Hakikatrai and Sons Vs Union of India and Ors. (Bombay High Court)
The Bombay High Court quashed a show cause notice dated 26/06/2025 issued under Section 74 of the CGST Act for financial years 2018-19 to 2022-23, holding that consolidation of multiple financial years in a single notice is impermissible. The petitioner challenged the notice on the ground that the statutory scheme of the CGST Act contemplates assessment and limitation on a year-wise basis. Relying on its earlier decisions in Milroc Good Earth Developers and Rite Water Solutions, the Court reiterated that tax liability, limitation, and recovery under Sections 73 and 74 operate separately for each financial year. It rejected the Revenue’s argument that alleged fraudulent availment of input tax credit justified clubbing of periods. The Court also declined to follow a contrary Delhi High Court view, stating that dismissal of an SLP in limine does not result in merger. Accordingly, the impugned notice was set aside, with liberty to issue fresh notices strictly in accordance with law.
Key issue: The argument is that clubbing of period, while issuing notice under Section 74 of the CGST Act, is not permissible.
Petitioner’s argument: The Counsel for the petitioner submits that the issue involved is covered by a judgment passed by the Division Bench of this Court at Goa in M/s. Milroc Good Earth Developers Vs. Union of India & Ors. [Writ Petition No. 2203/2025 decided on 9/10/2025], wherein, the Court held that if an authority lacks jurisdiction to have composite assessment for different tax periods/assessment years, then the formality of responding to show cause notice shall not be encouraged. Counsel for the petitioner submits that provision under Section 74 does not permit such clubbing even in the cases where fraudulent availment of income tax is alleged.
