Despite allowing single SCN under GST for multiple years, High Court of Karnataka affirms that it cannot be used as a means to beat limitation as specified in Section 73 (10) and 74(10)
Recently, the Hon’ble High Court of Karnataka in the case of The Commissioner of Central Tax & Ors. v. M/s. Chimney Hills Education Society (2026 (5) TMI 125 – HC – GST) took up on the question as to whether a show cause notice under Section 73 and 74 of CGST Act, 2017 for multiple financial years is permissible or not.
The said Writ Appeal was filed against the Single Bench judgement of the Karnataka High Court in an earlier Writ Petition filed by the M/s. Chimney Hills Education Society.
Background of the case
M/s. Chimney Hills Education originally filed a writ petition in the High Court of Karnataka challenging Show Cause Notice issued by the Revenue for the period 2017-2023, on the ground that the issuance of one show cause notice for a consolidated period contravenes the provisions of CGST Act.
The Hon’ble High Court allowed the Writ Petition in favour of the Petitioner on the ground that Section 73(10) of the Act mandates a specific time limit from the due date for furnishing the annual return for the financial year to which the due relates. The High Court placed reliance on the judgement of Madras High Court in the case of M/s. Titan Company Ltd. v. Joint Commissioner of GST[1] wherein the same issue was decided in favour of the taxpayer.
The High Court also relied upon the judgment of the Hon’ble Supreme Court in the case of State of Jammu and Kashmir and Others v. Caltex (India) Ltd.[2], wherein it was held that where an assessment encompasses different assessment years, each assessment order can be distinctly separated and must be treated independently.
The Revenue, under Section 4 of the Karnataka High Court Act filed an Appeal against the order passed by the Single Judge.
Issue Involved
Whether it would be permissible to issue consolidated/common show cause notice under Sections 73 and 74 of the Act covering multiple financial years or multiple tax periods?
Arguments by the Revenue
The Revenue argued that Sections 73 and 74 of the Act uses the word “any period” and when the legislature has used consciously the expression “any period”, it would be impermissible to confine it to only a single financial year.
With regard to Sub-Section (10) of Sections 73 and 74 of the Act, Revenue stated that the said sub-sections are intended to protect the interest of the taxpayer by prescribing limitation and cannot be read as financial year specific to the proceedings under Section 73 and 74 of the Act.
Judgements relied upon by the Revenue –
- MATHUR POLIMERS VS. UNION OF INDIA[3]
- AMBIKA TRADERS VS. COMMISSIONER[4]
- M/s. SA AROMATICS PVT. LTD., AND ANOTHER VS. UNION OF INDIA AND OTHERS[5]
- New Gee Enn & Sons vs. Union of India[6]
Arguments by the Respondent
The Respondent argued that schemes framed under Section 2(11), 44, 62, 34 of the Act and Rule 56 are financial year specific and any default attracts consequences under Section 73 and the 74 of the Act.
The Respondent further argued that when the provisions governing filing of returns and assessment, whether self-assessment or provisional assessment, are structured with reference to the financial year, the consequential proceedings under Sections 73/74 must also be with reference to the financial year.
The Respondent also pointed out that when the show cause notice format in DRC-01 indicates and confines the period to a financial year, issuance of show cause notice for multiple financial years is impermissible.
One major concerned raised by the Respondent was that when common show cause notice is issued consolidating various financial years, show cause notice for some financial years may not be maintainable or be barred by limitation.
The Respondent also contended that in view of the deeming fiction under sub-section (10) of Section 75, proceedings are deemed to be concluded if not adjudicated within the time prescribed under sub-section (10) of Sections 73 and 74.
Reference was also placed on 53rd meeting of the GST Council dated 22.06.2024 that introduced Section 74A of the Act to highlight that the intention of the legislature was for proceeding to pertain for a particular financial year.
Judgements relied upon by the Respondent –
- Titan Company Ltd. vs. Joint Commissioner of GST & Central Excise[7]
- Rite Water Solutions vs. Joint commissioner[8]
- ICAD School of Learning vs. Union of India[9]
- M/s. Hakikatrai and Sons, Akola vs. Union of India[10]
- Instakart Services Private Limited vs. The Additional Commissioner[11]
Findings of the Court
The High Court analyzed compliances contemplated under GST which are structured with reference to each calendar month and went on to hold in favour of Revenue that determination under Section 73 and 74 does not have a reference to a financial year.
