2026 INSC 920
M/s Tata Steel Limited v. Union of India through the Secretary, Ministry of Finance & Ors.
Supreme Court of India — Civil Appellate Jurisdiction
Civil Appeal arising out of SLP (C) No. 16859 of 2026
Judgment dated: 25 August 2026
Bench: J.B. Pardiwala and K. Vinod Chandran, JJ.
I. HEAD NOTES
1. CGST Act — Sections 73 and 74 — Extended limitation — Fraud, wilful misrepresentation or suppression — Foundational facts must appear in SCN — Paras 8, 11, 14–15
For invoking the extended limitation under Section 74 of the CGST Act, 2017, the proper officer must be satisfied not merely that there has been an ITC mismatch or short payment of tax, but that such liability arose by reason of fraud, wilful misrepresentation or suppression of facts.
The Supreme Court held that the foundational facts supporting such allegation must be evident from the Show Cause Notice itself. Mere mechanical use of the statutory expressions “fraud”, “wilful misrepresentation” or “suppression” is insufficient. Paras 8, 11 and 14–15.
2. Audit objection — Satisfaction of Proper Officer cannot be mechanically borrowed from audit — Para 11
Proceedings under Sections 73/74 can be initiated only upon the satisfaction of the Assessing Officer/Proper Officer.
An audit objection may bring an issue to the Department's notice, but the officer issuing the notice must independently apply his mind and record the requisite satisfaction.
In a Section 74 proceeding, the satisfaction must extend to the statutory ingredients of fraud, wilful misrepresentation or suppression.
3. Department contesting audit objection before Public Accounts Committee — Para 13
The fact that the Department itself had contested the audit objection before the Public Accounts Committee was treated by the Supreme Court as significant.
It indicated that there was no demonstrated satisfaction on the part of the Assessing Officer that the alleged ITC mismatch or short payment had occurred, much less that it resulted from suppression.
4. Section 73 limitation — Relevant limitation is for passing the order, not merely issuing notice — Para 12
The Supreme Court rejected the argument that proceedings were valid merely because they were initiated before expiry of the limitation period under Section 73.
Section 73(10) prescribes the period for passing the order under Section 73(9), while Section 73(2) requires notice to be issued at least three months before that statutory period expires.
5. COVID-19 limitation extension — Application to the three financial years — Paras 5–7
The Supreme Court considered the statutory extensions for filing annual returns and the exclusion of limitation directed in Suo Motu Writ Petition (C) No.3 of 2020, In Re: Cognizance for Extension of Limitation.
After applying the exclusion period from 15.03.2020 to 28.02.2022, the Court held that the three-year limitation under Section 73 stood extended such that, for all three financial years involved, the relevant three-year limitation expired on 28.02.2025.
6. SCN dated 13.06.2025 — Beyond Section 73 limitation — Para 7
The Show Cause Notice dated 13.06.2025 was issued after expiry of the extended three-year limitation under Section 73.
Therefore, the notice could survive only if the Department validly invoked the extended five-year period under Section 74.
7. Explanation 2 to Section 74 — Cannot be relied upon after omission — Para 12
The Department relied upon Explanation 2 to Section 74 to contend that suppression could arise from mere non-declaration of facts or information which the assessee was required to declare.
The Supreme Court rejected the argument because, even according to the Department, the Explanation had been omitted with effect from 01.11.2024.
8. “Protective demand” under GST Act — No statutory basis — Para 10
After the earlier SCN was transferred to the “call book”, meaning kept in abeyance, a fresh notice dated 01.07.2025 was issued reviving the earlier notice and proposing a protective demand because the statutory period was running out.
The Supreme Court held that the concept of protective assessment/demand is not statutorily recognised under the GST Act.
9. Mere recital of statutory words does not satisfy Section 74 — Para 14
The Court emphasised that extended limitation based upon allegations of fraud, wilful misrepresentation or suppression cannot be invoked by merely reproducing the statutory expressions.
The SCN must disclose the foundational facts which led to the inference of fraud, wilful misrepresentation or suppression.
The statutory language cannot be used mechanically to extend limitation.
10. SCN and consequential Order-in-Original quashed — Paras 15–16
The Court found that the SCN contained no factual foundation demonstrating a deliberate device to evade tax or avail excess ITC.
The SCN and consequential Order-in-Original dated 26.12.2025 were therefore set aside.
