Case Law Details
Nagpur Ashok Vs Additional Director General, DGGI, NZU, Nagpur and Ors. (Bombay High Court)
In this case, the petitioner challenged a demand-cum-show cause notice dated 28.05.2025 issued under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act), along with the consequential order-in-original dated 29.12.2025. The proceedings related to the period from April 2018 to September 2023 and involved allegations of tax liability spanning multiple financial years.
The primary contention raised by the petitioner was that the notice was invalid as it clubbed multiple tax periods/financial years into a single show cause notice (SCN), which was not permissible under the statutory scheme of the CGST Act. The petitioner relied on earlier Division Bench judgments of the Bombay High Court, including M/s. Milroc Good Earth Developers Vs. Union of India & Ors. (Bombay High Court, Goa Bench, 2025) and Rite Water Solutions (India) Ltd. Vs. Joint Commissioner, CGST & Central Excise, Nagpur & Ors. (Bombay High Court, 2025), which had held that consolidation of multiple financial years in a single SCN under Section 74 is not permissible.
The Court examined the statutory framework of the CGST Act and reiterated the principles laid down in the above precedents. It emphasized that GST liability is structured around defined “tax periods,” typically linked to financial years and annual returns. The Act prescribes separate timelines for assessment and recovery for each financial year, including a limitation period of five years from the due date of filing the annual return for that year under Sections 73(10) and 74(10).
The Court noted that issuing a single SCN covering multiple years would effectively merge distinct tax periods, each having separate limitation timelines and factual considerations. This, according to the Court, is inconsistent with the statutory scheme and adversely affects the taxpayer’s ability to respond to allegations on a year-wise basis. It further observed that such consolidation would undermine procedural safeguards embedded in the Act.
The Revenue opposed the petition, relying on a contrary judgment of the Delhi High Court in M/s Mathur Polymers Vs. Union of India & Ors. (Delhi High Court, 2025), where it was held that in cases involving fraudulent input tax credit (ITC) spanning multiple years, issuance of a consolidated SCN may be justified to establish the pattern of illegality. It was also argued that the Supreme Court had declined to interfere with the Delhi High Court’s decision, thereby lending finality to that view.
The Bombay High Court, however, rejected this argument. It clarified that dismissal of a Special Leave Petition by the Supreme Court without a detailed order does not amount to affirmation of the lower court’s reasoning on merits, and therefore, the doctrine of merger does not apply. Consequently, the Delhi High Court’s judgment was not binding in the present case.
The Court further held that since the Bombay High Court had subsequently taken a clear and consistent view in the Milroc and Rite Water Solutions cases, those decisions would prevail and bind the authorities within its jurisdiction. It also noted that the statutory scheme and reasoning adopted in those judgments had not been overturned or stayed by the Supreme Court.
The Court outlined key reasons for disallowing consolidation of tax periods in a single SCN:
- GST liability is determined with reference to specific tax periods linked to returns.
- Limitation periods for assessment and recovery operate independently for each financial year.
- Consolidation would mix different timelines and legal considerations, which is not envisaged under the Act.
- It would impair the taxpayer’s right to respond effectively to year-specific allegations.
While acknowledging that the Revenue indicated a possible challenge to earlier Bombay High Court rulings before the Supreme Court, the Court held that until such judgments are set aside, they remain binding.
Accordingly, the Court allowed the petition in part and quashed both the impugned show cause notice and the consequential order. However, it granted liberty to the Revenue authorities to issue fresh notices in accordance with the provisions of Section 74 of the CGST Act, provided there is no other legal impediment. It also allowed the authorities to seek revival of the proceedings if the earlier Bombay High Court judgments are overturned by the Supreme Court in future.
The petition was disposed of without any order as to costs.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
The respondents have tendered across the bar their reply. Taken on record.
2] Heard.
3] Challenge is to the demand-cum-show cause notice dated 28/5/2025 issued under Section 74 of The Central Goods and Services Tax Act, 2017 (for short “CGST Act”) by respondent no.5 – Joint Director, DGGI, NZU, Nagpur and consequent order in original dated 29/12/2025 issued by respondent no.4 – Additional Commissioner (Adjudication), CGST & Central Excise, Nagpur. The notice and order pertain to the period from April – 2018 to September – 2023.
4] The argument is that clubbing of period, while issuing notice under Section 74 of the CGST Act, is not permissible. 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. While doing so, the Court considered relevant provisions of the CGST Act, and held as under :
“18. When we have perused the scheme of assessment and payment of tax, we find that the taxes payable under the Act commensurate with Return filed for ‘each tax period’ and this is may be in the form of self assessment or provisional assessment as provided in the Act. However, what is important to note is that there is a prescription of period of five years of due date on which ‘annual Return’ is filed for the relevant financial year and provision of payment and recovery is also included in the statutory scheme in form of Section 73 and 74, which underwent significant amendment by the Act 15 of 2024 and the provision as per sub-section (12) shall be applicable for determination of tax pertaining to the period up to Financial Year 2023-24 and for financial year 2024-25 and onwards, the provision under Section 74A will be relevant.
19. From the perusal of the entire Scheme, it is evidently clear to us that the statutory provision for assessment of tax for each financial year expect the Show Cause Notice to be issued at least 3 months prior to the time limit specified in Section 73(10) and 74(10) of the Act, for issuance of assessment order as subsection (10) provide that the proper officer shall issue the order within a period of five years from the due date for furnishing of annual Return for the financial year to which the tax not paid/short paid or input tax credit wrongly availed or utilised relates to or within five years from the date of erroneous Return. Thus, there is limitation prescribed for demand of tax and its recovery.
