Supreme Court Invalidates Vague GST SCN Under Section 74: Key Principles on Limitation and Drafting

Background and Context

In G.R. Infra Projects Limited Ratlam Vs State of Madhya Pradesh & Ors. (Supreme Court of India), the Supreme Court examined the validity of a Show Cause Notice (SCN) dated 13.06.2025 issued in relation to the assessment year 2018-19 under the Central Goods and Services Tax Act, 2017 (CGST Act) read with the Madhya Pradesh Goods and Services Tax Act, 2017 (MPGST Act).

The central issue was whether this SCN could legitimately be treated as having been issued under Section 74 rather than Section 73 of the CGST Act, particularly in light of:

  • The expiry of limitation for action under Section 73, and
  • The requirement that an SCN invoking Section 74 must clearly spell out allegations of fraud, wilful misstatement or suppression of facts.

The assessee challenged the SCN as being time-barred under Section 73 and as legally unsustainable under Section 74 due to absence of concrete particulars of fraud or suppression in the notice itself.

Statutory Framework: Section 73 vs Section 74

Distinction Between Sections

  • Section 73 of the CGST Act deals with determination of tax not paid, short paid, erroneously refunded, or input tax credit wrongly availed or utilized for reasons other than fraud, wilful misstatement or suppression of facts.
  • Section 74 applies in cases where non-payment, short payment or wrongful availment/utilization of input tax credit is “by reason of fraud or any wilful misstatement or suppression of facts”.

The statutory scheme therefore creates:

  1. A normal limitation period under Section 73, and
  2. An extended limitation period under Section 74, but only when clear and specific allegations of fraud, wilful misstatement or suppression are made out.

Time Limits Under Section 73

The Court examined the limitation framework as follows:

  • Section 73(2) requires that the proper officer must issue the SCN at least three months prior to the time limit prescribed in Section 73(10).
  • Section 73(10) provides that the adjudication order must be passed within three years from the due date for furnishing the annual return for the relevant financial year.
  • Section 44(1) mandates filing of the annual return in the manner and within the time prescribed.
  • Rule 80 of the CGST Rules prescribes that the annual return must be filed on or before 31st December following the end of the financial year.

For F.Y. 2018-19:

  • Normal due date for annual return: 31.12.2019.
  • Due to system-related and implementation issues, this date was repeatedly extended through notifications under Section 44(1).
  • Eventually, for F.Y. 2018-19, the due date stood extended to 31.12.2020.
  • On that basis, the standard outer limit for passing an order under Section 73 would be 31.12.2023, and correspondingly, the SCN must be issued at least three months prior.

Impact of COVID-19 Limitation Extension

The Court took into account its earlier suo motu intervention in Re: Cognizance for Extension of Limitation (Writ Petition (C) No.3/2020) relating to extension of statutory limitation due to the COVID-19 pandemic.

Key directions relevant here:

  • Limitation periods in various statutes were suspended during the pandemic.
  • By order dated 01.01.2022, the Court concluded the suo motu proceedings and directed that the period from 15.03.2020 to 28.02.2022 be excluded while computing limitation.

For the assessment year 2018-19:

  • Within the relevant three-year period under Section 73, 1 year and 2 months (15.03.2020 to 28.02.2022) had to be excluded.
  • Consequently, the effective outer limitation date shifted from 31.12.2023 to 28.02.2025.

Therefore:

Any SCN validly issuable under Section 73 for F.Y. 2018-19 had to be issued on or before 28.02.2025.

The SCN in this case was issued on 13.06.2025, which clearly fell beyond the extended time limit for Section 73. Thus, the Revenue could sustain the notice only if it met the stricter conditions of Section 74.

Factual Matrix Leading to the SCN

Initiation of Proceedings

The record showed the following chronology: