Composite GST show-cause notice clubbing multiple financial years u/ss 73/74 held invalid; proceedings quashed, fresh notices allowed

Clubbing multiple tax periods/financial years in a single composite show-cause notice under ss. 73/74 of the CGST/KGST Acts was held impermissible because the statutory scheme-registration, accounts, returns, annual reconciliation, assessment, and limitation-operates financial-year-wise, making each year a distinct assessment unit requiring an independent notice; a consolidated notice is therefore without jurisdiction and contrary to the Act. Consequently, the impugned composite show-cause notice covering FYs 2019-20 to 2023-24, and all proceedings pursuant to it, were quashed as illegal and arbitrary, with liberty to the revenue to initiate fresh proceedings in accordance with law.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether a solitary/composite show-cause notice issued under Sections 73/74 of the CGST/KGST Acts can validly club/consolidate/bunch multiple tax periods/financial years into one proceeding.

(ii) Whether the impugned show-cause notice covering financial years 2019-20 to 2023-24 under Section 74 suffered from lack of jurisdiction/invalidity on account of such clubbing, warranting writ interference and quashing, with liberty to issue fresh notices year-wise.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Validity of composite show-cause notice clubbing multiple financial years under Sections 73/74

Legal framework (as discussed by the Court): The Court examined the statutory scheme of the CGST/KGST Acts as reflected in provisions governing maintenance/retention of accounts (Sections 35-36), periodic and annual returns (Sections 37, 39 and 44), time limits tied to annual return dates, and the determination provisions under Sections 73 and 74, including the limitation architecture in Sections 73(2), 73(10), 74(2) and 74(10). The Court also referred to Section 16(4) to note that input tax credit entitlement is financial-year bound and subject to year-specific cut-offs. The Court treated the statutory structure as being built around financial-year-specific "assessment universes".

Interpretation and reasoning: The Court held that the architecture of GST compliance and adjudication is intrinsically tied to distinct financial years: registration compliance, accounts, return filing (monthly/quarterly), and the annual return and reconciliation are structured year-wise, and limitation for adjudication is pegged to the due date for furnishing the annual return for the specific financial year to which the demand relates. A composite notice "collapses" this framework and creates jurisdictional illegality because (a) the limitation clock and end-point under Sections 73(10)/74(10) vary year-to-year; (b) the statutory requirement that notices be issued at least three/six months prior to the limitation end cannot be meaningfully applied across multiple years in one notice without curtailing statutory time for some years; and (c) the assessee's right to furnish year-wise explanations, reconciliations and legal defences is prejudiced, resulting in violation of principles of natural justice.

The Court further reasoned that allowing composite notices risks blurring the distinct statutory regimes of Section 73 (non-fraud; shorter limitation) and Section 74 (fraud etc.; longer limitation), enabling an impermissible "colourable exercise of power" by effectively extending limitation for years that might otherwise fall under Section 73. The Court also rejected reliance on a departmental communication/circular asserting permissibility of composite notices, finding it contrary to the Act's scheme. The Court additionally addressed the maintainability objection, holding that where the defect goes to inherent jurisdiction, a writ can lie even against a show-cause notice because the jurisdictional fact necessary to invoke Sections 73/74 is absent when the notice itself is issued in a manner not recognized by the statute.

Conclusion: The Court conclusively held that clubbing/consolidation/bunching/combining of multiple tax periods/financial years in a single/composite show-cause notice under Sections 73/74 is illegal, invalid, impermissible and without jurisdiction, being contrary to the statutory framework of the CGST/KGST Acts.

Issue (ii): Whether the impugned notice for FY 2019-20 to FY 2023-24 warranted quashing

Legal framework (as applied): Applying the above construction of Sections 73/74 and the year-specific limitation and adjudication scheme, the Court examined the impugned notice's coverage across multiple financial years under Section 74.

Interpretation and reasoning: The Court found, on the face of the notice, that it encompassed multiple financial years (2019-20 to 2023-24) and therefore fell within the jurisdictional prohibition declared under Issue (i). Because the defect was foundational-issuance of a composite notice not contemplated by the Act-the notice and all consequential proceedings were held vitiated. The Court therefore exercised writ jurisdiction to prevent continuation of proceedings initiated without authority of law.

Conclusion: The Court held that the impugned show-cause notice and all further proceedings pursuant thereto were illegal, invalid, arbitrary and without jurisdiction, and accordingly quashed them, while reserving liberty to the authorities to initiate fresh proceedings in accordance with law (i.e., by issuing separate/independent notices as permissible under the statutory scheme).

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