Section 74 CGST Act After G.R. Infra Projects: A Comprehensive Analysis of Limitation, Explanation 2, and Section 75(2)
Overview
The Hon'ble Supreme Court's Order dated 19 August 2026 in G.R. Infra Projects Limited Ratlam Vs State of Madhya Pradesh & Ors. has emerged as a landmark ruling in GST litigation, particularly concerning the issuance of Show Cause Notices under Section 74 of the Central Goods and Services Tax Act, 2017. A Division Bench comprising Hon'ble Mr. Justice J.B. Pardiwala and Hon'ble Mr. Justice K. Vinod Chandran quashed a Show Cause Notice dated 13 June 2025 issued for FY 2018-19, holding that the foundational ingredients of fraud, wilful misstatement, or suppression of facts must be expressly pleaded within the body of the notice itself — they cannot be introduced later through a counter affidavit before the Court.
While this core proposition has precedential roots, the Order carries several deeper implications that have largely gone unexamined in broader commentary. These concern the distinction between the limitation period for issuing a notice versus passing an order, the year-specific manner of computing the COVID-19 exclusion, the complete absence of any reference to Section 168A notifications, the use of statutory vocabulary foreign to Section 74, and the deliberate withholding of any direction under Section 75(2). Each of these dimensions is examined in detail below.
Background Facts
The assessee was a company engaged in the design and construction of roads and highways. A search was conducted under Section 67 of the CGST Act in August 2022. Summons had previously been issued in March 2022, covering FY 2017-18 through FY 2020-21, and statements were recorded from the company's Accountant, Authorised Signatory, and Director.
A draft notice-cum-investigation report was prepared on 3 March 2025, followed by an intimation in Form GST DRC-01A dated 29 April 2025 under Rule 142(1A) of the CGST Rules, 2017. Upon the assessee's objection that the draft notice had not been formally served, it was provided on 27 May 2025. The Show Cause Notice under Section 74 was ultimately issued on 13 June 2025 for FY 2018-19.
The Supreme Court's Order does not enumerate the heads of demand; however, from the High Court's judgment, the total demand of Rs. 1,52,56,431 was raised under four heads:
- Inter-State outward supply — GSTR-3B vs. e-way bill: Rs. 1,06,954
- Inter-State inward supply — GSTR-3B vs. e-way bill: Rs. 42,19,025
- Ineligible input tax credit on account of site office: Rs. 2,69,014
- Post-supply cancellation of vendor registrations: Rs. 1,06,61,438
Notably, the last head — constituting nearly 70% of the total demand — pertained to denial of input tax credit following cancellation of supplier registrations after the relevant supplies had already been made.
The Core Question Before the Court
The central issue was whether a Show Cause Notice dated 13 June 2025, issued for FY 2018-19, could be sustained as a valid notice under Section 74 of the CGST Act, given that the normal three-year limitation window under Section 73 had admittedly lapsed.
Rival Contentions
For the assessee: A notice under Section 74 can only be issued where allegations of fraud, wilful misstatement, or suppression of facts are present on the face of the notice itself. Since the notice was issued beyond the three-year limitation period, Section 73 was no longer available.
For the Revenue: The Government Advocate sought to rely on the counter affidavit filed before the Court, which elaborated on the allegations of fraud and suppression, contending that this was sufficient to justify invocation of Section 74 rather than Section 73.
Supreme Court's Findings
Rejection of the Counter Affidavit
In Para 5 of the Order, the Court firmly declined to examine the counter affidavit. Relying on the well-established principle articulated in Mohinder Singh Gill & Anr. v. The Chief Election Commissioner, New Delhi & Ors., (1978) 1 SCC 405, the Court held that wherever a notice or order is challenged for non-application of mind, the conditions rendering it valid must be contained within the four corners of the notice or order itself. Such conditions cannot be introduced or supplemented through a counter affidavit filed subsequently before the Court.
Computation of Limitation Under Section 73
In Paras 6 to 8, the Court traced the limitation chain for FY 2018-19 as follows:
- Rule 80 of the CGST Rules, 2017 requires the annual return to be filed by 31 December following the close of the financial year — meaning 31 December 2019 for FY 2018-19;
- Successive notifications under
Section 44(1)extended the due date to 31 December 2020; - Three years from that date under
Section 73(10)placed the outer limit at 31 December 2023; - The exclusion granted by the Supreme Court in Re: Cognizance for Extension of Limitation, Suo Motu W.P. (C) No. 3 of 2020, covering the period 15 March 2020 to 28 February 2022, was applied to the extent it fell within the three-year window — amounting to 1 year and 2 months;
- This extended the outer limit to 28 February 2025.
Since the Show Cause Notice was issued on 13 June 2025 — well beyond 28 February 2025 — it was held to be time-barred under Section 73. Its validity therefore hinged entirely on whether Section 74 could be validly invoked.
Recital of Departmental History
Para 9 of the Order recounts, from the counter affidavit, the full investigative chain: the summons, failure to produce documents, the search, statements recorded, twenty instances between 1 September 2022 and 7 February 2025 on which the assessee failed to appear, the draft notice-cum-investigation report, the DRC-01A intimation, and the eventual issuance of the notice.
This recital is not in contradiction with Para 5. Its purpose is to underscore that the investigative material existed in the Department's possession and yet was not incorporated into the notice. The defect, therefore, lay not in the inadequacy of the investigation but squarely in the drafting of the notice itself.
The Two Infirmities Identified in the Notice
In Para 10, the Court identified two distinct deficiencies:
Absence of substantive allegations: The notice contained no more than a bland recital of "fraud or concealment of facts" without setting out how fraud was inferred or concealment detected. The notice must contain the specific aspects that persuaded the Proper Officer to conclude that surreptitious devices were employed — a mechanical reproduction of statutory expressions is insufficient.
**Use of the disjunctive "or"😗* The Court noted that the use of "or" between "fraud" and "concealment of facts" itself indicated that the Proper Officer was uncertain whether the proceedings were founded on fraud or on concealment — pointing to a lack of deliberate application of mind.
Relief Granted
In Paras 11 to 13, the Court found no basis to sustain the notice, concluded that the Hon'ble Madhya Pradesh High Court at Indore (W.P. No. 40749 of 2025 dated 29 October 2025, Neutral Citation 2025:MPHC-IND:31486) had erred in declining to interfere at the notice stage, and accordingly set aside both the High Court's order and the Show Cause Notice. The respondent-State was directed to desist from pursuing any further proceedings in pursuance of the said notice.
Crucially, no remand was ordered, no liberty to issue a fresh notice was granted, and no direction was issued under Section 75(2).