Supreme Court: Mere Words “Fraud” or “Suppression of Facts” in a GST Show Cause Notice Are Not Enough to Invoke Section 74
Summary: The Supreme Court in M/s G.R. Infra Projects Limited Ratlam vs. The State of Madhya Pradesh & Ors. held that merely using the expressions “fraud” or “suppression of facts” in a GST show cause notice is insufficient to invoke the extended limitation period under Section 74 of the CGST Act. M/s G.R. Infra Projects Limited Ratlam challenged an SCN dated 13.06.2025 concerning FY 2018-19 and raising a demand of Rs.1,52,56,431/-. The company argued that the ordinary limitation period applicable under Section 73 had expired on 28.02.2025 and that the department had mechanically invoked Section 74 without identifying any conduct constituting fraud, wilful misstatement or suppression of facts. Although the department sought to explain the allegations through its counter affidavit, the Court refused to consider those subsequent explanations. It reiterated that the legal validity of a notice must be determined from the notice itself and that deficiencies affecting jurisdiction cannot be cured through pleadings filed later before a court. The SCN contained only a bland reference to “fraud or concealment of facts” without explaining how fraud was inferred or concealment detected. The use of the expression “or” also indicated uncertainty regarding the allegation being made. Holding that the foundational facts and reasoning supporting the invocation of the extended limitation period must be disclosed in the notice, the Supreme Court set aside the Madhya Pradesh High Court’s order as well as the SCN and restrained the department from proceeding further on its basis.
Background of the Case
This case deals with a Show Cause Notice (SCN) issued to a Ratlam-based infrastructure company for the assessment year 2018-19. The department issued the SCN on 13.06.2025 under Section 74 of the CGST Act read with the MPGST Act, raising a total demand of Rs. 1,52,56,431/-.
The matter first went before the Madhya Pradesh High Court at Indore, where the company had challenged the SCN by way of a writ petition. The High Court dismissed the writ petition on 29.10.2025, holding that the petitioner should participate in the SCN proceedings and raise its objections before the proper officer, rather than approach the writ court directly. The company then went in appeal before the Supreme Court.
What the Company Argued
The company’s main argument was about limitation. Under Section 73 of the CGST Act, a notice for a normal (non-fraud) case has to be issued within three years, counted from the due date of filing the annual return. For FY 2018-19, after accounting for various notifications extending the annual return due date, and after excluding the COVID limitation period as directed by the Supreme Court in its Suo Motu Writ Petition (Re: Cognizance for Extension of Limitation), the extended limitation period under Section 73 worked out to 28.02.2025.
Since the SCN was issued only on 13.06.2025, it was clearly beyond the three-year period applicable under Section 73. The department could still act within a five-year period, but only if the case genuinely involved fraud, wilful misstatement or suppression of facts, since that is what Section 74 requires.
The company’s case was that the SCN merely used the words “fraud or suppression of facts” without explaining what the actual fraud or suppression was. According to the company, such vague and mechanical wording cannot justify invoking the extended five-year period under Section 74.
What the Department Argued
The department, through its counsel, tried to rely on the counter affidavit filed before the Court to explain and elaborate on the allegations of fraud and suppression, arguing that these details justified proceeding under Section 74.
What the Supreme Court Held
The Supreme Court refused to look at the counter affidavit for this purpose. It reiterated a well-settled principle: if a notice or order is under challenge for being invalid—for example, for non-application of mind or for not meeting statutory requirements—then whatever is needed to make that notice valid must be found within the notice itself. It cannot be supplied later through a counter affidavit filed in court.
Coming to the SCN itself, the Court observed that it only contained a bland statement referring to “fraud or concealment of facts”, without stating how the fraud was inferred or how the concealment was detected. The Court even pointed out that the use of the word “or” between fraud and concealment showed that the department itself was not clear about which allegation actually applied.
The Court held that for the extended limitation period to apply, the specific facts and reasoning that lead to an inference of fraud or suppression must come out from the notice itself. Simply repeating the words “fraud, wilful misstatement or suppression of facts” without describing the conduct that is said to amount to any of these will not satisfy the requirement of Section 74.
On this basis, the Supreme Court set aside both the High Court’s order and the SCN, and directed the department not to proceed further on the strength of that notice. The appeal was allowed.
Key Takeaways for Practitioners
- Merely writing “fraud” or “suppression of facts” in an SCN is not sufficient—the notice must set out the specific facts and reasoning behind such an allegation.
- The department cannot fill in the gaps later through a counter affidavit filed in court; the notice has to stand on its own.
- Section 74’s extended five-year limitation cannot be invoked just to get around the expiry of the three-year period under Section 73—the conditions for fraud/suppression must genuinely exist and be reflected in the notice.
- In old-period GST matters, always work out the limitation date carefully, factoring in the COVID exclusion period where applicable, before looking at the merits of the demand.
- Before drafting a reply on merits, first examine whether the SCN itself is legally sustainable—particularly the language used to invoke Section 74.
This is a useful precedent for practitioners dealing with GST SCNs relating to older assessment years where the department has invoked Section 74 without adequately explaining the basis for alleging fraud or suppression.
