TaxTMI 
TaxTMI 
Common Show Cause Notices across Multiple Financial Years: Scope of Sections 73 and 74 and Limitation Safeguards
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....rt the notice-issuing power into a financial-year-specific power. The permissibility of consolidation does not dilute substantive safeguards. Each component period must independently satisfy the applicable limitation requirement. Further, a notice invoking Section 74 must disclose material supporting fraud, wilful misstatement or suppression of facts to evade tax; the extended limitation under Section 74 cannot be obtained merely by labelling a demand as one under that provision. • Sections 73 and 74 apply to determination of tax pertaining to periods up to Financial Year 2023-24. • A common notice may cover multiple tax periods or financial years. • Limitation remains separately examinable for every component period in the notice. • The taxpayer retains the right to contest the factual basis, statutory classification, limitation and quantum of each component demand. Background & Context The controversy arises from the interaction between the periodic compliance structure of GST and the demand-determination framework. A registered person is ordinarily required under Section 39 to furnish returns for every calendar month o....
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....to which the demand relates, or from the date of erroneous refund. The financial-year reference provides the temporal reference point for limitation; it does not prohibit a composite notice. Section 75 It incorporates hearing, reasoned-order and notice-boundary safeguards. The order cannot confirm an amount exceeding the notice or a demand on grounds other than those stated in the notice. Proceedings are deemed concluded if the order is not issued within the statutory limitation period. Rule 142 The proper officer must serve an electronic summary of a notice under Sections 73 or 74 in FORM GST DRC-01, and a summary of a Section 73(3) or 74(3) statement in FORM GST DRC-02. The prescribed electronic process supports communication of demand particulars but does not impose a financial-year bar on the statutory notice power. Detailed Analysis The statutory language permits a proceeding extending beyond one financial year Section 73(1) requires the proper officer to serve notice where tax remains unpaid or short paid, refund has been erroneously made, or input tax credit has been wrongly availed or utilised for a non-fraud reason. Section 74(1) em....
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.... eventual order must meet the statutory time requirement applicable to the particular demand component. Section 74 cannot be invoked without supporting material for the fraud-based ingredients The distinction between Sections 73 and 74 remains material even when one notice covers multiple periods. Section 74(1) applies only where the demand arises by reason of "fraud, or any wilful-misstatement or suppression of facts to evade tax." The relevant clarification in Circular No. 5/2023-GST states that Section 74(1) cannot be invoked merely because GST has not been paid; material evidence of fraud, wilful misstatement or suppression of facts to evade tax must exist and must form part of the show cause notice. Section 75(2) reinforces this safeguard. If an appellate authority, tribunal or court concludes that the fraud-based charge has not been established, the proper officer must determine the tax as if the notice had been issued under Section 73(1). The appellate ruling further holds that the extended limitation available under Section 74(10) is not automatic. A taxpayer may therefore challenge the statutory classification and contend, where the necessary ingredients are not e....
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....hibition and leaves objections on limitation, merits and procedural prejudice open for adjudication. The decision reported in 2025 (7) TMI 1402 - MADRAS HIGH COURT construed "any period" by reference to the defined expression "tax period" and held that a notice could not extend beyond one financial year. The appellate ruling rejects that interpretative route, distinguishing the return-linked definition of tax period from the language used in the demand provisions. Earlier rulings reported in 2024 (10) TMI 116 - KARNATAKA HIGH COURT and 2025 (12) TMI 1188 - KARNATAKA HIGH COURT had treated the financial year as the relevant separate unit and quashed composite notices. The appellate ruling rejects that financial-year-specific reasoning, sets aside the writ orders before it and restores the impugned notices, while leaving the merits of the respective demands open. Practical Implications For revenue authorities, the ruling permits administrative consolidation where the alleged defaults, transactions, audit findings or investigation material extend across multiple periods. However, the notice should identify the relevant periods distinctly, disclose the supporting material a....