Sections 74 & 74A After SC decision in Tata Steel: Will Old GST Demands Be Withdrawn?

Section 74 and 74A Explained: What Taxpayers Must Do After Tata Steel: Will the Department withdraw old GST demands?

Summary: The article examines the Supreme Court decisions in M/s G.R. Infra Projects Limited, Ratlam v. State of Madhya Pradesh & Ors., Civil Appeal No. 11277 of 2026, decided on 19 August 2026, and M/s Tata Steel Limited v. Union of India & Ors., Civil Appeal arising from SLP (C) No. 16859 of 2026, decided on 25 August 2026 and reported as 2026 INSC 920. The supplied material states that G.R. Infra concerned a Section 74 notice for FY 2018–19 issued after the ordinary Section 73 limitation had expired, while Tata Steel concerned FY 2018–19, FY 2019–20 and FY 2020–21, an audit objection concerning ITC mismatch and short payment, and tax demand of ₹890.52 crore with an equivalent penalty. The Supreme Court held that foundational facts supporting fraud, wilful misstatement or suppression must be evident from the notice itself; mechanical statutory expressions cannot by themselves sustain Section 74 or its extended limitation. The article discusses consequences for pending SCNs, appeals, writ petitions and GSTAT matters, the treatment of existing orders and liabilities, possible departmental responses, and the application of Section 74A from FY 2024–25 onwards. It also provides draft formats for seeking withdrawal or dropping of Section 74 proceedings and for raising an additional appellate/GSTAT ground.

The Supreme Court rulings

1. G.R. Infra Projects Limited

Case: M/s G.R. Infra Projects Limited, Ratlam v. State of Madhya Pradesh & Ors.

Citation: 2026 Live Law (SC) 852; Civil Appeal No. 11277 of 2026, arising from SLP (C) No. 33594 of 2025

Date: 19 August 2026.

The Department had issued a Section 74 SCN for FY 2018–19 after the ordinary limitation under Section 73 was over. The notice simply used the expression “fraud or concealment of facts” without explaining:

• What was the alleged fraud.
• Which fact was concealed.
• What was the supporting evidence.
• How the alleged conduct caused tax short payment or wrongful ITC.
• Why the case was under Section 74 rather than the normal provision.

The Supreme Court quashed the SCN and also set aside the High Court order that had upheld it. The Court held that the extended limitation cannot be invoked merely by mechanical use of the words “fraud” or “concealment.”

The operative conclusion of the Court was:

“We find absolutely no reason to sustain the SCN issued and find the High Court to have erroneously upheld the same. We set aside the impugned order as also the SCN and direct the respondent-State to desist from taking any further proceedings in pursuance of the SCN challenged before the High Court.”

2. Tata Steel Limited

Case: M/s Tata Steel Limited v. Union of India & Ors.

Citation: 2026 INSC 920; Civil Appeal arising from SLP (C) No. 16859 of 2026

Date: 25 August 2026.

Tata Steel received a Section 74 SCN dated 13 June 2025 for FY 2018–19, FY 2019–20, and FY 2020–21. The case arose from audit observations concerning alleged ITC mismatch and tax short payment. The Department confirmed:

The Supreme Court set aside both the SCN and the OIO dated 26 December 2025.

The Court held that the normal Section 73 limitation had expired and Section 74 could apply only if the notice contained valid, evidence-based allegations of fraud, wilful misstatement, or suppression of facts. A general allegation that ITC was availed “without documentary evidence” and that the taxpayer had “suppressed facts” was insufficient.

The governing statement is:

The foundational facts which lead to an inference of fraud, wilful misrepresentation, or suppression must be evident from the notice itself. Mere use of those words does not demonstrate application of mind.

The Supreme Court also held that an audit objection cannot replace the proper officer’s independent satisfaction. It noted that a “protective” assessment or demand is not recognised by GST law. A Section 74 notice cannot be issued merely because the normal limitation under Section 73 has expired.

What happens to existing Section 74 cases?

Pending SCNs

A pending Section 74 SCN does not automatically become void merely because of Tata Steel. However, the taxpayer can now demand that the officer identify, from the SCN itself:

• The precise fraudulent act alleged.
• The precise false declaration or omitted fact.
• The legal obligation to disclose that fact.
• The evidence relied upon.
• The basis for inferring deliberate intention to evade tax.
• The direct causal connection between the alleged conduct and tax short payment or wrongful ITC.
• The reason for invoking Section 74 rather than the normal route.

If the SCN merely says “ITC mismatch,” “ineligible ITC,” “fraud,” “suppression,” or “wilful misstatement,” without the above particulars, it is vulnerable under G.R. Infra and Tata Steel.

Orders under appeal

Orders passed under Section 74 continue to remain enforceable unless they are set aside in appeal, writ, Tribunal proceedings, revision, or by the Supreme Court. There will be no automatic cancellation merely because the Supreme Court has laid down a legal principle.

Therefore, taxpayers with appeals before the first appellate authority, GSTAT, High Court, or Supreme Court should immediately file additional written submissions and specifically invoke the two Supreme Court judgments.

