The Bombay High Court has clarified that limitation to pass any order cannot be a limitation on issuance of a show cause notice, as the limitation for passing an order is not the same as issuance of a show cause notice. The Court therefore made reference to the Larger Bench to decide as to whether the provisions of sub-section (10) of Section 73/74 of the CGST Act per se prohibits the issuance of single consolidated show cause notice for multiple financial years/tax periods?
The High Court also referred the question as to whether the operation of sub-section (1) of Section 73/74 of the CGST Act read with the provisions of sub-section (3) is in any manner controlled by the provisions of sub section (10), so as to create an embargo, on the department to issue a consolidated show cause notice for different years, before the Larger Bench.
The Division Bench comprising Justice G. S. Kulkarni and Justice Aarti Sathe stated that that there was a clear cleavage of judicial opinion on the issue whether a consolidated show cause notice for multiple financial years could be issued under Sections 73 and 74 of the CGST Act. On a prima facie reading of Sections 73 and 74, it observed that the provisions appeared to be a complete code in themselves and that there ought not to be any embargo on the department issuing a consolidated show cause notice covering different periods.
The Bench emphasized that Sections 73(3) and 74(3) use the expressions “for any period” and “for such periods”, which prima facie support the respondents’ contention that notices may cover more than one period. Further, Section 73(10) and Section 74(10), which prescribe the time limit for issuance of orders under sub-section (9), do not on their plain language control or restrict the power to issue show cause notices under sub-section (1). According to the Bench, limitation for passing an order and the power to issue a show cause notice are distinct statutory concepts, and limitation for orders cannot be read as an embargo on consolidated notices.
The Delhi High Court in the case of Mathur Polymers vs. Union of India [2025 SCC OnLine Del 6892] had treated the words “period” and “periods” in Sections 73(3), 73(4), 74(3) and 74(4), as distinct from “financial year” in Sections 73(10) and 74(10), and had held that consolidated notices were permissible, particularly in cases involving fraudulent availment of ITC where transactions may span several years, added the Bench.
Further, the Bench observed that the GST Policy Wing’s clarification dated September 16, 2025, stated that consolidation of proceedings does not extend or alter the limitation period for each individual year, and that each financial year remains subject to its own separate limitation even when included in a consolidated notice or order. The Bench also clarified that it would always remain open to the noticee to raise objections on limitation in respect of any particular demand period, and for the proper officer to confine determination to such period as is within limitation.
Ultimately, the Bench concluded that the issue required authoritative determination by a Larger Bench and framed five questions of law, including whether Sections 73(1)/74(1) read with sub-section (3) are controlled by sub-section (10), whether sub-section (10) prohibits consolidated notices, the effect of Section 160 of the CGST Act. Hence, these matters were directed to be placed before the Chief Justice for constitution of a Larger Bench, and interim orders already operating were directed to continue until the Larger Bench decides the issue.
Briefly, the batch of petitions concerns the validity of a single consolidated show cause notice issued under Sections 73 and 74 of the Central Goods and Services Tax Act, 2017, by clubbing multiple financial years/tax periods in one notice. The petitioners contended that such composite notices were contrary to Sections 73(10) and 74(10) of the CGST Act, because the statutory scheme contemplates period-wise self-assessment and year-wise limitation, and therefore a consolidated notice was without jurisdiction.
The petitioners argued that Sections 73(1), 73(3), 74(1), 74(3), 73(10) and 74(10), read with the definitions of “return” and “tax period” and Section 44 of the CGST Act, indicate that each financial year is a separate unit and that show cause notices must therefore be confined to the relevant tax period/financial year.
The respondents/ Department, opposed and contended that the limitation under Sections 73(10) and 74(10) applies separately to each financial year and that consolidation of proceedings does not extend or alter the limitation period. They argued that Sections 73(1), 73(3), 74(1) and 74(3) do not prohibit composite notices, that such notices cause no prejudice if each year remains within limitation, and that in cases involving fraudulent or wrongful availment of ITC, consolidated proceedings may be necessary because the transactions are interconnected across years.
Appearances:
Senior Advocates Arshad Hidayatullah and Prakash Shah, along with Advocates Shailaja Kher Hidayatullah, Makarand Joshi, Chandni Tanna, Prathamesh Chavan, Abhishek A. Rastogi, Pooja M. Rastogi, Minal Songire, Aarya More, Mihir Mehta, Mohit Raval, Jas Sanghavi, Vikas Poojary, Bharat Raichandani, Bhagrati Sahu, Brijesh Pathak, Anjali Joshi, Mahir Chablani, Prathamesh Gargate, and Keval Shailesh Shah, for the Petitioners
AGPs D.S. Deshmukh, Savita A. Prabhune, Aditya R. Deolekar, along with Advocates Karan Adik, Suman Kumar Das, Karan Adik, Niyati Mankad, Priyanka Singh, Subir Kumar, Sangeeta Yadav, Niyanta Trivedi, Diksha Pandey, Subir Kumar, Mamta Omle, Jitendra B. Mishra, Sangeeta Yadav, S.D. Deshpande, Rupesh Dubey, Ram Ochani, Harshad Shingnapurkar, Maya Majumdar, Miyati Mankad, Abhishek Mishra, S.D. Vyas, for the Respondents
