Consolidated GST Notices Referred to Larger Bench Due to Conflicting Judicial Views

Consolidated GST Show Cause Notice for Multiple Years — Bombay High Court Refers Matter to Larger Bench

Summary: The Bombay High Court in M/s Rollmet LLP & Ors v. Union of India & Ors examined writ petitions challenging consolidated show-cause notices issued under Sections 73 and 74 of the Central Goods And Services Tax Act, 2017 (“the CGST Act”) covering multiple financial years. Petitioners argued that the statutory framework mandates year-wise assessment and limitation, making such consolidated notices without jurisdiction. The Revenue contended that the Act permits notices for “any period” and that limitation applies only to passing orders, not issuance of notices. The Court noted a clear divergence of judicial opinion across High Courts and the Supreme Court’s dismissal of a Special Leave Petition supporting the view permitting consolidation. It observed that Sections 73 and 74 use broad expressions indicating that notices are not restricted to a single financial year, and that limitation under sub-section (10) applies only to orders. However, given conflicting precedents and substantial legal questions, the Court referred the matter to a Larger Bench for authoritative determination while continuing interim reliefs.

Facts:

Multiple taxpayers (“the Petitioners”) received consolidated show-cause notices under Sections 73 and/or 74 of the CGST Act, each notice clubbing tax demands across several financial years into a single instrument. The Petitioners challenged these notices by filing writ petitions before the Bombay High Court, contending that the CGST Act mandates separate, year-wise show-cause notices and that a consolidated notice for multiple financial years is without jurisdiction.

The Petitioners relied primarily on the Bombay High Court (Goa Bench) decision in Milroc Good Earth Developers v. Union of India [2026] 104 GSTL 45 (Bombay), which had struck down consolidated notices as invalid. The Revenue, on the other hand, pointed to the Delhi High Court’s contrary view in Mathur Polymers v. Union of India [2025 SCC OnLine Del 6892]and Ambika Traders v. Commissioner [(2025) 148 GSTR 1], both of which the Supreme Court declined to interfere with, the latter by a speaking order dated November 7, 2025.

Contentions of the Petitioners:

• Sections 73(10) and 74(10) of the CGST Act prescribe a year-specific limitation of 3 years and 5 years respectively, reckoned from the due date of the annual return for each financial year — thereby treating each financial year as a distinct unit of assessment; clubbing multiple years in one notice defeats this scheme.
• The definitions of “return” (Section 2(97)), “tax period” (Section 2(106)), and “assessment” (Section 2(11)) read with Section 44 (annual return) contemplate a financial-year-wise assessment framework that cannot be circumvented by a composite notice.
• A co-ordinate Bench’s decision is binding under the doctrine of stare decisis; the Milroc ruling, followed in Paras Stone Industries and Rite Water Solutions (Nagpur Bench), must be followed.
• The year-bound nature of Input Tax Credit (ITC) under Section 16(4) further reinforces the prohibition against clubbing financial years.

Contentions of the Revenue:

• The CGST Act contains no explicit prohibition against issuing a consolidated show-cause notice. Sections 73(3)/74(3) expressly use the phrase “for any period” and “for such periods”, indicating that a notice need not be confined to a single financial year.
• The limitation under sub-section (10) governs the passing of orders, not the issuance of notices. The two are independent statutory concepts; a limitation on orders cannot be imported as a restriction on notices.
• Fraudulent ITC transactions typically span multiple financial years and are interconnected; requiring separate notices for each year would render adjudication unworkable.
• The GST Policy Wing Circular dated September 16, 2025 clarifies that consolidation does not alter the year-wise limitation, which continues to be reckoned independently for each financial year.
• The Supreme Court’s speaking order dismissing the SLP against Mathur Polymers amounts to a declaration of law under Article 141 of the Constitution of India, which the Bombay High Court is bound to follow.
• The Milroc decision is per incuriam and sub-silentio as it failed to consider crucial Supreme Court precedents and the full scope of Sections 73/74.

Issues:

• Whether the operation of sub-section (1) of Section 73/74 of the CGST Act, read with sub-section (3), is in any manner controlled or restricted by sub-section (10), so as to create an embargo on the Department from issuing a consolidated show-cause notice covering multiple financial years?
• Whether sub-section (10) of Section 73/74 of the CGST Act per se prohibits the issuance of a single consolidated show-cause notice for multiple financial years/tax periods?
• Whether the decision of the Division Bench in Milroc Good Earth Developers v. Union of India — holding that a proper officer lacks authority to club various financial years/tax periods in a single consolidated show-cause notice under Section 73(1) & (3)/74(1) & (3) of the CGST Act — lays down the correct position in law?
• What is the effect of Section 160 of the CGST Act on proceedings initiated under Sections 73/74 of the CGST Act by issuance of a consolidated show-cause notice for different periods?
• In terms of Article 141 of the Constitution of India, what is the legal position as brought about by the Supreme Court’s speaking order in the case of Mathur Polymers v. Union of India?

