The Bombay High Court has referred a key question to a larger bench: whether the Goods and Services Tax (GST) department can legally issue a single consolidated show-cause notice (SCN) covering multiple financial years under the CGST Act, 2017.
A Division Bench of Justices G. S. Kulkarni and Aarti Sathe made the reference on April 17 while hearing a batch of petitions led by Rollmet LLP, along with several assessees from sectors including real estate, banking, logistics, manufacturing, and entertainment.
The petitions challenge the validity of consolidated SCNs issued for multiple financial years. Petitioners argued that the GST framework operates on a year-wise basis, and combining several years into a single notice violates the limitation provisions under Sections 73(10) and 74(10) of the Act.
Under Section 73(10), a final order in non-fraud cases must be issued within three years from the due date of the annual return or erroneous refund. Section 74(10) extends this period to five years in cases involving fraud, wilful misstatement, or suppression of facts.
The petitioners relied on judgments such as Milroc Good Earth Developers v. Union of India, as well as rulings by the Nagpur bench in Paras Stone Industries v. Union of India and Rite Water Solutions v. Union of India. These decisions held that the CGST Act contains no provision allowing clubbing of tax periods, making consolidated SCNs invalid.
They also pointed to similar views expressed by the Madras, Kerala, and Karnataka High Courts, which treat each financial year as a separate unit for assessment and limitation.
On the other hand, the GST Department cited contrary rulings, including Mathur Polymers v. Union of India and Ambika Traders v. Union of India by the Delhi High Court, and SA Aromatics v. Union of India, which upheld the validity of consolidated SCNs across multiple financial years. These rulings are particularly relevant in cases involving fraudulent Input Tax Credit (ITC) spanning several years.
The Bombay High Court observed that Sections 73 and 74 form a self-contained code governing demand and recovery under GST law. On a plain reading, the Court found no explicit restriction preventing issuance of a consolidated SCN for multiple periods.
It further noted that interpreting limitation provisions as a bar on clubbing tax periods would effectively amount to rewriting the statute.
Highlighting the divergence of judicial opinions across various High Courts, the Bench expressed doubt over the correctness of the Milroc ruling and deemed it necessary for authoritative determination.
Accordingly, the issue has been referred to a three-judge bench for final adjudication.