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

Background and Challenge
The Bombay High Court addressed a series of writ petitions challenging show cause notices issued under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act). The notices, issued by tax authorities, consolidated alleged tax shortfalls and suppression of taxable value across multiple financial years (2017-18 to 2021-22). The petitioners contended that such consolidation was contrary to the statutory scheme of the CGST Act.

Legal Issue and Submissions
The central issue before the Court was whether tax authorities could issue a single show cause notice covering multiple financial years or tax periods under Section 74 of the CGST Act. The petitioners relied on prior judgments of the Bombay High Court, particularly the Division Bench decision in M/s. Milroc Good Earth Developers v. Union of India, which held that the statutory scheme does not permit consolidation of different tax periods in a single notice. The respondents, however, cited a contrary view from the Delhi High Court in M/s Mathur Polymers v. Union of India, which allowed consolidated notices in cases involving fraudulent availment of input tax credit, and argued that this view had attained finality as the Supreme Court declined to interfere.

Court’s Reasoning
The Bombay High Court reaffirmed its earlier position, emphasizing that the GST statutory framework is structured around distinct tax periods, typically aligned with financial years. The Court noted that:
– The liability to pay tax and the assessment process are tied to specific tax periods, with statutory limitations for each year.
– Sections 73(10) and 74(10) of the CGST Act prescribe separate time limits for each financial year for issuing assessment orders.
– Consolidating multiple years in a single show cause notice would undermine the statutory scheme, collapse distinct limitation periods, and impair the taxpayer’s ability to respond to year-wise allegations.
The Court distinguished the Delhi High Court’s judgment, observing that the nuances of the GST statutory scheme and the rationale for separate tax periods were not fully considered in that decision. The Court also clarified that the Supreme Court’s refusal to interfere with the Delhi High Court’s judgment did not amount to a merger or endorsement on merits.

Legal Principle and Outcome
The Court held that, in light of the statutory provisions and its own precedents, there is no scope for consolidating various financial years or tax periods in a single show cause notice under Section 74 of the CGST Act. The Court quashed the impugned consolidated show cause notices, granting liberty to the authorities to issue fresh notices strictly in accordance with the statutory requirements, i.e., on a year-wise basis.

In related petitions, the Court similarly quashed other consolidated notices, reiterating the need for compliance with the statutory scheme and relevant procedural safeguards. The Court also noted that if the earlier Bombay High Court judgments are set aside by a higher court in the future, the authorities may seek to revive the proceedings.

Conclusion
This decision reinforces the principle that each tax period under the CGST Act must be treated distinctly for the purposes of assessment, demand, and recovery. The ruling provides clarity on procedural safeguards for taxpayers and underscores the importance of adhering to the statutory structure of the GST regime.