Issuance of consolidated GST SCN/ order for multiple financial years is impermissible, and must be quashed

The Hon’ble Madras High Court in the case ofInstakart Services Private Limited Represented By Its Authorized Signatory Mr Ritesh Lunia Versus The Additional Commissioner Chennai South Commissionerate, Chennai - 2025 (9) TMI 456 - MADRAS HIGH COURT held that the issuance of a consolidated show cause notice and passing a single order covering multiple financial years is impermissible in law. The Court quashed the GST demand and rectification order aggregating several years, granting liberty to initiate separate proceedings for each financial year.

Facts:

Instakart Services Private Limited ('the Petitioner') operates Ekart Logistics and was subjected to a single GST demand covering the period July 2017 to March 2023, resulting in a liability of ₹37 crores.

The Additional Commissioner, Chennai South Commissionerate ('the Respondent') issued a consolidated show cause notice (SCN) and passed an order aggregating several financial years, and subsequently issued a rectification order.

The Petitioner contended that such 'bunching' of SCN/order over multiple years is contrary to the CGST Act, 2017 and violates procedural fairness and limitation rules. They argued that Section 73 limitation had expired, Section 74 was unlawfully invoked to avoid limitation, and that principles of natural justice were breached as effective service and consideration of its responses were absent.

The Respondent contended that proceedings were validly initiated under Section 74, that consolidated show cause notices are not specifically barred under the Act, and that jurisdiction existed based on the aggregate pattern of transactions.

The Petitioner, aggrieved by the ₹37-crore demand and cumulative order, challenged the same by writ petition, seeking quashing for lack of jurisdiction and procedural violation.

Issue:

Whether GST authorities can issue a consolidated show cause notice and pass a single order covering multiple financial years under the CGST Act?

Held:

The Hon’ble High Court in  Instakart Services Private Limited Represented By Its Authorized Signatory Mr Ritesh Lunia Versus The Additional Commissioner Chennai South Commissionerate, Chennai - 2025 (9) TMI 456 - MADRAS HIGH COURT held as under:

• Observed that, the GST Act permits issuance of SCN and passing of orders based only on a defined 'tax period', which is generally a financial year, or a period covered by filed annual returns or monthly returns.
• Noted that, issuance of SCN/order covering more than one financial year in a consolidated manner is impermissible in law, frustrates the statutory limitation framework, and amounts to jurisdictional overreach.
• Quashed the consolidated assessment and rectification orders issued for multiple years, but granted liberty to the Revenue to initiate and pursue proceedings separately for each financial year, complying with law.

Our Comments:

This judgment strengthens the principle that consolidation of multiple years into a single GST proceeding (SCN/order) undermines statutory safeguards for taxpayers, especially limitation and proper adjudication on a year-wise basis. The Madras High Court's approach is now the prevailing view among several High Courts:

The Kerala High Court in the case of Joint Commissioner (Intelligence & Enforcement) Thiruvananthapuram, Joint Commissioner Taxpayer Services, Kottayam, Versus M/s. Lakshmi Mobile Accessories. - 2025 (2) TMI 666 - KERALA HIGH COURT held that Section 74(10) (limitation for adjudication) and Rule 142 require financial year-wise SCN/order to ensure proper invocation of limitation and opportunity to contest allegations for each year individually.

Similarly, the Karnataka High Court in the case of M/s. Veremax Technologie Services Limited Versus The Assistant Commissioner Of Central Tax Bengaluru. - 2024 (9) TMI 1347 - KARNATAKA HIGH COURT held that the practice of issuing a single, consolidated show cause notice for multiple assessment years contravenes the provisions of the CGST Act and established legal precedents.

Relevant Provisions:

Section 74 of the CGST Act, 2017

74. Determination of tax pertaining to the period up to Financial Year 2023-24, not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any willful- misstatement or suppression of facts.-

(10). The proper officer shall issue the order under sub-section (9) within a period of five years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within five years from the date of erroneous refund.

Section 2(106), CGST Act, 2017:

“tax period” means the period for which the return is required to be furnished.”

 (Author can be reached at [email protected])