The Bombay High Court has delivered a decisive clarification on the procedural validity of GST show cause notices, reinforcing that administrative authorities cannot consolidate alleged violations across multiple financial years into a single notice. This ruling affirms a foundational principle of natural justice in tax enforcement, offering immediate relief to businesses facing overlapping and ambiguous demands.
Background & Facts
The Dispute
The petitioners, small and medium-sized engineering and electrical enterprises, received show cause notices under the Central Goods and Services Tax Act, 2017, alleging tax evasion, input tax credit misuse, and non-filing of returns. Crucially, each notice combined allegations spanning two to four distinct financial years - 2019-20, 2020-21, 2021-22, and 2022-23 - without segregating the facts, evidence, or legal grounds applicable to each period.
Procedural History
- The petitioners challenged the notices before the Bombay High Court under Article 226 of the Constitution.
- All three petitions were filed by the same legal team and raised identical legal grounds.
- The notices were issued by the Commissionerate of Central GST, Aurangabad, under Section 73 or Section 74 of the CGST Act.
- No separate notices were issued for individual financial years despite the temporal and factual divergence in the allegations.
Relief Sought
The petitioners sought quashing of the composite show cause notices on the grounds that they violated the principles of natural justice, created undue prejudice, and were contrary to binding precedents of the same court. They also sought interim protection from coercive recovery proceedings.
The Legal Issue
The central question was whether a single show cause notice under the CGST Act, combining allegations from multiple financial years, satisfies the requirements of procedural fairness and statutory clarity under Section 73 and Section 74.
Arguments Presented
For the Petitioner
The petitioners relied on two recent judgments of the Bombay High Court: M/s. Milroc Good Earth Developers v. Union of India (2025-TIOL-1697-HC-MUM-GST) and Marfani Steel Impex v. Principal Commissioner, CGST (17.01.2026). They argued that combining multiple years in one notice:
- Prevents the assessee from preparing a targeted defense
- Violates the principle of audi alteram partem
- Contravenes the statutory mandate for specificity under Section 73(5) and Section 74(5)
- Creates ambiguity in determining the period of limitation and applicable rates
For the Respondent
The Revenue Department contended that consolidation was a matter of administrative convenience and did not prejudice the petitioners, as all allegations pertained to the same subject matter - GST compliance. They argued that the petitioners had adequate opportunity to respond and that judicial intervention was unnecessary at the notice stage.
The Court's Analysis
The Court examined the nature of show cause notices under the CGST Act and found them to be quasi-judicial instruments that must meet the threshold of clarity and specificity required by natural justice. The Court emphasized that each financial year constitutes a distinct accounting period with its own return filings, credit claims, and tax liabilities. Combining them into a single notice obscures the temporal boundaries of alleged violations.
"A show cause notice is not a general inquiry but a formal accusation requiring precise specification of the alleged default, the period involved, and the statutory provision breached. A composite notice for multiple years defeats this purpose and renders the right to be heard illusory."
The Court distinguished the Revenue’s argument of administrative convenience from the constitutional obligation to ensure fair procedure. It reaffirmed that procedural fairness is not a technicality but a substantive right under Article 14 and Article 21. The precedents cited were binding and directly on point. The Court held that the notices, as framed, were legally unsustainable and amounted to an abuse of power.
The Verdict
The petitioners succeeded. The Court held that composite show cause notices spanning multiple financial years are invalid under the CGST Act. The notices were set aside, and the respondents were directed to issue fresh, year-specific notices if they intended to pursue the allegations.
What This Means For Similar Cases
Composite Notices Are Legally Invalid
- Practitioners must immediately challenge any GST show cause notice combining multiple financial years
- The burden shifts to the department to issue separate notices for each year, with distinct allegations and evidence
- Any demand notice issued on the basis of a composite notice is procedurally tainted and unenforceable
Defense Strategy Must Focus on Procedural Defects
- File writ petitions under Article 226 at the notice stage - do not wait for adjudication
- Cite Milroc Good Earth and Marfani Steel Impex as binding precedents
- Argue that delay in issuing separate notices may also invoke limitation defenses under Section 73(1) and Section 74(1)
Administrative Convenience Cannot Override Natural Justice
- Tax authorities must restructure their notice issuance protocols
- Audit teams must segregate findings by financial year before initiating proceedings
- Legal officers should review all pending composite notices and withdraw or reissue them
