The Supreme Court has delivered an important ruling on the invocation of the extended limitation period under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act). The Court has held that tax authorities cannot invoke the extended limitation available for cases involving fraud, wilful misstatement or suppression of facts merely by reproducing those words in a show cause notice (SCN).
According to the Supreme Court, an SCN seeking to proceed under Section 74 must contain specific allegations and the circumstances that enabled the proper officer to form a prima facie view that the taxpayer had committed fraud, made a wilful misstatement or suppressed material facts.
The judgment was delivered by a Bench comprising Justice J.B. Pardiwala and Justice K. Vinod Chandran in M/s G.R. Infra Projects Limited, Ratlam v. State of Madhya Pradesh.
Background of the Case
The dispute arose from a Show Cause Notice dated June 13, 2025, issued to G.R. Infra Projects Limited in relation to the financial year 2018-19.
The proceedings concerned tax allegedly unpaid or short-paid by the taxpayer. Ordinarily, such cases, where the non-payment or short payment is not attributable to fraud, wilful misstatement or suppression of facts, fall under Section 73 of the CGST Act.
However, by the time the disputed SCN was issued, the limitation period applicable under Section 73 had already expired.
The State therefore sought to sustain the proceedings under Section 74, which provides a longer period where the alleged tax short-payment or non-payment is attributable to fraud, wilful misstatement or suppression of facts with an intention to evade tax.
Supreme Court Rejects Mechanical Invocation of Section 74
The Supreme Court closely examined the language of the SCN and found that it merely contained a general allegation referring to “fraud or concealment of facts”.
The notice did not explain the factual circumstances or material that led the assessing authority to believe that fraud, wilful misstatement or suppression of facts had actually occurred.
The Court held that such a “bland statement” is insufficient to invoke the extended limitation under Section 74.
The Court emphasised that the statutory notice itself must disclose the allegations and circumstances which form the basis for invoking the exceptional limitation provision.
Importantly, the Bench also took note of the expression “or” used in the notice. According to the Court, this wording suggested that even the assessing authority was uncertain whether the proceedings were based on fraud or concealment of facts.
The Supreme Court made it clear that merely inserting statutory expressions such as “fraud, wilful misstatement or suppression of facts” into an SCN does not automatically bring the case within Section 74.
Reasons Supporting Fraud Must Appear in the SCN
The judgment reinforces a significant principle of tax administration: when the department seeks to invoke a provision carrying serious consequences for the taxpayer, the foundational allegations must be clearly stated in the statutory notice.
The officer must identify the conduct or circumstances that allegedly constitute fraud, wilful misstatement or suppression of facts.
Thus, an SCN under Section 74 should not merely reproduce the language of the statute. It should provide sufficient particulars to enable the taxpayer to understand:
- What information was allegedly suppressed;
- How the alleged suppression occurred;
- What facts indicate fraud or wilful misstatement;
- Why the extended limitation provision is being invoked; and
- How the alleged conduct resulted in non-payment or short payment of tax.
This requirement also protects the taxpayer’s right to effectively respond to the allegations.
Defective SCN Cannot Be Cured Through Counter-Affidavit
The Supreme Court also rejected the State’s attempt to rely upon additional allegations contained in its counter-affidavit filed before the Court.
The Bench reiterated the established legal principle that the validity of an administrative notice or order must ordinarily be determined from the contents of that notice or order itself.
The department cannot issue an inadequately reasoned SCN and subsequently attempt to supplement its deficiencies through pleadings filed before a court.
Therefore, where the SCN itself fails to disclose the circumstances justifying invocation of Section 74, subsequent explanations in a counter-affidavit cannot ordinarily cure that fundamental defect.
Section 73 Limitation Had Already Expired
Another significant aspect of the judgment was the Court’s examination of limitation.
For FY 2018-19, the annual return filing due date had been extended to December 31, 2020. After taking into account the applicable limitation provisions and the exclusion of limitation granted during the COVID-19 pandemic, the Supreme Court concluded that the permissible period for initiating proceedings under Section 73 had expired on February 28, 2025.
The disputed SCN was issued on June 13, 2025, more than three months after the expiry of the Section 73 limitation period.
Consequently, the State’s attempt to proceed under Section 74 assumed critical importance. However, because the SCN did not adequately disclose the factual basis for invoking fraud, wilful misstatement or suppression of facts, the Court found no legal basis to sustain the extended limitation.
Investigation Material Cannot Replace a Proper SCN
The State relied upon an investigation that had commenced through summons relating to the company’s business activities for FY 2017-18 to FY 2020-21. An inspection had also been conducted at the company’s premises, and statements of its accountant, authorised signatory and director were recorded.
The State further referred to alleged non-compliance with certain scheduled hearings and subsequent investigation proceedings.
The Supreme Court, however, held that whatever material may have been gathered during the investigation could not overcome the fundamental deficiency in the final statutory notice.
The allegations necessary to invoke Section 74 had to emanate from the SCN itself.
Supreme Court Quashes SCN
Finding no justification for sustaining the proceedings, the Supreme Court allowed the appeal filed by G.R. Infra Projects Limited.
The Court quashed both the disputed SCN dated June 13, 2025, and the Madhya Pradesh High Court order that had upheld the notice. The State was also directed not to take further proceedings pursuant to the challenged notice.
Key Takeaway for GST Taxpayers
The ruling is significant for GST litigation because Section 74 cannot be invoked merely as a device to overcome the expiry of limitation under Section 73.
Where the department seeks to invoke the extended limitation period, the SCN must independently disclose the factual foundation for alleging fraud, wilful misstatement or suppression of facts.
For taxpayers facing Section 74 proceedings, the decision provides an important ground for examining whether the SCN contains specific and legally sustainable allegations or merely reproduces statutory terminology.
Case Details
Case: M/s G.R. Infra Projects Limited, Ratlam v. State of Madhya Pradesh
Case No.: Civil Appeal No. 11277 of 2026
Judgment: Supreme Court of India
Bench: Justice J.B. Pardiwala and Justice K. Vinod Chandran
Subject: Validity of SCN and invocation of extended limitation under Section 74 of the CGST Act