Consolidated Show Cause Notices and Orders Across Multiple Financial Years Under Section 73 Are Legally Impermissible
Issue
Whether the GST Department is legally permitted to issue a single, consolidated Show Cause Notice (SCN) and pass a composite Order-in-Original (OIO) under Section 73 covering multiple distinct financial years, or whether separate proceedings must be initiated for each individual assessment year.
Facts
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Audit/Tax Period: The tax dispute spanned a multi-year period from the Financial Year (FY) 2018-19 to 2022-23.
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Consolidated Action: The respondent tax authorities issued a single, combined Show Cause Notice (Ext.P1) covering all these multiple assessment periods simultaneously.
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Composite Order: Following the notice, the respondents proceeded to pass a single, consolidated Order-in-Original (Ext.P4) adjudicating the tax liabilities for all those years collectively.
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Writ Petition: The petitioner challenged this entire process before the High Court through a writ petition, asserting that mixing multiple financial years into a single composite proceeding is procedurally and legally flawed.
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Judicial Precedents: The petitioner placed reliance on authoritative Division Bench rulings of the Kerala High Court, namely Tharayil Medicals v. Dy. Commissioner, SGST Department [2025] and Jt. Commissioner (Intelligence & Enforcement) v. Lakshmi Mobile Accessories [2025].
Decision
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Consolidation Held Impermissible: The High Court observed that the issue was no longer up for debate. The Division Bench in the cases of Tharayil Medicals and Lakshmi Mobile Accessories had categorically ruled that issuing composite show cause notices and passing consolidated assessment orders across different financial years is bad in law.
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Impugned Notices & Orders Quashed: Since the facts of the instant case involved an identical multi-year consolidation error, judicial interference was fully warranted. The High Court quashed both the consolidated SCN (Ext.P1) and the composite OIO (Ext.P4).
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Liberty to Issue Fresh Notices: The tax department was granted the liberty to restart the process by issuing separate, year-wise notices to the petitioner for each relevant financial year.
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Exclusion for Limitation: To ensure fairness to the revenue, the Court directed that the entire time frame from the date the faulty SCN was issued up to the date of receiving a certified copy of this judgment must be completely excluded when calculating the limitation period for initiating fresh, separate proceedings. The issue was decided in favour of the assessee.
Key Takeaways
1. Strict Enforcement of Financial Year Compartmentalization
Under Section 73 of the GST Act, each financial year represents a distinct assessment unit with its own independent timelines, limitations, and computations. The department cannot club multiple years into a single omnibus notice or order for administrative convenience.
2. Procedural Flaws Can Nullify Final Tax Orders
Merging multiple years into a single order constitutes a fundamental jurisdictional and procedural error. Even if the underlying tax merits are strong, a composite order across multiple assessment years is structurally fragile and liable to be struck down by High Courts.
3. Safe Passage on Limitation for Revenue
When courts quash an order purely on the technical ground of “composite filing,” they balance equity by pausing the statutory clock. The department is allowed a limitation waiver for the period spent litigating the faulty notice, ensuring they do not lose their right to recover taxes through correctly formatted, separate year-wise notices.