Multi-Year GST Show Cause Notices: Understanding the Bombay High Court Decision and Its Implications

 Introduction: A Legal Turning Point in GST Compliance

In a landmark development, the Bombay High Court has, at least on a prima facie basis, indicated that tax authorities may issue a single Show Cause Notice (SCN) under Section 74(1) of the CGST Act, 2017, covering multiple financial years. This decision, handed down on January 6, 2025, in the case of RioCare India Private Limited v. Assistant Commissioner, CGST & C.Ex., addresses a long-standing debate in India’s GST framework:

Can authorities consolidate multiple tax periods into one notice, or must they issue separate SCNs for each financial year?

For businesses, auditors, and compliance professionals, this judgment is far from academic—it directly impacts procedural fairness, limitation periods, and the approach to tax enforcement.

Interestingly, this ruling comes amid conflicting High Court opinions, creating a complex legal landscape where taxpayers and authorities alike must navigate carefully.

 

Understanding India’s GST Framework

Before diving into the controversy, it’s essential to understand the GST structure and the legal provisions in question.

India’s Goods and Services Tax (GST) unified central and state taxes into a single, streamlined framework. The CGST Act, 2017, along with corresponding State GST laws, prescribes detailed procedures for tax assessment, collection, and recovery.

Two sections are particularly relevant here:

1. Section 73: Applies when tax is unpaid, short-paid, or Input Tax Credit (ITC) is wrongly claimed due to reasons other than fraud, willful mis-statement, or suppression.
2. Section 74: Covers similar situations but specifically targets fraud, deliberate mis-statement, or suppression of facts.

Each section comes with limitation periods. For example, Section 74(10) mandates that authorities issue an adjudication order within five years from the due date of the annual return for the relevant year, or from the date of any erroneous refund in fraud cases.

A core concept in this debate is the “tax period”, defined under Section 2(106) of the CGST Act. A tax period generally refers to the span for which a return is filed—monthly or annually. But what happens when authorities attempt to combine multiple tax periods into a single SCN? Does this comply with the law, or does it overreach legal boundaries?

 

The Core Controversy: One SCN for Multiple Years

The controversy boils down to whether GST law allows authorities to issue a single consolidated SCN spanning multiple financial years. This is especially relevant when issues like ITC misuse cross over from one year to the next.

Implications for Stakeholders

• For Taxpayers: Consolidating years could limit the ability to challenge notices on procedural or limitation grounds. It also complicates audit strategies and documentation requirements.
• For Revenue Authorities: Multi-year SCNs can help trace fraudulent or incorrect ITC claims flowing across years, simplifying enforcement.
• For Courts: Different High Courts have delivered divergent opinions—some permit multi-year notices, while others insist on separate notices.

The Bombay High Court’s prima facie observation that Section 74(1) does not explicitly prohibit multi-year notices is therefore a significant development, though it is not a final, binding ruling.

 

Key Observations from the Bombay High Court

In RioCare India Pvt Ltd v. Assistant Commissioner, CGST & C.Ex. (Writ Petition No. 19381 of 2024), the Bombay HC made several important observations:

1. No Prohibition in Law: Section 74(1) does not prevent authorities from issuing an SCN for unpaid or short-paid tax due to fraud or mis-statement across multiple periods.
2. Prima Facie Validity: A notice can be issued for any period, provided it respects the limitation period under Section 74(10).
3. Opportunity to Object: Taxpayers retain the right to raise objections during adjudication, ensuring procedural fairness.

However, the Court emphasized these were prima facie remarks, not a final legal ruling. Later, in Milroc Good Earth Developers v. Union of India (October 9, 2025), the Court reaffirmed that these observations do not constitute a binding precedent.

 

Legal Questions at Stake

The case brings several critical legal questions to the forefront:

• Does Section 74(1) allow a notice “for any period”, or must each financial year be treated separately?
• Does combining multiple years affect appeal rights, limitation periods, and defense strategies?
• Is the concept of a tax period controlling, thus limiting multi-year notices?
• Are procedural safeguards like natural justice compromised when years are bundled into a single SCN?

Key Sections to Understand

Section	Purpose
74(1)	Allows issuing SCN for unpaid/short-paid tax due to fraud, mis-statement, or ITC misuse.
74(10)	Mandates issuance of adjudication order within five years for fraud cases.
2(106)	Defines “tax period” (monthly/annual return filing period).

Courts interpret the phrase “for any period” differently. Some argue it allows multi-year notices; others insist each financial year remains distinct.

 

Impact on Revenue Authorities and Taxpayers

Revenue Authorities

The Bombay HC’s observations provide authorities with more flexibility:

• Track complex ITC chains across financial years.
• Reduce administrative burden by avoiding separate SCNs for each year.

Taxpayers

Conversely, taxpayers face heightened uncertainty:

• Consolidated notices may span multiple years, increasing documentation and compliance challenges.
• Potential litigation risk rises due to varying High Court interpretations.

