Facts of the Case:

In this case, the petitioner challenged a SCN issued by the tax authorities, particularly under Section 74, alleging suppression of taxable value and consequent short payment of Central GST. The impugned notice covered a composite period from Financial Year 2018-19 to 2022-23, alleging that during these years the petitioner had suppressed taxable turnover and thereby short-paid tax.

The petitioner approached the High Court contending that the notice was without jurisdiction, as it clubbed multiple financial years into a single show cause notice. According to the petitioner, the GST statutory framework requires year-wise determination of tax liability, and therefore issuance of a consolidated notice for several financial years was impermissible. In support of this contention, the petitioner relied upon the judgment of the High Court in Milroc Good Earth Developers v. Union of India, where it was held that the scheme of the CGST Act does not permit consolidation of different financial years or tax periods in a single show cause notice under Section 74. 

The tax department opposed the petition and argued that the case involved fraudulent availment of Input Tax Credit (ITC) over multiple years. According to the department, when fraudulent transactions are spread across several years, a consolidated show cause notice may be issued to demonstrate the pattern of fraud. The department relied on the decision of the Delhi High Court in Mathur Polymers v. Union of India, where the Court had held that the CGST Act does not expressly prohibit issuance of a consolidated show cause notice for multiple years in cases involving fraudulent ITC. The department further argued that the decision of the Delhi High Court had been challenged before the Supreme Court, which declined to interfere with the judgment while dismissing the Special Leave Petition, thereby implying that the legal position had attained finality.

Issue:

Whether a single consolidated show cause notice under Section 74 of the CGST Act can be issued for multiple financial years (2018-19 to 2022-23) alleging suppression of taxable value and fraudulent availment of Input Tax Credit, or whether the GST statutory scheme requires separate notices for each financial year/tax period.

Held that:

The Court noted that Sections 73(10) and 74(10) of the CGST Act prescribe a separate limitation period for each financial year, allowing the tax authorities to pass an order within five years from the due date of furnishing the annual return for that particular financial year. If a consolidated notice covering several years were permitted, it would effectively merge different tax periods with different limitation timelines, which is contrary to the statutory design. The Court relied heavily on its earlier decisions in Milroc Good Earth Developers and Rite Water Solutions, which had examined the statutory scheme of GST in detail. The Court observed that the GST framework is structured around distinct tax periods, where tax liability is determined based on returns filed for each financial year. Although returns may be filed monthly, the statutory scheme ultimately links assessment, recovery and limitation to the financial year and annual return.

The Court further referred to the definition of “tax period” under Section 2(106) of the CGST Act, which denotes the period for which returns are required to be furnished. This statutory framework indicates that each financial year constitutes a distinct tax period for assessment and recovery purposes.

Accordingly, the Court held that Section 74 does not permit consolidation of notices for multiple financial years, even in cases involving alleged fraudulent availment of Input Tax Credit. The impugned show cause was therefore quashed and set aside.

The High Court allowed the petition and quashed the show cause notice, holding that clubbing multiple financial years into a single notice under Section 74 of the CGST Act is impermissible.

Case Name: M/s. Hakikatrai and Sons, Akola Versus Union of India and Ors. dated 27.02.2026

To read the complete judgement 2026 Taxo.online 533