TaxTMI 
TaxTMI 
Request for comments/inputs on the legality of bunching multiple financial years into a single demand notice under the GST Act
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....d policy comments of the GST Policy Wing on the subject are enclosed at Annexure A for further necessary action. 2. This issues with the approval of Member (GST). Encl: As above (Sakshi Garg) Secretary to the Government of India Annexure A This is with reference to various communications received from field formations seeking the Board's comments in relation to writ petitions filed before various courts across the country. It has been observed that the ground of challenge pertains to the legality of issuing composite Show Cause Notices (SCNs) covering multiple financial years, and whether such issuance is permissible under sections 73 and 74 of the CGST Act, 2017. Accordingly, a comprehensive list of such issues along with policy comments from this office is elaborated below: - 1. Composite SCNs for multiple financial years are legally permissible under sections 73/74 of the CGST Act, 2017- 1.1 The matter has been examined and, in this context, it is pertinent to refer section 73(1) & section 73(3) and section 74(1) & section 74(3) of the CGST Act, which are reproduced below - (i) Section 73(1) of the CGST Act, 2017: "Where it app....
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....ent that the statute does not prescribe any restriction regarding the period for which a demand notice may be issued. It is therefore implicit that the proper officer is duly empowered to issue a Show Cause Notice for any period, subject to the statutory framework and there is no express bar in the statute which supports the prayer made by the Petitioner before the Hon'ble Court. 1.3 It follows that the petitioner's objection to the issuance of a consolidated notice covering more than one financial year has no statutory foundation. On the contrary, issuance of a single notice, instead of multiple year-wise notices, promotes administrative efficiency, reduces duplication of proceedings, and is also beneficial to the taxpayer, who is required to appear only once for adjudication. Therefore, the contention of the Petitioner lacks merit and does not call for interference by this Hon'ble Court. 2. Composite SCNs for multiple financial years do not hit the limitation period provided under sections 73/74 of the CGST Act, 2017- 2.1 It is submitted that section 73(10) and section 74(10) of the CGST Act, 2017 specifically provides the time limit of three years and five years, respec....
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.... for each financial year remains unaffected and is taken into account independently so that the issuance of the notice or order meets the limitation criteria individually for each year concerned. Consolidation serves only as a procedural mechanism and does not dilute or override the temporal restrictions imposed by law on the issuance of notices/orders. Hence, clubbing of several financial years in one show cause notice does not compromise the overall timelines given in section 73(10) and section 74(10) of the CGST Act, 2017 and does not result in an indirect extension of the limitation period, contrary to some judicial interpretations. Instead, a single notice/order covering multiple years is bounded by the limitation for each financial year individually, by issuing an order/SCN within the prescribed time limit. 2.4 Besides, issuance of separate SCNs for each financial year on identical facts, based on the same set of relied upon documents and investigation under the relevant provisions of the CGST Act, 2017, would serve no meaningful purpose. On the contrary, consolidation of such SCNs covering multiple financial years is advantageous even to the taxpayer, as it requires appea....
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....ioner, Adjudication, DGGSTI [W.P.(C) 4853/2025 dated July 29, 2025] = 2025 (8) TMI 315 - DELHI HIGH COURT, wherein it has been held that a consolidated SCN for multiple financial years is permissible under the CGST Act, 2017. Relevant extracts of the said judgement are reproduced below- "Consolidated SCN for Multiple Financial Years 43. Insofar as the issue of consolidated notice for various financial years is concerned, a perusal of section 74 of the CGST Act would itself show that at least insofar as fraudulently availed or utilized ITC is concerned, the language used in section 74(3) of the CGST Act and section 74(4) of the CGST Act is "for any period" and "for such periods" respectively. This contemplates that a notice can be issued for a period which could be more than one financial year. Similar is the language even in section 73 of the CGST Act. The relevant provisions read as under: "73. Determination of tax [pertaining to the period up to Financial Year 2023-24] not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful-misstatement or suppression of facts.- XXXX ....
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....nual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund" "74.[...] 10) The proper officer shall issue the order under sub-section (9) within a period of five years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within five years from the date of erroneous refund." The Legislature is thus, conscious of the fact that insofar as wrongfully availed ITC is concerned, the notice can relate to a period and need not to be for a specific financial year. 46. The nature of ITC is such that fraudulent utilization and availment of the same cannot be established on most occasions without connecting transactions over different financial years. The purchase could be shown in one financial year and the supply may be shown in the next financial year. It is only when either are found to be fabricated or the firms are found to be fake that the maze of transactions can be analysed and established as being fraudulent or....
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....4 In this regard it is also submitted that the definition of the "tax period" provided under section 2(106) of the CGST Act, 2017, relates it to the period for which the return is required to be furnished, it is submitted that the period is defined in context of filing of return and not in respect of issuance of demand notice. However, in respect of the issuance of a demand notice, it is pertinent to note that the matter may involve one or multiple issues, which may be spread across and connected to multiple financial years, especially in the case of fraud. Therefore, issuance of a consolidated show cause notice is necessitated to establish the modus adopted by such businesses and entities. Issuance of the show cause notice, financial year-wise wise may not be feasible and defeat the purpose of the investigation. 4. Judgements in cases related to M/s Titan Company Ltd and M/s Tharayil Medicals decisions are distinguishable/ not binding pan-India. 4.1 It is submitted that the judgments of Hon'ble High Courts in M/s. Titan Company Ltd. v. Joint Commissioner of GST & Central Excise and M/s. Tharayil Medicals v. Union of India were delivered by individual High Courts ....
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....d the validated period. 5.2 The Hon'ble High Court, in dealing with this issue, chose to quash the entire assessment, reasoning that it was a single, composite order covering both valid and invalid periods, and therefore could not be sustained in part. However, the Hon'ble Supreme Court took a different view and held that even if an assessment order covers a continuous or composite period, it is permissible to segregate the portion that is legally valid from the portion that is not. The Court clarified that the mere fact that the assessing officer passed a single composite order does not preclude the courts from upholding the valid portion and striking down only the invalid part. Specifically, the Court observed: "The High Court was not justified in striking down the entire assessment merely because the assessment order was a composite one. The period covered could be bifurcated and the tax lawfully due for the valid period could be upheld." In doing so, the Hon'ble Supreme Court found the Hon'ble High Court's interpretation to be too rigid and legally unsound. It emphasized that tax laws are dynamic, and that validation statutes may apply only to specific periods, t....
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..... Amnesty Scheme under section 128A of the CGST Act, Compounding of offences under section 138 of the CGST Act, 2017 etc.- 6.1 The taxpayer will not lose the benefit of amnesty merely because the show cause notice (SCN) covers multiple financial years, and this has been expressly clarified in relation to the recently introduced amnesty scheme under section 128A of the CGST Act, 2017. This scheme was introduced in year 2024 for waiver of interest and penalty for the taxpayer who received the demand notices under section 73 of the CGST Act i.r.o. FY 2017-18, 2018-19, 2019-20. In this regard a circular No. 248/05/2025-GST, dated 27.03.2025 was issued and as per the clarificatory position outlined in para 4.2.1 of the said circular, a taxpayer does not forfeit eligibility under the GST Amnesty Scheme solely on the ground that the SCN, statement, or order includes periods both covered and not covered under section 128A. The Rule 164(4) and the proviso to Rule 164(7) explicitly allow the taxpayer to make payment only for the portion pertaining to the eligible years (i.e., FY 2017-18 to 2019-20) and to file the appropriate application in FORM SPL-01 or SPL- 02. Simultaneously, the taxp....