2026 (2) TMI 953 - HC - GST

Year-specific Limitation: Composite GST show cause notices across multiple years are unsustainable; separate yearly notices required.

Year specific limitation governs initiation under the CGST scheme: limitation is tied to the annual return due date for each financial year, so officers ... Sustainability of the notices issued u/s 73 and 74 of the CGST/SGST Act 2017 in the form of a composite notice for multiple assessment years - limitation linked to the financial year u/s 74(10) - prejudice to the assessee from consolidated adjudication - in limine dismissal of Special Leave Petition not constituting precedent - binding effect of a Division Bench decision - HELD THAT:- It is pointed out that, the term “valid return” is defined under Section 3(117) as a return furnished under Section 39 on which self assessed tax has been paid in full. Section 39 deals only with monthly returns and the purpose of annual return contemplated under Section 44 of the CGST Act is as a self certified statement, reconciling the values of supplies declared in the return furnished for the financial year. Thus, the contention of the learned Special Government Pleader is that, going by the scheme of the CGST Act, the financial year is not of much relevance, for the purpose of proceeding under Sections 73 and 74, as what is to be addressed through the said proceedings is to ensure the collection of tax which was sought to be evaded or short levied or input tax credit wrongfully availed, in respect of particular instances alone. In other words, while initiating proceedings under Sections 73 and 74 of the CGST Act, the attempt of the officers concerned, is to recover the tax, which is short levied or short collected or input tax credit wrongfully availed and it is not intended to reopen the assessment for the whole year as such. It was also pointed out that, in an inspection or search conducted by the competent officers, if instances as referred to above are revealed relating to multiple assessment years, it may be necessary for the officer to conduct a common enquiry to determine the tax liability, which is not prohibited under the Act specifically or with necessary impications. Thus, according to the learned Special Government Pleader these aspects are not taken into account in the decision rendered in Lakshmi Mobile [2025 (2) TMI 666 - KERALA HIGH COURT] and Tharayil Medical [2025 (4) TMI 1152 - KERALA HIGH COURT] The impugned notices in these cases are to be interfered with. Accordingly, these writ petitions are disposed of quashing the impugned notices issued and impugned orders passed for multiple years under the provisions of the CGST /SGST Act, granting liberty to the assessing officers to issue fresh notices separately for the relevant assessment years and to complete the proceedings in accordance with law. It is further clarified that the period during which the respective writ petitions were pending consideration before this Court, i.e from the date of filing till the date of the judgment can be excluded, while computing the period of limitation for issuing notices and completing the proceedings. All other contentions of all the parties are left open. Issues: Whether officers are competent under Sections 73 and 74 of the Central Goods and Services Tax Act, 2017 to issue a single composite show cause notice and pass a consolidated adjudication order covering multiple financial/assessment years.Analysis: The statutory scheme governing initiation and limitation under Section 74 requires the determination year-wise because the limitation for adjudication is pegged to the due date for furnishing the annual return of the specific financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates. Consolidated notices covering multiple years can curtail the period available to an assessee to adduce evidence and defend years whose limitation period would otherwise expire later, and can multiply the assessed liability and appellate pre-deposit burden contrary to the year-specific language of subsections (9) and (10) of Section 74. Prior decisions holding composite notices unsustainable explained that consolidated adjudication is permissible only where a statute provides a common initiation and completion period; comparable provisions in other Acts (for example Section 28 of the Customs Act, 1962 and Section 11A of the Central Excise Act, 1944) demonstrate that year-agnostic consolidation is statute-specific. Orders dismissing Special Leave Petitions in limine do not operate as precedents on the merits and therefore do not preclude application of the Division Bench reasoning that consolidated notices cause prejudice and exceed officer powers under the CGST scheme.Conclusion: Composite show cause notices and consolidated adjudication orders for multiple financial/assessment years issued under Sections 73 and 74 of the Central Goods and Services Tax Act, 2017 are unsustainable; the impugned composite notices and orders are quashed, with liberty to issue separate notices for each relevant assessment year and complete proceedings in accordance with law.