However, the Department was granted liberty to initiate an appropriate proceeding under Section 74, provided it did so on the basis of proper foundational facts appearing in the notice and passed the order before 28.02.2027.
II. FACTS AND EVIDENCE OF THE CASE
1. Subject matter of the dispute — Para 2
The appellant, Tata Steel Limited, challenged a Show Cause Notice issued for three financial years:
2018–2019
2019–2020
2020–2021
The SCN purported to invoke Section 74 of the CGST Act on the basis of an audit objection raised by the office of the Comptroller and Auditor General of India.
2. Appellant's principal objection
The appellant contended that the SCN contained no allegation supported by foundational facts showing:
fraud;
wilful misrepresentation; or
suppression of facts.
Without those statutory ingredients, Section 74 could not be invoked and the Department could not rely upon its extended five-year limitation.
The appellant further contended that the Assessing Officer himself was not convinced by the audit objection and had placed the matter in the “call book”, meaning that the issue had been kept in abeyance.
3. Audit proceedings and correspondence — Para 9
The proceedings leading to the SCN commenced with Annexure P1 dated 27.05.2024, concerning audit observations relating to:
mismatch of Input Tax Credit for all three financial years; and
short payment of tax for financial year 2019–2020.
The assessee submitted replies.
On 27.06.2024, by Annexure P5, documents were sought in support of the explanations.
Further communications followed between the assessee and the Department.
4. SCN dated 13.06.2025 — Para 9
Following the correspondence, the Department issued the SCN dated 13.06.2025, marked as Annexure P11.
The Department attempted to sustain the notice under Section 74 and thereby avail the extended limitation period.
5. Call book — Para 9
After issuance of the SCN, the Additional Commissioner, by Annexure P12 dated 27.06.2025, informed the appellant that the SCN had been transferred to the “call book”, meaning it had been kept in abeyance.
Significantly, the Department had itself contested the audit objection before the Public Accounts Committee.
6. Fresh protective notice — Para 10
A fresh notice was issued on 01.07.2025, reviving the earlier notice and proposing a protective demand on the ground that the GST proceedings were time-bound.
The Supreme Court noted that there was no statutory provision for such protective assessment under the GST Act.
III. LIMITATION: STATUTORY COMPUTATION
1. Section 73 — Normal limitation — Paras 5–6
Section 73 applies where there is no allegation of fraud, wilful misrepresentation or suppression.
Under Section 73(10), the Proper Officer is required to pass the order within three years from the date of furnishing of the annual return.
Section 73(2) requires the notice to be issued at least three months before expiry of that period.
2. Annual-return dates and subsequent extensions — Paras 5–6
Rule 80 of the CGST Rules prescribes the annual return to be furnished electronically by the prescribed date.
Because of the initial difficulties following introduction of GST, the statutory dates were extended by notifications issued under Section 44(1).
The final dates relevant to the three financial years were:
| Financial Year | Final annual-return date |
|---|---|
| 2018–2019 | 31.12.2020 |
| 2019–2020 | 31.03.2021 |
| 2020–2021 | 28.02.2022 |
Accordingly, absent further exclusion, the three-year limitation would have expired on:
| Financial Year | Initial three-year expiry |
|---|---|
| 2018–2019 | 31.12.2023 |
| 2019–2020 | 31.03.2024 |
| 2020–2021 | 28.02.2025 |
3. Supreme Court's COVID limitation exclusion — Para 7
In Suo Motu Writ Petition (C) No.3 of 2020, the Supreme Court excluded the period from:
15.03.2020 to 28.02.2022
from computation of limitation.
Applying that exclusion, the Court held that the limitation for the first two financial years was extended to 28.02.2025.
For 2020–2021, the limitation remained 28.02.2025, because the three-year limitation period commenced only on 28.02.2022 and therefore the earlier exclusion period did not operate to extend it further.
Result
The SCN dated 13.06.2025 was beyond the extended three-year limitation under Section 73.
Therefore, the Department could sustain the notice only if the five-year extended limitation under Section 74 was validly attracted.
IV. LAW APPLIED AND DISCUSSED
1. Section 73 versus Section 74 — Paras 5, 8 and 12
The judgment draws a clear statutory distinction:
Section 73
Applies where the tax shortfall does not involve:
fraud;
wilful misrepresentation; or
suppression of facts.
It carries the normal three-year limitation.
Section 74
Permits the extended limitation of five years only where the statutory conditions relating to:
fraud;
wilful misrepresentation; or
suppression of facts
are satisfied.
