• Dated 04^th September, 2026

General Allegations Of Fraud/Suppression Won't Extend Limitation; SCN Must Specify Foundational Facts- Supreme Court

Facts:

The assessee was issued a Show Cause Notice under Section 74 of the CGST Act for FY 2018–19, 2019–20 and 2020–21, concerning mismatch of Input Tax Credit and short payment of tax. The proceedings originated from audit objections. The matter was subsequently kept in the "call book", meaning it was kept in abeyance, and was later revived when the limitation period was approaching.

Assessee's contention:

The assessee contended that Section 74 could not be invoked because there was no proper allegation or factual basis of fraud, wilful misstatement or suppression of facts. It was also argued that the Department's attempt to issue a notice as a protective measure merely because limitation was expiring was not permissible under the GST Act.

Department's contention:

The Department argued that there was suppression of material facts and wilful misrepresentation, and therefore the extended limitation under Section 74 was available. It also relied upon Explanation 2 to Section 74 in support of its allegation of suppression.

Held:

The Supreme Court held that merely mentioning the words "fraud", "wilful misrepresentation" or "suppression" in an SCN is not sufficient. The notice must itself disclose the foundational facts establishing such fraud or suppression, and the Proper Officer must independently be satisfied before invoking Section 74. Since the SCN did not contain such foundational facts, it was set aside along with the consequential order.

Case ref-M/s Tata Steel Limited Versus Union of India through the Secretary Ministry of Finance and Ors. (Arising out of SLP (C) No.16859 of 2026

Author: Aindrila Ghosh

Edited by- Madhurima Bose