Bombay High Court Quashes Consolidated GST Show Cause Notice Covering Multiple Years

In a significant judgment delivered on 27 February 2026, the Bombay High Court addressed the legality of issuing a consolidated show cause notice under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act) covering multiple financial years. The Division Bench, comprising Justice Anil L. Pansare and Justice Nivedita P. Mehta, quashed the impugned notice and order, holding that such consolidation is not permissible under the statutory scheme of the CGST Act.

The petitioner, Bhawana Steel Traders, challenged the show cause notice dated 6 June 2025 and the consequential order dated 31 October 2025, both of which pertained to alleged suppression of taxable value and short payment of GST for the financial years 2018-19 to 2023-24. The core contention was that the respondents had impermissibly clubbed multiple financial years into a single notice under Section 74 of the CGST Act.

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 CGST Act does not permit composite assessment or consolidated show cause notices for different tax periods or assessment years. The Court in Milroc emphasized that the statutory scheme requires assessment and recovery to be tied to specific financial years, with separate limitation periods for each year as prescribed under Sections 73(10) and 74(10) of the Act.

The respondents argued that in cases involving fraudulent availment of input tax credit, a consolidated notice for multiple periods is justified. They cited the Delhi High Court’s decision in M/s Mathur Polymers v. Union of India, which permitted consolidated notices in such circumstances, and noted that the Supreme Court had declined to interfere with that judgment. However, the Bombay High Court distinguished the Delhi High Court’s approach, noting that the Supreme Court’s dismissal of the special leave petition was in limine and did not amount to a merger or endorsement on merits.

The Bench reaffirmed the reasoning in Milroc Good Earth Developers and Rite Water Solutions (India) Ltd. v. Joint Commissioner, CGST & Central Excise, Nagpur, reiterating that:

• The GST scheme is based on annual returns for each financial year, and the statute fixes a five-year limitation period for each year separately.
• Issuing a single show cause notice covering multiple years would aggregate different tax periods with different due dates and limitation periods, which the statute does not permit.
• Section 74 does not distinguish between cases involving fraud and other cases for the purpose of clubbing multiple years in a single notice.

The Court further observed that the explicit year-wise structure of the statute is designed to protect taxpayers’ ability to respond to allegations for each period and to maintain the integrity of the limitation provisions. The Bench held that the authorities below are bound by the subsequent judgments of the Bombay High Court, which have not been stayed or overruled by the Supreme Court.

Accordingly, the Court quashed and set aside the impugned order and show cause notice, granting 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.

This judgment reinforces the principle that each financial year must be treated as a separate tax period for the purposes of assessment and recovery under the CGST Act, and that consolidated show cause notices spanning multiple years are not permissible, even in cases alleging fraudulent availment of input tax credit.