Clubbing Multiple Financial Years in One GST Notice Unsustainable Under CGST Act: Bombay HC

Aasawa Brothers Corporate Avenue Vs Union of India (Bombay High Court)

The petitions challenged show cause–cum–demand notices issued in June 2025 by the Additional Director of the Directorate General of GST Intelligence (DGGI) under Section 74 of the Central Goods and Services Tax Act, 2017. The notices covered multiple financial years in a consolidated manner. The petitioners sought to restrain the authorities from proceeding further based on these notices. Amendments to the writ petitions were also allowed through civil applications, enabling the petitioners to challenge not only the notices but also the final adjudication orders passed in two matters pursuant to those notices.

The petitioners limited their challenge to two main grounds. First, they argued that issuing a consolidated show cause notice covering multiple financial years under Section 74 of the CGST Act is impermissible in law. According to them, the statutory framework under Sections 73 and 74 requires year-wise determination of tax liability. Section 74(10) prescribes that the proper officer must pass an order within five years from the due date for furnishing the annual return for the relevant financial year. Because the limitation period is linked to each financial year’s annual return, the petitioners contended that independent notices must be issued for each financial year. They argued that clubbing several financial years into a single notice defeats the statutory limitation structure and prejudicially affects the assessee’s rights.

In support of their submissions, the petitioners relied on several earlier decisions of the same Court, including rulings in Milroc Good Earth Developers, Marfani Steel Impex, Paras Stone Industries, Rite Water Solutions (India) Ltd., and ICAD School of Learning Pvt. Ltd. These decisions had held that consolidation of financial years in a single show cause notice under Section 74 of the CGST Act is not permissible.

The petitioners also pointed out that in two of the matters the adjudication process had already been completed and final orders had been passed based on the impugned notices. By amendment, they challenged those orders as being without jurisdiction because they were founded on consolidated notices covering multiple financial years.

The respondents opposed the petitions and argued that courts should ordinarily not interfere at the stage of a show cause notice. They contended that the petitioners should raise their defences before the adjudicating authority. In cases where final orders had already been passed, the respondents argued that an effective alternate remedy of appeal was available. The respondents relied on a previous decision of the Court in Viswaat Chemicals Ltd. and also cited judgments of the Delhi High Court in Mathur Polymers and Ambika Traders.

The Court considered the rival submissions and identified the main issue for determination as whether consolidated show cause notices under Section 74 of the CGST Act covering multiple financial years are legally sustainable.

The Court referred to its earlier judgment in Milroc Good Earth Developers, where the statutory scheme of the CGST Act had been examined in detail. That decision had held that there is no scope for issuing a single show cause notice covering multiple financial years under Section 74. The Court noted that this view had been consistently followed in subsequent decisions, including ICAD School of Learning Pvt. Ltd. and Rite Water Solutions (India) Ltd. It was also observed that the judgment in Milroc Good Earth Developers had not been stayed by the Supreme Court.

The respondents relied on the Delhi High Court’s decision in Ambika Traders, which allowed a consolidated notice covering multiple financial years in cases involving fraudulent availment of input tax credit spanning several years. The Delhi High Court had reasoned that such fraud could not always be established without connecting transactions across different financial years. However, the Bombay High Court observed that this decision had already been examined and distinguished in Milroc Good Earth Developers. In that case, the consolidated notice was permitted because the proceedings were based on a single and indivisible cause involving interlinked fraudulent transactions.

In the present matters, the Court found that the impugned notices merely clubbed multiple financial years without alleging any composite or interlinked fraudulent mechanism spanning those years. The notices did not disclose a continuous fraudulent design that required consolidation of multiple financial years for adjudication.

The Court emphasized that the statutory scheme under the CGST Act links limitation to the due date for furnishing the annual return for each financial year. Since limitation runs independently for each financial year, combining multiple years into one show cause notice effectively aggregates separate tax periods governed by different limitation timelines. Such consolidation could prejudice the assessee’s right to raise year-specific defences.

Reiterating its consistent judicial view, the Court held that a consolidated show cause notice covering multiple financial years under Section 74 of the CGST Act is not sustainable in law, unless exceptional circumstances such as a single continuous fraudulent mechanism across several years are demonstrated.

