One GST Show Cause Notice for Many Years? Supreme Court Steps in On Consolidated SCNs Under Sections 73/74
1. Why this issue matters now
Across the country, GST formations have begun issuing single, consolidated show cause notices (SCNs) covering a block of years – for example, FY 2017‑18 to 2021‑22 – especially in alleged bogus ITC and suppression cases under sections 73 and 74. Assessees are being called upon to answer five or six years of demands in one composite document, and orders are being passed in the same fashion.
At the same time, several High Courts – particularly the Bombay High Court (Nagpur and Aurangabad benches) – have started pushing back, quashing such notices on the ground that GST is structurally year‑wise, and each financial year is a separate assessable period with its own limitation clock. Other courts, notably the Delhi High Court in an ITC‑fraud matter, have upheld consolidated SCNs, and the Supreme Court has refused to interfere in at least one such case. This clash has now brought the validity of multi‑year SCNs to the Supreme Court’s doorstep.
2. Statutory scheme – tax period, assessment and limitation
(a) Tax period is the building block
Section 2(106) of the CGST Act defines “tax period” as the period for which the return is required to be furnished. Returns may be monthly or quarterly, but for purposes of assessment and demand, the Act repeatedly uses the financial year, read with the annual return, as the anchor.
High Courts have emphasised that, taken together, the definition of “tax period” and the annual‑return framework show that each financial year functions as a distinct unit for assessment, demand and recovery. This is the starting point of the argument against consolidated SCNs.
(b) Sections 73(10) and 74(10) – separate limitation clock for each year
Sections 73(10) and 74(10) link the time limit for passing an order to the due date for furnishing the annual return for “that” financial year. For fraud/suppression cases under section 74, the department must pass the order within five years from the due date of the annual return for the relevant year; for non‑fraud cases under section 73, the period is shorter.
The Bombay High Court (Nagpur and Aurangabad benches) has read this as a year‑wise, not block‑wise, limitation scheme. If limitation is financial‑year specific, the reasoning goes, then the underlying show cause and assessment must also be financial‑year specific. A composite SCN that merges distinct years with different limitation timelines is seen as contrary to this design.
3. High Courts against consolidated SCNs – “no clubbing” line
(a) Bombay High Court: consolidated SCNs are without jurisdiction
In M/s Hakikatrai and Sons, Akola v. Union of India, the Bombay High Court (Nagpur Bench) dealt with a section 74 SCN covering FY 2018‑19 to 2022‑23 in one composite notice. The Court held:
Each financial year is a distinct tax period.
Limitation under section 74(10) attaches independently to each such year.
Clubbing multiple financial years into a single SCN aggregates separate limitation periods and “collapses” independent causes of action.
On this basis, the SCN was quashed as impermissible under section 74, with liberty to issue fresh, year‑wise notices within limitation.
The Aurangabad Bench, in a line of cases including those involving DGGI notices, has taken the same view, stressing that consolidated SCNs undermine the taxpayer’s ability to present year‑specific defences and that the Act does not contemplate a block‑assessment model.
(b) Procedural fairness and right to appeal
These benches also anchor their reasoning in procedural fairness:
A single SCN covering five or six years mixes different factual patterns, different levels of alleged mens rea, and possibly different applicable rates or exemptions.
It becomes difficult for the assessee to respond year‑wise, and even more difficult to pursue clean, year‑specific appeals, because everything is rolled into one composite order.
Some judgments and commentaries characterise this as “judicial overreach” by the department, because it effectively rewrites a year‑wise scheme into a block‑assessment scheme without statutory backing. For these courts, the defect is not a minor technicality; it goes to jurisdiction.
4. The opposite trend – courts and SC allowing consolidation (especially in fraud cases)
(a) Delhi High Court: consolidation allowed where there is a “common thread”
In a leading decision summarised by EY and widely discussed Ambika Traders vs. Additional Commissioner, Adjudication,
DGGSTI [TS-683-HC(DEL)-2025-GST], the Delhi High Court upheld a consolidated SCN under section 74 covering FY 2017‑18 to 2021‑22 in a metal‑scrap ITC‑fraud case. The Court reasoned:
Sections 73 and 74 permit notices “for any period” or “for such periods”; they do not expressly prohibit covering multiple years in one notice.