The most useful argument is:

The SCN was issued under Section 74 after expiry of the normal limitation, but it does not disclose foundational facts of fraud, wilful misstatement, or suppression. Therefore, the extended limitation is unavailable, and the SCN/OIO is without jurisdiction.

Writ petitions pending in High Courts

Many taxpayers approached High Courts before GSTAT became operational because of:

• Absence of Tribunal remedy;
• Alleged lack of jurisdiction;
• Violation of natural justice;
• Time-barred proceedings;
• Mechanical invocation of Section 74;
• Demand based only on GSTR-2A/GSTR-2B mismatch;
• Denial of cross-examination or relied-upon documents.

In such pending writ petitions, Tata Steel and G.R. Infra should be brought on record by filing a memo, additional affidavit, or written submissions, according to the High Court procedure. The taxpayer should demonstrate the actual wording of the SCN and show that there are no foundational facts in it.

GSTAT appeals

For matters now before GSTAT, taxpayers should not merely attach the judgment. They should prepare a separate Section 74 jurisdictional note comparing the SCN with the Supreme Court’s test.

Will old liabilities be withdrawn?

The Department is legally entitled to review its pending cases. Yet the following distinction is important.

The Department cannot legally continue a Section 74 case merely to protect revenue. But only a competent authority, appellate forum, or court can formally cancel an existing demand.

What the Department may do next

1. Scrutinise and defend stronger fraud cases

The Department is likely to continue proceedings where the SCN contains material such as:

• Fake invoices or invoices without actual supply.
• Non-existent suppliers or bogus registrations.
• Fabricated e-way bills, transport documents, or invoices.
• Circular trading backed by transaction trail and investigation evidence.
• Parallel books, unaccounted sales, or hidden consideration.
• Deliberately false returns contradicted by seized records, bank trail, stock records, or admissions.
• Wrongful ITC claimed with evidence of knowledge and intent.

In these matters, Tata Steel does not protect the taxpayer from Section 74. It only requires proper pleading and proof.

2. Rework future notices

Future Section 74 SCNs for older years may become longer and more detailed. Officers may try to record:

• Transaction-wise allegation;
• Supplier-wise/invoice-wise findings;
• Investigation material;
• Statements and third-party evidence;
• Explanation of fraud/suppression;
• Limitation calculation;
• Reasons for treating the case as deliberate tax evasion.

A fresh SCN may be issued only if the statutory time limit is still available and the statutory requirements are met. The Supreme Court expressly permitted fresh proceedings in Tata Steel, if legally warranted, and required a fresh order in that case by 28 February 2027.

3. Drop weak or limitation-driven matters

Where the only material is a GSTR-2A/2B difference, CAG audit note, general intelligence input, or a general allegation of suppression, the Department should reconsider the case. If normal limitation is over and Section 74 cannot be sustained, the demand should be dropped.

This is especially relevant to FY 2017–18, FY 2018–19, FY 2019–20, and FY 2020–21 matters where officers issued Section 74 notices near the end of the extended period. The Supreme Court has directly disapproved using Section 74 as a limitation-saving device.

4. Continue ordinary demands under Section 74A

The Department will not stop issuing GST notices after Tata Steel. For FY 2024–25 onwards, Section 74A is the governing provision. It is a common determination provision for tax not paid, short paid, erroneously refunded, or ITC wrongly availed/utilised.

A crucial distinction is:

Thus, Tata Steel will not stop Section 74A notices. But the Department should not mechanically classify a normal Section 74A mismatch case as a fraud case merely to levy 100% penalty.

Illustration: normal mismatch versus Section 74 case

Example A: normal reconciliation issue

A purchaser claims ITC in GSTR-3B based on genuine tax invoices, goods received, e-way bills, purchase register, and bank payment. One vendor files GSTR-1 late, and the invoice does not appear in GSTR-2A/2B during the original month.

This may require verification, supplier follow-up, or reversal/re-availment as per applicable provisions. But it does not, without more, establish fraud, wilful misstatement, or suppression by the recipient.

For FY 2017–18 to FY 2023–24, merely calling this a Section 74 fraud case is inconsistent with the Supreme Court’s test unless the SCN sets out additional evidence demonstrating deliberate tax evasion.

Example B: potential fraud case

A recipient claims ITC on invoices from suppliers who were non-existent at the declared addresses. Investigation finds no goods movement, no transport documents, no payment trail, common controllers, and records indicating the recipient knew the invoices were accommodation entries.

Here, Section 74 may be validly invoked if the SCN sets out those exact facts, provides relied-upon documents, quantifies invoice-wise ITC, and connects the evidence to deliberate wrongful availment.

The difference is not the use of the word “fraud.” The difference is the presence of specific, disclosed evidence.

Draft request for withdrawal/dropping

The following can be adapted for a pending Section 74 SCN. It should be filed through the GST portal wherever reply filing is available, as well as physically/e-mail by an acknowledged covering letter where appropriate.

