Division Bench rules that Sections 73 and 74 of CGST Act, 2017 permit issuance of common show cause notices for multiple years, overruling earlier Single Judge’s quashing orders and conflicting High Court judgments.
In a landmark decision dated April 23, 2026, the Karnataka High Court Division Bench comprising Justices S.G. Pandit and K.V. Aravind clarified the contentious issue of whether consolidated or common show cause notices (SCNs) under Sections 73 and 74 of the Central Goods and Services Tax (CGST) Act, 2017 can cover multiple financial years or tax periods. The decision arose from a batch of writ appeals filed by the Commissioner of Central Tax, Bengaluru, and others challenging Single Judges’ orders which had quashed consolidated SCNs on the ground that such notices must be confined to a single financial year.
The appellants, representing the Revenue, issued consolidated SCNs alleging tax defaults and fraudulent availment of Input Tax Credit (ITC) spanning several financial years between 2017 and 2023. The respondents, including M/s Chimney Hills Education Society and others, challenged the SCNs contending that the CGST Act’s provisions and limitation periods are financial year-specific, thus prohibiting consolidated notices.
The Division Bench undertook an exhaustive analysis of the CGST Act’s statutory framework, including detailed scrutiny of key provisions such as Sections 2(106) (definition of tax period), 37, 39 (return filing), 44 (annual return), 73 and 74 (determination of tax), and related rules. The Court emphasized the express legislative use of the term “any period” in Sections 73 and 74 for issuance of notices, which, it held, cannot be artificially confined to a single financial year. The limitation provisions under sub-section (10) of these sections, although referencing financial years, apply separately to each financial year included in the consolidated notice and do not restrict the scope of initiating proceedings covering multiple years.
The Court referenced authoritative decisions from the Delhi, Allahabad, and Jammu & Kashmir High Courts, which had upheld the permissibility of consolidated SCNs spanning multiple financial years. It also referred to the circulars and data evidencing rampant fraudulent availment of ITC across years necessitating consolidated proceedings to effectively detect and prevent tax evasion. The Court rejected contrary views of the Bombay, Kerala, Madras, Andhra Pradesh, and Himachal Pradesh High Courts, which had ruled against consolidated notices, deeming those interpretations as restrictive and amounting to re-writing the statute.
Addressing concerns on pecuniary jurisdiction, the Court held that the jurisdiction of the proper officer is determined by aggregate demand in the SCN, and a shift in jurisdiction due to consolidation does not prejudice the assessee since safeguards and remedies remain intact. It further clarified that a writ petition challenging the SCN on the ground of consolidation is not maintainable; statutory objections and appeals under the CGST Act are the proper remedies.
Consequently, the Division Bench allowed the appeals filed by the Revenue, set aside the impugned Single Judge orders quashing the consolidated SCNs, and restored the notices for adjudication. The respondents were granted reasonable time to reply, and in certain appeals, time was given to file appeals against related orders without limitation pleas being raised, ensuring procedural fairness.
This judgment reinforces the legislative intent and administrative necessity for consolidated show cause notices under the CGST Act, providing clarity and uniformity to tax administration and compliance.
Bottom line:-
CGST Act - Issuance of consolidated/common show cause notice under Sections 73 and 74 of the Central Goods and Services Tax Act, 2017, covering multiple financial years is permissible and not prohibited by the statute.
Statutory provision(s): Central Goods and Services Tax Act, 2017 Sections 2(106), 37, 38, 39, 41, 44, 49, 51, 52, 54, 59, 60, 61, 62, 63, 64, 65, 66, 67, 73, 74
