The Supreme Court in M/s Tata Steel Limited v. Union of India & Ors., 2026 INSC 920 examined whether the extended limitation period under Section 74 of the Central Goods and Services Tax Act, 2017 can be invoked merely by alleging suppression of facts in a Show Cause Notice (SCN), without setting out the foundational facts supporting such an allegation.
The Court held that the expressions fraud, wilful misrepresentation or suppression of facts cannot be mechanically reproduced in an SCN merely to invoke the extended limitation period. The foundational facts giving rise to such an inference must be evident from the notice itself.
Relevant Law
Central Goods and Services Tax Act, 2017
- Section 73 – Determination of tax in cases not involving fraud, wilful misstatement or suppression of facts
- Section 74 – Determination of tax in cases involving fraud, wilful misstatement or suppression of facts
- Section 44 – Annual Return
Facts of the Case
The appellant, M/s Tata Steel Limited, was served with a Show Cause Notice concerning three financial years, namely 2018-19, 2019-20 and 2020-21. The proceedings arose from objections raised pursuant to an audit conducted by the office of the Comptroller and Auditor General of India.
The SCN purported to invoke Section 74 of the CGST Act. Tata Steel challenged the invocation of this provision on the ground that there was no proper allegation of fraud, wilful misstatement or suppression of facts. According to the appellant, in the absence of these statutory ingredients, Section 74 could not be invoked merely to obtain the benefit of its extended limitation period.
The appellant further pointed out that the Assessing Officer himself was apparently not convinced about the audit objection and had kept the matter in the “call book”, meaning that it was kept in abeyance. Nevertheless, a notice was issued because limitation was approaching, purportedly as a protective measure.
The proceedings leading to the impugned SCN had commenced with a communication dated May 27, 2024, relating to audit observations regarding mismatch of Input Tax Credit for all three financial years and short payment of tax for FY 2019-20.
Tata Steel submitted its replies, after which supporting documents were sought by the authorities. Following further communications, an SCN was issued on June 13, 2025.
Subsequently, on June 27, 2025, the Additional Commissioner informed the appellant that the SCN had been transferred to the “call book”. The communication also disclosed that the Department had contested the audit objection before the Public Accounts Committee.
A fresh notice was thereafter issued on July 1, 2025, reviving the earlier notice and proposing a protective demand on the ground that proceedings under the GST law were time-bound. The Supreme Court noted that no such concept of protective assessment was statutorily provided under the GST Act.
Issues Before the Supreme Court
The principal issues before the Court were:
- Whether the SCN dated June 13, 2025 was barred by limitation under Section 73 of the CGST Act?
- Whether the Department could invoke the extended limitation available under Section 74 without setting out foundational facts establishing fraud, wilful misrepresentation or suppression of facts?
- Whether mere use of the expression “suppression of facts” in an SCN was sufficient to sustain proceedings under Section 74?
Contentions of the Appellant
Tata Steel contended that Section 74 could be invoked only when the case involved fraud, wilful misstatement or suppression of facts.
The SCN did not contain any factual material demonstrating any of these elements. Merely alleging suppression could not transform proceedings otherwise governed by Section 73 into proceedings under Section 74.
It was further contended that the Department itself had doubts about the audit objection, as was evident from the decision to keep the matter in the “call book” and contest the audit objection before the Public Accounts Committee.
The appellant therefore argued that the Department could not resort to Section 74 merely because the ordinary limitation period was expiring or had expired.
Contentions of the Department
The Department argued that proceedings had commenced before the limitation under Section 73 expired and that the circumstances disclosed suppression of material facts and wilful misrepresentation.
The Additional Solicitor General also relied upon Explanation 2 to Section 74 to contend that suppression could include non-declaration of facts or information which an assessee was required to declare.
The Supreme Court, however, noted that Explanation 2 relied upon by the Department had already been omitted with effect from November 1, 2024.
Supreme Court’s Analysis of Limitation
The Court first examined the limitation prescribed under Section 73. It noted that Section 73 governs cases where there is no allegation of fraud, wilful misrepresentation or suppression of facts. Section 73(2) requires the proper officer to issue the notice at least three months before the time limit prescribed under Section 73(10) for passing the order.
The relevant limitation was linked to the date for furnishing the annual return under Section 44 of the CGST Act.
Because of extensions granted for filing GST annual returns, the last date for filing the annual return for FY 2018-19 eventually stood at December 31, 2020, while the corresponding dates for FY 2019-20 and FY 2020-21 were March 31, 2021 and February 28, 2022, respectively.
The Court then considered its orders passed during the COVID-19 pandemic in In Re: Cognizance for Extension of Limitation.
Under those orders, the period between March 15, 2020 and February 28, 2022 was excluded while computing limitation.
