Jagruteshwar Metals Pvt. Ltd. Nagpur Vs. Union of India and Ors. (Bombay High Court)
The Bombay High Court examined the validity of a show cause notice dated 25.09.2023 issued under Section 74 of the Central Goods and Services Tax Act, 2017 by the Assistant Director, DGGI, Nagpur. The notice covered the period from July 2017 to March 2024 and alleged that the petitioner had suppressed taxable value and consequently short-paid GST during that period.
The petitioner challenged the notice on the ground that clubbing multiple financial years and tax periods into a single show cause notice under Section 74 of the CGST Act was impermissible. Reliance was placed on the Bombay High Court’s earlier decisions in Milroc Good Earth Developers v. Union of India and Rite Water Solutions (India) Ltd. v. Joint Commissioner, CGST & Central Excise, where it was held that there is no scope under the statutory scheme of the CGST Act for consolidating various financial years or tax periods in a single show cause notice.
The Court referred to the reasoning in Milroc Good Earth Developers, which emphasized that GST liability is linked to returns filed for each tax period and that the Act prescribes separate limitation periods for assessment, demand, and recovery of tax for each financial year. The statutory framework, including Sections 73 and 74, contemplates year-wise assessment and recovery. The Court noted that the Act defines tax periods separately, and limitation under Sections 73(10) and 74(10) operates independently for each financial year. According to the earlier decisions, consolidation of multiple years would merge different tax periods, different limitation periods, and distinct factual grounds, thereby affecting a taxpayer’s ability to respond to allegations year-wise.