Thus, Section 74 cannot be invoked merely because the Department needs additional time after expiry of Section 73 limitation.
2. Satisfaction of the Proper Officer — Para 11
The Supreme Court laid down an important procedural requirement.
Even where an audit objection exists, the Assessing Officer must independently enter his satisfaction before issuing notice.
In a Section 74 case, that satisfaction must extend beyond the existence of a mismatch or short payment.
The officer must be satisfied that the mismatch or short payment resulted from one of the statutory grounds justifying Section 74—fraud, wilful misrepresentation or suppression.
3. Audit objection is not equivalent to statutory satisfaction — Para 13
The Court found the Department's own conduct significant.
The audit objection had been taken up before the Public Accounts Committee and was being contested.
This undermined the contention that there had already been a clear satisfaction of the Assessing Officer regarding the alleged suppression.
The judgment therefore distinguishes between:
audit observation
and
independent statutory satisfaction of the Proper Officer.
The former does not automatically establish the latter.
4. Foundational facts must be stated in the SCN — Para 14
This is the central legal principle of the judgment.
The Court held that an extended limitation provision cannot be sustained merely through “lip service” to the statutory expressions.
The SCN itself must contain the factual foundation from which the inference of:
fraud;
wilful misrepresentation; or
suppression
can legitimately arise.
A mere recital of those expressions is insufficient because it does not demonstrate application of mind by the officer.
5. Application of law to the SCN — Para 15
The Supreme Court examined the actual contents of the SCN.
It found no factual foundation demonstrating:
a deliberate device to evade tax;
deliberate suppression; or
deliberate wrongful availment of excess ITC.
The references to suppression were merely bland statements, including the assertion that ITC had been availed “without documentary evidence and suppress the facts”.
That was held insufficient to sustain Section 74 and its extended limitation.
V. FINDINGS OF THE SUPREME COURT
1. The SCN dated 13.06.2025 was beyond the Section 73 limitation — Para 7.
The extended COVID limitation had been fully accounted for, and the three-year limitation expired on 28.02.2025 for the purposes relevant to the case.
2. Section 74 could be invoked only if its statutory conditions were established — Para 8.
The Department therefore had to demonstrate the factual basis for fraud, wilful misrepresentation or suppression.
3. The Proper Officer had to independently satisfy himself — Para 11.
An audit objection alone was insufficient.
4. The Department's own conduct undermined the alleged satisfaction — Para 13.
The Department was contesting the audit objection before the Public Accounts Committee.
5. The SCN contained no adequate foundational facts for suppression — Paras 13–15.
The statutory words were used without sufficient factual particulars demonstrating deliberate conduct.
6. Protective demand had no statutory basis — Para 10.
The GST Act contains no provision authorising such a protective assessment merely because limitation is approaching.
VI. FINAL CONCLUSION
The Supreme Court held that the Show Cause Notice dated 13.06.2025 could not be sustained under Section 74.
The decisive reasons were:
the normal three-year limitation under Section 73 had expired;
the Department therefore had to validly invoke Section 74;
invocation of Section 74 required satisfaction of the Proper Officer regarding fraud, wilful misrepresentation or suppression;
the SCN contained no adequate foundational facts establishing such conduct;
mere repetition of the statutory expressions was insufficient; and
the Department's own conduct in contesting the audit objection before the Public Accounts Committee further demonstrated the absence of the requisite satisfaction.
Accordingly, the Supreme Court:
set aside the SCN;
set aside the consequential Order-in-Original dated 26.12.2025; and
allowed the appeal.
Liberty reserved to the Department
The Court nevertheless made an important reservation.
The Department was permitted, if it considered it appropriate, to initiate a fresh proceeding under Section 74, but only:
on the basis of proper foundational facts appearing in the notice itself; and
with an order being passed before 28.02.2027.
Thus, the judgment does not hold that no Section 74 proceeding can ever be initiated. It holds that the particular SCN could not sustain the extended limitation because the statutory foundation for invoking Section 74 was absent from the notice.
Core legal proposition
For invoking the extended limitation under Section 74 of the CGST Act, the Proper Officer must independently satisfy himself that fraud, wilful misrepresentation or suppression of facts has resulted in the tax shortfall or wrongful ITC. The Show Cause Notice itself must disclose the foundational facts supporting that conclusion. Mere reproduction of the statutory expressions does not constitute application of mind and cannot, by itself, sustain a proceeding beyond the normal limitation under Section 73.
