Consolidation of tax periods disallowed: fraud affects limitation but does not permit clubbing separate GST periods into one notice.

Whether a show cause notice under Section 74 CGST can consolidate multiple financial years was decided by reference to the statutory design tying tax liability to defined tax periods and separate year-wise limitation regimes under Sections 73(10)/74(10). The court applied statutory interpretation and prior Division Bench precedents to hold that distinct tax periods cannot be clubbed into a single Section 74 notice; allegations of fraudulent input tax credit affect limitation but do not permit collapsing separate periods. The impugned consolidated notice and order were quashed; re-issuance limited to separate periods and statutory scope was permitted.

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Issues: Whether a show cause notice under Section 74 of the Central Goods and Services Tax Act, 2017 can validly consolidate or club multiple financial years/tax periods (including where fraudulent availment of input tax credit is alleged).

Analysis: The Court examined the statutory scheme of the CGST Act, 2017 treating tax liability as tied to defined tax periods (monthly or annual returns) and noted the separate year-wise limitation framework established by Sections 73(10) and 74(10). The Court considered prior Division Bench decisions of this Court (Milroc Good Earth Developers and Rite Water Solutions) which held that the Act prescribes year-wise assessment and recovery and does not permit aggregation of different financial years with distinct due dates and limitation periods into a single consolidated show cause notice. The Court rejected the submission that allegations of fraudulent availment of input tax credit create an exception permitting consolidation, observing that Section 74 does not differentiate so as to allow clubbing of periods; rather, fraud affects the applicable limitation period but does not collapse separate tax periods into one proceeding. The Court also distinguished the contrary view of another High Court by noting that the Supreme Court's dismissal of a challenge to that view was in limine and did not decide the merits, and that subsequent binding decisions of this Court must be followed by the authorities below.

Conclusion: The show cause notice dated 06/06/2025 and the order dated 31/10/2025 insofar as they purport to consolidate multiple financial years under Section 74 of the Central Goods and Services Tax Act, 2017 are quashed and set aside. The respondents are permitted to re-issue notices strictly in terms of Section 74 of the Central Goods and Services Tax Act, 2017 if otherwise permissible by law.

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