Karnataka High Court: Single GST Show Cause Notice for Multiple Financial Years Permissible, But Limitation Under Section 73(10) and Section 74(10) Must Be Independently Satisfied

Overview of the Ruling

The Hon'ble High Court of Karnataka, in a significant ruling in The Commissioner of Central Tax & Ors. v. M/s. Chimney Hills Education Society (2026 (5) TMI 125 – HC – GST), addressed a crucial and long-debated question under GST law — whether a single Show Cause Notice (SCN) issued under Section 73 and Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017) can lawfully cover multiple financial years in a consolidated manner.

The Division Bench took up this matter as a Writ Appeal arising from a challenge to an earlier Single Bench decision. The ruling has significant implications for both the Revenue authorities and assessees, particularly concerning the protection of limitation periods embedded in Section 73(10) and Section 74(10) of the CGST Act, 2017.

Background and Genesis of the Dispute

M/s. Chimney Hills Education Society had originally approached the Karnataka High Court through a Writ Petition, seeking to quash a Show Cause Notice issued by the Revenue covering the period from 2017 to 2023 — a span of six financial years consolidated into a single notice.

The assessee's core argument before the Single Bench was that issuing one omnibus SCN for such a prolonged and multi-year period was fundamentally incompatible with the statutory scheme of the CGST Act, 2017, specifically because Section 73(10) and Section 74(10) anchor the limitation period to each specific financial year.

The Single Bench agreed with the assessee and allowed the Writ Petition, relying on two precedents:

  1. The Madras High Court's ruling in M/s. Titan Company Ltd. v. Joint Commissioner of GST (W.P.No.33164 of 2023), which had settled the issue in favour of the assessee on similar facts.
  2. The Hon'ble Supreme Court's decision in State of Jammu and Kashmir and Others v. Caltex (India) Ltd. (AIR 1966 SC 1350), where it was held that where an assessment encompasses different assessment years, each assessment order can be distinctly separated and must be treated independently.

Aggrieved by this outcome, the Revenue filed a Writ Appeal before the Division Bench under Section 4 of the Karnataka High Court Act, which led to the present ruling.

Whether it is legally permissible to issue a consolidated or common Show Cause Notice under Section 73 and Section 74 of the CGST Act, 2017 that covers multiple financial years or multiple tax periods simultaneously?

Revenue's Position and Arguments

The Revenue mounted a multi-pronged defence in support of the consolidated SCN:

  • Legislative language: The Revenue emphasized that Section 73 and Section 74 of the CGST Act, 2017 deliberately use the expression "any period" — a phrase that is broad enough to encompass multiple financial years. Since Parliament consciously chose this wording, it would be impermissible to restrict the scope of the SCN to a single financial year.

  • Limitation as a protective measure, not a structuring tool: According to the Revenue, Section 73(10) and Section 74(10) are provisions designed solely to protect the assessee by capping the time within which proceedings must conclude. They are not intended to restrict the Revenue's discretion in structuring the notice itself or to mandate a financial year-specific SCN.

  • Supporting case law relied upon:

    • MATHUR POLIMERS VS. UNION OF INDIA (2026) 154 GSTR 443
    • AMBIKA TRADERS VS. COMMISSIONER (2025) 33 Centax 189 (Del)
    • M/s. SA AROMATICS PVT. LTD., AND ANOTHER VS. UNION OF INDIA AND OTHERS Writ Tax.No.7515/2025 dated 20.01.2026
    • New Gee Enn & Sons vs. Union of India 2025 SCC Online J&K 1180

Assessee's Counterarguments