Summary: Supreme Court in M/s G.R. Infra Projects Limited Ratlam v. State of Madhya Pradesh & Ors. has set aside a Show Cause Notice dated 13 June 2025 issued under Section 74 of the CGST Act for FY 2018-19. The Court held that proceedings under Section 73 were already barred by limitation and that the Department could rely on Section 74 only if its requirements were independently satisfied. Examining the notice, the Court found that the general reference to “fraud or concealment of facts” did not explain the alleged fraud, concealed facts, suppression, wilful conduct or how such conduct resulted in tax not being paid or short paid. The Court held that the allegations forming the basis for invoking the extended limitation under Section 74 must be specifically reflected in the Show Cause Notice itself and cannot be supplied subsequently through a counter affidavit. Accordingly, the Supreme Court set aside the Madhya Pradesh High Court judgment, quashed the Show Cause Notice dated 13 June 2025 and directed the State authorities to desist from taking further proceedings pursuant to the notice.
Mere Use of Words “Fraud, Wilful Misstatement or Suppression of Facts” Cannot justify the Invocation of extended period of time, unless same is substantiated.-Suprement Court
The Supreme Court in M/s G.R. Infra Projects Limited Ratlam v. State of Madhya Pradesh & Ors. has set aside a Show Cause Notice issued under Section 74 of the CGST Act, for FY 2018-19, holding that the extended limitation available under Section 74 cannot be invoked merely by mechanically mentioning expressions such as “fraud” or “concealment/suppression of facts.” Background of the Case
The appellant was issued a Show Cause Notice dated 13 June 2025 in relation to FY 2018-19.The appellant contended that proceedings for the relevant period were already barred by limitation under Section 73 of the CGST Act, and therefore the Department could not resort to Section 74 unless the essential ingredients of fraud, wilful misstatement or suppression of facts were specifically established.
Supreme Court’s Observations
1. Validity of SCN Must Be Tested from the Notice Itself
The Court reiterated the settled principle that where an authority issues a notice or passes an order, the legal requirements necessary to sustain such notice or order must be evident from the document itself. The validity of an otherwise deficient notice cannot be improved subsequently by furnishing additional reasons through a counter affidavit before the Court.
2. Section 73 Proceedings were Already Time-Barred
The Court examined the limitation applicable to FY 2018-19.
Considering the extended due date for filing the annual return for FY 2018-19 and the exclusion of the COVID-19 limitation period referred to by the Court, it held that the extended limitation for proceedings under Section 73 expired on 28 February 2025. Since the SCN was issued only on 13 June 2025, the Court held that the proceedings were clearly beyond the period available under Section 73.
The Department could therefore sustain the proceedings only if the requirements for invoking Section 74 were independently satisfied.
3. Mere Mention of “Fraud or Concealment” Is Not Sufficient
On examining the Show Cause Notice, the Supreme Court found that except for a general and bland statement referring to “fraud or concealment of facts,” the notice did not explain:
1. what constituted the alleged fraud;
2. what facts were allegedly concealed;
3. how the concealment amounted to suppression;
4. what wilful conduct was attributable to the taxpayer; or
5. how such conduct resulted in tax not being paid or short paid.
The Court further noticed that even the manner in which the expression “fraud or concealment” was used indicated absence of a clear finding or application of mind regarding the precise ground on which Section 74 was being invoked.
4. Extended Limitation Requires Specific Allegations
The Supreme Court held that for extended limitation under Section 74 to apply, the allegations which form the basis for drawing an inference of: fraud, wilful misstatement or suppression of facts must be specifically reflected in the Show Cause Notice itself. A proper officer cannot simply reproduce the statutory expressions without identifying the underlying facts which persuaded the officer to conclude that the taxpayer had employed such conduct.
Supreme Court’s Decision
The Supreme Court found no justification to sustain the Show Cause Notice issued under Section 74. Accordingly, court order to set aside the judgment of the Madhya Pradesh High Court; quashed the Show Cause Notice dated 13 June 2025; and directed the State authorities to desist from taking any further proceedings pursuant to the said notice.
