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Consolidated Show Cause Notices Covering Multiple Financial Years Without Interlinked Fraud are Legally Unsustainable and Void

Issue

Whether the Revenue can issue a single consolidated Show Cause Notice (SCN) and demand order under Section 74 covering multiple financial years, particularly when no single continuous or indivisible fraud spanning those years is alleged.

Facts

Consolidated Notice: The Additional Director of the DGGI issued consolidated show cause-cum-demand notices under Section 74 to the petitioners.
Scope: These notices clubbed together allegations and tax demands pertaining to multiple different financial years.
Nature of Allegations: The Revenue did not plead or demonstrate that the alleged fraud was “composite” or “interlinked” through a single continuous design across the relevant years.
Adjudication: In two of the writ petitions, final adjudication orders had already been passed based on these consolidated notices, which the petitioners also challenged as being without jurisdiction.
Legal Challenge: The petitioners argued that since the period of limitation and the cause of action for GST are year-specific (linked to annual return due dates), a consolidated notice is legally impermissible.

Decision

Prohibition of Consolidation: The court held that a single consolidated notice for multiple financial years is prohibited unless there is an indivisible fraud that spans across those years.
Absence of Continuous Design: Since the impugned notices did not allege a single continuous fraudulent design, the existing legal view permitting consolidation in “composite fraud” cases was deemed inapplicable.
Prejudice to Limitation: The court observed that the statute of limitations runs year-wise based on the due date of each year’s annual return. Consolidating years prejudices the assessee’s ability to raise year-specific defenses, such as limitation.
Quashing of Notices: The consolidated notices were set aside, and the consequential final adjudication orders in two of the petitions were quashed for being unsustainable.
Liberty to Revenue: The court granted the Revenue the liberty to issue fresh, separate notices for each year in accordance with the law.
Result: The decision was rendered in favor of the assessee.

Key Takeaways

Year-Wise Adjudication: Under Section 74, the “Financial Year” is the standard unit for assessment and limitation; authorities should generally avoid clubbing multiple years into one notice.
Burden of Proof for Consolidation: To justify a consolidated notice, the Revenue must explicitly plead and prove a “composite fraud”—a singular, interlinked scheme that cannot be separated by year.
Limitation Safeguards: Taxpayers have a right to defend themselves against demands based on the specific limitation period of each financial year; consolidation cannot be used to circumvent these statutory timelines.

HIGH COURT OF BOMBAY

Aasawa Brothers Corporate Avenue

Union of India^*

Arun R. Pedneker and VAISHALI PATIL-JADHAV, JJ.

WP NOS. 11644, 12893, 12894 OF 2025 & 728, 735, 742 and 743 OF 2026
CIVIL APPLICATION NOS. 2217 & 2226 OF 2026

FEBRUARY 27, 2026

Makrand Joshi and Chandak Raviraj R., Advs. for the Petitioner. S. W. Munde, D. S. Ladda, P. P. Kothari and P. P. Dawalkar, Advs. for the Respondent.

ORDER

1. At the outset, Civil Application No.2217 of 2026 and Civil Application No.2226 of 2026 are taken up. Both the applications seek amendment to the respective writ petitions. The applications are allowed and disposed of.

2. Heard learned Counsel for the parties.

3. By the present writ petitions, the petitioners challenge the show cause-cum-demand notices dated 25/06/2025 in Writ Petition No.11644 of 2025, dated 27/06/2025 in Writ Petition Nos.12893 of 2025, 12894 of 2025, 742 of 2026, 728 of 2026 and 735 of 2026, and dated 26/06/2025 in Writ Petition No.743 of 2026. The said notices have been issued by respondent No.4 – Additional Director, DGGI, Directorate General of GST Intelligence. The petitioners seek to restrain the respondents from proceeding further pursuant to the aforesaid notices.

4. Though various grounds are raised in the petitions assailing the impugned show cause notices, learned Counsel for the petitioners has restricted his challenge to two principal submissions.

5. He submits that in the present matters, consolidated show cause notices under Section 74 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) have been issued covering multiple financial years. According to him, such consolidation of financial years in a single notice is impermissible in law and has been consistently disapproved by this Court.

6. In support of this contention, reliance is placed upon the following decisions of this Court:

•

Milroc Good Earth Developers v. UOI GST 596/[2026] 104 GSTL 45 (Bombay)/(2025-TIOL-1697-HC-MUM-GST);

•

Marfani Steel Impex v. Principal Commissioner, Central GST & Central Excise GSTL 381 (Bombay)/(Writ Petition No.180 of 2026, decided on 17/01/2026);

•Paras

Stone Industries v. UOI GSTL 269 (Bombay)/2026 (1) TMI 839;

•

Rite Water Solutions (India) Ltd. v. Jt. Commissioner, CGST & Central Excise (Bombay)/2025 (11) TMI 1939; and

•

ICAD School of Learning (P.) Ltd. v. UOI [WP No.736 of 2026, dated 6-2-2026].

7. It is further submitted that in Writ Petition Nos.742 of 2026 and 743 of 2026, pursuant to the impugned notices, adjudication has already been completed and orders have been passed. By way of amendment, the petitioners have also challenged the said orders on the ground that they are without jurisdiction, being founded on consolidated notices covering multiple financial years.

8. Learned Counsel for the petitioners submits that under Section 74(2) (3) sub-Section (10) of the CGST Act, the proper officer is required to issue the order within a period of five years from the due date for furnishing the annual return for the financial year to which the tax not paid, short paid, or input tax credit wrongly availed or utilised relates. He submits that the statutory scheme clearly contemplates determination year-wise, linked to the “financial year” and the corresponding “annual return”.

