Madras High Court Quashes Clubbed Show Cause Notices Covering Multiple Financial Years Under GST

Case Title: Smt. R. Ashaarajaa, Partner of M/s JRD Realtorss & Ors. vs Union of India & Ors.

Court: Madras High Court

Date of Order: 21 July 2025

Coram: Hon'ble Justice Krishnan Ramasamy

Writ Petition Nos.: 29716, 29720, 29726, 34137 of 2024 & 2270, 3597, 7616... (and others)

(Quash Clubbed Show cause)

Smt. R. Ashaarajaa, Partner of M/s JRD Realtorss & Ors. vs Union of India & Ors.

Issue

Whether issuance of a single consolidated Show Cause Notice (SCN) covering more than one financial year is valid under the CGST Act, 2017.

Facts

• Multiple petitioners challenged the bunching of SCNs covering several financial years in one notice and the corresponding composite assessment orders.

• Petitioners argued that such clubbing:

  • Violates principles of natural justice,

  • Causes undue hardship in contesting and responding,

  • Prejudices eligibility for schemes like compounding or amnesty applicable to specific years,

  • Breaches statutory limitation requirements under Sections 73 and 74 of the CGST Act.

Petitioners’ Key Arguments

• Each financial year is a distinct unit under GST law.

• Limitation under Section 73(10) (3 years) and 74(10) (5 years) applies separately for each year.

• The phrase “any period” in Sections 73/74 refers to tax periods, not multi-year blocks.

• Reliance placed on:

  • Titan Company Ltd. case (2024-VIL-19-MAD)

  • Kerala HC in Tharayil Medicals (2025-VIL-356-KER)

  • Supreme Court in Caltex (India) Ltd. (AIR 1966 SC 1350)

Respondent’s Arguments

• No explicit bar under Sections 73 or 74 against issuing SCNs for multiple years.

• The term “any period” allows for block-year notices.

• Clubbing avoids issuance of multiple notices for similar issues across years.

Court’s Findings

• Tax period as defined under Section 2(106) means the period for which a return is required (monthly/annually).

• SCNs must correspond to specific tax periods — either monthly or annually—but cannot span across financial years.

• Limitation periods are distinct and must be applied per financial year.

• Composite SCNs hinder taxpayers’ ability to:

  • Contest only a few years,

  • Settle under schemes available for select years,

  • Apply for compounding for specific years,

  • Exercise meaningful right to appeal.

Key Observations

“The limitation period of 3/5 years cannot be stretched by clubbing years together. The GST law does not permit SCNs for more than one financial year under a single notice.”

“When the Act mandates issuance of notices for a specific tax period, deviation from it renders the SCN without jurisdiction.”

Conclusion & Order

• The Court held that clubbed SCNs for multiple financial years are impermissible in law.

• All such SCNs and the resultant assessment orders were quashed.

• Writ petitions were allowed.

Implications

• A landmark ruling safeguarding procedural fairness under GST.

• Emphasizes that compliance with time-bound notice issuance is essential to protect taxpayer rights.

• Reinforces that assessment must be conducted year-wise to preserve statutory limitations and remedies.