Mumbai, April 20: The Bombay High Court has referred to a larger bench a key question under the GST regime — whether the department can issue a single consolidated show-cause notice (SCN) covering multiple financial years under Sections 73 and 74 of the CGST Act, 2017.
Reference to larger bench on GST issue
A bench of Justices Girish Kulkarni and Aarti Sathe passed the reference on April 17 while hearing a batch of petitions by assessees from sectors such as real estate, banking, logistics, manufacturing and entertainment. The petitions challenge SCNs that club several financial years into one notice.
Petitioners challenge consolidated notices
The petitioners argued that the GST framework is inherently year-specific, with separate returns and limitation periods for each financial year. They contended that issuing a composite SCN violates Sections 73(10) and 74(10), which prescribe a time limit of three years (non-fraud cases) and five years (fraud or suppression cases) for passing final orders.
According to them, “the statutory scheme requires period-wise self-assessment and a year-wise limitation,” making such consolidated notices without jurisdiction.
They relied on earlier rulings, including Milroc Good Earth Developers v. Union of India, where a Goa bench of the High Court held that there is “no provision” in the CGST Act to club tax periods. Similar views have been taken in other High Courts as well.
Department cites contrary rulings
On the other hand, the GST Department cited contrary judgments of the Delhi High Court and Allahabad High Court, which upheld consolidated SCNs. It also pointed out that special leave petitions against such rulings were dismissed by the Supreme Court of India, arguing that the issue requires reconsideration.
Court notes divergence of views
The Bombay HC noted this “cleavage of opinion” across courts. On a prima facie reading, it observed that Sections 73 and 74 form a self-contained code for tax demand and recovery, and “there ought not to be any embargo on the department to issue a consolidated show cause notice covering different periods.”
The bench further clarified that limitation for passing an order is distinct from issuance of a notice. “A limitation to pass any order cannot be a limitation on issuance of a show cause notice,” it said, adding that reading such a restriction into the law would amount to “re-writing of the provision.”
Matter to be decided by three-judge bench
At the same time, the court noted that assessees can still raise limitation objections for specific periods, which the authorities must consider while passing final orders.
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Framing key questions of law, including whether Section 73(10) restricts issuance of consolidated SCNs and whether the Milroc ruling is correct, the bench directed the matter to be placed before the Chief Justice for the constitution of a three-judge bench.
Interim orders in the pending petitions will continue until the larger bench decides the issue.
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