Case Law Details
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.
The respondents opposed the petition and relied on a judgment of the Delhi High Court in Mathur Polymers v. Union of India, where it was held that in cases involving allegations of fraudulent availment of Input Tax Credit spread over several years, a consolidated show cause notice may be permissible and that the statutory provisions do not expressly prohibit issuance of notices covering multiple years. The respondents also pointed out that the Supreme Court had declined to interfere with the Delhi High Court judgment in a Special Leave Petition.
The Bombay High Court observed that the dismissal of the Special Leave Petition by the Supreme Court was in limine and not on merits. Therefore, the doctrine of merger would not apply. The Court further held that the reasoning adopted in its own earlier decisions remained binding. It noted that several aspects, including the annual nature of GST assessment, separate limitation periods for each financial year, and the statutory structure governing assessment and recovery, had been specifically considered in Milroc Good Earth Developers and Rite Water Solutions, whereas those aspects were not considered in the Delhi High Court judgment.
The Court also observed that although the respondents indicated that proposals were under consideration to challenge the Bombay High Court decisions before the Supreme Court, those judgments had neither been stayed nor overruled. Consequently, the authorities remained bound by the law laid down in those decisions.
Relying on its earlier judgments, the Court held that consolidation of various financial years and tax periods in a single show cause notice under Section 74 was not permissible. Accordingly, the impugned show cause notice dated 25.09.2023 was quashed and set aside. However, the Court granted liberty to the respondents to issue fresh notices strictly in accordance with Section 74 of the CGST Act, subject to there being no other legal impediment. The petition was partly allowed and disposed of without any order as to costs.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
Heard.
2] Challenge is to the show cause notice dated 25/09/2023 issued under Section 74 of The Central Goods and Services Tax Act, 2017 (for short “CGST Act”) by respondent no.3 – Assistant Director, DGGI, Nagpur. The notice issued pertains from July – 2017 to March – 2024, saying that the petitioner has, during this period, suppressed taxable value, and thereby made short payments of Central Goods and Service Tax.
3] 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 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.”
4] 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.
5] 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.
6] The Counsel for 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.”
7] The Counsel for 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.
8] 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.
9] 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.
10] 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.
11] 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.
12] The Counsel for 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.
13] 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.
14] 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 show cause notice dated 25/09/2023 issued by respondent no.3 is 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.
15] The petition is disposed of in above terms. No order as to costs.
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