Supreme Court Sets Aside GST Notice Against Tata Steel, Says 'Suppression' Must Have Factual Basis

The Supreme Court has set aside a GST show cause notice issued to Tata Steel Limited and the consequential Order-in-Original dated 26 December 2025, holding that the Department could not invoke the extended limitation period under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act), merely by using the words “suppression of facts” without setting out the foundational facts supporting the allegation.

A Bench of Justices J.B. Pardiwala and K. Vinod Chandran held that where the Department seeks to invoke the extended limitation period on the grounds of fraud, wilful misstatement or suppression of facts, the show cause notice must itself disclose the facts forming the basis for such an allegation. The judges held:

“The foundational facts which led to the inference arrived at of fraud/willful misrepresentation/suppression should be evident from the notice itself. The mere employment of such words will not indicate an application of mind, upon which alone the satisfaction can be arrived at. The words are not to be mechanically recited in the notice to enable recovery outside the normal limitation provided under the statute.”

The dispute arose from a show cause notice issued to Tata Steel for the financial years 2018-19, 2019-20 and 2020-21 concerning an alleged mismatch of Input Tax Credit (ITC) and short payment of tax. The notice was issued under Section 74 of the CGST Act, which permits recovery of tax where non-payment, short payment or wrongful availment or utilisation of ITC is allegedly due to fraud, wilful misstatement or suppression of facts.

Tata Steel contended that the notice contained no factual allegations establishing fraud, wilful misstatement or suppression of facts. It argued that, in the absence of these ingredients, the Department could not invoke Section 74 and its extended limitation period.

The Court observed that proceedings under Sections 73 and 74 of the CGST Act can be initiated only upon the satisfaction of the proper officer. For invoking Section 74, the officer must also be satisfied that fraud, wilful misstatement or suppression of facts resulted in the alleged mismatch of ITC or short payment of tax.

It further noted that the Department itself had taken up the audit objections before the Public Accounts Committee. This, the Bench held, indicated an absence of the required satisfaction on the part of the proper officer. The show cause notice, apart from making a “bland statement” regarding suppression, did not contain foundational facts supporting the allegation.

It also noted that the notice did not disclose facts showing that Tata Steel had adopted any deliberate device to evade tax or avail excess ITC. A mere allegation of suppression for invoking the extended limitation period was therefore insufficient.

Accordingly, the Supreme Court set aside the show cause notice and the consequential Order-in-Original dated 26 December 2025. It, however, granted the Department liberty to initiate appropriate proceedings under Section 74, if warranted, by setting out the necessary foundational facts in the notice and passing an order before 28 February 2027.

Appearances: Dr. A.M. Singhvi and Kavin Gulati, Senior Advocates, for Tata Steel; S. Dwarakanath, ASG, for the Department.