GST Show-Cause Notice Must Specify Whether ITC Misuse Involves Fraud Or Suppression Of Facts: Himachal Pradesh High Court

The Court observed that these grounds must be substantiated by the allegations in the show cause notice, and the statutory provision cannot be invoked merely by reproducing its language without establishing the factual basis for doing so.

Division Bench of Justice Ajay Mohan Goel and Justice Yogesh Jaswal remarked, “The Authority has to be very very clear and categoric as to whether the act of the incumbent amounts to fraud or willful misstatement or suppression of facts. Same has to be correlated with the allegations as are contained in the notice. The provisions of Section 74 of HP GST Act cannot be used just as a lip service”

The Himachal Pradesh High Court has held that a show cause notice under Section 74 of the GST Act must disclose the foundational facts establishing fraud, wilful misstatement or suppression of facts to evade tax.

The Court observed that merely reproducing these statutory expressions without specifying the grounds supporting the allegations does not satisfy the requirements of the provision, and that the alleged conduct must be clearly correlated with the facts stated in the notice.

The Court held that invoking Section 74 of the GST Act requires the tax authority to establish whether the alleged wrongful availment of Input Tax Credit arose from fraud, wilful misstatement or suppression of facts to evade tax.

Merely reproducing these expressions in a show cause notice without specifying the supporting facts is insufficient. Finding that the notice failed to clearly identify the applicable ground and correlate it with the allegations, the Court set it aside while granting liberty to issue a fresh notice within 60 days, without limitation being an impediment.