2026 (3) TMI 1199 - HC - GST

Tax period specificity prevents consolidated show-cause notices across years; notice quashed and reissue allowed only in strict compliance.

The note addresses whether a single consolidated show-cause notice under Section 74 CGST can cover multiple financial years/tax periods. It explains that ... Validity of clubbing of period, while issuing notice under Section 74 - Consolidation of tax periods in show cause notices - fraudulent availment of input tax credit - single consolidated show cause notice under Section 74 - Separate limitation and assessment regime for each financial year under the CGST Act Validity of issuing a single consolidated show cause notice under Section 74 of the CGST Act covering multiple financial years/tax periods, including where fraudulent availment of input tax credit is alleged - HELD THAT: - The Court held that the statutory scheme of the CGST Act treats each financial year as a distinct tax period tied to the return for that period, and that Sections 73(10) and 74(10) fix separate limitation periods year-wise. Aggregating different tax periods in a single show cause notice would conflate distinct limitation dates and denial of year wise procedural rights of the taxpayer. The Court expressly rejected the submission that allegations of fraudulent availment of input tax credit permit consolidation of show cause notices across years, observing that Section 74 contains no distinct provision authorising clubbing of different financial years even in fraud cases. The decision relies on and follows the reasoning in Milroc Good Earth Developers [2025 (10) TMI 867 - BOMBAY HIGH COURT] and Rite Water Solutions [2025 (11) TMI 1939 - BOMBAY HIGH COURT], and concludes that consolidated SCNs for multiple financial years are impermissible under Section 74. [Paras 4, 8, 12] Consolidated show cause notices under Section 74 covering multiple financial years are not permissible; allegations of fraudulent availment do not validate clubbing of tax periods. Having found the consolidated show cause notice unlawful for contravening the year wise scheme and limitation in the Act, the Court quashed the impugned notice. The respondents were granted liberty to re issue show cause notice strictly in accordance with the provisions of Section 74 for the relevant financial year or years, and to revive proceedings if earlier decisions are overturned by a higher forum. This relief preserves the respondents' ability to proceed within the statutory framework while protecting the taxpayer from impermissible clubbing. [Paras 17] Impugned consolidated show cause notice quashed; respondents may re issue notices strictly in accordance with Section 74 and have liberty to revive proceedings if higher court decisions permit. Final Conclusion: The consolidated show cause notice dated 28/09/2025 covering financial years 2018-19 to 2022-23 was quashed for impermissible clubbing of distinct tax periods under Section 74 of the CGST Act; respondents are permitted to re-issue notices strictly in terms of Section 74 and may revive proceedings if higher court rulings alter this position. Issues: Whether a single consolidated show cause notice under Section 74 of the Central Goods and Services Tax Act, 2017 covering multiple financial years/tax periods (including cases alleging fraudulent availment of input tax credit) is permissible.Analysis: The Court analysed the statutory scheme of the CGST Act, 2017 which ties tax liability to specific tax periods determined by returns (monthly or annual) and prescribes year-wise limitation for issuance of assessment orders (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 statute contemplates assessment and recovery on a year-wise basis and that consolidating different financial years in a single show cause notice aggregates distinct tax periods having different due dates and limitation timelines. The Court distinguished the contrary view expressed by another High Court on the basis that the Supreme Court had dismissed the related SLP in limine and had not decided the issue on merits, and reaffirmed that Section 74 contains no provision allowing clubbing of multiple financial years even where fraudulent availment of input tax credit is alleged. The Court nevertheless granted liberty to the revenue to re-issue notices strictly in terms of Section 74 if legally permissible.Conclusion: The petition is partly allowed; the show cause notice dated 28/09/2025 is quashed and set aside, and the respondents are permitted to re-issue notices only in strict conformity with the provisions of Section 74 of the Central Goods and Services Tax Act, 2017.