The Supreme Court on Thursday issued notice on a Special Leave Petition (SLP) challenging a Karnataka High Court judgment that held composite show cause notices under the Goods and Services Tax (GST) law, covering multiple financial years in a single proceeding, to be legally unsustainable.
The matter has now been tagged with a batch of connected cases, indicating that the apex court is likely to settle an issue that has generated conflicting views across High Courts.
A Bench comprising Justice K.V. Viswanathan and Justice Alok Aradhe directed issuance of notice on both the SLP and the prayer for interim relief, making the matter returnable on July 24, 2026. The Court also ordered that the petition be tagged with connected matters, suggesting that multiple appeals involving the same legal question are pending before the Court.
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The litigation arises from a GST show cause notice issued to a real estate developer under Section 74 of the Central Goods and Services Tax (CGST) Act, alleging tax, interest and penalty liabilities amounting to approximately ₹11.86 crore. The notice covered the period from FY 2019-20 to FY 2023-24, clubbing several financial years into a single adjudication proceeding.
The taxpayer challenged the notice before the Karnataka High Court, contending that the GST framework contemplates separate proceedings for each financial year and that a consolidated notice violates both the statutory scheme and principles of natural justice. Besides challenging the jurisdiction of the tax authorities, the petitioner also sought declarations relating to the GST treatment of transfer of development rights under Joint Development Agreements and the sale of completed apartments after receipt of completion certificates.
In a detailed judgment delivered on December 11, 2025, the Karnataka High Court accepted the taxpayer’s principal contention and held that the architecture of the CGST Act is fundamentally built around financial-year-specific assessments.
The High Court observed that virtually every stage of GST administration—including registration, maintenance of accounts, filing of returns, annual reconciliation, assessment, limitation and adjudication—is structured independently for each financial year. According to the Court, issuing a single notice covering multiple years collapses this statutory framework and results in a jurisdictional defect.
The Court emphasized that returns are filed separately for each tax period and annually for each financial year. Limitation periods under Sections 73 and 74 are linked to the relevant financial year. Input Tax Credit (ITC) eligibility is also determined on a year-specific basis. Different years may involve different tax rates, factual matrices, statutory amendments and legal issues, requiring independent adjudication.
According to the High Court, allowing consolidated notices would undermine statutory limitation provisions and deprive taxpayers of the opportunity to furnish year-wise explanations and defences.
The Karnataka High Court relied upon several of its earlier decisions, including Veremax Technologies Services Ltd., Bangalore Golf Club, Chimney Hills Education Society and Albatross Builders and Developers LLP, all of which had taken the view that separate show cause notices are required for each assessment year under the GST regime.
The Court also referred to decisions of the Madras High Court and Bombay High Court supporting the same interpretation while noting that contrary views had been expressed by the Delhi High Court in certain cases.
The tax authorities argued that the CGST Act contains no express prohibition against issuing a single show cause notice covering multiple financial years. They relied upon a departmental communication dated September 16, 2025, as well as judicial precedents supporting the permissibility of consolidated proceedings where transactions extend across several years.
The High Court, however, rejected these submissions, holding that the statutory scheme itself mandates separate proceedings for each financial year and that administrative convenience cannot override legislative design.
The issue has significant implications for GST administration across India. Over the past two years, tax authorities have increasingly issued composite show cause notices covering multiple assessment years, particularly in complex investigations involving real estate, ITC claims and alleged tax evasion.
At the same time, several High Courts—including Karnataka, Madras and Bombay—have held that such notices are contrary to the scheme of the GST law, whereas other courts have adopted a more permissive approach.
With the Supreme Court now issuing notice and tagging the matter with connected appeals, the Court is expected to authoritatively determine whether the GST law permits clubbing multiple financial years into a single show cause notice under Sections 73 or 74 of the CGST Act.
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