In GST Notice u/s 74, allegations should emanate from itself, a bland statement of ‘fraud or concealment of facts” not sufficient – SC
In a recent judgment, Hon’ble Supreme Court has held in a SCN u/s 74 of GST Act 2017, allegations should emanate from the notice itself. It cannot mechanically use the words ‘fraud, willful misstatement or suppression of facts’
ABCAUS Case Law Citation:
5216 (2026) (08) abacus.in SC
In the instant case, the appellant had challenged the show cause notice issued under section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act) read with State GST Act, 2017.
The case of the assessee was that notice issued under Section 74 can only be issued when there is a fraud/ willful misstatement/ suppression of facts alleged; which allegation has to come out from the notice itself which was not in its case.
It was submitted that the SCN was issued beyond the time of three years provided under Section 73 for determination of tax inter alia short paid, for any reason other than fraud, willful misstatement or suppression of facts.
The Hon’ble Supreme Court declined to peruse the counter affidavit of the Department in which the allegations of fraud and suppression of facts had elaborated, justifying the proceedings under Section 74 and not under Section 73.
The Hon’ble Supreme Court stated that it is a trite principle that when an authority has issued a notice or an order, the requirements to make the notice or order valid should be contained in such notice or order and cannot be supplanted by a counter affidavit in Court, where the notice or order is alleged to be invalid for reason to non-application of mind.
The Hon’ble Supreme Court noted that a bare reading of the notice would indicate that but for a bland statement of ‘fraud or concealment of facts’ nothing is stated as to how fraud was inferred or concealment of facts were detected. In fact, the ‘or’ employed indicates that even the assessing officer was not sure that the assessment was proceeded by reason of fraud or on the ground of concealment of facts. What is required for the extended time to be applied are the allegations, which lead to the inference of a fraud or the concealment as attempted by the assessee resulting in suppression of facts, should emanate from the notice itself.
The Hon’ble Supreme Court opined that there cannot be a mechanical use of the words ‘fraud, willful misstatement or suppression of facts’ without listing out the aspects which persuades the assessing officer to conclude that there has been employed either of these surreptitious devices by the assessee.
Accordingly, the Hon’ble Supreme Court 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.
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