2026 (3) TMI 248 - HC - GST

Year wise limitation prevents aggregation of multiple tax periods into a single Section 74 show cause notice, rendering consolidated notices invalid.

A consolidated show cause notice purporting to club alleged tax defaults across multiple financial years is impermissible because the statutory scheme ... Validity of a single show cause notice under Section 74 of the CGST Act that aggregates multiple financial years/tax periods - consolidation of assessment periods - fraudulent availment to permit consolidation - independent operation of year wise statutory limitation. Consolidation of tax periods in a single show cause notice - independent operation of year wise statutory limitation - HELD THAT: - The Court held that the statutory scheme of GST assesses tax with reference to specific tax periods linked to returns for each financial year and that Sections 73(10) and 74(10) prescribe separate limitation periods running year by year. Aggregating different financial years into a single show cause notice would collapse distinct tax periods having different due dates and limitation timelines, and thereby contravene the year wise structure of the Act. The Court relied upon and followed earlier Division Bench decisions which interpreted the Act to require assessment and recovery to be carried out with reference to the relevant financial year and its specific limitation period, concluding there is no scope in Section 74 for consolidating various financial years/tax periods into one notice. [Paras 4, 12] A show cause notice under Section 74 that clubs multiple financial years/tax periods is not permissible; the impugned consolidated notice is quashed. Fraudulent availment to permit consolidation - consolidation of tax periods in a single show cause notice - HELD THAT:- The Court rejected the contention that fraud allegations create an exception allowing clubbing of years. While fraud affects the limitation period applicable (the show cause notice in fraud cases may be issued within five years for the particular financial year), the statutory scheme does not create any provision authorising consolidation of distinct tax periods even where fraudulent availment is alleged. The respondents therefore cannot rely on the allegation of fraud to subsume different financial years into a single notice, and must issue notices in strict conformity with the year wise provisions of Section 74. [Paras 8] Fraudulent availment of input tax credit does not justify issuing a consolidated multi year show cause notice; such consolidation is impermissible. Consolidation of tax periods in a single show cause notice - HELD THAT:- Having found the consolidated notice impermissible, the Court quashed the notice but granted the respondents liberty to re issue notices strictly in terms of Section 74 for the relevant financial years if there is no other legal impediment. The Court also afforded liberty to revive proceedings should higher courts subsequently overturn the controlling precedents relied upon by this Court. [Paras 17] The impugned consolidated show cause notice is quashed; respondents may re issue notices year wise in conformity with Section 74 and may revive the petition if higher fora alter the binding law. Final Conclusion: The consolidated show cause notice issued under Section 74 for financial years 2018-19 to 2022-23 is impermissible and is quashed; fraudulent availment allegations do not permit clubbing of years, but the revenue may re issue notices strictly in terms of Section 74 for each relevant financial year and may seek revival of the challenge if higher courts modify the controlling precedent. Issues: (i) Whether a show cause notice under Section 74 of the Central Goods and Services Tax Act, 2017 can validly consolidate or club alleged tax defaults across multiple financial years/tax periods.Analysis: The Court examined the statutory scheme of the Central Goods and Services Tax Act, 2017 concerning tax periods, return filing and limitation for assessment and recovery, including the treatment of each financial year as a separate tax period (Section 2(106); Sections 39, 44, 37, 50) and the separate operation of time limits for issuance of assessment/orders under Sections 73(10) and 74(10). The Court considered and followed prior Division Bench decisions which held that the statute prescribes year-wise limitation and assessment structure and does not permit aggregation of different tax periods into a single consolidated show cause notice. The Court rejected the proposition that alleged fraudulent availment of input tax credit permits clubbing of multiple years into one show cause notice, noting that fraud-related cases remain subject to the same year-wise limitation framework under Section 74 and related provisions. The Court also addressed conflicting authority and explained that subsequent decisions of this Court on the point bind the authorities below unless set aside by a competent court.Conclusion: The Court concluded that issuance of a consolidated show cause notice under Section 74 of the Central Goods and Services Tax Act, 2017 covering multiple financial years/tax periods is not permissible; this conclusion is in favour of the assessee. The impugned consolidated show cause notice dated 26/06/2025 is quashed and set aside. The respondents remain at liberty to issue notices strictly in accordance with Section 74 of the Central Goods and Services Tax Act, 2017 and applicable limitation rules.