Multi-Year Section 74 GST Notices: High Courts Split on Composite SCNs

Received a Section 74 GST Notice for Multiple Years? Different High Courts on Composite SCNs

Summary: Whether a single GST show cause notice under Section 74 can validly cover multiple financial years remains the subject of conflicting High Court decisions. The issue has significant practical consequences because each financial year has its own returns, evidence, limitation period and possible defences, while a consolidated notice can aggregate substantial tax, interest and penalty exposure. Kerala, Andhra Pradesh and Calcutta High Courts have adopted taxpayer-favouring approaches requiring separate year-wise treatment, while Delhi, Allahabad, Jammu & Kashmir and Ladakh, Karnataka and Gauhati High Courts have accepted consolidated proceedings in varying circumstances, generally subject to safeguards such as independent limitation, year-wise quantification and adequate opportunity. The Bombay High Court’s earlier taxpayer-favouring approach has subsequently been questioned and the issue referred to a Larger Bench. Punjab and Haryana proceedings also remain pending with interim protection in the matter discussed. The Supreme Court has issued notice in the Revenue’s challenge arising from Lakshmi Mobile Accessories, but no reasoned Supreme Court judgment has yet settled the nationwide controversy as of the stated research cut-off. The article examines the divergent judicial approaches, Section 74 requirements, limitation, appellate burden, Section 74A, writ remedies and practical checks taxpayers should undertake immediately after receiving a multi-year GST notice.

Introduction

You open the GST portal and find one show cause notice covering many financial years. The notice proposes demand for 2017-2018 to 2020-2021 with ₹8 crore as tax, adds interest, and—because Section 74 has been invoked—proposes a penalty equal to the tax. What initially looks like one proceeding can therefore expose the business to a demand exceeding ₹16 crore!

The first thing to do is breathe in and breathe out and then ask yourself a question can a single notice for four financial years could lawfully be issued?

There is no uniform answer across India. Some High Courts have held that every financial year must be dealt with separately. Others have found that a consolidated notice can be issued. So, the answer depends that in which state you are and what your High court says!

Let’s understand this in detail-

Q1: What exactly is a composite GST show cause notice?

In other words, a composite or multi-year show cause notice is one notice that proposes a demand for more than one financial year or tax period. Suppose a notice covers FY 2018-19 to FY 2021-22 and alleges that your firm is bogus and you have availed wrongful input tax credit of ₹10 crore from fake/ bogus suppliers. With one composite notice, now instead of one year you have to gather all the documents for all four years, all suppliers, purchasers for all those years to prove that your transactions and ITC availed was lawful.

Q2: Why a multi-year notice can become dangerous very quickly?

The question that comes to one’s mind is when the tax-period returns, annual returns are financial-year-specific with their own deadlines then how my returns/defence that succeeds for FY 2018-19 is relevant to FY 2020-21. A supplier may have been active during one year and cancelled later. The allegation may concern reconciliation in one period, classification in another and supposedly fraudulent ITC in a third. Describing all of this as one “continuing dispute” does not make the underlying facts identical.

Furthermore, the most visible problem is the amount. Clubbing several years produces one formidable figure comprising tax, interest and penalty. Under Section 74, the proposed penalty may equal the tax. That number can affect credit facilities, and the continued operation of a business even before adjudication is complete.

The problem does not end with the order. Under Section 107(6), a first appeal ordinarily requires payment of the admitted dues and 10 per cent of the remaining tax in dispute, subject to the statutory cap applicable to the appeal. Even when correctly confined to disputed tax, the pre-deposit attached to a large combined order may impose a serious economic burden, especially on small or new businesses.

There is also a limitation problem. Sections 73(10) and 74(10), as applicable to the earlier financial years, calculate the outer period for adjudication with reference to the due date of the annual return for the financial year concerned. If an officer combines an older year that is approaching limitation with later years for which time remains, the taxpayer may effectively be required to answer the later years on the accelerated timetable of the oldest period.

Finally, demand adjudication cannot be confused with arrest or prosecution. A show cause notice does not by itself authorise arrest. Sections 69 and 132 have separate conditions, alleged offences and monetary thresholds. Nevertheless, aggregation of alleged tax evasion across several years can influence how the department characterises the scale of the alleged offence. When reputation, business continuity and personal liberty may be affected, year-wise accuracy is a substantive safeguard—not a procedural indulgence.

Q3: Reply to the officer or approach the High Court?

Since this issue is already sub judice in the High courts, option is open to consider approaching the jurisdictional High Court under Article 226. The position is materially stronger where the challenge concerns the authority to initiate the proceeding, an independently time-barred year, absence of the statutory ingredients of Section 74, breach of natural justice, or an incurable defect apparent from the notice itself.

