Ganesh Valmik Bawane Vs Joint Director (Bombay High Court)
Summary: The Bombay High Court partly allowed the petition challenging a show cause notice dated 25/06/2025, issued under Section 73 of the CGST Act for financial years 2019-20 to 2021-22. The notice alleged suppression of taxable value and short payment of central GST. The petitioner argued that different financial years could not be clubbed in one notice, relying on Milroc Good Earth Developers and Rite Water Solutions (India) Ltd., in which the Bombay High Court had held that the statutory scheme did not permit consolidation of tax periods in a notice under Section 74.
The respondents relied on the Delhi High Court’s decision in Mathur Polymers, which permitted a consolidated notice in a case alleging fraudulent input tax credit across several years. They submitted that the Supreme Court had declined to interfere with that decision. The Bombay High Court held that dismissal of the special leave petition in limine did not bring the doctrine of merger into play. It considered its own subsequent decisions binding on authorities within its jurisdiction. In explaining those decisions, the Court emphasised the separate annual returns, limitation periods and opportunity to respond applicable to each financial year.
The respondents also stated that the Bombay decisions had been challenged before the Supreme Court and that the clubbing issue had been referred to a Larger Bench. The Court therefore gave them liberty to revive the petition if those decisions were set aside or the Larger Bench took a different view. It quashed the notice but permitted the respondents to issue a fresh notice strictly under Section 74, if no other legal impediment existed. The petition was disposed of without an order as to costs.
Cases Discussed
- M/s. Milroc Good Earth Developers Vs. Union of India & Ors. — Writ Petition No. 2203/2025, decided on 9/10/2025; followed for the ruling against consolidating different financial years in a show cause notice.
- Rite Water Solutions (India) Ltd. Vs. Joint Commissioner, CGST & Central Excise, Nagpur and Ors. — Writ Petition No. 466/2025, decided on 28/11/2025; followed as reiterating the Bombay High Court’s position.
- M/s Mathur Polymers Vs. Union of India & Ors. — W.P.(C) 2394/2025, decided on 26/8/2025; relied on by the respondents and distinguished in favour of the Bombay High Court’s binding decisions.
- M/s. Technosys Integrated Solutions Pvt. Ltd. vs. Union of India and others — W.P. (C) No.5581/2025; cited by the respondents as a later Delhi High Court decision.
- M/s. Hakikatrai and Sons, Akola vs. Union of India and others — W.P. No.6118/2025; cited by the Court on the binding effect of its decisions within its jurisdiction.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Heard.
02] Challenge is to show cause notice dated 25/06/2025 issued by respondent no. 1, under Section 73 of The Central Goods and Services Tax Act, 2017 (for short “CGST Act”). The notice dated 25/06/2025 pertains to financial years 2019-20 to 2021-22 saying that the petitioner has, during this period, suppressed taxable value, and thereby made short payments of Central Goods and Service Tax.
03] 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. MilrocGood 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 CNR No: HCBM040121012026 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.”
04] 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.
05] 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.
06] The Counsel for respondents then opposed the contentions by saying that clubbing of notice is permissible. They 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.”
07] 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.
08] 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.
09] 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, one 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] 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.
11] Despite the aforesaid position of law, the learned Counsel for the respondents is relying upon the judgment of the Delhi High Court in the case of M/s. Technosys Integrated Solutions Pvt. Ltd. vs. Union of India and others (W.P. (C) No.5581/2025), saying that this is the latest view taken by the Delhi High Court.
12] We fail to understand as to how this judgment will be of any relevance when the law is settled on the point, that unless 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. We had taken a different view and, therefore, the authorities below i.e. the authorities working within the jurisdiction of the State of Bombay, will be bound by the law laid down by this Court. We have in the case of M/s. Hakikatrai and Sons, Akola vs. Union of India and others (W.P. No.6118/2025), reiterated the above position of law.
13] The Counsel for respondents submits that the judgments in the case of Milroc Good Earth Developers (supra) and Rite Water Solutions (India) Ltd. (supra), has been challenged before the Hon’ble Supreme Court in SLP Diary Nos. 22424/2026 & 24615/2026. She further submit thats the issue of clubbing notice has been referred to Larger Bench vide order dated 17-4-2026 in Writ Petition No. 16848/2025 (M/s. Rollmet LLP Vs. The Union of India and ors.) with connected writ petitions.
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 or if the Larger Bench takes a different view in the matter.
15] With the above liberty, and for the reasons set out in Milroc Good Earth Developers (supra) and RiteWater Solutions (India) Ltd.(supra), the petition is partly allowed. The show cause notice dated 25/06/2025 issued by respondent no. 1 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.
16] The petition is disposed of in above terms. No order as to costs.
