Short payments of GST and clubbing of tax periods barred; notice under Section 74 quashed in part.

Decision addresses short payments of GST and the impermissibility of clubbing distinct tax periods when issuing show cause notices under the CGST Act. The court relied on prior Division Bench rulings establishing that authorities lack jurisdiction to make composite assessments across different financial years or tax periods, and therefore consolidation of periods in a Section 74 show cause notice is impermissible; consequence: the challenged show cause notice issued in September 2023 was quashed and set aside, and the petition was allowed in part.

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Issues: Whether a show cause notice under Section 74 of the Central Goods and Services Tax Act, 2017 can validly club or consolidate multiple financial years/tax periods into a single notice, and whether the impugned notice issued in September 2023 is maintainable.

Analysis: The Court examined the statutory scheme of assessment and recovery under the CGST Act, noting the concept of tax being tied to distinct tax periods (monthly or annual returns) and the limitation framework embodied in Sections 73 and 74 including the timelines in sub-section (10). The Court considered binding precedents of this High Court which held that there is no scope for consolidating different financial years/tax periods in a single show cause notice under Section 74, and contrasted those decisions with a contrary view from another High Court. The Court applied the principle that authorities within the State are bound by the law declared by this High Court, and found the petitioner's challenge to be a substantive challenge to jurisdiction in issuing a consolidated notice under Section 74.

Conclusion: The show cause notice issued in September 2023 under Section 74 of the CGST Act is quashed and set aside. The respondents are at liberty to re-issue a notice only strictly in accordance with the provisions of Section 74 and subject to any other legal impediment. Costs previously imposed were recalled and the petition is disposed of accordingly.

Ratio Decidendi: Section 74 of the CGST Act must be applied with regard to distinct tax periods and does not permit consolidation of multiple financial years into a single show cause notice; a consolidated notice issued in contravention of that scheme is liable to be quashed.

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