Consolidated Show Cause Notice Covering Six Financial Years Quashed as Legally Unsustainable Under Section 73
Issue
Whether the tax authorities have the jurisdiction under Section 73 of the CGST/SGST Act to issue a single, consolidated Show Cause Notice (SCN) spanning six consecutive financial years (FY 2019-20 to 2024-25), or if the statutory scheme mandates the issuance of separate notices for each individual financial year.
Facts
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The petitioner challenged an exhibit marked as Ext.P1, which was a single consolidated Show Cause Notice (SCN) issued by the tax department.
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This single notice wrapped together tax demands and alleged discrepancies for six distinct financial years, stretching from FY 2019-20 to FY 2024-25.
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The petitioner approached the High Court via a writ petition, asserting that the “bunching” of multiple years into a single notice was a fatal jurisdictional error.
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The petitioner relied on binding Division Bench precedents which explicitly ruled that separate notices are mandatory for each financial year under Section 73.
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The Revenue defended the notice, but the court evaluated the objection against the established architectural framework of the GST law.
Decision
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The writ petition was allowed, and the issue was decided entirely in favour of the assessee.
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Precedents Upheld: The High Court found substantial merit in the petitioner’s arguments, noting that the issue was no longer res integra (unsettled). Binding Division Bench rulings had already firmly established that composite notices for multiple assessment years are completely impermissible.
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Quashing of Notice: Consequently, the consolidated SCN (Ext.P1) was held to be legally unsustainable under the governing statutory scheme and was quashed.
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Liberty and Limitation Protection: The court granted the department the liberty to issue separate, individual notices for each relevant assessment year. To ensure the revenue was not unfairly penalized by time-bars due to this litigation, the court directed that the entire period from the issuance date of Ext.P1 until the receipt of the certified copy of the judgment must be excluded when computing the limitation period for initiating fresh proceedings.
Key Takeaways
No Multi-Year Clubbing: Under Section 73, the limitation period, the calculation of tax defaults, and the filing of annual returns are strictly segregated by financial year. The department cannot create a single, macro-demand spanning half a decade, as it violates the procedural design of the Act.
Year-Specific Defense: A taxpayer has a statutory right to defend their case on a year-by-year basis. Clubbing multiple years severely compromises this right, as distinct tax rates, exemptions, and compliance circulars apply to different financial years.
Limitation Clock Paused: When a court strikes down a tax notice on purely technical or procedural grounds (like a composite notice defect), it will almost always exclude the time spent in court from the department’s limitation deadline. This balances the scales, allowing the tax officer a clean slate to issue fresh, legally compliant, year-wise notices.