Auditors and Tax Professionals

• Need to review audit strategies, linking ITC availment and utilization year-wise.
• Monitor case law closely, as the matter may reach the Supreme Court for definitive guidance.

 

Practical Implications for Businesses

Businesses should proactively strengthen compliance and documentation practices:

1. GST Compliance Review: Assess ITC utilization across multiple years, especially if cross-year claims exist.
2. Documentation: Maintain year-wise reconciliations and audit trails for all ITC claims.
3. Limitation Awareness: Bundling years in a single SCN may extend exposure to potential recovery, as limitation periods may reset.
4. Pre-Litigation Preparedness: Engage legal counsel immediately if a multi-year SCN is received to evaluate procedural fairness and limitation adherence.

 

Common Misunderstandings

• “Any multi-year SCN is invalid.”
  ❌ Not necessarily. Bombay HC has prima facie accepted them.
• “Limitation always runs from the first year.”
  ❌ Limitation under Section 74(10) applies per year; bundling doesn’t automatically alter this.
• “Tax period equals one financial year.”
  ❌ Defined by return requirements; courts interpret differently.
• “Revenue cannot issue multi-year SCNs without fraud.”
  ❌ Section 74 applies only to fraud; Section 73 may also raise bundling issues.
• “Multi-year SCNs cannot be split later.”
  ✅ Courts may allow re-issuance for separate years to ensure fairness.

 

Expert Commentary

Leading GST experts highlight:

“Multi-year SCNs reflect evolving enforcement. Fraudulent ITC claims increasingly span years. Businesses must maintain robust, year-wise documentation.”

However, law remains unsettled. Taxpayers and compliance professionals are advised to adopt a cautious, risk-aware approach.

 

Recommended Action Steps for Businesses

1. Review ITC claims across multiple years for accuracy.
2. Maintain detailed audit trails linking availment and utilization.
3. Engage tax advisors to monitor High Court and Supreme Court decisions.
4. Verify multi-year SCNs for:
• Limitation compliance per year
• Proper service of notice
• Adherence to natural justice
5. Prepare defense strategies considering possible litigation across multiple years.

 

Frequently Asked Questions

Q1. What is a Show Cause Notice under Section 74 of CGST?
An SCN is issued when tax is unpaid, short-paid, or ITC wrongly claimed due to fraud, mis-statement, or suppression, allowing authorities to recover tax, interest, and penalties.

Q2. Why is issuing a single SCN for multiple years controversial?
A multi-year SCN may affect limitation periods, appeal rights, and procedural fairness, complicating defense strategies.

Q3. What is the current judicial stance?

• Bombay HC (RioCare) accepts multi-year SCNs prima facie.
• Other High Courts, such as Andhra Pradesh and Madras, insist on year-wise SCNs.
• Supreme Court may provide a final ruling.

Q4. How should taxpayers respond to a multi-year SCN?

• Check that each financial year is clearly identified.
• Verify limitation expiry per year.
• Confirm proper service and procedural compliance.
• Consult legal counsel and maintain detailed ITC documentation.

Q5. Does this issue apply only under Section 74 (fraud cases)?
No. Section 73 (non-fraud cases) also raises bundling questions, adding complexity.

 

Broader Implications

The multi-year SCN debate underscores a tension between administrative efficiency and procedural fairness. Authorities benefit from consolidated notices, but taxpayers face challenges in asserting rights, managing limitations, and preparing defenses.

Until the Supreme Court delivers a definitive ruling, businesses must adopt a proactive, risk-aware approach, ensuring:

• Transparency in ITC claims
• Robust documentation year-wise
• Readiness for cross-year scrutiny

 

Conclusion: Navigating Uncertainty in GST Compliance

The Bombay High Court’s prima facie acceptance of multi-year SCNs is a significant, yet not final, development. For businesses and taxpayers, the key takeaway is the importance of proactive compliance, thorough documentation, and legal preparedness.

At Manika TaxWise, we advise clients to:

• Maintain year-wise audit trails for ITC claims
• Monitor High Court and Supreme Court developments
• Adopt risk-aware compliance strategies

While the law evolves, careful planning and professional guidance remain the most effective tools for managing multi-year GST scrutiny.

 

References

1. “Issue of Single SCN for Multiple Years: Divergent Observations by Bombay HC” – TaxGuru, 20 Oct 2025
2. “Issuance of consolidated GST SCN/order for multiple financial years is impermissible …” – TaxTMI, Oct 2025
3. “HC upholds validity of consolidated show cause notice issued for multiple financial years” – EY India Tax Alert, Aug 2025
4. “Single SCN/Assessment for Multiple Years Invalid: Andhra Pradesh HC” – TaxGuru, 19 Oct 2025

 

Author Bio:
Manoj Kumar, Founder of Manika TaxWise, is a seasoned GST and taxation expert with over 11 years of experience in advising businesses on compliance, litigation, and strategic planning. Through Manika TaxWise, he helps companies navigate complex tax scenarios with accuracy, reliability, and efficiency.