Bombay High Court Rules Consolidated GST Notices Spanning Multiple Financial Years are Legally Impermissible

Introduction

The Bombay High Court has delivered a significant ruling on the procedural validity of show cause notices issued under the Goods and Services Tax regime. In the matter of ICAD School of Learning Pvt. Ltd. Vs Union of India, the Court addressed a fundamental question regarding whether tax authorities can issue a single consolidated show cause notice covering multiple financial years under Section 74 of the Central Goods and Services Tax Act, 2017. The judgment provides crucial clarity on the statutory framework governing GST assessments and reinforces the year-wise structure mandated by the legislation.

The judicial pronouncement emerged from Writ Petition No. 736 of 2026, where the petitioner challenged a show cause notice dated 01/05/2025 along with a consequential adjudication order dated 30/12/2025. These proceedings encompassed a prolonged period spanning from April 2018 through March 2023, raising serious concerns about the legal sustainability of such temporal consolidation within a single notice framework.

Background of the Case

The petitioner organization received a show cause notice from the Joint Director, DGGI, Nagpur Zonal Unit, issued under Section 74 of the CGST Act, 2017. This notice covered an extensive five-year duration and was founded on the allegation that the educational institution had provided a composite supply comprising taxable commercial training services bundled with hostel accommodation facilities.

According to the revenue authorities, this arrangement resulted in:

  • Underreporting and short payment of Central Goods and Service Tax
  • Irregular availment of input tax credit that was not legitimately eligible

Subsequently, the Additional Commissioner (Adj.), CGST and C.Ex., Nagpur issued an adjudication order dated 30-12-2025 confirming the demands raised in the show cause notice.

The petitioner's primary legal contention focused not on the merits of the substantive tax allegations, but rather on a procedural infirmity—that the consolidation of multiple distinct financial years within a single show cause notice violated the statutory scheme established under the CGST Act, 2017.

The core legal issue presented for judicial determination was: Whether a single show cause notice issued under Section 74 of the CGST Act can validly consolidate demands pertaining to multiple financial years or distinct tax periods?

This question strikes at the heart of the GST statutory framework, particularly concerning:

  • The definition and treatment of "tax period" under Section 2(106) of the CGST Act
  • The limitation provisions prescribed in Sections 73(10) and 74(10)
  • The return filing obligations under Sections 39, 44, 37, and 50
  • The constitutional and procedural rights of assessees to respond to notices period-wise

Petitioner's Arguments

The petitioner's legal team constructed their argument on the foundation of existing judicial precedents from the Bombay High Court itself. They relied substantially on two significant Division Bench decisions:

Reliance on M/s. Milroc Good Earth Developers

The petitioner cited the Division Bench judgment in M/s. Milroc Good Earth Developers Vs. Union of India & Ors. [Writ Petition No. 2203/2025 decided on 9/10/2025], delivered by the Goa Bench of the Bombay High Court. This precedent established that when authorities lack jurisdiction to conduct composite assessments spanning different tax periods or assessment years, requiring assessees to respond to such jurisdictionally flawed notices serves no legitimate purpose.

The Milroc judgment conducted an exhaustive analysis of the GST statutory scheme and concluded:

"From the perusal of the entire Scheme, it is evidently clear to us that the statutory provision for assessment of tax for each financial year expect the Show Cause Notice to be issued at least 3 months prior to the time limit specified in Section 73(10) and 74(10) of the Act, for issuance of assessment order as sub-section (10) provide that the proper officer shall issue the order 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/short paid or input tax credit wrongly availed or utilised relates to or within five years from the date of erroneous Return."

The Milroc decision further held:

"In the light of the statutory scheme, we find that there is no scope for consolidating various financial years/tax period which is attempted by the impugned Show Cause Notices assailed in the Petition."

Reinforcement through Rite Water Solutions

Additionally, the petitioner drew the Court's attention to the subsequent Division Bench decision in Rite Water Solutions (India) Ltd. Vs. Joint Commissioner, CGST & Central Excise, Nagpur and Ors. [Writ Petition No. 466/2025 decided on 28/11/2025]. This judgment explicitly reiterated the legal principle established in Milroc Good Earth Developers, thereby creating a consistent line of judicial thinking within the Bombay High Court's jurisdiction.

The petitioner argued that these authoritative pronouncements categorically established that the impugned notice suffered from a fundamental jurisdictional defect that warranted its quashing.

Revenue's Counter-Arguments

The revenue authorities, represented by counsel for respondent nos. 1 to 4, vigorously opposed the petitioner's contentions. Their defense rested primarily on a conflicting view adopted by the Delhi High Court.

Reliance on Mathur Polymers Judgment

The revenue cited the Division Bench decision of the Delhi High Court in M/s Mathur Polymers Vs. Union of India & Ors. [W.P.(C) 2394/2025 decided on 26/8/2025]. The Delhi High Court had taken a diametrically opposite view, holding:

"Thus, this Court is of the opinion that in cases involving allegations of fraudulent availment of ITC, where the transactions are spread across several years, a consolidated notice may in fact be required in such cases in order to establish the illegal modality adopted by such businesses and entities. The language of the legislation, itself, does not prevent issuance of SCN or order for multiple years in a consolidated manner."

Supreme Court's Dismissal of SLP

The revenue further highlighted that the assessee in Mathur Polymers had approached the Supreme Court by filing Special Leave Petition (Civil) Diary No. 50279/2025, which was dismissed. The revenue argued that this dismissal conferred finality upon the Delhi High Court's reasoning, making the law settled in favor of permitting consolidated notices.

The revenue's position was that the Supreme Court's refusal to interfere with the Delhi High Court judgment should be interpreted as implicit approval of the legal position adopted therein, thereby creating binding precedent across jurisdictions.

Court's Analysis of Statutory Framework

The Bombay High Court undertook a meticulous examination of the GST statutory architecture to resolve the conflicting judicial views. The Court's analysis focused on several interconnected statutory provisions:

Definition of Tax Period

The Court examined Section 2(106) of the CGST Act, which defines "tax period" as the period for which a return is mandated to be filed. While returns may be submitted monthly in operational practice, the statute explicitly treats each financial year as a discrete and separate tax period for purposes of assessment and recovery proceedings.

Return Filing Mechanism

The Court analyzed Sections 39, 44, 37, and 50 of the CGST Act, which collectively establish the return filing framework. The statutory scheme contemplates:

  • Monthly returns during the course of the financial year
  • Annual returns consolidating the entire financial year
  • Tax liability crystallization tied to the relevant financial year

The Court observed that GST liability is intrinsically linked to returns filed for each distinct tax period, reinforcing the year-wise structural foundation of the taxation regime.

Limitation Provisions Analysis

The Court paid particular attention to Sections 73(10) and 74(10) of the CGST Act, which prescribe time limitations for issuing assessment orders:

Under Section 73(10): The proper officer must issue an order within three years from the due date for furnishing the annual return for the relevant financial year.

Under Section 74(10): In cases involving fraud, suppression, or wilful misstatement, the time limit extends to five years from the due date for filing the annual return for that specific financial year, or from the date of filing an erroneous return.