Divergent Rulings on Consolidation of Multiple Financial Years in Single SCN

The Hon’ble Delhi High Court in the case of M/s. Technosys Integrated Solutions Pvt. Ltd. Versus Union of India, CGSTR North Commissionerate New Delhi, Office of The Commissioner CGST, Audit-I New Delhi. - 2026 (3) TMI 1136 - DELHI HIGH COURT held that consolidation of multiple financial years in a single Show Cause Notice (SCN) and adjudication order is permissible under Sections 73 and 74 of the CGST Act, even in cases not involving fraudulent Input Tax Credit, and declined interference in writ jurisdiction in view of the availability of an alternate appellate remedy.

Facts:

M/s Technosys Integrated Solutions Pvt Ltd (‘the Petitioner’) is a private limited company engaged in supply and installation of CCTV surveillance systems and registered under GST laws.

The Union of India & Ors. (‘the Respondent’) conducted GST audit for FY 2017–18 to 2021–22, issued SCN alleging wrongful classification (12% instead of 18%), non-payment at 28%, and imposed penalty under Sections 74 and 122(1)(xvii) of the CGST Act through Order-in-Original dated January 31, 2025.

The Petitioner contended that its services qualified as works contract service taxable at 12% under Notification No. 11/2017-CT (Rate). The SCN and Order-In-Original were invalid as they impermissibly clubbed multiple financial years in a single SCN and that the dispute was interpretational (classification/rate) and not involving fraud; hence, precedents permitting clubbing in fraud cases were inapplicable.

The Respondent contended that consolidation of multiple years is permissible under Sections 73 and 74 relying on other decisions from the Hon’ble Delhi High Court.

The Petitioner, aggrieved by confirmation of demand of ₹18.67 crore along with penalties and clubbing of multiple financial years in a single proceeding, approached the Hon’ble High Court by way of writ petition seeking quashing of the Order-In-Original and related proceedings.

Issue:

Whether consolidation of multiple financial years in a single Show Cause Notice and adjudication order is permissible under Sections 73 and 74 of the CGST Act?

Held:

The Hon’ble Delhi High Court in M/s. Technosys Integrated Solutions Pvt. Ltd. Versus Union of India, CGSTR North Commissionerate New Delhi, Office of The Commissioner CGST, Audit-I New Delhi. - 2026 (3) TMI 1136 - DELHI HIGH COURTheld as under:

• Observed that, it would not examine merits such as classification or rate applicability, as the petitioner has an efficacious alternate remedy under Section 107 of the CGST Act.
• Noted that, writ jurisdiction should not be exercised where statutory appellate remedy exists, as laid down in Whirlpool Corporation Versus Registrar of Trade Marks, Mumbai & Ors. - 1998 (10) TMI 510 - Supreme Court
• Observed that, Sections 73(3)–(4) and 74(3)–(4) use the expressions “for any period” and “for such periods”, thereby permitting issuance of notices covering multiple financial years.
• Noted that, its earlier judgment in Ambika Traders Through Proprietor Gaurav Gupta Versus Additional Commissioner, Adjudication DGGSTI, CGST Delhi North. - 2025 (8) TMI 315 - DELHI HIGH COURT clearly accepted consolidation of SCNs across multiple financial years under both Sections 73 and 74.
• Further observed that, the contention that Ambika Traders applies only to fraudulent ITC cases is not acceptable, as the statutory scheme itself permits multi-period notices.
• Held that, no interference is warranted with the impugned order and that the Petitioner is relegated to statutory appellate remedy. Hence writ petition dismissed.

Our Comments:

The judgment reiterates and follows the ratio laid down in Ambika Traders Through Proprietor Gaurav Gupta Versus Additional Commissioner, Adjudication DGGSTI, CGST Delhi North. - 2025 (8) TMI 315 - DELHI HIGH COURT, wherein the Delhi High Court interpreted Sections 73(3)–(4) and 74(3)–(4) of the CGST Act and held that the expressions “for any period” and “for such periods” permit issuance of consolidated notices covering multiple financial years. The reasoning is rooted in statutory language and the deeming fiction allowing statements for additional periods to be treated as notices.

The present judgment expands the applicability of Ambika Traders by rejecting the distinction between fraud and non-fraud cases, thereby holding that consolidation is permissible even in classification disputes. This aligns with the earlier Delhi High Court ruling in M/s. Mathur Polymers Versus Union Of India & Ors. - 2025 (9) TMI 112 - DELHI HIGH COURT, which also upheld multi-year SCNs.

However, the Court expressly notes divergence from Bombay High Court jurisprudence. In M/s. Milroc Good Earth Developers, Mariposa Beach Grove Versus Union of India, Additional Director, Directorate General of India (DGGI), Pune, Additional Commissioner of Central Tax, Goa Commissionerate, Joint Commissioner of Central Tax, Goa Commissionerate, State of Goa., The Assistant Commissioner, Central Goods & Services Tax, Deputy Director, Directorate General Of Goods and Service Tax Intelligence (DGGI) Zonal Unit Pune, The Commissioner, Central Goods & Services Tax Margao - 2025 (10) TMI 867 - BOMBAY HIGH COURT, the Bombay High Court distinguished Ambika Traders (supra) and held that clubbing of financial years is contrary to the scheme of Sections 73 and 74, particularly in non-fraud cases, emphasizing separate causes of action, limitation periods, and statutory scheme. Similarly, in M/s Paras Stone Industries, through proprietor Shri Sunil Shatrughan Mishra Versus Union of India & Ors. - 2026 (1) TMI 839 - BOMBAY HIGH COURT, and M/s. AR Traders, through its proprietor Shri Abdul Rashid s/o Abdul Aziz Vs. Joint Commissioner, CGST & Central Excise, Nagpur – II & Ors. - 2026 (1) TMI 1488 - BOMBAY HIGH COURT, the Bombay High Court held that consolidation of multiple financial years in a single SCN is impermissible as it prejudices the assessee and violates statutory scheme.

Thus, while the Delhi High Court adopts a textual interpretation of Sections 73 and 74 permitting multi-year SCNs, the Bombay High Court adopts a structural and procedural interpretation emphasizing year-wise adjudication. The present judgment can be seen to highlight the continuing divergence across High Courts on this issue.

Relevant Provisions:

Section 73 of the CGST Act, 2017

“73. 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 for any reason other than fraud or any willful-misstatement or suppression of facts.-

(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder.

(2) The proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order.

(3) Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under sub-section (1), on the person chargeable with tax.

…”

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-

…(3) Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under sub-section (1), on the person chargeable with tax.

(4) The service of statement under sub-section (3) shall be deemed to be service of notice under sub-section (1) of section 73, subject to the condition that the grounds relied upon in the said statement, except the ground of fraud, or any wilful-misstatement or suppression of facts to evade tax, for periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice.

…”

 (Author can be reached at [email protected])