Gauhati High Court Rules Consolidated GST Show Cause Notices for Multiple Financial Years Are Permissible Under Sections 73 and 74

Background and Context
The present judgment of the Gauhati High Court addresses a batch of writ petitions challenging the jurisdiction of the Proper Officer under the Central Goods and Services Tax Act, 2017 (“the Act of 2017”) to issue consolidated show cause notices (SCNs) and pass consolidated orders covering multiple financial years under Sections 73 and 74. The petitioners, engaged in various businesses and registered under the Act, were subjected to audits, investigations, and subsequent consolidated SCNs for alleged tax shortfalls or wrongful availment of input tax credit spanning several years.

Jurisdictional Issue Raised
The core issue was whether the Proper Officer could lawfully issue a single, consolidated SCN encompassing different financial years, or whether the statutory scheme required separate notices and orders for each financial year. The petitioners argued that the GST regime is structured around distinct tax periods and financial years, with separate limitation periods and potential for different defences each year. They contended that consolidated proceedings would prejudice their rights and contravene the legislative intent, as reflected in Sections 73(10) and 74(10), which compute limitation per financial year.

The respondents, representing the tax authorities, countered that the Act permits issuance of notices and statements for “any period” or “such periods” without restricting them to a single financial year. They argued that consolidation is a matter of procedure, not substance, and serves administrative efficiency without overriding statutory limitation periods. The respondents relied on recent judgments, including those of the Delhi and Karnataka High Courts, which upheld the permissibility of consolidated SCNs.

Court’s Analysis and Reasoning
The Court undertook a detailed examination of the statutory provisions, including the definitions and the scheme of assessment, demand, and recovery under the Act. It noted that while the Act prescribes limitation periods for passing orders (three years under Section 73(10) and five years under Section 74(10)), there is no express statutory bar against issuing a consolidated SCN for multiple financial years, provided each period covered is within the respective limitation.

The Court distinguished between assessment proceedings (Chapter XII) and adjudication under Sections 73 and 74 (Chapter XV), emphasizing that the latter are adversarial and adjudicatory in nature, involving determination of tax liability, interest, and penalty. The Court found that the language of Sections 73(1), 73(2), 74(1), and 74(2) does not mandate separate notices for each financial year. Instead, the provisions allow for consolidated notices, so long as the limitation for each year is respected.

Addressing the petitioners’ concerns about prejudice, the Court held that any such prejudice does not invalidate the statutory power to issue consolidated notices, unless it amounts to a violation of Article 14 of the Constitution. The Court also clarified that if a consolidated notice includes periods barred by limitation, the doctrine of severability applies—only the time-barred periods would be excluded, and the rest of the notice would remain valid.

The Court expressly disagreed with contrary views taken by certain High Courts, including the Kerala and Madras High Courts, and instead aligned with the reasoning of the Delhi, Karnataka, and Allahabad High Courts. It noted that the Supreme Court had declined to interfere with the Delhi High Court’s judgment in M/S Mathur Polymers, thereby lending further authority to the proposition that consolidated SCNs are permissible.

Decision and Directions
The Gauhati High Court concluded:
(a) There is no bar in law to issuing a consolidated SCN for different financial years under Sections 73(1) or 74(1) of the Act of 2017.
(b) There is no bar to passing a consolidated order for different financial years under Sections 73(9) or 74(9).
(c) The Proper Officers in the present cases acted within their jurisdiction in issuing consolidated SCNs and orders.

The Court disposed of the writ petitions, relegating the petitioners to their alternative statutory remedies before the Appellate Tribunal or Appellate Authority, as applicable. It granted liberty to approach the appropriate forum within thirty days, with a direction that appeals filed within this period would not be rejected on limitation grounds. Interim orders protecting the petitioners from coercive action were directed to continue until the stay applications are considered by the appellate forums.

Conclusion
This judgment settles the jurisdictional question in the Gauhati High Court’s jurisdiction, affirming that consolidated show cause notices and orders for multiple financial years are legally permissible under the CGST Act, provided statutory limitation periods are observed. The decision aligns with the prevailing judicial trend and Supreme Court’s tacit approval of similar rulings from other High Courts.