TaxTMI 
TaxTMI 
TaxTMI 
Recently, in Ambika Traders Through Proprietor Gaurav Gupta Versus Additional Commissioner, Adjudication DGGSTI, CGST Delhi North. - 2025 (8) TMI 315 - DELHI HIGH COURT, the Hon’ble Delhi High Court has held that a consolidated Show Cause Notice (SCN) for multiple financial years is permissible under Section 74 of the CGST/SGST Act, 2017, by referring to M/s. Vallabh Textiles Versus Additional Commissioner Central Tax Gst, Delhi East And Ors. - 2025 (4) TMI 1154 - DELHI HIGH COURT. This ruling, however, stands in clear contradiction to a series of judgments rendered by various other High Courts. In M/s. Tharayil Medicals Versus The Deputy Commissioner Audit Division-IV, Thrissur. - 2025 (4) TMI 1152 - KERALA HIGH COURT, M/s. BANGALORE GOLF CLUB Versus ASSISTANT COMMISSIONER OF COMMERCIAL TAXES, KORAMANGALA, BENGALURU - 2024 (10) TMI 116 - KARNATAKA HIGH COURT. and Smt R Ashaarajaa, J. Rajendran, R. Deepak Vigneshvar And Others Versus The Senior Intelligence Officer, The Superintendent of Central Tax CGST Central Excise And Others - 2025 (7) TMI 1402 - MADRAS HIGH COURT, the Hon’ble High Courts have held that the notices issued under Section 73 or 74 of CGST/SGST Act, 2017, are flawed due to the improper consolidation of multiple tax periods into a single SCN. The rationale adopted by these courts stems from the express statutory prescription that the limitation period for completion of proceedings is distinct for each financial year. Accordingly, the Hon’ble High Courts have held that separate SCNs are required to be issued for each financial year.
However, in the Ambika Traders case (supra), the Hon’ble Delhi High Court has neither taken note of the aforementioned rulings of the other High Courts nor the legal reasoning of the said orders. On the contrary, the Hon’ble Delhi High Court has offered a distinct interpretative approach to the same provisions in favour of the Revenue. The Hon’ble High Court observed that Sections 73(3)/74(3) & 73 (4)/74(4) of the CGST/SGST Act, 2017 use the term “for any period” and “for such periods”, which is in contrast with the language used in Sections 73(10) and 74(10) of the CGST Act where the term “financial year” is used.
Furthermore, the Hon’ble Delhi Court further observed that the nature of Input Tax Credit (ITC) is such that the fraudulent utilization and availment of the same cannot be established on most occasions without considering the 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. Thus, in the Hon’ble Court’s view, a consolidated approach is sometimes necessary to scrutinise the continuity and pattern of such transactions, as availment in one year and utilisation in another could collectively establish fraudulent conduct of a taxpayer. Accordingly, the Hon’ble High Court has decided the issue in favour of the revenue.
The two axiomatic differing interpretations by the different High Courts pose a significant challenge for legal professionals and tax adjudicators. The Hon’ble High Court has relied upon the expressions, “for any period” and “for such periods” appearing in sections, 73(3)/ 74(3) & 73 (4)/74(4) of the CGST/ SGST Act, 2017. In my view, the Hon’ble High Court has not appreciated that the expressions “for any period” and “for such periods” have been used in the said Sub-sections in the context of serving of a “statement” in lieu of a SCN for the subsequent period where a SCN has already been issued for the earlier period on the same issue. In the aforementioned Sub-Sections, the expressions “for any period” and “for such periods” are referring to the period other than the period, which is covered by the original SCN. Hence, Sections 73(3)/74(3) & 73 (4)/74(4) of the CGST/ SGST Act, 2017 are not relevant for the SCN issued under Section 73(1) or 74(1) of the said Act. These provisions are not authorizing the proper officer to issue the SCN under Section 73/74 of the CGST/SGST, 2017 Act for any period, per se.
The Hon’ble High Court is of the view that fraudulent availment and utilisation of ITC cannot be established without considering the connecting transactions spread over different financial years. However, the Hon’ble High Court has not noticed that the proper officer is required to make subjective analysis of each transaction of the supply for each financial year to reckon the limitation period prescribed under Section 73/74 of the CGST/SGST Act, 2017, failing to which provisions relating to limitation period cannot be applied. Further, for the period prior to Financial Year, 2024-25, the proper officer is to consider each supply to invoke the provision of section 73 or section 74 of the Act, appropriately, as cases may exist where nonpayment arises both from bona fide mistakes as well as from fraudulent conduct within the same consolidated period. The complexity would be further intensified in situations where the SCN purports to cover financial years, both the F.Y. 2024-25 onwards (to which Section 74A is applicable) and the years, prior to F.Y. 2024-25 (governed by Sections 73/74).
In view of the above, time alone will tell whether the view adopted by the Hon'ble Delhi High Court is correct.
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Prashant Shukla, Advocate