The Supreme Court of India has quashed a Goods and Services Tax (GST) show-cause notice (SCN) issued to Tata Steel Limited under Section 74 of the Central Goods and Services Tax (CGST) Act, 2017, ruling against the improper invocation of extended limitation periods by the tax authorities.

Strict Standard for Invoking Extended Limitation Period

A Bench comprising Justice J.B. Pardiwala and Justice K. Vinod Chandran held that the Revenue department cannot routinely invoke Section 74 of the CGST Act—which provides an extended period of limitation—instead of the standard period under Section 73, merely by incorporating boilerplate statutory phrases such as "fraud", "wilful misstatement", or "suppression of facts".

Key Operational Principles Established by the Bench

  • Specification of Foundational Facts: For an SCN to be valid under Section 74, the tax authority must explicitly spell out the precise foundational facts, underlying conduct, and deliberate intent to evade tax.
  • Rejection of Vague Allegations: Sweeping or generalized allegations without concrete factual backing will be treated as bad in law and an impermissible attempt to circumvent statutory limitation limits.
  • Procedural Propriety: The ordinary mechanism under Section 73 remains the default procedure unless clear, substantiated grounds of deliberate evasion are demonstrated at the threshold stage.

The judgment provides major relief to corporate taxpayers by establishing strict evidentiary and procedural checks against arbitrary show-cause notices issued under extended limitation provisions.