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Rules Multiple Financial Years in Single GST Invalid
Nagpur, – The has quashed a under , holding that the GST department cannot consolidate demands for different financial years into a single notice. A Division Bench of Justices Anil L. Pansare and Nivedita P. Mehta declared that the statutory scheme treats each financial year as a separate , with its own due dates and , leaving no room for .
The Disputed Notice and Core Issue
The petition, filed by M/s. Mehadia & Sons C & F Division through its partner, challenged a dated issued by the , Nagpur-II. The notice covered financial years 2021-22, 2022-23, and 2023-24, alleging and consequent of Central GST.
The primary legal question was whether Section 73 of the CGST Act permits the consolidation of multiple financial years or tax periods in a single . The petitioner argued that several years was legally impermissible, relying on earlier rulings.
Arguments: Battle of Precedents
Petitioner’s Stand: submitted that the issue was covered by the Division Bench judgment in M/s. Milroc Good Earth Developers v. Union of India (2025), where the held that “there is no scope for consolidating various financial years/ while issuing under Section 73 of the CGST Act.” He also cited Rite Water Solutions (India) Ltd. v. Joint Commissioner, , Nagpur (2025), which reiterated the same principle.
Respondent’s Defense: The department, represented by , relied on the ’s decision in , which held that consolidated notices may be necessary in cases involving fraudulent transactions spread across years. The department noted that the had dismissed a special leave petition against that judgment, arguing that the ’s view had attained finality.
High Court’s Reasoning: Why Bombay Precedent Prevails
The court rejected the respondent’s reliance on the judgment, observing that the ’s dismissal of the SLP was and not on merits, so the did not apply. It emphasized that authorities within Maharashtra are bound by the law declared by the jurisdictional high court. Since the had taken a different view, and that view had not been stayed or overruled, the department was obliged to follow it.
The court catalogued several reasons for holding that consolidation of financial years is impermissible:
- The GST scheme is based on for each financial year, and tax liability is tied to a specific financial year.
- under run separately for each year, from the due date of the annual return for that year.
- Consolidating different years would collapse separate steps and grounds, harming the taxpayer’s ability to respond year by year.
- The definition of “” under ties returns to specific periods, and the statute treats each financial year as a distinct unit for assessment and recovery.
The court noted that the had not considered these “niceties” of the statutory framework.
Key Observations from the Bench
In a pointed observation, the court stated:
“Consolidation would collapse these years, specific steps and grounds, harming the tax payers’ ability to respond year by year and violating the explicit year wise structure of the statute. These niceties, in our view, were not considered by the .”
It further noted that the department’s reliance on later decisions, such as , was irrelevant because “authorities working within the jurisdiction of the State of Bombay, will be bound by the law laid down by this Court.”
Reference to Larger Bench and Future Proceedings
During the hearing, the department informed the court that proposals to challenge the ’s earlier rulings were under consideration, and that the issue of had been referred to a Larger Bench in M/s Rollmet LLP v. Union of India (Writ Petition No. 16848/2025). Acknowledging this, the court granted the department liberty to seek revival of the petition if the earlier decisions are set aside or a larger bench takes a different view.
Final Decision: Notice Quashed, Liberty to Re-Issue
The court partly allowed the petition, quashing the dated . However, it gave the respondents liberty to issue a fresh notice “strictly in terms of the provisions of Section 73 of the CGST Act, if there is no other legal impediment.” The petition was disposed of with no order as to costs.
Implications: For GST assessees in Maharashtra, this ruling reinforces that separate show cause notices must be issued for each financial year under Section 73. The decision provides clarity on the binding nature of jurisdictional high court precedents, even when other high courts have expressed contrary views. The department must now decide whether to await the larger bench’s verdict or issue fresh notices in compliance with the law as declared by the .
