Authority: Supreme Court of India

Order Date: 25 August 2026

Case Overview

  • Parties: Appellant – M/s Tata Steel Limited; Respondents – Union of India through the Secretary, Ministry of Finance and others.
  • Nature of Proceeding: Civil appeal (No. ___ of 2026) arising from SLP (C) No.16859 of 2026, challenging a Show Cause Notice (SCN) issued under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act) for the financial years 2018‑2019, 2019‑2020 and 2020‑2021.
  • Key Dates:
  • Audit objection raised by the Comptroller and Auditor General of India (CAG) leading to SCN.
  • Annexure P1 (audit observations) dated 27‑May‑2024.
  • Replies submitted; Annexure P5 (document request) dated 27‑Jun‑2024.
  • SCN issued on 13‑Jun‑2025 (Annexure P11).
  • Additional Commissioner transferred SCN to “call book” on 27‑Jun‑2025 (Annexure P12).
  • Fresh notice reviving SCN issued on 01‑Jul‑2025.
  • Allegations: Department alleged mismatch of input tax credit (ITC) and short payment of tax for FY 2019‑2020, invoking Section 74 on the basis of alleged fraud, willful misrepresentation or suppression of facts.
  • Legal Contentions:
  • Appellant argued no fraud or willful misstatement existed; therefore Section 74 could not apply and the five‑year extended limitation was inapplicable.
  • ASG contended that suppression existed and that proceedings began before the three‑year limitation under Section 73 expired.
  • The Court examined the statutory framework of Sections 73 and 74, the requirement of a three‑month notice before the limitation expiry, and the need for the Assessing Officer’s satisfaction of fraud/suppression.
  • Limitation Framework:
  • Section 73 mandates a three‑year limitation from the date of filing the annual return (Section 44) for issuing a notice under Section 9.
  • Annual returns for FY 2018‑19, 2019‑20 and 2020‑21 were required by 31‑Dec‑2020, 31‑Mar‑2021 and 28‑Feb‑2022 respectively, due to successive notifications extending the filing dates.
  • Consequently, the three‑year limitation expired on 31‑Dec‑2023, 31‑Mar‑2024 and 28‑Feb‑2025 respectively.
  • The Supreme Court’s suo motu Writ Petition (C) No.3 of 2020 extended limitation periods by excluding the period 15‑Mar‑2020 to 28‑Feb‑2022.
  • Applying this exclusion, the limitation for FY 2018‑19 extended to 28‑Feb‑2025; for FY 2019‑20 and 2020‑21 it remained 28‑Feb‑2025.
  • Court’s Reasoning:
  • The SCN dated 13‑Jun‑2025 was issued after the extended limitation period had expired.
  • Section 74 can be invoked only when the Assessing Officer is satisfied of fraud, willful misrepresentation or suppression, which must be substantiated by factual findings in the notice.
  • The SCN contained only a generic statement of “suppression of facts” without concrete factual basis; Explanation 2 to Section 74, relied upon by the ASG, had been omitted with effect from 01‑Nov‑2024.
  • The Department had not obtained the Assessing Officer’s satisfaction, as the audit objections were still before the Public Accounts Committee.
  • Therefore, the SCN and the subsequent Order‑in‑Original dated 26‑Dec‑2025 could not be sustained.
  • However, the extended two‑year period (until 28‑Feb‑2027) for invoking Section 74 remains open, allowing the Department to initiate fresh proceedings if it can provide foundational facts.

Final Outcome

  • The Supreme Court set aside the Show Cause Notice dated 13‑Jun‑2025 and the Order‑in‑Original dated 26‑Dec‑2025.
  • The appeal by Tata Steel Limited was allowed.
  • The Department may, at its discretion, initiate a new proceeding under Section 74 before 28 Feb 2027, provided it includes concrete factual allegations of fraud, willful misrepresentation or suppression.
  • All pending applications, if any, were disposed of.

Topics: GST, Limitation Period, Tax Litigation