The Supreme Court has ruled that authorities cannot invoke GST Section 74 Limitation through vague allegations of fraud, wilful misstatement, or suppression of facts. A show-cause notice must clearly state the facts and circumstances supporting the extended limitation period.
A Division Bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran set aside proceedings against M/s G.R. Infra Projects Limited, Ratlam. The Court also quashed the High Court judgment that had upheld the disputed notice.
Supreme Court Rejects Generic Fraud Allegations
The dispute arose from a show-cause notice issued on June 13, 2025, for the 2018–19 financial year.
The normal limitation period under Section 73 had expired on February 28, 2025. The tax authorities therefore relied on Section 74 to continue the proceedings beyond the ordinary period.
The Supreme Court found that the notice merely referred to “fraud or concealment of facts.” It did not explain how the officer reached that conclusion.
The Court held that a notice invoking the extended limitation must disclose the facts that support the allegation. Authorities cannot simply use statutory terms such as fraud, wilful misstatement, or suppression of facts without explaining the underlying circumstances.
Notice Must Explain Grounds For Extended Limitation
The Bench also noted the use of the word “or” in the phrase “fraud or concealment of facts.” According to the Court, this wording showed that the assessing officer had not clearly identified the specific ground for invoking Section 74.
The Court stressed that the statutory notice itself must contain the relevant allegations and supporting circumstances. Authorities cannot rely on vague or mechanical assertions.
This ruling strengthens the requirements for GST Section 74 Limitation proceedings. Tax officers must provide clear reasons when they seek to apply the extended limitation period.
Investigation Cannot Repair Defective Notice
The State argued that the proceedings followed a wider investigation covering financial years 2017–18 to 2020–21. It also relied on an investigation report prepared on March 3, 2025, and subsequent communications under Section 142(1A).
The Supreme Court rejected this argument. It held that later explanations cannot cure defects in the original statutory notice.
The Court reiterated that authorities must support their decisions through the reasons recorded in the relevant notice or order. They cannot introduce new grounds through affidavits filed during litigation.
Supreme Court Quashes Proceedings
The Bench set aside the disputed show-cause notice and the High Court judgment that had upheld it. The Court also directed the State tax authorities not to take further action based on the quashed proceedings.
The ruling makes clear that authorities must establish the factual basis for invoking the extended limitation period under Section 74. Generic references to fraud or concealment, without supporting details, cannot justify proceedings beyond the normal statutory period.
