Maintained: The CBIC asserted that consolidation does not extend or alter the limitation period for any individual financial year. The statutory time limits (three or five years) are reckoned separately and strictly adhered to for every specific year included in the consolidated notice.
Contrasting Judicial Views: The CBIC noted that while some High Courts (like Delhi High Court) have upheld the legality of consolidated SCNs, other High Courts (like Madras and Kerala) have quashed them (citing the Titan Company and Tharayil Medicals decisions), though the CBIC asserts these opposing rulings are distinguishable/not binding pan-India. * Call for Uniformity: The circular aims to ensure that field formations across the country adopt this standardized policy view while dealing with the numerous writ petitions challenging the issue.