Q4: What does different High Courts opine on this issue?

The following position is verified up to 21 September 2026. “Taxpayer-favouring” and “Revenue-favouring” describe the result on the composite-notice issue; they do not eliminate the need to examine the facts, limitation and safeguards in an individual notice.

Q5: Why are the High Courts divided?

The Courts that permit consolidation generally begin with the absence of an express prohibition in Sections 73 and 74. They rely on expressions such as ‘any period’ and ‘such periods’ and reason that one notice may be workable where the investigation, transaction chain and allegation are common across several years. On this view, separate proceedings may duplicate evidence and adjudicatory effort, provided that the demand is quantified year-wise, limitation is independently satisfied and the taxpayer receives a real opportunity to answer every period.

The Courts granting relief take a different starting point. GST returns, annual returns, limitation dates and statutory determinations operate financial year by financial year. They therefore treat separate treatment as necessary to preserve the taxpayer’s defence for each year and to prevent a weak, distinct or time-barred period from being absorbed into one aggregate demand. Their concern is not merely the number of notices, but whether the notice and adjudication disclose an independent application of mind to each period.

The real dividing line is consequently narrower than a simple yes-or-no rule. Even most Revenue-favouring decisions do not approve a vague lump-sum demand, disregard of separate limitation dates or denial of adequate opportunity. Conversely, a taxpayer-favouring case may turn on the wording of the notice, different subject matters or a concession recorded in that proceeding. The notice must therefore be tested against both the binding law of the jurisdictional High Court and its own year-wise facts.

Q6: What is the view of the author?

In my respectful view, separate notices and separate adjudication for each financial year better reconcile the text of the statute with fairness in administration. This does not require the department to repeat an entire investigation. Common evidence can be relied upon and connected hearings can be coordinated. What must remain distinct is the legal determination for each year.

First, limitation is not a matter of office convenience. It is a substantive protection created by Parliament. Every year has its own annual return and outer date. The oldest year should not be used to accelerate the defence and adjudication of later years, nor should a time-barred demand be allowed to disappear inside an aggregate figure.

Second, Section 74 is not an ordinary computational provision. For the financial years governed by that section, the extended fraud route requires the notice to state how non-payment, short payment or wrongful ITC occurred by reason of fraud, wilful misstatement or suppression with intent to evade tax. Section 74A, applicable from FY 2024-25 onwards, creates a common determination mechanism for both fraud and non-fraud cases, while prescribing different penalty consequences where fraud, wilful misstatement or suppression is established. In either setting, the necessary foundational facts must exist and be stated for the period concerned. In Tata Steel Ltd. v. Union of India, 2026 INSC 920, the Supreme Court held in the limitation context that a mechanical recital of ‘suppression’ cannot substitute the foundational facts in the notice and that the defect cannot later be repaired through a counter-affidavit. That principle is highly relevant where a notice repeats one accusation across several years without explaining how the statutory ingredients exist in each of them.

Third, one composite order can magnify the immediate appellate burden. A taxpayer may possess a complete limitation defence for one year, a supplier-document defence for another and a classification argument for a third. It is unfair to force those different disputes into one financial event before the appeal can be entertained.

Fourth, aggregation may have consequences beyond assessment. The power of arrest and the offences under Sections 69 and 132 are separate from demand adjudication. But when the alleged amount is aggregated across years, the combined figure may affect how the department presents the seriousness and monetary bracket of the alleged offence. A procedure capable of affecting liberty should not depend on an administratively convenient total that conceals year-wise weaknesses.

Finally, year-wise notices improve adjudication itself. They require the officer to identify the allegation, evidence, limitation, defence and conclusion applicable to that year. An appellate authority or constitutional court can then review the decision without having to disentangle several factual records from one common conclusion.

Q4: What if your High Court presently permits composite notices?

An adverse judgment on the broad question does not validate every multi-year notice. The correct response is to test the notice against the qualifications recognised by the Revenue-favouring decisions themselves.

The following defects require particular examination:

• one or more years are independently outside limitation;
• the notice supplies only a lump-sum demand instead of year-wise quantification;
• the relied-upon documents do not establish the allegation for every included year;
• different issues have been grouped together merely because they were found in the same audit or investigation;
• the notice uses Section 74 language without pleading facts showing fraud, wilful misstatement or suppression for each period;
• a Section 73 dispute has effectively been placed under Section 74 only to obtain the longer limitation period;
• the taxpayer has not been given the documents, transaction particulars or time needed to answer the later years;
• the proposed or final order applies one conclusion across years despite materially different facts;
• the order travels beyond the allegations or quantification contained in the notice.