9. According to him, independent notices are required to be issued for each financial year. Clubbing multiple financial years in a single show cause notice defeats the limitation structure under Sections 73 and 74 of the CGST Act and prejudicially affects the rights of the assessee. Therefore, the impugned consolidated notices, as well as consequential orders, are liable to be quashed.

10. Learned Counsel further submits that this Court has, in a catena of judgments, consistently held that consolidation of financial years in a single notice under Section 74 is impermissible. It is urged that judicial discipline and consistency require that the same view be followed in the present matters.

11. In Milroc Good Earth Developers (supra) this Court, after analysing the statutory scheme, held that there is no scope for consolidating various financial years/tax periods while issuing a show cause notice under Section 74 of the CGST Act. In paragraph 23 thereof, this Court observed that the facts before the Delhi High Court were distinct and related to fraudulent availment of input tax credit across subsequent years, which were materially different from the facts under consideration.

12. Similar view is taken in case of ICAD School of Learning (P.) Ltd. (supra) this Court, following Milroc Good Earth Developers and Rite Water Solutions.

13. Per contra, learned Counsel for the respondent-Union of India submits that ordinarily this Court should not entertain a challenge to a show cause notice and that the petitioners ought to raise all their defences before the adjudicating authority. It is further submitted that in two of the petitions, adjudication has already culminated in orders, against which a statutory appeal is available. Hence, an efficacious alternate remedy exists.

14. Reliance is placed upon the decision of this Court in Viswaat Chemicals Ltd. v. UOI GSTL 114 (Bombay)/(Writ Petition (L) No.27725 of 2025, decided on 14/10/2024).

The learned Counsel for the respondents also relies upon the judgments of the Delhi High Court in:

•

Mathur Polymers v. UOI GSTL 72 (Delhi)/(W.P.(C) 2394/2025, decided on 26/08/2025); and

•

Ambika Traders v. Additional Commissioner GSTL 64 (Delhi)/(W.P.(C) 4853/2025),

15. Thus, the principal issue that arises for consideration is whether the issuance of consolidated show cause notices under Section 74 of the Central Goods and Services Tax Act, 2017 covering multiple financial years is sustainable in law, in light of the binding precedents of this Court.

16. This Court has considered the rival submissions advanced by the learned Counsel for the respective parties. It is to be noted that this Court, in Milroc Good Earth Developers (supra) has comprehensively dealt with the issue as to whether a consolidated show cause notice covering multiple financial years can be issued under Section 74 of the CGST Act. This Court in Milroc Good Earth Developers (supra) has held that a single consolidated show cause notice covering multiple financial years cannot be issued under Section 74 of CGST Act. The said view has been consistently followed in subsequent judgments of this Court, including ICAD School of Learning (P.) Ltd. (supra) and Rite Water Solutions (India) Ltd. (supra). It is not brought to our notice that the judgment in Milroc Good Earth Developers (supra) has been stayed by the Hon’ble Supreme Court.

17. The learned Counsel for the respondent has placed reliance upon the judgment of the Delhi High Court in Ambika Traders(supra). However, the said decision in Ambika Traders (supra) has also been considered by this Court in Milroc Good Earth Developers (supra). This Court has specifically referred to and discussed paragraph No. 46 of Ambika Traders (supra), as reproduced below :

“46. The nature of ITC is such that fraudulent utilization and availment of the same cannot be established on most occasions without connecting transactions over different financial years. The purchase could be shown in one financial year and the supply may be shown in the next financial year. It is only when either are found to be fabricated or the firms are found to be fake that the maze of transactions can be analysed and established as being fraudulent or bogus.”

18. The Delhi High Court, thus, held that in cases involving allegations of fraudulent availment of ITC spanning several years, a consolidated notice may be permissible, as the pattern of fraud may not be capable of being established in isolation for each financial year. Thus, in Milroc Good Earth Developers (supra), this Court distinguished the judgment of the Delhi High Court in Ambika Traders (supra) on the ground that, in the facts of that case, there existed a common and indivisible cause forming the whole sole basis of the proceedings, and it was not possible to establish the same without clubbing the notices pertaining to different financial years. The Delhi High Court permitted the issuance of a consolidated show cause notice covering multiple financial years.

19. However, the facts of the present cases stand on a different footing. The impugned notices club together multiple financial years without alleging a composite or interlinked fraudulent mechanism spanning across the said years. The notices do not indicate a single, continuous fraudulent design that necessitates consolidation of different financial years for effective adjudication.

20. The statutory scheme under the CGST Act makes the limitation for determination of tax dependent upon the due date for furnishing the annual return for the respective financial year to which the demand relates. The limitation, therefore, runs independently for each financial year. Clubbing multiple financial years in a single show cause notice has the effect of aggregating distinct tax periods governed by separate limitation timelines, which may prejudice the assessee’s right to raise year-specific defences.

21. This Court has consistently taken the view that a single show cause notice covering multiple financial years, in the absence of exceptional circumstances for relating to fraud that may be practiced over multiple financial years warranting such consolidation, is not sustainable in law. Judicial discipline and consistency require that we follow the binding precedents of this Court.

22. In view of the aforesaid, the impugned show cause notices are set aside. Consequently, the final orders passed pursuant thereto in Writ Petition No. 742 of 2026 and Writ Petition No. 743 of 2026 are also quashed and set aside.

23. However, liberty is granted to the respondents to issue fresh notices strictly in accordance with Section 74 of the Central Goods and Services Tax Act, 2017, for the respective financial years, if otherwise permissible in law.

24. With the above observations and directions, all the Writ Petitions stand disposed of.