Recent Judicial Developments in GST- Part two.

Incidentally, I had an occasion today to go through one judgement of the division bench of the Bombay High Court on 11/09/2026 in W P No 2978 of 2026 in the matter of Ganesh Valmik Bawane Versus Joint Director, Directorate General of GST Intelligence, Nagpur Zonal Unit & another. - 2026 (9) TMI 1101 - BOMBAY HIGH COURT. This order gets importance as the issue on which the case was heard has not still attained finality. The facts also reveal that identical issue is now before the Supreme Court in SLP Diary number 24615 of 2026. Despite a contrary decision by Delhi High Court and the matter under consideration at Supreme Court, the division bench passed reasoned order in favor of the taxpayer with liberty to the respondent to revive the petition in case the decisions in the two cases of the Bombay High Court relying on which this order is passed is set-aside subsequently or in case the Larger Bench, before which the issue is live takes a different view.

I find this case very interesting as both the counsels have argued strongly on respective grounds and the division bench has taken an unbiased view by granting temporary relief to the taxpayer, which in the long run may change in case the Supreme Court or the Larger Bench takes a contrary view. The taxpayer was issued with a show cause notice under section 74 on 25/06/2025. The SCN covered multiple financial years covering 2019-20 to 2021-22. The general practice exercised by the High Courts on writs against a show cause notice is to dismiss as the taxpayer has opportunity to argue the matter before the adjudicating officer. As a rare gesture, the writ was admitted and issue was considered.

Let us tabulate all the favorable arguments of the counsel for petitioner in one go so as to facilitate all concerned to take advantage appropriately. If an authority lacks jurisdiction to have composite assessment for different tax periods/assessment years, then the formality of responding to show cause notice shall not be encouraged. It may be noted that several high courts all over India have uniformly held that single show cause notice can- not be issued for multiple financial years. Due to few contrary decisions by Delhi High Court, the issue is now under consideration of the top court of the country. The favorable arguments are:

1. The GST Scheme is based on annual returns for each financial year (even if returns are filed monthly in practice, the liability is tied to a specific financial year).
2. The statute fixes a five year time limit for demanding and recovering tax from due date for furnishing annual return for that year or from the date of erroneous return (Sections 73(10) and 74(10) of the CGST Act as applicable). This limit runs separately for each year.
3. If issued a single SCN covering multiple years, one would be aggregating different tax period with different due dates and different limitations, which the statute does not permit.
4. Tax period is defined (Section 2(106) of the CGST Act) as the period, for which the return is required to be furnished. Return can be monthly or yearly, but the statute treats each financial year as a separate tax period for the purpose of assessment and recovery (Sections 39, 44, 37, 50, etc.).
5. Time limit operate year by year. Section 73(10) and 74(10) of the CGST Act fix the time limit to issue an assessment order within three years (Section 73) or five years (Section 74) from the last date for filing annual return for the year to which the tax dues relate.
6. Consolidation would collapse these years, specific steps and grounds, harming the tax payers' ability to respond year by year and violating the explicit year wise structure of the statute. These niceties, in our view, were not considered by the Delhi High Court.

All the above arguments, as per the division bench's earlier order are found applicable in the instant case, the division bench has closed the writ petition by way of para 15. With the above liberty, and for the reasons set out in Milroc Good Earth Developers (supra) and Rite Water Solutions (India) Ltd. (supra), the petition is partly allowed. The show cause notice dated 25/06/2025 issued by respondent no. 1 is quashed and set aside. The respondents, however, are at liberty to reissue notice strictly in terms of the provisions of Section 74 of the CGST Act, if there is no other legal impediment.

Take aways: The CBIC must immediately withdraw their CBIC, Policy Wing circular with a set of standard policy comments vide F.No. CBIC -20010/67/2025-GST/994 dated 16.09.2025 issued by CBIC (GST Policy Wing) on the legality of bunching multiple financial years into a single demand notice under the CGST Act arising out of challenging the legality, constitutionality and validity of issuance of a consolidated demand notice covering multiple financial years in various High Courts. Instead of protecting the field formation, they must issue clarifications in line with the observations of various high courts which have held that single SCN for more than one financial year is impermissible.

For taxpayers and tax professionals: As we are not gaining at this stage on the argument of single SCN for multiple financials years due to departmental clarifications as well as contrary decisions, this ground may be taken as one of the grounds but not as a main ground. In the long run, this issue shall gradually close as section 74 is applicable as on date only for three financial years and the years up to 2020-21 have no application of 74 as on date and financial years 2024-25 onwards are under section 74A.

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