Section 73 covers tax shortfalls/input tax credit errors without fraud, while Section 74 covers the same issues involving fraud or suppression
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Bombay High Court (Photo: Shutterstock)
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The Bombay High Court on April 17 referred to a larger Bench the contentious issue of whether the revenue department could issue a single consolidated showcause notice (SCN), clubbing multiple financial years, under Sections 73/74 of the Central Goods and Services Tax (CGST) Act, 2017.
Section 73 covers tax shortfalls/input tax credit errors without fraud while Section 74 covers the same issues involving fraud or suppression.
A two-member Division Bench of the Bombay High Court, while hearing a batch of over 40 writ petitions (lead petition of M/s Rollmet LLP v. Union of India and connected matters involving companies like Shemaroo Entertainment, Uttam Movies, Everest Fleet, Golden Bullion, JDS Motion Pictures, and others), noted a clear “cleavage of judicial opinion” across high courts.
The Bench observed that while its Coordinate Bench in Goa in the Milroc Good Earth Developers (2025) case, followed by the Nagpur Bench and several other high courts (Kerala, Madras, and Karnataka), had held such consolidated notices to be invalid and without jurisdiction, the Delhi and Allahabad High Courts had taken a contrary view, upholding their validity.
The Supreme Court had dismissed special leave petitions (SLPs) against the Delhi High Court rulings in Mathur Polymers and Ambika Traders without interfering.
Despite being bound by the Milroc case, the Division Bench prima facie found strong reasons to reconsider it, describing the earlier view as potentially “per incuriam and sub silentio”. “Per incuriam” refers to a judgment rendered in ignorance of a binding statute or precedent, whereas “sub silentio” denotes a decision where a point of law was not consciously determined or addressed. The Division Bench has now referred the matter to the chief justice of the Bombay High Court for constituting a larger Bench to decide the issue authoritatively.
It held that the CGST Act’s demand and recovery provisions did not impose any embargo on issuing a consolidated SCN for multiple years, provided the limitation under the Act was strictly adhered to for each financial year individually.
The court stressed the need for a purposive interpretation to ensure the tax machinery remains workable.
Abhishek A Rastogi, founder, Rastogi Chambers, who argued for several petitioners, said: “The reference to a larger Bench is a welcome and necessary step, given the clear cleavage of judicial opinion across high courts on the permissibility of consolidated SCNs. From the petitioner’s standpoint, Sections 73 and 74 require separate showcause notices for each financial year as every tax period is distinct.”
Rastogi added that permitting a consolidated SCN spanning multiple years risked diluting statutory safeguards and imposed undue hardship by mixing independent causes of action.
According to M S Mani, partner with Deloitte India, businesses are vexed with multiple-year SCNs and the relevant legislation and precedents could lead to different interpretations in each year.
“They would prefer defending the SCNs on a year-specific basis because that would also offer them an opportunity to evaluate their legal defences for subsequent years and allow them to recalibrate wherever required.”
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