Bombay High Court Holds Consolidated Show Cause Notices for Multiple Tax Periods Not Permissible Under Section 74 of CGST Act

The Bombay High Court, in its decision dated 10 April 2026, addressed the legality of issuing consolidated demand-cum-show cause notices under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act) covering multiple financial years or tax periods. The petition challenged a notice dated 28 May 2025 and a consequential order dated 29 December 2025, both of which pertained to the period from April 2018 to September 2023 and were issued by the Directorate General of GST Intelligence (DGGI), Nagpur.

The principal contention raised by the petitioner was that the CGST Act does not permit the clubbing of different tax periods or financial years in a single show cause notice under Section 74. The petitioner relied on the Division Bench judgment of the Bombay High Court at Goa in M/s. Milroc Good Earth Developers v. Union of India, which held that the statutory scheme of the CGST Act requires assessment and adjudication to be conducted for each tax period or financial year separately. The Court in that case emphasized that the Act prescribes a five-year limitation period for each financial year, and consolidating multiple years in a single notice would violate the explicit year-wise structure of the statute.

The respondents, however, argued that such consolidation is permissible, citing the Delhi High Court’s decision in M/s Mathur Polymers v. Union of India, which allowed consolidated notices in cases involving fraudulent availment of input tax credit (ITC) across several years. The respondents further submitted that the Supreme Court had declined to interfere with the Delhi High Court’s judgment, suggesting that the law laid down therein had attained finality.

The Bombay High Court, after considering the rival submissions, held that the mere dismissal of a special leave petition by the Supreme Court does not amount to a merger or affirmation of the Delhi High Court’s reasoning. The Court reiterated the legal principle established in its earlier decisions—Milroc Good Earth Developers and Rite Water Solutions (India) Ltd. v. Joint Commissioner, CGST & Central Excise, Nagpur—that the CGST Act’s statutory scheme does not permit the issuance of a single show cause notice consolidating multiple financial years or tax periods. The Court highlighted several reasons for this conclusion, including:

(i) The GST scheme is based on annual returns for each financial year, and the liability is tied to a specific year.
(ii) The statute prescribes a separate five-year limitation period for each year.
(iii) Consolidating multiple years would aggregate different tax periods with different due dates and limitations, which the statute does not allow.
(iv) The definition of ‘tax period’ and the structure of the Act require year-wise assessment and recovery.
(v) Consolidation would undermine the taxpayer’s ability to respond to each year’s assessment and violate the statute’s explicit structure.

The Court further clarified that, since the Bombay High Court had taken a different view subsequent to the Delhi High Court’s decision, authorities within its jurisdiction are bound by the Bombay High Court’s interpretation. The Court also noted that the Supreme Court had neither stayed nor overruled the Bombay High Court’s judgments on this issue.

Accordingly, the Court quashed and set aside the impugned demand-cum-show cause notice and the consequential order. However, it granted liberty to the respondents to re-issue notices strictly in accordance with Section 74 of the CGST Act, provided there is no other legal impediment. The petition was disposed of on these terms, with no order as to costs.