Supreme Court Clarifies When Extended Limitation Under Section 74 CGST Can Be Invoked

1. Overview

In Tata Steel Limited v. Union of India & Ors. [Civil Appeal arising out of SLP (C) No. 16859 of 2026 dated August 25, 2026], the Supreme Court has delivered an important ruling on the pre-conditions for invoking the extended five-year limitation under Section 74 of the Central Goods and Services Tax Act, 2017 (“CGST Act”).

The Court held that merely lifting the statutory expressions “fraud”, “wilful misstatement” or “suppression of facts” and inserting them mechanically in a show cause notice (SCN) is not sufficient to trigger Section 74. The notice must itself disclose the foundational facts that led the proper officer to conclude that such serious allegations exist.

Because the SCN dated June 13, 2025, issued to Tata Steel Limited did not set out those foundational facts, and because the normal period under Section 73 had already expired by then, the Supreme Court:

  • Quashed the SCN issued under Section 74 for FY 2018-19 to FY 2020-21, and
  • Set aside the consequential Order-in-Original dated December 26, 2025.

At the same time, the Court granted liberty to the Department to re-initiate proceedings under Section 74, so long as this is done within the statutory outer limit and the new SCN itself contains the necessary factual basis.

This ruling, read alongside G.R. Infra Projects Limited v. State of Madhya Pradesh & Ors. [Civil Appeal No. 11277 of 2026 dated August 19, 2026], significantly tightens the standards for GST show cause notices invoking extended limitation for pre-Section 74A periods (up to FY 2023-24).

2. Background Facts

2.1 C&AG Audit and Initial Communications

  • M/s Tata Steel Limited (“the Appellant”) underwent an audit by the Comptroller and Auditor General of India (C&AG).
  • Audit observations dated May 27, 2024 alleged:
    • Mismatch of Input Tax Credit (ITC) for FY 2018-19, FY 2019-20 and FY 2020-21, and
    • Short payment of GST for FY 2019-20.
  • The Appellant replied to these objections, and on June 27, 2024, the Department sought supporting documents. Thereafter, further correspondence took place.

2.2 Issue of SCN and Transfer to Call Book

  • On June 13, 2025, the Department (“the Respondent”) issued an SCN (Impugned SCN) under Section 74 of the CGST Act, covering the three financial years.
  • By letter dated June 27, 2025, the Additional Commissioner informed the Appellant that:
    • The SCN had been placed in the “call book” (kept in abeyance), and
    • The Department had challenged the C&AG audit objection before the Public Accounts Committee (PAC).

2.3 Revival as “Protective Demand” and Order-in-Original

  • On July 01, 2025, a subsequent communication revived the earlier SCN and styled the revival as a “protective demand”, purportedly because the GST proceedings were subject to strict timelines.
  • Adjudication then proceeded, culminating in an Order-in-Original dated December 26, 2025 (Impugned Order) confirming demand under Section 74.

2.4 High Court Proceedings

  • The Appellant approached the Jharkhand High Court by way of writ in Tata Steel Limited v. Union of India & Ors. [W.P. (T) No. 2485 of 2026 dated April 23, 2026].
  • The Appellant argued that:
    • Essential jurisdictional requirements of Section 74—fraud, wilful misstatement or suppression to evade tax—were absent; and
    • Abruptly reviving a call-book matter purely on the ground of limitation violated natural justice.
  • The Jharkhand High Court, relying on Whirlpool Corporation v. Registrar of Trade Marks [(1998) 8 SCC 1], State of Maharashtra v. Greatship (India) Limited [(2022) 17 SCC 332] and Oberoi Constructions Ltd. v. Union of India [2024 SCC OnLine Bom 3508], held:
    • The Impugned Order was not ex facie without jurisdiction;
    • Whether the ingredients of Section 74 co-existed was a factual inquiry better suited to statutory appeal; and
    • Transfer to the call book was merely an administrative step.
  • The writ petition was dismissed, with liberty to file an appeal within four weeks.

2.5 Appeal to the Supreme Court

Dissatisfied with being relegated to the appellate remedy, the Appellant moved the Supreme Court.

3. Rival Contentions Before the Supreme Court

3.1 Appellant’s Submissions

The Appellant’s core submissions were:

  • Absence of Allegations Under Section 74:

    • The SCN did not actually allege “fraud”, “wilful misstatement” or “suppression of facts” in a meaningful, fact-based manner.
    • Without such allegations and supporting particulars, the extended five-year period under Section 74 could not be applied; only the three-year period under Section 73 was available.

  • Lack of Officer’s Satisfaction & Call Book Conduct:

    • Transfer of the SCN to the call book demonstrated that the Assessing Officer himself was unsure about the validity of the C&AG audit objections.
    • Revival of the SCN as a “protective measure” was claimed to be alien to the CGST framework, given that concepts such as protective assessment are not embedded in the GST statute.

3.2 Revenue’s Submissions

The Respondent contended that:

  • Timely Commencement of Proceedings:

    • Proceedings had commenced prior to the expiry of the limitation under Section 73, thus justifying subsequent steps.

  • Suppression and Misrepresentation:

    • The record, including audit material, allegedly showed suppression of material information and wilful misrepresentation by the assessee.

  • Explanation 2 to Section 74:

    • Based on now-omitted Explanation 2 to Section 74, the Department argued that “suppression” includes even simple non-disclosure of information which the assessee was obliged to declare.

The Supreme Court considered two central questions:

  1. Validity of SCN under Section 74:

    • Can a show cause notice under Section 74 be upheld when it merely reproduces the statutory terms “fraud, wilful misstatement or suppression of facts” without setting out the basic facts on which this conclusion is drawn?

  2. Limitation under Section 73:

    • Was the SCN dated June 13, 2025, for FY 2018-19 to FY 2020-21 within the prescribed time limit under Section 73(10) read with Section 73(2) of the CGST Act?

5. Supreme Court’s Findings and Reasoning

5.1 Computation of Limitation Under Section 73

The Court first examined the limitation framework under Section 73: