Case Law Details
Rite Water Solutions (India) Ltd. Vs Joint Commissioner (Bombay High Court)
The petition challenged a show cause notice issued under Section 74 of the Central Goods and Services Tax Act, 2017, on the ground that the tax authorities had impermissibly clubbed multiple tax periods into a single notice. The respondent authority issued a notice dated 4 August 2024 demanding recovery of ₹2,12,16,300 by invoking Section 74 read with Section 9 of the CGST Act and Section 20 of the Integrated Goods and Services Tax Act, 2017. The notice covered a consolidated tax period from July 2017 to March 2022.
The petitioner argued that such consolidation of notices across several financial years was not permissible under the statutory scheme of the CGST Act. Reliance was placed on a Division Bench judgment of the Goa Bench of the Court in Milroc Good Earth Developers, which examined the structure of assessment, return filing, limitation, and recovery provisions under the CGST Act. That judgment emphasized that GST liability is determined with reference to specific tax periods, whether monthly or annual, and that Sections 73 and 74 prescribe strict time limits linked to the relevant financial year. The Court in that case held that the Act does not permit consolidation of multiple financial years or tax periods into a single show cause notice, as each assessment must correspond to a defined tax period and be subject to its own limitation framework.
The Division Bench reasoning noted that the CGST Act envisages tax determination on the basis of returns filed for each tax period, and where assessment is linked to annual returns, the relevant unit is the financial year. It further observed that Section 74(10) prescribes a five-year limitation from the due date of furnishing the annual return for the relevant financial year, reinforcing that demands and recovery proceedings must be year-specific. On this statutory interpretation, the Court concluded that there is no scope under the Act for issuing composite show cause notices spanning multiple financial years.
In response, the counsel for the tax authorities relied on a communication dated 15 September 2025 issued by the Under Secretary to the Government of India, which suggested that composite show cause notices for multiple financial years were legally permissible. The Court, however, found that this executive communication ran contrary to the statutory provisions as interpreted by the Division Bench in the earlier judgment. Consequently, the communication could not override or dilute the scheme of the CGST Act and was of no assistance to the respondents.
Applying the settled legal position, the Court observed that the impugned notice in the present case admittedly consolidated demands for five years into a single show cause notice under Section 74. Such consolidation was inconsistent with the statutory framework and the binding judicial interpretation governing assessment and limitation under the CGST Act. As a result, the Court held that the notice was unsustainable in law.
The petition was therefore allowed. The show cause notice dated 4 August 2024, bearing the specified DIN and SCN number and issued by the Joint Commissioner under Section 74 of the CGST Act, was quashed and set aside. However, the Court clarified that the respondents were at liberty to re-issue fresh notices strictly in accordance with Section 74 of the CGST Act, 2017, provided there was no other legal impediment. With these directions, the petition was disposed of.
FULL TEXT OF THE ORDER OF ITAT DELHI
Challenge is to clubbing notices issued under Section 74 of The Central Goods and Services Tax Act, 2017 (for short “CGST Act, 2017”). The Counsel for the petitioner submits that respondent no.1 has issued notice dated 4/8/2024 calling upon the petitioner to show cause as to why tax amount of Rs.2,12,16,300/-should not be demanded and recovered from them under Section 74 read with Section 9 of CGST Act, 2017, and Section 20 of The Integrated Goods and Services Tax Act, 2017. The notice issued covers tax period from July – 2017 to March – 2022.
2] The argument is that such clubbing of notices is not permissible. In support, the Counsel has relied upon the judgment of a 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 various provisions of the CGST Act, 2017, 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 subsection (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 sub-section (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.”
3] As could be seen, the Division Bench has in categorical terms held that there is no scope for consolidating various financial years/tax period while issuing show cause notice under Section 74 of the CGST Act, 2017.
4] The Counsel for respondent nos. 1 and 2 has invited our attention to a communication dated 15/9/2025 issued by the Under Secretary to the Government of India in favour of Principal Chief Commissioners/Commissioners of CGST Zones indicating that composite show cause notice for multiple financial years are legally permissible.
5] This communication apparently runs contrary to the provisions of the CGST Act, 2017, as discussed by the Division Bench in the aforesaid judgment and, therefore, will be of no help to the respondents.
6] Accordingly, and since notice hereunder is admittedly issued consolidating five years, the same will have to be set aside. Hence, following order is passed :
ORDER
I] The petition is allowed in terms of prayer Clause (a), which reads as under :
“a. Quash and Set Aside impugned show cause notice dated 4/8/2024 having DIN – 20240866vk000061826d & SCN No. 181/GRP-06/JC/2024-25 issued by Respondent No.1 i.e. Joint Commissioner, CGST & Central Excise, Audit Division, Civil Lines, Nagpur under section 74 of the Central Goods and Service Act, 2017”
II] The respondents, however, are at liberty to re-issue notice strictly in terms of Section 74 of the CGST Act, 2017, if there is no other legal impediment.
III] The petition is disposed of in above terms.
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