SC holds extended period cannot be invoked if allegations are not justified in the show cause notice issued under section 74

 This Tax Alert summarizes a recent judgement of the Supreme Court (SC) ^[1] on whether a show cause notice (SCN) under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act) can be sustained merely on a generic allegation of fraud or concealment of facts, without the notice itself setting out the grounds for such allegation.

In the present case, Revenue issued SCN under Section 74 for FY 2018-19 on 13 June 2025. The petitioner argued that the SCN was time-barred under Section 73 and did not, on its face, disclose the necessary ingredients for invoking Section 74, i.e., fraud, wilful misstatement or suppression of facts. The Revenue sought to justify the invocation of Section 74 by relying on allegations set out in its counter affidavit before the SC.

The key observations of the SC are:

• For FY 2018-19, the limitation to issue SCN under Section 73 expired on 28 February 2025 ^[2]. Accordingly, the SCN issued in the present case was hit by limitation under Section 73 and could survive only if Section 74 was validly invoked.
• When an authority issues a notice or an order, the requirements necessary to make such notice or order valid should be contained therein and cannot be supplanted by a counter affidavit filed before a Court.
• The allegations leading to an inference of fraud or concealment resulting in suppression of facts should emanate from the notice itself and cannot be based on a mechanical use of the words "fraud, wilful misstatement or suppression of facts".
• The notice must disclose the aspects which persuaded the assessing officer to conclude that any such device had been employed by the petitioner.

Basis above, SC set aside the High Court order as well as the impugned SCN and directed the Revenue not to pursue any further proceedings pursuant to the SCN.

Comments:

• The Apex Court ruling reiterates the settled principle that deficiencies in a statutory notice cannot be cured through subsequent pleadings or affidavits filed before judicial forums.
• Recently, the Madras HC [2026 (6) TMI 1495] had held that allegations of fraud, suppression, or wilful misstatement could be inferred from the communications issued prior to the SCN. The present ruling appears to narrow the scope of the said decision.
• Notification No. 56/2023-CT providing January 2024 as the last date to issue notice under Section 73 for FY 2018-19 does not appear to have been specifically considered by the Court. It indirectly reinforces Madras HC's decision [2025 (7) TMI 772] that the SC's COVID-19 related extensions apply to GST adjudication proceedings as well.