Composite GST Show Cause Notices Covering Multiple Financial Years Are Legally Unsustainable And Must Be Quashed
Issue
Whether a consolidated or composite Show Cause Notice (SCN) issued under Section 73 of the CGST/SGST Act covering multiple financial years (2019-2020 to 2023-2024) is legally sustainable, or if the tax authorities are mandated to issue separate, year-wise notices for each individual assessment period.
Facts
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The respondent tax authorities issued a single, consolidated Show Cause Notice (SCN) marked as Ext.P1 to the petitioner.
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This composite notice clubbed together tax and Input Tax Credit (ITC) demands across a span of five distinct financial years, from 2019-2020 to 2023-2024.
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The petitioner filed a writ petition challenging the legal validity of Ext.P1, arguing that a composite SCN is impermissible and that separate notices are mandatory for each individual assessment year.
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The petitioner relied on established Division Bench precedents within the same jurisdiction that explicitly disapproved of the practice of issuing consolidated notices for multiple assessment periods.
Decision
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The High Court held that the petitioner’s argument was valid as the issue was fully covered by binding Division Bench precedents, thereby making the composite SCN legally unsustainable.
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The Court quashed the impugned Ext.P1 consolidated SCN but granted the revenue department the liberty to initiate fresh proceedings by issuing separate notices for each respective financial year.
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To protect the department from statutory expiry, the Court directed that the entire period from the issuance date of the composite notice until the date of receipt of the certified copy of this judgment must be excluded when computing the limitation period for the fresh proceedings.
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The Court clarified that it did not adjudicate on the core tax merits of the case, leaving all other contentions open for both parties to argue during the fresh year-wise proceedings.
Key Takeaways
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Year-Wise Notice is a Mandatory Right: Under Section 73, each financial year stands alone as an independent unit of assessment. The revenue department cannot bundle multiple years into a single, rolling notice to simplify its administrative workflow.
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Binding Precedent Enforcement: Single-judge benches will strictly enforce procedural safeguards established by higher Division Benches of the same jurisdiction, ensuring that administrative convenience does not override statutory frameworks.
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Tolling of the Limitation Clock: When a tax notice is quashed purely on procedural errors, courts routinely exclude the time spent in litigation from the statute of limitations. This balances equity by ensuring the taxpayer faces a proper year-wise audit while preventing the department from being barred by time.