Where there is a common modus operandi of fraud spanning several years, a consolidated SCN is permissible, provided it contains clear year‑wise break‑up of facts and demands within the same document.
The focus here is on practicality: fraudulent ITC chains usually run through multiple years, purchases may be in one year while outward supplies are in another, and slicing them strictly year‑wise may obscure the overall scheme.
(b) Supreme Court SLP dismissal: consolidation ok in ITC fraud
In M/s Mathur Polymers v. Union of India, the Delhi High Court had, inter alia, upheld consolidated orders for multiple years in an ITC‑fraud context; the Supreme Court dismissed the SLP, declining to interfere. The High Court had read sections 73/74 as allowing notices “for any period” or “for such periods”, and held that in fraudulent ITC cases involving continuing modus, consolidated proceedings can be sustained, so long as individual years are discernible and within limitation.
This order is now widely cited by the department to argue that multi‑year SCNs are valid at least in serious fraud / bogus ITC situations.
5. Bombay reference and Supreme Court – where is the law headed?
(a) Bombay High Court’s internal split and reference
The issue has generated such divergence that a Bombay High Court Division Bench has now referred the question of consolidated SCNs to a larger bench, noting that demand and recovery provisions do not explicitly bar consolidated notices, but also noting the petitioner’s argument that separate SCNs are required year‑wise.
This reference acknowledges two competing pulls:
The “strict year‑wise” reading: each financial year is a distinct tax period; limitation is year‑specific; thus, consolidation is ultra vires.
The “purposive / workable system” reading: if limitation is preserved for each year and the SCN clearly sets out year‑wise figures, the absence of an express bar means a consolidated SCN can be tolerated, particularly to handle complex, multi‑year frauds.
(b) Supreme Court’s likely task
With High Courts sharply divided, the Supreme Court is being called upon to settle at least three questions:
Bright‑line vs qualified rule
Is a consolidated SCN per se invalid under sections 73/74, irrespective of fraud or non‑fraud?
Or is it valid only in narrowly‑defined circumstances, such as continuing fraudulent ITC patterns, subject to strict safeguards (year‑wise particulars, limitation, separate findings)?
Nature of the defect
Is clubbing multiple years a jurisdictional illegality (notice void ab initio)?
Or a curable procedural irregularity where no prejudice is caused, especially if the assessee can respond year‑wise?
Balancing revenue interests and taxpayer rights
How to reconcile administrative convenience and effective fraud control with the year‑wise limitation structure and the assessee’s right to a clear, segregated case for each year?
The Supreme Court’s answer will effectively decide whether departments must completely shift to year‑wise SCNs, or whether they may continue using consolidated notices, but under a disciplined, rule‑bound framework.
6. Practical strategy for taxpayers while we wait for the final word
Until the Supreme Court pronounces, practitioners can:
Raise a jurisdictional objection where a single SCN clubs multiple financial years, especially in non‑fraud or routine 73 cases, relying on the Bombay/Karnataka/Madras/Kerala/AP line that each financial year is a distinct assessable period and limitation is year‑specific.
Emphasise prejudice and natural justice: difficulty in giving year‑wise replies, differing factual patterns, and the risk of a “one‑size‑fits‑all” order, particularly where the SCN is not carefully broken up year‑wise.
In serious ITC‑fraud allegations, be prepared for the department to rely on Mathur Polymers and the Delhi HC approach, and focus your challenge on lack of clear year‑wise particulars, limitation breaches for some years within the block, and absence of a genuinely common modus operandi.
For writing and client advisory, the key narrative is: GST is structurally year‑wise, but fraud jurisprudence is pushing courts to tolerate some consolidation where the statute is silent and fraud is continuous. The Supreme Court’s intervention will decide how far that tolerance can go.
Author Bio
