Even Fraud Allegations Don’t Justify Clubbing of GST SCN Of Multiple Years: Bombay High Court

The Bombay High Court has held that even fraud allegations do not justify clubbing of GST show cause notice for multiple years. The bench of Justice Anil L. Pansare and Justice Nivedita P. Mehta has observed that 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. 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. The dispute arose from a show cause notice dated September 28, 2025, issued by GST authorities alleging that the petitioner had suppressed taxable value and short-paid tax over an extended period covering Financial Years 2018–19 to 2022–23. The notice was issued under Section 74 of the Central Goods and Services Tax Act, 2017, a provision typically invoked in cases involving fraud, wilful misstatement, or suppression of facts, and which allows a longer limitation period of up to five years. The petitioner challenged the notice primarily on jurisdictional grounds, arguing that the GST law does not permit the issuance of a single, consolidated show cause notice for multiple financial years. It was contended that each financial year constitutes a separate tax period under the statutory framework, and therefore must be assessed independently. The petitioner relied on earlier rulings of the Bombay High Court, particularly Milroc Good Earth Developers v. Union of India and Rite Water Solutions (India) Ltd. v. Joint Commissioner, which had categorically held that such clubbing of tax periods is impermissible. On the other hand, the tax department defended its action by arguing that the case involved alleged fraudulent availment of input tax credit spread across several years, and therefore a consolidated notice was necessary to capture the entire modus operandi. Reliance was also placed on the judgment of the Delhi High Court in Mathur Polymers v. Union of India, where consolidated notices in cases of fraud were held to be permissible. The Court undertook a detailed examination of the scheme of the CGST Act and reaffirmed that the statute is fundamentally structured around distinct tax periods. It noted that GST liability is linked to returns filed for each tax period, and even though returns may be filed monthly, the statutory framework ultimately ties assessment and recovery to the financial year through annual returns. The Bench emphasized that Sections 73 and 74 of the Act prescribe specific timelines for issuance of orders, which are calculated separately for each financial year based on the due date of the annual return. This limitation framework, the Court observed, would be rendered unworkable if multiple years were consolidated into a single notice, as each year carries different timelines and statutory consequences. Further, the Court highlighted that the definition of “tax period” under the Act reinforces the concept of separateness. Each period—whether monthly or annual—is treated as an independent unit for assessment, compliance, and enforcement. Allowing consolidation would effectively collapse these distinct units into one proceeding, which is contrary to the legislative scheme. Addressing the argument based on fraud, the Court made it clear that Section 74 merely extends the limitation period in such cases but does not alter the procedural requirement of issuing year-wise notices. The statute, the Court noted, does not carve out any exception permitting consolidation of financial years even where serious allegations like fraudulent ITC availment are involved. The Bench also dealt with the reliance placed on the Delhi High Court’s ruling in Mathur Polymers. While acknowledging that the Supreme Court had declined to interfere with that judgment, the Court clarified that such dismissal was not on merits and therefore does not create a binding precedent. Moreover, since the Bombay High Court had already taken a contrary view in earlier decisions, those rulings would continue to bind authorities within its jurisdiction. The Court quashed the impugned show cause notice and allowed the petition. However, it granted liberty to the tax authorities to issue fresh notices in accordance with law, strictly adhering to the requirement of separate proceedings for each financial year. Case Details Case Title: Supreme Bituchem India Pvt. Ltd. Nagpur vs. The Commissioner Citation: JURISHOUR-451-HC-2026(BOM) Case No.: Writ Petition No. 8184/2025 Date: 13/03/2026 Counsel For Petitioner: Shaad Mirza, Advocate Counsel For Respondent: K. K. Nalamwar, Advocate Click Here To Read Order Read More: Aborted IPO Expenses Allowable as Revenue, Forex Losses Not Speculative: ITAT

Even Fraud Allegations Don’t Justify Clubbing of GST SCN Of Multiple Years: Bombay High Court

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