Single SCN consolidation allowed for multiple years where main allegation is fraudulent ITC; appeal under Section 107 CGST permitted

HC held that consolidation of a single SCN for multiple years is permissible where the primary allegation is fraudulent availing of Input Tax Credit, as in this case involving ITC exceeding Rs.89 crores. The petition was disposed of, with liberty granted to the petitioner to file an appeal under Section 107, CGST Act, 2017 by 30 September 2025 subject to requisite pre-deposits.

---

---

ISSUES PRESENTED AND CONSIDERED

1. Whether a single Show Cause Notice (SCN) or consolidated order can be issued covering input tax credit (ITC) transactions spanning multiple tax periods/financial years under the CGST framework.

2. Whether consolidation of SCNs/orders for multiple years is permissible particularly where fraudulent availment or utilisation of ITC is alleged.

3. Whether an appeal against the impugned order should be entertained notwithstanding delay in filing, given the nature of the consolidated notice and the statutory appeal provisions.

ISSUE-WISE DETAILED ANALYSIS - Issue 1: Permissibility of a single SCN for multiple tax periods

Legal framework: Sections 73 and 74 of the CGST Act, read with definition of "tax period" in Section 2(106), govern determination of tax not paid/short paid/erroneously refunded and wrongful availment/utilisation of ITC. Relevant subsections (73(3), 73(4), 74(3), 74(4)) use the language "for any period" / "for such periods," whereas limitation provisions (73(10), 74(10)) refer to issuance of final orders within prescribed years from the due date for furnishing annual returns for the financial year to which the tax relates.

Precedent treatment: The Court followed the prior decision (referred to as Ambika Traders) interpreting the statutory language to permit notices/statements relating to periods extending beyond a single financial year, subject to the statutory conditions in the cited subsections.

Interpretation and reasoning: The distinction in statutory wording between "period/periods" and "financial year" indicates legislative intent that notices may cover transactions across multiple tax periods. The statutory mechanism (service of a statement under subsections 73(3)/74(3) and deeming provision in 73(4)/74(4)) contemplates supplementation/extension of the initial notice to additional periods provided the grounds relied upon are the same (with specific caveats in fraud matters). The concept of "tax period" being tied to return periods does not preclude aggregation where transactions span returns.

Ratio vs. Obiter: Ratio-The statutory scheme in Sections 73 and 74, read together, permits issuance of notices/statements for "periods" beyond a single financial year; therefore a consolidated SCN for multiple tax periods is legally permissible under the CGST Act. This is central to the Court's decision and applied to the facts.

Conclusions: A single SCN or consolidated order covering multiple tax periods is permissible under the statutory framework where the language and mechanism of Sections 73 and 74 allow service for "any period"/"such periods."

ISSUE-WISE DETAILED ANALYSIS - Issue 2: Consolidation where fraudulent availment/utilisation of ITC is alleged

Legal framework: Sections 73 and 74 provide special contours where fraud, wilful misstatement or suppression of facts are alleged; limitation periods differ (three years for non-fraud matters under s.73(10), five years for fraud matters under s.74(10)), and subsections 73(3)/74(3)-(4) govern extension of notices to other periods on identical grounds.

Precedent treatment: The Court followed the reasoning in the earlier authority (Ambika Traders) that consolidation is not merely permissible but often necessary in fraud-related ITC matters.

Interpretation and reasoning: The nature of ITC transactions is such that establishing fraudulent availment frequently requires tracing interconnected transactions across different tax periods/financial years (e.g., purchases in one period, supplies in another). A single-year-centric approach can prevent full exposure of a fraudulent scheme; the statutory choice of "period/periods" reflects this practical reality. Additionally, consolidated presentation of year-wise details within the impugned order satisfies requirements of specificity; where the consolidated order itemises amounts per year it does not violate the statutory language or principles of fair notice.

Ratio vs. Obiter: Ratio-Where allegations indicate fraudulent or systematic misuse of ITC spanning years, consolidated SCNs/orders are permissible and may be necessary to demonstrate the modus operandi and connect transactions. Obiter-Policy observations regarding misuse of ITC in general and Parliamentary data on bogus firms, while informative, are not essential to the statutory holding.

Conclusions: Consolidation of SCNs/orders for multiple years is valid and often required when fraudulent availment/utilisation of ITC is alleged; the law permits consolidation provided the grounds for the extended periods are the same as in the original notice (subject to fraud-related stipulations in the statute) and the consolidated order contains decipherable year-wise particulars.

ISSUE-WISE DETAILED ANALYSIS - Issue 3: Appeal and limitation consequences where consolidated SCN/order issued

Legal framework: Section 107 (appeals) of the CGST Act provides the statutory right of appeal against orders passed by authorities, subject to appellate pre-deposit requirements and limitation rules applicable to the filing of appeals.

Precedent treatment: The Court applied the prior reasoning allowing consolidation and recognised the impugned order as an appealable order under the statute; it applied equitable procedural relief in the specific context of a pending petition under Article 226.

Interpretation and reasoning: Given that the consolidated order is appealable, and in view of the settled principle permitting consolidation in fraud-related ITC cases, the Court exercised its discretion to dispose of the writ petition while protecting the petitioner's appellate remedy. The Court granted liberty to file an appeal within a specified timeline and directed that the Appellate Authority should not reject it on limitation grounds if filed within that period, thus preserving the petitioner's substantive right to appellate adjudication on merits.

Ratio vs. Obiter: Ratio-An appellate remedy must be preserved where the impugned consolidated order is appealable; courts may grant limited temporal relief to ensure appeals are decided on merit rather than dismissed on technical limitation grounds when the legality of consolidation is in question. Obiter-Directions as to pre-deposit requirements and the precise timeline given are pragmatic dispositive orders tailored to the facts and not intended as general rule-making beyond the case.

Conclusions: The impugned consolidated order is appealable; equitable relief may be granted to permit an appeal to be filed within a specified timeframe with requisite pre-deposit, and the Appellate Authority should not dismiss such appeal on limitation grounds if filed within the afforded period; the appeal must be decided on merits.

Cross-references and Practical Points

1. Issues 1 and 2 are interlinked: statutory language permitting notices for "periods" (Issue 1) reinforces the practical necessity of consolidation in fraud-related ITC matters (Issue 2).

2. The Court's reliance on the earlier decision is a direct application (followed) of that precedent; distinctions were not required on the facts before the Court.

3. The holding on consolidation is a binding ratio for similar factual matrices where fraudulent availment/utilisation of ITC across tax periods is alleged; policy and factual observations about the misuse of ITC are supportive but not the primary legal basis.

---