GST Act Does Not Prima Facie Prohibit Consolidated Show-Cause Notices For Multiple Years: Bombay HC Refers Issue To Larger Bench

"A limitation to pass any order cannot be a limitation on issuance of a show cause notice. The two are independent statutory concepts." Bombay High Court, in a significant ruling, held that the Central Goods and Services Tax (CGST) Act does not prima facie prohibit the issuance of a single, consolidated show-cause notice covering multiple financial years. While dealing with a batch of writ petitions challenging composite notices issued under Sections 73 and 74 of the CGST Act, a division bench of Justice G.S. Kulkarni and Justice Aarti Sathe expressed disagreement with an earlier coordinate bench ruling and referred the matter to a Larger Bench to resolve conflicting judicial opinions.

The petitioners approached the High Court challenging consolidated show-cause notices issued by the GST Department that clubbed together multiple financial years. They relied on a prior coordinate bench decision of the Bombay High Court in Milroc Good Earth Developers, which held that composite notices were without jurisdiction as the CGST Act contemplates year-wise limitation and assessment. Conversely, the Revenue Department argued that consolidated notices are valid, relying on decisions from the Delhi and Allahabad High Courts, as well as a Supreme Court order dismissing an appeal against the Delhi High Court's view.

The primary question before the court was whether the limitation prescribed for passing an order under sub-section (10) of Sections 73 and 74 of the CGST Act restricts the proper officer from issuing a consolidated show-cause notice for multiple financial years under sub-section (1). The court was also called upon to determine if the prior coordinate bench decision in Milroc laid down the correct position of law in light of emerging Supreme Court jurisprudence.

Plain Language Permits Clubbing Of Periods A

nalyzing the statutory framework, the court observed that Sections 73 and 74 form a complete code for demand and recovery. The bench noted that sub-section (3) of these provisions expressly uses the words "for any period" and "such periods other than those covered under sub-section (1)." The court held that the legislature was fully conscious of allowing notices for different periods, and restricting this power would amount to rewriting the statute.

"To read the provision in the manner the petitioners would suggest... would amount to reading something in the provisions which the legislature has avoided to provide," the court observed.

Limitation For Orders Does Not Restrict Show-Cause Notices

Addressing the petitioners' argument that the three-year and five-year limitation periods in sub-section (10) prohibit composite notices, the court drew a sharp distinction between notices and final orders. The bench clarified that sub-section (10) only dictates the timeline for passing an order under sub-section (9) and does not create an embargo on the proper officer's jurisdiction to issue a single notice clubbing different periods. The court emphasised that the limitation to pass an order and the issuance of a notice are independent statutory concepts.

Coordinate Bench Decision In 'Milroc' Doubted

The court expressed grave doubts about the correctness of the coordinate bench’s ruling in Milroc, which had previously invalidated consolidated notices. The bench noted that Milroc was primarily guided by decisions of the Madras and Kerala High Courts, which applied principles of strict interpretation that may not fit the adjudication machinery under the CGST Act. The court observed that these prior decisions failed to consider the distinct nature of the machinery provisions within Chapter XV of the Act.

"To consider a bar under sub-section (1) to issue a consolidated show cause notice... would amount to an incorrect reading of sub-section (1), imposing an unwarranted restriction to the operation and legislative intent."

Supreme Court's Speaking Order In 'Mathur Polymers' Is Binding

The bench placed heavy reliance on the Delhi High Court's decision in Mathur Polymers, which upheld the validity of consolidated notices based on the "maze of transactions" involved in GST fraud. Crucially, the court noted that the Supreme Court had dismissed a Special Leave Petition against Mathur Polymers via a speaking order. Citing the Supreme Court's ruling in Kunhayammed, the bench indicated that this constituted a binding declaration of law under Article 141 of the Constitution.

Noticees Retain Right To Plead Limitation For Specific Years

To alleviate fears of the department circumventing time bars, the court referenced a September 2025 clarification by the GST Policy Wing. The clarification confirmed that a consolidated notice does not extend the limitation period for any individual year. The bench affirmed that noticees are always entitled to raise objections regarding time-barred demands, and the proper officer is bound to confine the tax determination only to the periods that fall strictly within the legal limitation.

Five Questions Of Law Referred To Larger Bench

Given the cleavage of judicial opinion across various High Courts and its direct disagreement with the Milroc judgment, the Division Bench framed five substantial questions of law. These include whether Section 73/74(10) prohibits consolidated notices, the effect of Section 160 of the CGST Act on such notices, and the binding nature of the Supreme Court's order in Mathur Polymers. The registry was directed to place the matter before the Chief Justice for the constitution of a Larger Bench.

The High Court referred the matter to a Larger Bench to decisively settle whether the GST Department has the jurisdictional authority to issue consolidated show-cause notices for multiple financial years. Pending the Larger Bench's constitution and decision, the court directed that all interim orders previously granted in the batch of petitions shall continue to operate.

Date of Decision: 17 April 2026