Section 74 GST SCN Only States Figures Without Fraud/Suppression Allegation: SC Grants Stay

Section 74 GST show cause notice (SCN) only sets out figures, without factual narration of “fraud / wilful misstatement / suppression”- Hon’ble Supreme Court stayed further proceedings pursuant to such SCN 

The Supreme Court in GR Infra Projects Limited, Ratlam vs State of Madhya Pradesh & Ors (SLP (C) No. 33594/2025, order dated 21.11.2025) has prima facie held that a Section 74 GST show cause notice (SCN) which only sets out figures, without factual narration of “fraud / wilful misstatement / suppression”, is legally deficient and has stayed further proceedings pursuant to such SCN. The order is interim but is already being treated as a strong precedent against vague, template SCNs issued under Section 74 of CGST/SGST Acts.

Basic case details

• Case title: GR Infra Projects Limited, Ratlam vs State of Madhya Pradesh & Ors.
• Court/bench: Supreme Court of India, coram Hon’ble Justice J.B. Pardiwala and Hon’ble Justice K.V. Viswanathan.
• Proceeding: SLP (C) No. 33594/2025 arising from MP High Court order dated 29.10.2025 in WP No. 40749/2025.
• Statutory provision: Section 74 of CGST Act read with MPGST Act (fraud / wilful misstatement / suppression).
• Impugned action: SCN dated 13.06.2025 under Section 74 demanding approx. ₹1.52 crore for FY 2018‑19 on alleged mismatches, ineligible ITC, and cancelled vendors.

Facts and procedural history

• GR Infra Projects is engaged in design and construction of roads and highways and is registered under CGST and MPGST Acts.
• The premises had earlier been searched in August 2022 under Section 67; the assessee claims to have cooperated fully and supplied requisite records.
• Subsequently, a detailed internal investigation report of 191 pages was prepared by the department, but the same was not reproduced or meaningfully reflected in the SCN.
• On 13.06.2025, the department issued an SCN under Section 74 read with MPGST Act for ₹1,52,56,431, tabulating heads like alleged excess ITC, mismatch with GSTR‑2A, ITC on cancelled vendors etc., but without narrative of how these amounted to fraud, wilful misstatement or suppression.
• GR Infra challenged the SCN before the Madhya Pradesh High Court, contending that the notice was non‑speaking, bereft of material particulars and invoked Section 74 mechanically instead of Section 73.
• The MP High Court in GR Infra Projects Limited Vs State of Madhya Pradesh & Ors., Writ Petition No. 40749 of 2025
  Dated: 29/10/2025 declined to interfere, invoking the alternate remedy doctrine (relying inter alia on State of Maharashtra vs Greatship (India) Ltd., (2022) 17 SCC 332) and directed the assessee to reply and contest before departmental authorities, treating the SCN as sufficiently detailed in view of the internal report.
• Aggrieved, the assessee filed SLP before the Supreme Court challenging the High Court’s refusal to quash / interfere with the SCN.

Issues before the Supreme Court

• Whether a GST SCN under Section 74 that only contains numerical figures (tax, interest, penalty etc.) but does not plead specific foundational facts of fraud, wilful misstatement or suppression is prima facie valid.
• Whether the High Court was justified in declining writ interference at SCN stage solely on the ground of alternate remedy when the SCN itself was alleged to be vague and jurisdictionally defective.
• Whether the departmental internal investigation report can cure the defects of a non‑speaking Section 74 SCN, when the report is not part of or incorporated in the SCN served on the assessee.

Key findings and operative order

• The Supreme Court recorded that the principal argument of the assessee was that the Section 74 SCN is “bereft of any material particulars”.
• The Court noted that the petitioner “has no idea” why the department alleges fraud, wilful misstatement or wilful suppression to evade tax, as the SCN only sets out figures without narrating the basis.
• The Court observed that except figures, there is nothing else stated in the SCN, and held that prima facie the petitioner “seems to be justified in saying” that the notice lacks material particulars.
• The Court issued notice in the SLP, returnable in four weeks, and permitted dasti service.
• Importantly, the Court stayed all further proceedings arising out of the impugned SCN in the meantime, thereby injuncting adjudication till further orders.

Legal principles on Section 74 SCN

• Section 74 is a penal provision, invoked only where tax is short‑paid or ITC wrongly availed “by reason of” fraud, wilful misstatement or suppression of facts to evade tax, with extended limitation and 100% penalty exposure.
• Because of its penal and extended‑period nature, a Section 74 SCN must be a speaking, reasoned notice that:
  • Clearly articulates the specific acts/omissions alleged as fraud, misstatement or suppression.
  • Links those factual allegations to tax short‑payment or wrongful ITC.
  • Explains why Section 74 (and not Section 73) is being invoked.
• Mere numerical discrepancies (e.g., GSTR‑3B vs 2A mismatch, ITC on cancelled vendors) without pleaded facts showing intent to evade do not by themselves constitute “fraud” or “suppression” for purposes of Section 74.
• The Supreme Court’s interim view aligns with earlier jurisprudence (e.g., Uniworth Textiles Ltd. and various High Court rulings) that extended limitation and fraud‑based demands require specific, pleaded and evidenced allegations; non‑payment or mismatch per se is not fraud.
• CBIC Circular No. 185/17/2022‑GST has also cautioned that Section 74 cannot be invoked mechanically and mandates that the SCN itself must carry the particulars and material relied upon, not merely refer to internal reports.

Practical implications for drafting and defence

• For the department, the case underlines that:
  • Section 74 cannot be used as a default for all discrepancies; if there is no cogent allegation of fraud / suppression, Section 73 is the appropriate provision.
  • SCNs must narrate facts, chronology, and reasoning; simply appending a table of tax/ITC figures or citing an internal report is insufficient.
• For assessees (including your clients), the order strengthens challenges where:
  • Section 74 SCNs are template‑style, merely reciting statutory language of “fraud / suppression” without factual particulars.
  • There is no reference in the notice to how mens rea or intent to evade is inferred from the material.
• Writ petitions can be considered at SCN stage where the defect is jurisdictional (e.g., misuse of Section 74 instead of 73, complete absence of foundational facts) rather than a mere merits dispute on quantification.

If you want, a separate note can be prepared comparing this order with CBIC Circular 185/17/2022‑GST and relevant HC decisions (e.g., HCL Infotech, Varanasi Sangam Expressway) and also suggesting draft grounds to attack vague Section 74 SCNs in your clients’ matters.