Accordingly, the Court set aside the impugned show cause notices. As a consequence, the final adjudication orders passed in two of the petitions pursuant to those notices were also quashed. However, the Court granted liberty to the authorities to issue fresh show cause notices strictly in accordance with Section 74 of the CGST Act for the respective financial years, if otherwise permissible in law.

With these directions, the writ petitions were disposed of.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. At the outset, Civil Application No.2217 of 2026 and Civil Application No.2226 of 2026 are taken up. Both the applications seek amendment to the respective writ petitions. The applications are allowed and disposed of.

2. Heard learned Counsel for the parties.

3. By the present writ petitions, the petitioners challenge the show cause–cum–demand notices dated 25/06/2025 in Writ Petition No.11644 of 2025, dated 27/06/2025 in Writ Petition Nos.12893 of 2025, 12894 of 2025, 742 of 2026, 728 of 2026 and 735 of 2026, and dated 26/06/2025 in Writ Petition No.743 of 2026. The said notices have been issued by respondent No.4 – Additional Director, DGGI, Directorate General of GST Intelligence. The petitioners seek to restrain the respondents from proceeding further pursuant to the aforesaid notices.

4. Though various grounds are raised in the petitions assailing the impugned show cause notices, learned Counsel for the petitioners has restricted his challenge to two principal submissions.

5. He submits that in the present matters, consolidated show cause notices under Section 74 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) have been issued covering multiple financial years. According to him, such consolidation of financial years in a single notice is impermissible in law and has been consistently disapproved by this Court.

6. In support of this contention, reliance is placed upon the following decisions of this Court:

• M/s Milroc Good Earth Developers v. Union of India (2025-TIOL-1697-HC-MUM-GST);
• M/s Marfani Steel Impex v. Principal Commissioner, CGST and Central Excise, Nagpur (Writ Petition No.180 of 2026, decided on 17/01/2026);
• M/s Paras Stone Industries v. Union of India reported in 2026 (1) TMI 839;
• Rite Water Solutions (India) Ltd. v. Joint Commissioner, CGST and Central Excise, Nagpur reported in 2025 (11) TMI 1939; and
• ICAD School of Learning Pvt. Ltd. v. Union of India (Writ Petition No.736 of 2026, decided on 06/02/2026).

7. It is further submitted that in Writ Petition Nos.742 of 2026 and 743 of 2026, pursuant to the impugned notices, adjudication has already been completed and orders have been passed. By way of amendment, the petitioners have also challenged the said orders on the ground that they are without jurisdiction, being founded on consolidated notices covering multiple financial years.

8. Learned Counsel for the petitioners submits that under Section 74(2) (3) sub-Section (10) of the CGST Act, the proper officer is required to issue the order within a period of five years from the due date for furnishing the annual return for the financial year to which the tax not paid, short paid, or input tax credit wrongly availed or utilised relates. He submits that the statutory scheme clearly contemplates determination year-wise, linked to the “financial year” and the corresponding “annual return”.

9. According to him, independent notices are required to be issued for each financial year. Clubbing multiple financial years in a single show cause notice defeats the limitation structure under Sections 73 and 74 of the CGST Act and prejudicially affects the rights of the assessee. Therefore, the impugned consolidated notices, as well as consequential orders, are liable to be quashed.

10. Learned Counsel further submits that this Court has, in a catena of judgments, consistently held that consolidation of financial years in a single notice under Section 74 is impermissible. It is urged that judicial discipline and consistency require that the same view be followed in the present matters.

11. In M/s Milroc Good Earth Developers v. Union of India (Supra) this Court, after analysing the statutory scheme, held that there is no scope for consolidating various financial years/tax periods while issuing a show cause notice under Section 74 of the CGST Act. In paragraph 23 thereof, this Court observed that the facts before the Delhi High Court were distinct and related to fraudulent availment of input tax credit across subsequent years, which were materially different from the facts under consideration.

12. Similar view is taken in case of ICAD School of Learning Pvt. Ltd. v. Union of India (Supra) this Court, following Milroc Good Earth Developers and Rite Water Solutions.

13. Per contra, learned Counsel for the respondent–Union of India submits that ordinarily this Court should not entertain a challenge to a show cause notice and that the petitioners ought to raise all their defences before the adjudicating authority. It is further submitted that in two of the petitions, adjudication has already culminated in orders, against which a statutory appeal is available. Hence, an efficacious alternate remedy exists.