As per the High Court, if the default pertains to a monthly return, proceedings may relate to that month and if default pertains to annual return, the proceedings may relate to the said period.
Further, the High Court interpreted Section 65 of the Act wherein tax authorities have the power to undertake audit of any registered person. As per the High Court, the audit under Section 65 is not confined to a tax period or a financial year; rather, it may extend to such period as the Commissioner of the authorized officer deems fit.
The High Court held that a plain reading of Section 65(7) with Section 73 and 74 showed that there was no intention to confine the proceedings to a particular financial year. Similar view was taken by the High Court with respect to Special Audit under Section 66 and with respect to inspection, search, seizure and arrest under Section 67 when both the provisions were read with Section 73 and 74.
The High Court noted that when proceedings are not intended to be confined to a financial year, then the statue uses the expression “such period” or does not refer to any period at all.
With respect to Section 73 and 74, the High Court held that these provisions consciously employ the expression “any period” while providing for issuance of notice and therefore cannot be said to be in respect to a financial year.
With regard to limitation prescribed with reference to a financial year in Section 73(10) and 74(10), the High Court held that the provision of limitation under sub-section (10) operates within a limited sphere and does not control or restrict the scope of issuance of notice under Sections 73 and 74.
Further, the High Court observed that the use of “such periods” in sub-section 3 of Section 73 and 74 establishes that the legislative intent was to not confine the proceedings strictly to a financial year.
With regard to the Respondent’s contention that the format of Form-GST DRC-01 refers to tax period and financial year, the Court held that even though column No.4 in DRC-01 refers to the tax period, note appended to the form clarifies that column No.4 is not mandatory. As per the Court, the reference to tax period in Form-GST DRC-01 is for computation of limitation under Sub-Section 10 of Section 73 and 74.
With respect to the shifting of pecuniary jurisdiction to an officer of a higher rank due to combining more than one financial year, the Court noted that it is a settled position of law that an assessee has no right to choose the Adjudicating Authority and shifting of pecuniary jurisdiction is not causing any prejudice to the assessee.
Further, with regard to Sub-Section (10) the court held that it operates with reference to the financial year, and each component period covered in the show cause notice must independently satisfy the test of limitation prescribed therein.
It was also affirmed by the court that issuance of a consolidated show cause notice would not dilute or take away the protection of limitation available under Sub-Section (10) of Section 73 and 74.
Conclusion and Opinion of the Author
The High Court relied upon the principle that a tax statue must be construed strictly and since the statue does not explicitly bar a single SCN for multiple financial years, the High Court took a more flexible approach in favour of the Revenue by allowing the same.
The major concern for a taxpayer in case of multiple years SCN is to lose the benefit of limitation as per Sub-Section (10) of Section 73 and 74. There have also been cases where a SCN for multiple years have been used to incorporate even those financial years that are beyond the period of limitation specified in Sub-Section (10). In this regard, the High Court clearly noted that limitation under Sub-Section (10) will have to be assessed for each financial year separately in case of a single SCN for multiple years.
The author believes that this balanced approach has allowed some liberty to the Department during the issuance of SCN and at the same time ensured that the purpose of limitation doesn’t get defeated in the process.
Despite this judgment, there continues to be other judgements from various High Courts wherein issuance of a single SCN for multiple years have been disallowed. This judgement from the Karnataka High Court went into an extensive analysis of the GST provisions and might become a pathway for future matters on this issue.
Notes:
[1] (W.P.No.33164 of 2023)
[2] (AIR 1966 SC 1350)
[3] (2026) 154 GSTR 443
[4] (2025) 33 Centax 189 (Del)
[5] Writ Tax.No.7515/2025 dated 20.01.2026
[6] 2025 SCC Online J&K 1180
[7] [2024] 159 taxmann.com 162 (Madras) [18-12-2023].
[8] W.P.No.466 of 2025 (Bombay High Court)
[9] W.P.No.736/2026 (Bombay High Court)
[10] 2026 (3) TMI 248
[11] W.P. No. 31551 of 2025
Author Bio
