Consolidated GST Notice For Multiple Years Valid, But Liability Must Be Decided Separately: Gauhati High Court

The Gauhati High Court has ruled that while the GST department can issue a consolidated show-cause notice covering multiple financial years, it must determine the tax liability separately for each year and apply the provision applicable to that period.

“The authorities are therefore required to determine the liability separately for each financial year, apply the provision applicable to that year, and examine the question of limitation and the ingredients necessary for invoking the respective provisions,” the court observed.

The ruling was given by Justice Arun Dev Choudhary on a petition filed by HD Associates, which carries on business as “Detailing Bull”.

The firm challenged a demand-cum-show-cause notice covering financial years 2021-22 to 2024-25. It also challenged the search and seizure order dated February 1, 2024, and the actions taken in consequence of it.

The notice alleged misdeclaration or suppression of taxable value of ₹3,42,61,665, involving GST of ₹61,67,100, for financial years 2021-22 to 2023-24. Section 74 of the Central Goods and Services Tax Act, 2017 was invoked for these years, while Section 74A(1) was invoked for 2024-25. Interest and penalties were also proposed, including under Section 122.

HD Associates argued that the February 1, 2024 search under Section 67 was not validly authorised and that the requisite “reasons to believe” had not been furnished. It also challenged compliance with the Document Identification Number (DIN) requirements and argued that its returns should first have been scrutinised under Section 61.

The court rejected the argument that failure to furnish the reasons to believe automatically invalidated the search authorisation. Section 67(2) empowers the proper officer, where the circumstances specified in the provision are believed to exist, to authorise a search in writing. Rule 139(1) prescribes Form GST INS-01 for that authorisation.

The court observed that the requirement of reasons to believe and the requirement of written authorisation are distinct. Non-furnishing of the reasons to the taxpayer cannot by itself be equated with the absence of reasons.

The competent officer must have formed the requisite belief on the basis of material available before issuing Form GST INS-01. The adjudicating authority must examine the original INS-01 and contemporaneous departmental records to determine whether that requirement was met.

On the DIN objection, the court noted that CBIC Circular No. 122/41/2019-GST prescribed mandatory DINs for specified communications, including search authorisations. It held that whether the relevant communication carried a DIN, fell within a permissible exception or was subsequently regularised was a factual issue for the adjudicating authority.

The court declined to quash the show-cause notice on the alleged DIN defect at this stage. It held that the issue required examination of the relevant records and the applicability of the exceptions.

The court rejected the argument that Section 61 scrutiny was mandatory before the department could initiate the present demand proceedings. Section 61, read with Rule 99, provides a procedure for dealing with discrepancies noticed during scrutiny of GST returns. Where a demand is founded on such a discrepancy, the statutory procedure cannot be bypassed.

Section 61 is not, however, a mandatory preliminary stage in every GST investigation. In this case, the demand was founded on the search under Section 67 and the investigation that followed.

The department relied on material allegedly found during the search, statements recorded during the investigation, entries in the “Garage Plug” software, slip pads, and other records. It also relied on information obtained from third parties.

The court therefore held that the absence of prior proceedings under Section 61 did not invalidate the notice. It clarified that if any component of the demand is founded solely on a discrepancy detected during Section 61 scrutiny, the statutory requirements applicable to that scrutiny must be followed.

On the consolidated notice, the court held that there is no statutory prohibition against issuing one notice covering more than one financial year. It referred to the coordinate bench decision in Tata Projects Ltd. v. Union of India, which held that a consolidated notice covering different financial years cannot be termed without jurisdiction merely on that ground.

The department must nevertheless determine liability separately for each financial year. For 2021-22 to 2023-24, Section 74 was invoked, while Section 74A(1) was invoked for 2024-25.

The authority must apply the provision applicable to each year. It must also examine limitation and whether the requirements for invoking the respective provisions are satisfied.

HD Associates also challenged the proposed penalties by relying on Section 75(13). The court held that Section 75(13) does not prohibit the department from referring to Section 74/74A and Section 122 in the same show-cause notice.

Section 75(13) prevents the imposition of more than one penalty on the same person for the same act or omission. The mere proposal of penalties under both sets of provisions at the notice stage therefore does not invalidate the proceedings.

The authorities must ensure that the same act or omission is not subjected to double penalty in violation of Section 75(13).

The court did not decide whether the material actually established suppression, fraud or wilful misstatement. It also left the correctness of the department's quantification of the alleged suppressed turnover for adjudication.

The firm can explain the records relied upon by the department, contest the statements and other material, reconcile the figures and demonstrate the correctness of its returns and tax liability before the adjudicating authority.

The writ petition was dismissed, with the court declining to interfere with the show-cause notice and the search and seizure action. The firm was given 45 days from September 3, 2026 to submit its reply and raise all factual and legal objections before the adjudicating authority.

For Petitioner: Advocate S.K. Saha

For Respondent No. 1: Advocate V.K. Chopra

For Respondent Nos. 2 and 3: Advocate M. Kumar