14. Reliance is placed upon the decision of this Court in Viswaat Chemicals Ltd. v. Union of India (Writ Petition (L) No.27725 of 2025, decided on 14/10/2024).

The learned Counsel for the respondents also relies upon the judgments of the Delhi High Court in:

• M/s Mathur Polymers v. Union of India (W.P.(C) 2394/2025, decided on 26/08/2025); an
• Ambika Traders v. Additional Commissioner, DGGSTI (W.P.(C) 4853/2025),

15. Thus, the principal issue that arises for consideration is whether the issuance of consolidated show cause notices under Section 74 of the Central Goods and Services Tax Act, 2017 covering multiple financial years is sustainable in law, in light of the binding precedents of this Court.

16. This Court has considered the rival submissions advanced by the learned Counsel for the respective parties. It is to be noted that this Court, in M/s Milroc Good Earth Developers v. Union of India (Supra) has comprehensively dealt with the issue as to whether a consolidated show cause notice covering multiple financial years can be issued under Section 74 of the CGST Act. This Court in M/s Milroc Good Earth Developers (Supra) has held that a single consolidated show cause notice covering multiple financial years cannot be issued under Section 74 of CGST Act. The said view has been consistently followed in subsequent judgments of this Court, including ICAD School of Learning Pvt. Ltd. v. Union of India and Rite Water Solutions (India) Ltd. v. Joint Commissioner, CGST and Central Excise, Nagpur. It is not brought to our notice that the judgment in Milroc Good Earth Developers (Supra) has been stayed by the Hon’ble Supreme Court.

17. The learned Counsel for the respondent has placed reliance upon the judgment of the Delhi High Court in Ambika Traders v. Additional Commissioner, DGGSTI (supra). However, the said decision in Ambika Traders (supra) has also been considered by this Court in Milroc Good Earth Developers (supra). This Court has specifically referred to and discussed paragraph No. 46 of Ambika Traders (supra), as reproduced below :

“46. The nature of ITC is such that fraudulent utilization and availment of the same cannot be established on most occasions without connecting transactions over different financial years. The purchase could be shown in one financial year and the supply may be shown in the next financial year. It is only when either are found to be fabricated or the firms are found to be fake that the maze of transactions can be analysed and established as being fraudulent or bogus.”

18. The Delhi High Court, thus, held that in cases involving allegations of fraudulent availment of ITC spanning several years, a consolidated notice may be permissible, as the pattern of fraud may not be capable of being established in isolation for each financial year. Thus, in Milroc Good Earth Developers (supra), this Court distinguished the judgment of the Delhi High Court in Ambika Traders (supra) on the ground that, in the facts of that case, there existed a common and indivisible cause forming the whole sole basis of the proceedings, and it was not possible to establish the same without clubbing the notices pertaining to different financial years. The Delhi High Court permitted the issuance of a consolidated show cause notice covering multiple financial years.

19. However, the facts of the present cases stand on a different footing. The impugned notices club together multiple financial years without alleging a composite or interlinked fraudulent mechanism spanning across the said years. The notices do not indicate a single, continuous fraudulent design that necessitates consolidation of different financial years for effective adjudication.

20. The statutory scheme under the CGST Act makes the limitation for determination of tax dependent upon the due date for furnishing the annual return for the respective financial year to which the demand relates. The limitation, therefore, runs independently for each financial year. Clubbing multiple financial years in a single show cause notice has the effect of aggregating distinct tax periods governed by separate limitation timelines, which may prejudice the assessee’s right to raise year-specific defences.

21. This Court has consistently taken the view that a single show cause notice covering multiple financial years, in the absence of exceptional circumstances for relating to fraud that may be practiced over multiple financial years warranting such consolidation, is not sustainable in law. Judicial discipline and consistency require that we follow the binding precedents of this Court.

22. In view of the aforesaid, the impugned show cause notices are set aside. Consequently, the final orders passed pursuant thereto in Writ Petition No. 742 of 2026 and Writ Petition No. 743 of 2026 are also quashed and set aside.

23. However, liberty is granted to the respondents to issue fresh notices strictly in accordance with Section 74 of the Central Goods and Services Tax Act, 2017, for the respective financial years, if otherwise permissible in law.

24. With the above observations and directions, all the Writ Petitions stand disposed of.