Indirect Tax and GST : Law on Composite Show Cause Notices by Tax Department Answered by High Court in a Recent Judgment passed in June 2026

Indirect Tax and GST : Law on Composite Show Cause Notices by Tax Department Answered by High Court in a Recent Judgment passed in June 2026

In a recent Judgment, a writ petition was submitted by the petitioner challenging composite Show Cause Notice which was issued by the respondents for multiple financial years namely, 2019-2020 and 2020-2021 and Ext.P2 Order-in-Original. The main challenge raised against the sustainability of the same is that, issuance of a composite notice for multiple assessment years was found to be not legally sustainable.

The writ petition was allowed and direction was issued to issue separate show cause notice.

Case reference is Malabar Trade Links v. Superintendent [2026] GCtR 382 (Kerala).

One can also refer Joint Commissioner v. Lakshmi Mobile Accessories [2025] GCtR 869 (Kerala). 

In said case after looking at S.74 of CGST Act, 2017 it was noted as follows : 

"If a consolidated notice for various financial/assessment years is issued, the total amount of tax, penalty etc. determined as payable by the assessee may increase exponentially depending upon the number of financial/assessment years included in the consolidated notice. The determination of tax, penalty etc. would be in respect of all the financial/assessment years put together. That would go against the provisions of sub sections (9) and (10) of Section 74 which specifically refer to the “financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates” while stipulating the last date for passing the adjudication order." 

"A consolidated notice would also result in a consolidated adjudication order covering several financial/assessment years and in the event of it being adverse to the assessee, the fee/pre- deposit required to be paid by an assessee for preferring a statutory appeal would also be higher." 

"This could not have been the Scheme of the statutory provisions which are expected to adhere to principles of fairness in taxation."

"Under Section 74 of the CGST Act, 2017 the end termini for adjudication varies for each financial/assessment year, since it is not pegged to the date of the show cause notice but to a period of five years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to. Issuing a consolidated show cause notice covering various financial/assessment years would cause prejudice to an assessee who would not get the full period envisaged for adjudication under the Statute, if that period is circumscribed by the limitation period prescribed in relation to an earlier financial/assessment year."