To
The Proper Officer / Adjudicating Authority
[Commissionerate / Division / Range / LGSTO]
[Address]

Subject: Request for withdrawal/dropping of proceedings initiated under Section 74 of the CGST Act/KGST Act in the absence of foundational facts of fraud, wilful misstatement or suppression of facts — reg.

Reference:

Show Cause Notice / Form GST DRC-01 No. dated

GSTIN:

Tax period:

Name of taxpayer:

Respected Sir/Madam,

We respectfully submit that the impugned show-cause notice has invoked Section 74 of the CGST Act/KGST Act. However, the notice does not disclose the foundational facts necessary to invoke the said provision.

The SCN broadly alleges [mention the allegation—ITC mismatch / GSTR-2A difference / audit objection / short payment], but it does not identify:

• The exact fraudulent act alleged against the notice;
• The specific statement alleged to be wilfully false;
• The particular fact alleged to have been suppressed;
• The statutory disclosure obligation allegedly violated;
• The documents or evidence that establish deliberate conduct;
• The basis for alleging intention to evade tax; and
• The causal nexus between the alleged conduct and the proposed demand.

The SCN therefore merely reproduces statutory expressions such as “fraud,” “wilful misstatement,” and/or “suppression of facts,” without disclosing the factual material from which such inference could arise.

The Supreme Court in M/s G.R. Infra Projects Limited, Ratlam v. State of Madhya Pradesh & Ors., Civil Appeal No. 11277 of 2026, arising out of SLP (C) No. 33594 of 2025, decided on 19.08.2026, reported as 2026 Live Law (SC) 852, held that mechanical use of the expression’s “fraud” or “concealment of facts,” without particulars in the SCN, cannot justify invocation of the extended limitation under Section 74. The Court set aside the SCN and directed the State to desist from taking further proceedings pursuant to it.

Further, in M/s Tata Steel Limited v. Union of India & Ors., Civil Appeal arising out of SLP (C) No. 16859 of 2026, decided on 25.08.2026, 2026 INSC 920, the Supreme Court held that the foundational facts leading to an inference of fraud, wilful misrepresentation, or suppression must be evident from the notice itself. Mere use of such statutory terms does not show application of mind.

In the present case, the alleged discrepancy is fully capable of reconciliation through [GSTR-1, GSTR-3B, GSTR-2A/2B, purchase register, invoices, e-way bills, delivery records, bank-payment records, vendor confirmation, annual return, audit reply, etc.]. The relevant facts and documents were available to, or disclosed before, the Department. There is no material in the SCN establishing any deliberate act to evade tax.

In view of the above, we respectfully request that:

• The proceedings under Section 74 be withdrawn/dropped forthwith;
• The proposed demand, interest, and penalty be dropped;
• Alternatively, without prejudice, complete invoice-wise and transaction-wise relied-upon documents and the basis of the alleged fraud/suppression be provided, and a fresh reasonable opportunity of reply and personal hearing be granted; and
• No coercive recovery action be initiated pending disposal of this request and the proceedings.

This request is made without prejudice to all rights, remedies, factual submissions, legal objections, and limitation grounds available to the notice.

Yours faithfully,
For [Taxpayer name]
Authorised Signatory
Date:
Place:

Draft additional ground for appeal or GSTAT

The SCN has invoked Section 74 after the normal limitation applicable to non-fraud cases had expired. However, the SCN does not disclose foundational facts establishing fraud, wilful misstatement, or suppression of facts with intent to evade tax. It merely uses statutory expressions without identifying the alleged fraudulent conduct, the fact suppressed, the legal obligation allegedly breached, the evidence of deliberate conduct, or the causal nexus with the proposed demand. The invocation of Section 74 and extended limitation is therefore without jurisdiction.

Reliance is placed on M/s G.R. Infra Projects Limited, Ratlam v. State of Madhya Pradesh & Ors., Civil Appeal No. 11277 of 2026, decided on 19.08.2026, 2026 Live Law (SC) 852; and M/s Tata Steel Limited v. Union of India & Ors., Civil Appeal arising from SLP (C) No. 16859 of 2026, decided on 25.08.2026, 2026 INSC 920.

Practical action plan

For each taxpayer’s matter, prepare one concise case chart before filing the request or appeal:

Final position

The post-Tata Steel position is not that every old demand under Section 74 will be withdrawn. The correct position is more precise:

The Department can continue only those Section 74 proceedings where the notice itself contains specific, material, and evidence-backed allegations of fraud, wilful misstatement, or suppression.

A routine ITC mismatch, audit objection, reconciliation difference, or limitation pressure cannot be converted into a fraud proceeding by inserting statutory words in the SCN.

Weak notices can be requested to be withdrawn or dropped.

Existing orders must be challenged through appeal, GSTAT, writ, or other available remedy; they will not vanish automatically.

Section 74A notices will continue for FY 2024–25 onward, but the Department cannot impose fraud-based consequences or 100% penalty without clearly pleaded and established evidence of fraud/suppression.