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 (2019-20 to 2021-22) is legally sustainable, or if the tax authorities are mandated to issue separate notices for each individual assessment year.
Facts
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The Notice: The respondent tax authorities issued a single, consolidated Show Cause Notice (SCN) to the petitioner, grouping together demands across multiple financial years from 2019-20 to 2021-22.
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The Challenge: The petitioner filed a writ petition challenging the validity of this composite notice, arguing that multi-year consolidated demands are unsustainable under the law.
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Legal Reliance: To support their case, the petitioner relied heavily on binding Division Bench judgments of the exact same High Court jurisdiction which had already adjudicated on this specific issue.
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Petitioner’s Prayer: The petitioner sought to have the composite notice quashed and requested that the department be directed to issue distinct, year-wise notices instead.
Decision
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Notice Quashed: The High Court found merit in the petitioner’s arguments, citing that the issue was fully covered by the binding precedents of its own Division Bench. The composite SCN was officially quashed.
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Liberty to Reissue: The tax department was granted the liberty to initiate fresh proceedings by issuing separate, individual SCNs for each respective financial year.
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Limitation Period Excluded: To ensure equity, the court directed that the entire time period starting from the issuance date of the original composite notice up until the receipt of the certified copy of this judgment must be excluded when calculating the statutory limitation period for the fresh year-wise notices.
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Merits Left Open: The court clarified that it did not look into the actual tax merits of the case, leaving all other legal and factual contentions open for both parties in the upcoming fresh proceedings. (In favour of assessee)
Key Takeaways
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Year-Wise Adjudication is Mandatory: Under Section 73, each financial year constitutes a separate unit of assessment. The revenue department cannot club multiple years into a single, rolling composite notice to simplify its administrative workload.
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Precedential Binding Force: Single-judge benches are strictly bound by the legal principles established by Division Benches within the same jurisdiction regarding procedural tax mandates.
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Protection Against Limitation Bars: When the court quashes a departmental notice on purely technical or procedural grounds, it typically pauses or excludes that litigation window from the statute of limitations to prevent the taxpayer from escaping a substantive audit due to mere passage of time.