Time and Truth: Twin Supreme Court Rulings Rein in GST Notices Under Section 74
Adv Sherry Samuel Oommen: This article is authored by Adv Sherry Samuel Oommen. He special
ises in the Constitution, tax and corporate laws and has also cleared the final exams of the In
stitute of Chartered Accountants of India, the Institute of Cost Accountants of India and the
Institute of Company Secretaries of India. He has also completed his Masters’s Degree in Com
merce, apart from obtaining a Post Graduate Diploma in Business and Corporate Laws from Sym
biosis, Pune. The views expressly are personal and should not be construed as a legal opinion.
sherryoommen@nashcp.com
In two rulings delivered within days of each other, the Hon’ble Supreme Court has decisively addressed two recurring fault lines in GST adjudication: limitation for issuing show cause notices, and the evidentiary threshold for invoking the extended period under Section 74 of the Central Goods and Services Tax Act, 2017.
In Tata Steel Ltd. v. Union of India [2026] 189 taxmann.com 520 (SC), decided on 25 August 2026, a Bench of K. Vinod Chandran and J.B. Pardiwala, JJ. reversed the Jharkhand High Court and set aside both the show cause notice (“SCN”) and the consequential Order-in-Original, while granting the Department a narrow window to proceed afresh. Days earlier, the same Bench, in G.R. Infra Projects Ltd. v. State of Madhya Pradesh [2026] 189 taxmann.com 764 (SC), decided on 19 August 2026, reversed the Madhya Pradesh High Court on strikingly similar facts, setting aside a time-barred SCN founded on an equally vague allegation of fraud, without any liberty to proceed afresh.
- Background
The dispute concerned an SCN dated 13.06.2025, issued to Tata Steel for the financial years 2018-2019 to 2020-2021, arising from a CAG audit alleging mismatch of input tax credit and short payment of tax. The notice invoked Section 74, which permits a five-year limitation period where fraud, wilful misstatement, or suppression of facts is alleged, as opposed to the ordinary three-year period under Section 73. The assessee’s case was twofold: first, that the notice was time-barred even reckoning the extended period; and second, that there was no genuine allegation of fraud or suppression to justify invoking Section 74 at all. Notably, the reference to suppression being a mechanical formula deployed only to escape limitation.
G.R. Infra presented a narrower but parallel dispute. The State issued an SCN dated 13.06.2025 to the assessee for the financial year 2018-2019 alone, following an inspection and recorded statements initiated by summons dated 03.03.2025 covering the years 2017-2018 to 2020-2021. The notice invoked Section 74 on a bland assertion of “fraud or concealment of facts”, without particulars. When the assessee challenged the notice as time-barred and unsupported by any foundational allegation of fraud or suppression, the State sought to justify the invocation by elaborating the allegations through its counter affidavit before the High Court, which upheld the SCN.
- The Limitation Analysis
The Court undertook a granular computation of limitation. Under Section 73(10), the Proper Officer must issue an order within three years from the due date for furnishing the annual return, and Section 73(2) requires the notice to precede that outer limit by at least three months. Read with Section 44 and Rule 80, and after accounting for successive notifications extending the annual return due dates to 31.12.2020, 31.03.2021 and 28.02.2022 for the three years in question, the ordinary three-year limitation would have expired on 31.12.2023, 31.03.2024 and 28.02.2025 respectively.
Factoring in the Supreme Court’s own suo motu COVID-19 limitation extension (exclusion of 15.03.2020 to 28.02.2022), the Court found that for 2018-2019 and 2019-2020, the extended limitation converged at 28.02.2025, while for 2020-2021 it remained unaffected at the same date since the limitation clock had not even started running during the excluded period. The upshot was that the outer limit to pass an order under Section 73 for all three years fell on 28.02.2025 — and since a notice must precede the order by three months, the SCN issued on 13.06.2025 was hopelessly time-barred, even measured against the ordinary period. The Department’s audit communications and document requisitions through 2024 did not toll or extend these statutory timelines. The Court reached an identical computation in G.R. Infra for the 2018-2019 year, holding that the extended limitation converged on the same date of 28.02.2025, confirming that the annual return due date and the COVID exclusion apply uniformly under Section 73 regardless of the State administering the levy.
- Section 74 Cannot Be a Refuge of Convenience
The more consequential holding concerns the Department’s attempt to salvage the notice by invoking Section 74’s extended five-year period. The Revenue argued that Explanation 2 to Section 74 — which treated even non-declaration of information as “suppression” — supported the notice, and that proceedings had, in substance, commenced before the Section 73 limitation expired. The Court rejected both contentions. Explanation 2 stood omitted from the statute with effect from 01.11.2024, and could not be resurrected to sustain a notice issued thereafter. Equally, the argument conflated the timeline for issuing a notice with that for passing an order.In G.R. Infra, the Revenue similarly sought refuge in an amplified affidavit, attempting to substantiate the fraud allegation through material never disclosed in the notice itself.
More fundamentally, the Court held that invocation of Section 73 or Section 74 presupposes independent satisfaction by the Assessing Officer — not merely the reproduction of an audit objection. For Section 74 specifically, that satisfaction must extend beyond the existence of an ITC mismatch or short payment to a considered view that fraud, wilful misstatement, or suppression caused it. Tellingly, the very fact that the Department had referred the audit objection to the Public Accounts Committee indicated an absence of such satisfaction at the departmental level. The SCN itself contained only a “bland statement” that ITC had been availed “without documentary evidence and suppress the facts”, devoid of any foundational facts explaining how or why suppression was inferred. The Court was emphatic that extended limitation is not attracted by mechanical recitation of statutory language; the notice must disclose, on its face, the factual matrix supporting an inference of deliberate evasion.G.R. Infra applied an identical standard in emphatic terms: the notice’s use of the disjunctive “fraud or concealment of facts” betrayed the assessing officer’s own uncertainty as to which species of misconduct was alleged, and the Court refused even to look at the State’s counter affidavit, holding that the validity of a notice must be found within its four corners and cannot be supplemented by pleadings filed later in litigation.
The Court also disapproved of the Department’s practice of transferring the SCN to the “call book” — effectively holding it in abeyance — and subsequently reviving it with a “protective demand” merely because limitation was closing in, a concept the Court described as “alien to the GST regime”.
- Relief and Limited Liberty
While setting aside both the SCN and the Order-in-Original, the Court did not shut the door entirely. Noting that the extended five-year period under Section 74 had not yet lapsed, it granted the Department liberty to initiate fresh proceedings — provided the new notice discloses proper foundational facts — with an order to be passed before 28.02.2027.G.R. Infra reached a sterner result: having set aside the SCN and the High Court’s judgment, the Court simply directed the State to desist from any further proceedings pursuant to that notice, without granting liberty to issue a fresh one.
- Significance
Together, the two rulings reinforce two important disciplines for GST administration: strict, mathematically precise adherence to statutory limitation computed from the annual return due date rather than from audit correspondence or summons, and a substantive rather than formulaic standard for invoking the extended period. That the same Bench delivered both rulings within days of each other, reversing High Courts in two different States, signals that these are not fact-specific outcomes but a settled position of law. Audit- or inspection-driven notices that recite “fraud” or “suppression” — or, worse, hedge between the two with a disjunctive “or” — without demonstrating the underlying facts will not survive judicial scrutiny, protecting assessees from limitation being circumvented through boilerplate allegations while leaving a residual avenue, calibrated to the facts of each case, for genuine instances of evasion.
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