After giving effect to the COVID-19 exclusion, the Supreme Court concluded that the limitation period under Section 73 ultimately expired on February 28, 2025 for all three financial years concerned.
The SCN dated June 13, 2025 was therefore beyond the limitation period applicable under Section 73.
Whether Extended Limitation under Section 74 Could Be Invoked
The crucial question was consequently whether the Department could sustain the SCN by invoking Section 74. The Court observed that the extended period available under Section 74 can be used only when there is an allegation satisfying the statutory requirements of fraud, wilful misrepresentation or suppression of facts.
The Supreme Court emphasised that proceedings under Sections 73 and 74 can be initiated only upon the satisfaction of the Assessing Officer.
Even where an audit raises objections or makes certain observations, the Assessing Officer must independently arrive at the requisite satisfaction before issuing the notice.
In a case under Section 74, it is not sufficient for the officer merely to be satisfied that there has been a mismatch of ITC or short payment of tax. The officer must further be satisfied that such mismatch or short payment occurred because of fraud, wilful misrepresentation or suppression of facts.
Department’s Conduct and Absence of Satisfaction
The Supreme Court considered the Department’s own conduct particularly significant. The fact that the audit objections had been taken up before the Public Accounts Committee indicated that there was no final satisfaction on the part of the Department or the Assessing Officer regarding the alleged mismatch of ITC or short payment of tax.
If there was no definite satisfaction even regarding the underlying tax discrepancy, the allegation of suppression required still greater scrutiny.
The SCN contained only a general statement that ITC had been availed without documentary evidence and that facts had been suppressed. The Court found that the notice did not disclose any foundational facts capable of supporting such an allegation.
Mere Recital of “Suppression” Cannot Extend Limitation
The Supreme Court strongly rejected the practice of merely reproducing the statutory terminology contained in Section 74.
The Court observed that where an extended limitation period is provided on the basis of allegations such as fraud, wilful misrepresentation or suppression, mere “lip service” to those statutory expressions would not suffice.
The foundational facts leading to the inference of fraud, wilful misrepresentation or suppression must be evident from the notice itself.
Merely employing those words does not demonstrate application of mind. Such terminology cannot be mechanically inserted into an SCN simply to permit recovery beyond the normal limitation period prescribed by the statute.
In the present case, the Court found no factual particulars showing that Tata Steel had employed any deliberate device to evade tax or avail excess ITC.
The general statements regarding suppression appeared to have been made merely to secure the benefit of the extended limitation period. The Court held that such allegations were insufficient to sustain the SCN under Section 74.
Decision of the Supreme Court
The Supreme Court held that the impugned SCN could not be sustained.
Consequently, both the Show Cause Notice dated June 13, 2025 and the consequential Order-in-Original dated December 26, 2025 were set aside.
However, the Court noted that the extended period available to the Department had not yet completely expired.
Since the three-year limitation had expired on February 28, 2025, the Department was given liberty, if it considered it appropriate, to initiate proceedings under Section 74 afresh. Any such proceeding, however, must contain the necessary foundational facts in the notice itself, and the order must be passed before February 28, 2027.
Accordingly, the appeal was allowed.
Key Observations
The Supreme Court laid down the following important principles:
- Proceedings under Sections 73 or 74 must be based upon the independent satisfaction of the Assessing Officer.
- An audit objection by itself does not dispense with the requirement of the Assessing Officer applying his mind before issuing an SCN.
- For invoking Section 74, it is insufficient merely to establish a mismatch of ITC or short payment of tax. The authority must have a factual basis to conclude that it resulted from fraud, wilful misrepresentation or suppression.
- The foundational facts supporting an allegation of fraud, wilful misrepresentation or suppression must be evident from the SCN itself.
- Merely reproducing expressions such as “fraud” or “suppression of facts” does not amount to application of mind.
- Section 74 cannot be mechanically invoked merely to overcome the expiry of the normal limitation period.
- The GST Act does not statutorily provide for the kind of “protective assessment” sought to be employed in the present case.
Conclusion
The Supreme Court’s decision in M/s Tata Steel Limited v. Union of India & Ors. clarifies that invocation of the extended limitation period under Section 74 of the CGST Act requires much more than a routine allegation of suppression.
Where the Revenue seeks to proceed beyond the normal limitation period, the SCN must disclose the foundational facts demonstrating why the case involves fraud, wilful misrepresentation or suppression. Statutory expressions cannot be inserted mechanically merely to bring a time-barred proceeding within Section 74.
The judgment therefore reinforces the requirement of application of mind by the Assessing Officer and ensures that the exceptional extended limitation under Section 74 is invoked only where the factual circumstances disclosed in the notice genuinely justify it.
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