Held:

The Hon’ble Bombay High Court in WP No. 16848 of 2025 & connected matters held as under:

• Observed that, on a plain reading of Sections 73 and 74, sub-section (1) of each provision uses the words “any tax” in a broad sense and sub-section (3) explicitly contemplates notices for “any period” and statements for “such periods other than those covered under sub-section (1)” — strongly indicating that the legislature did not intend to confine a show-cause notice to a single financial year.
• Noted that, sub-section (10) prescribes limitation for the passing of orders under sub-section (9) and not for issuance of show-cause notices under sub-section (1). The limitation on orders and the power to issue notices are independent statutory concepts; to read sub-section (10) as restricting the power under sub-section (1) would be an unwarranted judicial addition to the statute.
• Noted that, there is a clear cleavage of judicial opinion between the Bombay High Court (Goa Bench) in Milroc, the Kerala, Madras, Karnataka, and Andhra Pradesh High Courts on one side (holding consolidated notices invalid), and the Delhi and Allahabad High Courts on the other (upholding such notices). The Supreme Court’s speaking order dismissing the SLP in Mathur Polymers — finding no ground to interfere with the Delhi High Court’s view — constitutes a declaration of law under Article 141 and cannot be overlooked.
• Held that, while a co-ordinate Bench is ordinarily bound by the Milroc decision, the significant legal issues raised by the Revenue — including the effect of the Supreme Court’s Article 141 declaration in Mathur Polymers — merit examination by a Larger Bench.
• Directed that, the matters be placed before the Hon’ble Chief Justice for constitution of a Larger Bench to decide the five questions of law framed above. All interim orders passed in individual matters shall continue until the Larger Bench decides the issues.

Our Comments:

Relevant Statutory Provisions:

• Section 73 of the CGST Act deals with determination of tax not paid, short paid, erroneously refunded, or ITC wrongly availed for reasons other than fraud or wilful misstatement. Sub-section (1) empowers the proper officer to serve a show-cause notice; sub-section (2) requires the notice to be issued at least three months prior to the order-limitation under sub-section (10); sub-section (3) permits a statement for “any period” beyond that of the original notice; and sub-section (10) mandates that the final order be passed within three years from the due date of the annual return for the relevant financial year.
• Section 74 of the CGST Act mirrors Section 73 but applies to cases of fraud, wilful misstatement, or suppression of facts, with the order-limitation extended to five years under sub-section (10). The language of sub-sections (1), (3), and (4) — using “any period” and “for such periods” — is identical in structure to Section 73.
• Section 160 of the CGST Act provides that no assessment, re-assessment, adjudication, review, revision, appeal, rectification, or any other proceeding under the Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect, or omission in such proceedings if the person assessed, or intended to be assessed, was otherwise adequately informed of the substance of the notice/order.

Brief Analysis of Judicial Divergence:

The core judicial divergence may be summarised as follows:

• Pari Materia (Pro-Petitioner) View — Courts following Milroc (Bombay-Goa), Titan Company Ltd. (Madras), Tharayil Medicals (Kerala), Bangalore Golf Club (Karnataka), etc., have reasoned that: (a) each financial year is a distinct unit for limitation purposes under Sections 73(10)/74(10); (b) separate shows-cause notices are presupposed by the year-specific limitation scheme; (c) a composite notice may enable the department to smuggle in time-barred periods; and (d) the assessee may be denied the opportunity to raise year-specific defences.
• Contrary (Pro-Revenue) View — Courts following Mathur Polymers (Delhi), Ambika Traders (Delhi), and S.A. Aromatics (Allahabad) have reasoned that: (a) Section 74(3)/73(3) deliberately uses the words “any period” and “for such periods”, clearly contemplating notices covering multiple periods; (b) the limitation in sub-section (10) operates only on orders, not notices; (c) fraud and ITC mismatch investigations are inherently cross-year in nature; and (d) the legislature has consciously distinguished “period” (used in sub-sections (1), (3), (4)) from “financial year” (used only in sub-section (10)).

Practical Implications: Until the Larger Bench of the Bombay High Court renders its decision, the legal position within the Bombay High Court’s jurisdiction remains unsettled. Assessees who have already received consolidated show-cause notices should note that: (a) they may raise year-wise limitation objections before the adjudicating authority under the notice itself; (b) the proper officer is required to confine the demand only to those periods for which limitation has not expired; and (c) existing interim stays granted by the Bombay High Court will continue in force pending the Larger Bench’s decision.

It is also noteworthy that the GST Council and the CBIC, through the GST Policy Wing’s circular of September 16, 2025, have affirmed the department’s position that consolidation is a procedural mechanism that does not alter the year-wise limitation, each financial year standing independently for limitation purposes. However, this executive clarification does not override judicial scrutiny, and the Larger Bench will be the final arbiter.

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