Madras High Court: Bunched GST Show Cause Notices Spanning Multiple Years Are Legally Impermissible

Background and Overview

In a significant ruling that reinforces the statutory framework governing GST adjudication proceedings, the Madurai Bench of the Madras High Court has quashed demand orders that were passed on the basis of a single consolidated show cause notice covering four financial years — from 2018-19 through 2021-22. The court, in Santosh Supplies Vs Prakash Supplies, categorically held that the issuance of a bunched or composite show cause notice for more than one financial year is not permissible under the GST law, and any order passed pursuant to such a notice is void ab initio.

The judgment reinforces a growing line of judicial precedent that treats each financial year as an independent unit for the purpose of GST assessment, notice issuance, and limitation computation under Section 73 and Section 74 of the Central Goods and Services Tax Act.

Facts of the Case

The assessee in this matter is engaged in trading activities. The GST authorities served a single show cause notice upon the assessee proposing denial of input tax credit for a consolidated span covering financial years 2018-19 to 2021-22 — a practice commonly referred to as "bunching" of show cause notices.

The assessee contested this approach, arguing before the adjudicating authority that clubbing multiple assessment years into one notice was contrary to the statutory scheme. Despite this objection, the 4th Respondent — the concerned GST officer — proceeded to pass an order against the assessee, placing reliance on a circular issued by the Central Board of Indirect Taxes and Customs (CBIC) dated 15.09.2025, which purportedly permitted the issuance of a single show cause notice covering multiple financial years.

Aggrieved by the order dated 30.12.2025, the assessee approached the Madras High Court by way of writ petitions. Since all writ petitions involved identical legal questions, they were clubbed together and disposed of through a common order at the admission stage itself.

The central question before the court was:

Can the GST authorities issue a single, consolidated show cause notice or pass a single composite assessment order covering more than one financial year?

Revenue's Argument: Reliance on CBIC Circular

Counsel appearing for the respondents sought to justify the consolidated notice and the consequent order by placing reliance on the CBIC circular dated 15.09.2025. It was argued that the said circular, after examining various judicial pronouncements, arrived at the conclusion that a single show cause notice may validly be issued for multiple assessment years. The Revenue contended that the impugned orders were lawfully passed on the strength of this circular and the petitions deserved to be dismissed.

The Court's Analysis: Statutory Framework Under Sections 73 and 74

The Madras High Court, at the outset, referred to its earlier coordinate bench judgment in R.A. and Co. vs. Additional Commissioner of Central Taxes, Chennai South, reported in (2025) 33 Centax 14 (Mad.), and extracted the detailed statutory analysis contained therein.

Understanding the Scheme of Section 73 and Section 74

The court undertook a thorough examination of Section 73 and Section 74 of the GST Act, which govern the determination of tax not paid, short paid, erroneously refunded, or input tax credit wrongly availed — whether due to ordinary reasons or fraud and suppression, respectively.

Key observations included: