One SCN for multiple years permissible when core allegation is fraudulent ITC; appeal allowed under Section 107 CGST Act

HC upheld that consolidation of a single SCN for multiple years is permissible where the primary allegation is fraudulent availing of Input Tax Credit; noting this is the central issue, the petition was disposed and the petitioner granted liberty to file an appeal under Section 107 of the CGST Act, 2017 by 30 September 2025 with requisite pre-deposits. If appealed within that period, the Appellate Authority was directed not to dismiss on limitation grounds and to decide the appeal on merits.

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ISSUES PRESENTED AND CONSIDERED

1. Whether a single Show Cause Notice (SCN) or consolidated order can validly cover alleged wrongful availment/utilisation of Input Tax Credit (ITC) across multiple tax periods/financial years under the CGST Act.

2. Whether the language and scheme of Sections 73 and 74 of the CGST Act permit issuance of notices/statements "for any period" or "for such periods" as distinct from being confined to a single financial year, and the legal consequences of that construction.

3. The evidentiary and investigatory rationale for permitting consolidated proceedings in cases alleging fraudulent or wilful misstatement/suppression in relation to ITC across multiple years.

4. Procedural consequence: treatment of limitation and appellate remedy where a consolidated order/SCN spanning multiple years is challenged.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Permissibility of a single SCN/ consolidated order for multiple years

Legal framework: Sections 73 and 74 (sub-sections (3) and (4)) employ the expressions "for any period" and "for such periods" respectively when dealing with determination of tax not paid/erroneous refund/ITC wrongly availed or utilised; Sections 73(10) and 74(10) use the term "financial year" in relation to the limitation period for issuance of the final order.

Precedent treatment: Earlier decisions of this Court have interpreted the language of Sections 73 and 74 to permit notices/statements that relate to periods extending beyond a single financial year, particularly where the grounds relied upon for additional periods are the same as in the earlier notice.

Interpretation and reasoning: The Court finds the statutory language significant - use of "period/periods" contemplates coverage beyond a single financial year. The contrast in phrasing between sub-sections that permit statements "for any period" and sub-sections prescribing limitation tied to "financial year" demonstrates legislative intent to allow consolidated scrutiny while preserving limitation rules keyed to financial years for final orders. The statutory mechanism in sub-sections (3) and (4) expressly contemplates service of a statement for periods other than those covered under the initial notice, subject to ground identity.

Ratio vs. Obiter: Ratio - consolidation of SCNs or statements across multiple periods is permissible under Sections 73(3)/(4) and 74(3)/(4) where the statutory conditions are met (e.g., same grounds). Obiter - detailed policy observations on the prevalence of fraudulent ITC schemes and the scale of misuse (while factual, these inform but are not essential to the legal holding).

Conclusion: A single SCN/ consolidated order covering multiple tax periods is legally permissible under the CGST Act where the statutory conditions are satisfied; consolidation does not per se violate the statutory language.

Issue 2 - Relationship between "period/periods" language and limitation tied to "financial year"

Legal framework: Sections 73(10) and 74(10) prescribe the time limits for issuance of the order (three and five years respectively) measured from the due date for furnishing of the annual return for the financial year to which the tax/ITC relates, or from the date of erroneous refund.

Precedent treatment: The Court relies on prior interpretation that the Legislature is conscious of the distinction and has deliberately used different terminology in different sub-sections to reconcile investigatory breadth with limitation constraints.

Interpretation and reasoning: The choice of terminology demonstrates a two-fold scheme: (a) investigatory and notice-stage provisions allow aggregation across periods to enable tracing and establishing fraudulent patterns; (b) the order-making/limitation provisions retain a financial-year anchor to protect the taxpayer against stale claims beyond prescribed periods. Thus, consolidated notices are permitted but orders must still comply with the limitation regime applicable to each implicated financial year.

Ratio vs. Obiter: Ratio - consolidation does not override or expand limitation periods; the final order must be issued within the statutory periods applicable to each financial year implicated. Obiter - commentary on policy reasons for the distinction.

Conclusion: Consolidated SCNs/statements are permissible, but the officer must ensure the final determination respects the limitation periods that are measured with reference to the financial year for each impugned tax period.

Issue 3 - Necessity and rationale for consolidated proceedings in fraud/ITC misuse cases

Legal framework: The ITC mechanism under GST is designed to operate through inter-connected transactions; ability to detect fraud often requires examination of linked transactions across periods.

Precedent treatment: The Court adopts prior findings recognizing that fraudulent availment/utilisation of ITC is frequently revealed only by analysis of transaction chains spanning multiple tax periods/financial years.

Interpretation and reasoning: Practical realities - purchases may be recorded in one year and supplies in another; fake or fabricated firms and circular transactions can only be detected by connecting entries across years. A solitary transaction may not itself disclose a fraudulent pattern; only consolidated analysis can reveal systematic misuse. The statutory terminology enabling statements "for any period" or "for such periods" aligns with this investigatory necessity.

Ratio vs. Obiter: Ratio - where fraudulent or wilful misstatement/suppression is alleged, consolidated proceedings may be not only permissible but often necessary to establish the consistent pattern requisite to sustain fraud allegations. Obiter - factual observations concerning extent of misuse and examples from parliamentary/administrative data.

Conclusion: Consolidated notices/orders are appropriate and sometimes required in alleged large-scale ITC frauds to enable comprehensive investigation and to establish consistent patterns of misuse across periods.

Issue 4 - Procedural consequence: appellate remedy and limitation on dismissal for delay where appeal filed within court-extended timeframe

Legal framework: The impugned order is appealable under the CGST Act; courts have discretion to permit prosecution of appeals on merits where limitations would otherwise bar them if procedural course dictated by the court is followed.

Precedent treatment: The Court follows established practice in affording litigants the opportunity to pursue statutory appellate remedies with directions on pre-deposit and time-limits, and to preclude dismissal of such appeals on limitation grounds where timely instituted pursuant to court directions.

Interpretation and reasoning: Given the settled view that consolidation is permissible, and that the order is appealable under the statutory provision, equity and procedural fairness require that the taxpayer be given a defined period to file the appeal with requisite pre-deposit; appellate authorities are directed not to dismiss for limitation if the appeal is so filed within the stipulated time and conditions.

Ratio vs. Obiter: Ratio - where a court disposes of a writ petition by holding the core legal question settled by prior rulings and the order is appealable, the writ may be disposed with liberty to file appeal within a specified timeline and with directions against limitation dismissal. Obiter - ancillary procedural guidance.

Conclusion: The petitioner is granted liberty to prefer the statutory appeal within a specified period with requisite pre-deposits; the appellate authority must decide the appeal on merits and not dismiss it on the ground of limitation if filed within the court-stipulated period.

Cross-reference

For Issues 1-3, see the interplay between Sections 73(3)/(4) and 74(3)/(4) (permitting statements for periods) and Sections 73(10)/74(10) (limitation tied to financial years). The permissibility of consolidated SCNs must be read subject to the limitation constraints applicable to final orders for each financial year.

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