The Hon’ble Madras High Court in the case of R A and Co v. The Additional Commissioner of Central Taxes, South Commissionerate [W.P. No. 17239 of 2025 dated July 21, 2025] held that issuance of a single show cause notice and passing of a composite assessment order covering more than one financial year is impermissible under the GST Act, and such action renders the proceedings void ab initio.
Facts:
R A and Co (“the Petitioner”) challenged the issuance of a single show cause notice and the consequent assessment order covering six financial years i.e., 2017–18 to 2022–23 issued by the Additional Commissioner of Central Taxes, South Commissionerate (“the Respondent”).
The Petitioner contended that, Sections 73 and 74 of the GST Act require issuance of separate show cause notices for each financial year, and “bunching” of years is contrary to the statutory scheme.
The notice was issued at the fag end of the limitation period for 2017–18, forcing the Petitioner to submit replies for all years within a constrained timeframe, thereby impeding their ability to collect supporting evidence.
Such bunching also imposes undue hardship, including difficulties in availing amnesty schemes selectively or settling disputes year-wise.
The Respondent contended that, the phrase “any period” under Sections 73 and 74 allows issuance of a notice for a block of years. “Tax period” under Section 73(4) and 74(4) includes both monthly and annual periods; hence, clubbing of multiple financial years is permissible.
According to the Respondents, accepting the Petitioner’s argument would compel issuance of 12 separate notices for each month in a financial year, leading to administrative inconvenience.
Issue:
Whether the Respondent can pass a single assessment order for more than one financial year under Sections 73 and 74 of the GST Act?
Held:
The Hon’ble Madras High Court in W.P. No. 17239 of 2025 held as under:
- Observed that, Section 73(3)/ 74(3) permits issuance of a statement for “such periods other than those covered under sub-section (1)”. Thus, a notice must first be issued for a specific tax period.
- Noted that, such a notice must be issued based on monthly or annual returns for a relevant financial year and cannot exceed that financial year.
- Held that, bunching of multiple financial years into one notice frustrates the scheme of limitation under Sections 73 and 74 and prevents effective year-wise rebuttal by the assessee.
- Noted that, the limitation period applies distinctly to each financial year and cannot be treated as continuous or overlapping.
- Further noted that, the term “any period” in Sections 73(1)/(3) and 74(1)/ (3) must be interpreted in conjunction with “tax period” as defined in Section 2(106).
- Held that, a composite show cause notice and demand without year-wise adjudication amounts to jurisdictional overreach and renders the order void ab initio. Therefore, the impugned order was held to be passed in contravention of statutory provisions including Section 74(10) and Section 136 of the GST Act.
Our Comments:
In Titan Company Ltd. v. Joint Commissioner of GST & Central Excise [(2024) 15 Centax 118 (Mad.)], the Madras High Court squarely held that issuing bunched notices for five financial years under Section 73 is contrary to Section 73(10), which prescribes a separate three-year limitation period for each assessment year. It was observed that “by issuing bunching of show cause notices, the respondents are trying to do certain things indirectly which they are not permitted to do directly and the same is not permissible in law.” The Court held that limitation must be applied separately for every year and cannot be clubbed, and found “fault in the process of issuing of bunching of show cause notices” which was accordingly quashed. This reasoning also draws support from the Constitution Bench judgment of the Hon’ble Supreme Court in the case of State of J&K v. Caltex (India) Ltd. [AIR 1966 SC 1350], which recognized that each assessment year could “be easily split up and dissected and the items can be separated and taxed for different periods.”
The Hon’ble High Court of Karnataka in the case of M/s Veremax Technologie Services Limited vs. The Assistant Commissioner of Central Tax, Div-4, GST Commissionerate, Bengaluru [2024-VIL-1028-KAR] quashed the consolidated SCN issued for four financial years (2017-18 to 2020-21) under Section 73 of the CGST Act, as it was contrary to the section 73(10) of the GST Act and directed to issue separate SCNs for each assessment year in compliance with Section 73 of the CGST Act.
Therefore, each financial year is to be treated as a distinct “tax period” for the purposes of issuance of notices and passing of assessment orders under GST. The Court’s interpretation aligns with the statutory framework of Sections 73 and 74, which establish specific limitation periods per financial year. Importantly, the Court has clarified that the phrase “any period” does not authorize issuance of consolidated SCN for multiple years, and any such clubbing frustrates both limitation period and procedural fairness under the GST law.
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