These are not drafting technicalities. They address limitation, jurisdiction and actual prejudice. They can distinguish Ambika Traders or another Revenue-favouring precedent because those decisions do not authorise vague, time-barred or unsegmented demands.

Q5: Has the Supreme Court settled the conflict?

No- reasoned Supreme Court judgment has, as of 21 September 2026, settled the validity of composite GST show cause notices across India.

The SLP arising from Ambika Traders was dismissed as not pressed on 1 September 2025. The SLP arising from Mathur Polymers was dismissed on 7 November 2025 at the leave stage with the observation that no good ground for interference was made out. Those orders are relevant, especially within the litigation in which they were passed, but they do not amount to a comprehensive Supreme Court judgment deciding every statutory and constitutional argument now dividing the High Courts.

On 28 January 2026, the Supreme Court issued notice in the Revenue’s SLP arising from Lakshmi Mobile Accessories, SLP(C) Diary No. 60097/2025. Notice has also been issued in Revenue challenges arising from the Andhra Pradesh line, including matters connected with Sahiti Agencies, Supraja Dairy and Sri Ganesh Steels. Issuance of notice means that the Court will examine the controversy. It is neither a merits decision nor, without a specific direction, a stay of the High Court judgment.

The eventual Supreme Court determination will need to reconcile four questions: whether the annual limitation scheme controls the form of the notice; what work Parliament intended sub-sections (3) and (4) to perform; whether one continuing fraudulent transaction can justify consolidation; and what minimum year-wise safeguards are necessary to prevent prejudice.

Q6: Does Section 74A change the position for later years?

Section 74A introduces a common demand and determination mechanism for FY 2024-25 onwards, replacing the earlier division between Sections 73 and 74 for those periods. It covers both fraud and non-fraud cases; fraud, wilful misstatement or suppression with intent to evade tax remains relevant to the applicable penalty and related consequences. Its limitation design and text must therefore be examined independently.

The existing judgments under Sections 73 and 74 cannot be transferred mechanically to Section 74A. Yet the underlying issues remain: identification of the relevant tax period, year-wise evidence and quantification, independent limitation, fair opportunity and demonstrable prejudice. A future dispute under Section 74A will likely turn on its own language, but a notice covering several years cannot escape those basic requirements merely because the section number has changed.

A practical checklist before the reply date expires

If you have received one GST notice covering several financial years, assemble the following before deciding whether to restrict the challenge to adjudication or consider a writ petition:

1. The complete show cause notice, not merely the DRC-01 portal summary.

2. Every annexure and relied-upon document referred to in the notice.

3. A financial-year-wise table of tax, interest and proposed penalty.

4. The due date of the annual return and limitation calculation for each year.

5. The precise paragraph alleging fraud, wilful misstatement or suppression for each year.

6. Supplier records, reconciliations, returns and transaction evidence relevant to each period.

7. DRC-01A, audit observations, summons, statements and replies already filed.

8. Any previous notice or order concerning the same tax period or subject matter.

9. Hearing notices, portal screenshots and proof of service.

10. The current law of the jurisdictional High Court, including any appeal, stay, review or Larger Bench reference.

Conclusion

A composite GST notice is not automatically valid merely because it contains a year-wise table. Nor is it automatically void everywhere merely because it covers multiple years. The present answer depends upon the jurisdictional High Court, the statutory period involved, the nature of the alleged transaction and the prejudice disclosed by the notice itself.

Where the jurisdictional High Court follows the taxpayer-favouring line—or where interim protection is presently available—the notice should be examined for a possible Article 226 challenge. Where the applicable precedent permits consolidation, the taxpayer should still test limitation, year-wise quantification, the factual foundation for Section 74 and compliance with the safeguards recognised by those very judgments.

Nazuk Singhal practises in GST and direct-tax litigation before the Punjab and Haryana High Court and other tax forums. She appears for the petitioner in the pending composite-notice challenge in Max Eco Solutions. Case-specific advice requires examination of the complete notice, annexures, limitation dates and applicable jurisdictional precedent.

Keywords: composite GST show cause notice; Section 74 GST notice; multiple-year GST SCN; GST writ petition; challenge GST notice in High Court; Section 73 composite notice; Section 74A notice; GST limitation financial year; DRC-01 multiple years; composite GST demand

Research cut-off: 21 September 2026. This article provides general legal information and does not constitute an opinion on any particular notice. Procedural status and statutory amendments should be checked on the date of advice.