Composite SCN for Multiple Years Quashed: Calcutta HC SBI Ruling

Under the Goods and Services Tax framework, tax authorities frequently consolidate multiple financial years into a single omnibus show-cause notice to overcome expiry of statutory limitation periods. In a landmark decision delivered by the Calcutta High Court (Circuit Bench at Jalpaiguri), the Court firmly quashed this administrative shortcut, ruling that composite notices combining multiple financial years under Section 74 are illegal, contrary to the statutory framework, and without jurisdiction.

"Under the statutory framework of Section 74(10) of the CGST Act, the period of limitation is inextricably anchored to the annual return due date for the relevant financial year. Each financial year constitutes a separate, distinct, and independent unit for the determination of tax liability and limitation. The Department cannot club multiple financial years into a single composite show-cause notice so as to bypass the statutory period of limitation prescribed by Parliament."

The ruling reinforces the principle that taxing statutes must be construed strictly according to their plain grammatical text. Where the legislature has demarcated the financial year as the statutory benchmark for limitation, revenue authorities cannot alter the statutory scheme in the name of administrative convenience.

Key Takeaways

• Composite show-cause notices clubbing multiple financial years under Section 74 are void and without jurisdiction.
• Each financial year constitutes an independent and distinct unit for tax determination and limitation under Section 74(10).
• Revenue cannot rely on bunching multiple years to circumvent statutory limitation periods or revive time-barred demands.
• Administrative convenience does not cure a jurisdictional defect under Section 160 of the CGST Act.

Who This Applies To

• Taxpayers and financial institutions facing consolidated or bunched Show Cause Notices in Form GST DRC-01 spanning multiple financial years under Section 73 or Section 74.
• Tax professionals drafting preliminary jurisdictional objections and Article 226 writ petitions against multi-year demand orders.

The Facts

The proceedings arose from action initiated by the Central Goods and Services Tax and Central Excise authorities, Siliguri Commissionerate, against the State Bank of India (SBI).

1. Issuance of Composite SCN: On June 25, 2025, the adjudicating authority issued a single consolidated Show Cause Notice to SBI under Section 74 of the CGST / WBGST Act, 2017. The notice clubbed six consecutive financial years—spanning FY 2018-19 to FY 2023-24—into one single composite proceeding.
2. Adjudication Order: Notwithstanding the bank's objections regarding jurisdiction and year-wise limitation bars, the Proper Officer proceeded to confirm the demand by passing an Order-in-Original on December 12, 2025. The order confirmed a cumulative demand of tax, interest, and penalties aggregating to approximately 10.97 Crores across the six financial years.
3. Writ Petition: State Bank of India approached the Calcutta High Court under Article 226 of the Constitution of India in WPA 433 of 2026 (Circuit Bench at Jalpaiguri), seeking a writ of certiorari to quash the composite SCN and the consequential adjudication order as being void ab initio and without jurisdiction.

The Law

• Section 74(1) of the CGST Act, 2017 (Determination of Tax with Fraud / Suppression): Empowers the Proper Officer to serve a notice where tax has not been paid, short paid, or input tax credit wrongly availed or utilized by reason of fraud, wilful-misstatement, or suppression of facts.
• Section 74(10) of the CGST Act, 2017 (Limitation Period): Mandates that the Proper Officer shall issue an order within five years from the due date for furnishing of the annual return for the financial year to which the tax not paid or short paid relates.
• Section 2(106) of the CGST Act, 2017 (Tax Period): Defines "tax period" as the period for which any return is required to be furnished under the Act.
• Section 160(1) of the CGST Act, 2017 (Service of Notice in Certain Circumstances): A saving provision protecting notices from invalidation due to minor clerical or procedural defects, which the Revenue routinely invokes to defend multi-year notices.

Arguments

Petitioner Contentions (State Bank of India)

• Violation of Section 74(10) Mandate: The bank contended that Section 74(10) explicitly ties the limitation period for issuing an adjudication order to the due date of the annual return for "the financial year." The singular usage confirms that each financial year must be treated as an isolated, distinct unit of assessment.
• Prejudice and Deprivation of Year-Specific Defenses: Clubbing six separate financial years into one notice creates procedural chaos, deprives the assessee of year-specific statutory defenses, and muddles the computation of interest and statutory penalty brackets.
• Impermissible Circumvention of Limitation: By issuing a composite notice covering periods from 2018-19 up to 2023-24, the department attempted to extend the limitation window backward, indirectly reviving demands that were already barred by limitation under their respective annual return deadlines.
• Judicial Precedents Cited: The petitioner relied on coordinate High Court jurisprudence against SCN bunching, including the Madras High Court in Titan Company Ltd. vs. Joint Commissioner (W.P. No. 33164 of 2023) and the Supreme Court ruling in State of Jammu and Kashmir vs. Caltex (India) Ltd. (AIR 1966 SC 1350).

Revenue Contentions (Department)

• Administrative Convenience and Judicial Economy: The Revenue argued that consolidated notices save administrative time and avoid multiplicity of proceedings when the nature of transactions or audit observations across several years is identical.
• Protection Under Section 160(1): The Department submitted that combining multiple financial years into a single notice is at most a procedural irregularity saved by Section 160(1) of the CGST Act, rather than a jurisdictional nullity.
• Ongoing Suppression: The authorities contended that in cases involving suppression of facts under Section 74, the cause of action is continuous, justifying a single consolidated demand across all affected years.

Analysis of the Court

Justice Aniruddha Roy rejected the Department contentions and held:

1. Strict Statutory Interpretation: Tax statutes admit of no equitable considerations. Because Section 74(10) specifies limitation with direct reference to "the financial year," the assessing officer possesses no statutory power to expand the scope to a multi-year block.
2. Defect Goes to the Root of Jurisdiction: Bunching multiple financial years is not a minor formal defect curable under Section 160(1). It directly affects the jurisdiction of the officer to adjudicate time-barred claims.
3. Rejection of Section 74 Exception: While Revenue relied on Delhi High Court decisions permitting composite notices in syndicates of fake invoicing, the Calcutta High Court clarified that statutory limitation guarantees cannot be discarded absent express legislative sanction.

The Decision

Verdict: [Allowed] Writ Petition Allowed; Composite SCN and Order-in-Original Quashed.

The Calcutta High Court held that the practice of issuing a single composite show-cause notice combining multiple financial years under Section 74 of the CGST Act is illegal and without jurisdiction. The Court set aside:

1. The composite Show Cause Notice dated June 25, 2025.
2. The consequential Order-in-Original dated December 12, 2025, confirming the demand of 10.97 Crores against State Bank of India.

The Court granted liberty to the Revenue authorities to proceed afresh against the bank strictly in accordance with law by issuing separate, year-specific notices, provided that such notices are initiated within the statutory limitation period prescribed for each respective financial year.

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