The Act of 2017, therefore involve a definite tax period, based on the filing of the Return, which can be either monthly or annual Return and if the assessment is based on annual Return, the tax period shall be the relevant financial year.
In the light of the statutory scheme, we find that there is no scope for consolidating various financial years/tax period which is attempted by the impugned Show Cause Notices assailed in the Petition.”
5] As could be seen, the Division Bench has, in categorical terms, held that there is no scope for consolidating various financial years/tax priod while issuing show cause notice under Section 74 of the CGST Act.
6] The aforesaid judgment was then considered by the Division Bench of this Court in Rite Water Solutions (India) Ltd. Vs. Joint Commissioner, CGST & Central Excise, Nagpur and Ors. [Writ Petition No. 466/2025 decided on 28/11/2025], wherein, the Court reiterated that there is no scope for consolidating various financial years/tax period while issuing show cause notice under Section 74 of the CGST Act.
7] The Counsel for the respondents opposed the contentions by saying that clubbing of notice is permissible. He referred to the judgment of the Division Bench of the High Court of Delhi in M/s Mathur Polymers Vs. Union of India & Ors. [W.P.(C) 2394/2025 decided on 26/8/2025], wherein, the Court referred to its earlier judgment, and held as under :
“22. Thus, this Court is of the opinion that in cases involving allegations of fraudulent availment of ITC, where the transactions are spread across several years, a consolidated notice may in fact be required in such cases in order to establish the illegal modality adopted by such businesses and entities. The language of the legislation, itself, does not prevent issuance of SCN or order for multiple years in a consolidated manner.”
8] The Counsel for the respondents submits that the judgment of the Delhi High Court was tested before the Hon’ble Supreme Court in Special Leave Petition (Civil) Diary No. 50279/2025, wherein, the Supreme Court declined to interfere with the impugned judgment. Accordingly, the Counsel argued that the law laid down by the Delhi High Court has attained finality.
9] True it is that the judgment of the Delhi High Court has attained finality, however, concept of merger of judgment will not apply here because the Hon’ble Supreme Court has dismissed the petition in limine and not on merit.
10] There is another reason why we find that the judgments of the High Court of Bombay will prevail. In the case of M/s. Milroc Good Earth Developers Vs. Union of India & Ors. (supra) and Rite Water Solutions (India) Ltd. (supra), following amongst others were the reasons why the Court held that show cause notice consolidating various financial years/tax periods is not permissible.
I] The GST Scheme is based on annual returns for each financial year (even if returns are filed monthly in practice, the liability is tied to a specific financial year).
II] The statute fixes a five year time limit for demanding and recovering tax from due date for furnishing annual return for that year or from the date of erroneous return (Sections 73(10) and 74(10) of the CGST Act as applicable). This limit runs separately for each year.
III] If issued a single SCN covering multiple years, you would be aggregating different tax period with different due dates and different limitations, which the statute does not permit.
IV] Tax period is defined (Section 2(106) of the CGST Act) as the period, for which the return is required to be furnished. Return can be monthly or yearly, but the statute treats each financial year as a separate tax period for the purpose of assessment and recovery (Sections 39, 44, 37, 50, etc.).
V] Time limit operate year by year. Section 73(10) and 74(10) of the CGST Act fix the time limit to issue an assessment order within three years (Section 73) or five years (Section 74) from the last date for filing annual return for the year to which the tax dues relate.
VI] Consolidation would collapse these years, specific steps and grounds, harming the tax payers’ ability to respond year by year and violating the explicit year wise structure of the statute.
These niceties, in our view, were not considered by the Delhi High Court.
11] The Division Bench of this Court in Commissioner of Income-tax, Vidarbha and Marathwada, Nagpur Vs. Smt. Godavaridevi Saraf Tumsar [1978 (2) ELTJ 624 Bombay] held that until a contrary decision is given by any other competent High Court, which is binding on Tribunal in the State of Bombay, it has to proceed on the footing that the law declared by the High Court, though of another State, is the final law of land.
12] In the present case, since this Court has, subsequent to decision of the Delhi High Court, taken a different view, the authorities below will be bound by the subsequent judgments. The Hon’ble Supreme Court has neither stayed nor overruled the view taken in above two cases. The argument of Counsel for respondent nos. 1 to 4, therefore, cannot be accepted.
13] The Counsel for the respondents submits that to the best of his knowledge, a proposal to challenge the judgments in Milroc Good Earth Developers (supra) and Rite Water Solutions (India) Ltd. (supra), is under consideration. Thus, it is suggested that judgments in both cases are likely to be challenged before the Hon’ble Supreme Court.
14] If that be so, the purpose will be served if the respondents are given opportunity to revive the petition, if the judgments passed by the High Court of Bombay in aforesaid two cases, are set aside.
15] With the above liberty, and for the reasons set out in Milroc Good Earth Developers (supra) and Rite Water Solutions (India) Ltd. (supra), the petition is partly allowed. The demand-cum-show cause notice dated 28/5/2025 issued by respondent no.5 and the consequential order in original dated 29/12/2025 passed by respondent no.4 are quashed and set aside. The respondents, however, are at liberty to re-issue notice strictly in terms of the provisions of Section 74 of the CGST Act, if there is no other legal impediment.
16] The petition is disposed of in above terms. No order as to costs.
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