Case Law

Mechanical Invocation of “Fraud” Cannot Extend GST Limitation: Supreme Court Quashes Section 74 Notice, Sets Out What a Valid SCN Must Contain

Published 26 Aug 2026· Updated 26 Aug 2026· 6 min read

The Story

Picture this: your business gets searched under GST law. Nothing comes of it right away — you cooperate, hand over records, move on. Three years pass. The window for the department to raise an ordinary demand under Section 73 quietly closes.

Then, months after that window has shut, a fresh notice lands — not under Section 73, but under Section 74, the provision reserved for fraud, wilful misstatement, or suppression of facts. Convenient, because Section 74 comes with a longer limitation period. The notice states a number — over Rs. 1.5 crore — and uses the word “fraud.” That’s about it.

That’s almost exactly what happened to G.R. Infra Projects Limited, a Ratlam-based road and highway contractor. Searched under Section 67 in August 2022. A draft notice in March 2025. A DRC-01A intimation in April 2025. And finally, on 13 June 2025, a full Section 74 show cause notice for FY 2018-19 — alleging fraud, but never quite explaining it.

The Madhya Pradesh High Court wasn’t troubled. It reasoned that the draft notice (prepared after the search) contained enough, that even if fraud couldn’t ultimately be proven the department could always fall back on Section 73, and that writ jurisdiction wasn’t the place to second-guess an officer’s choice between Section 73 and Section 74. Petition dismissed.

The Supreme Court, on appeal, saw it very differently.

Justices J.B. Pardiwala and K. Vinod Chandran didn’t just glance at the notice — they did the limitation maths themselves. FY 2018-19’s annual return due date had been extended to 31 December 2020. Add the ordinary three-year Section 73 window, then add the COVID-19 limitation exclusion. Result: the Section 73 deadline had already passed on 28 February 2025 — more than three months before the department finally issued its notice.

Which left only one route open to the department: Section 74. And that’s where the notice fell apart. “What is required for the extended time to be applied are the allegations, which lead to the inference of a fraud… should emanate from the notice itself,” the Bench held. G.R. Infra Projects’ notice didn’t do that. It had figures. It didn’t have facts.

Sidebar: the department tried to fill the gap with a counter affidavit filed before the Court, explaining the fraud allegation after the fact. The Supreme Court wasn’t having it — a notice has to stand on what it says at the time it’s issued, not on what gets argued later once it’s already under challenge.

Notice quashed, along with the High Court’s order. No further proceedings on this SCN.

Why It Matters

Extended-period Section 74 notices are the Revenue’s most common route for reopening GST periods once the ordinary three-year Section 73 limitation has run out, and departments frequently invoke “fraud, wilful misstatement or suppression of facts” as boilerplate language rather than a substantiated allegation. This ruling — from the Supreme Court itself, not merely a High Court — gives practitioners the strongest available precedent to challenge time-barred SCNs dressed up as Section 74 notices, and squarely forecloses the Revenue’s practice of trying to cure a deficient SCN through subsequent pleadings before a court.

Key Takeaways

The extended limitation period under Section 74 cannot be invoked by mechanically reciting “fraud,” “wilful misstatement” or “suppression of facts” — the SCN must itself set out the allegations and circumstances that led the officer to infer such conduct.
A deficiency in a notice cannot be cured by a counter affidavit filed later before a Court; the notice must be self-sufficient at the time of issuance.
The Court independently computed the Section 73 limitation timeline — factoring in the extended annual return due date (31 December 2020) and the COVID-19 limitation exclusion — and found it had expired on 28 February 2025, before the SCN was issued on 13 June 2025.
Where a Section 74 SCN contains only figures/quantification without disclosing why fraud, concealment or suppression is alleged, it is liable to be quashed as bereft of material particulars.
The ruling aligns with and reinforces prior authority (including Uniworth Textiles Ltd. v. Commissioner of Central Excise, Raipur, under the analogous Central Excise extended-period provision) that the Revenue bears the burden of specifically pleading fraud/suppression, not merely asserting it.

Practical Implications

Every CA firm should audit currently pending Section 74 SCNs and orders for genuine specificity — does the notice explain how and why fraud, wilful misstatement or suppression was inferred, or does it simply recite the statutory phrase alongside a tax figure? Where an SCN was issued after the ordinary Section 73 limitation window had already closed and relies on Section 74 language without particulars, this ruling is now the strongest available ground to seek quashing. Firms should also independently verify limitation computations (factoring in extended return due dates and the COVID-19 exclusion period) rather than accepting the department’s stated limitation position at face value.

Action Checklist

Audit all clients with pending or recent Section 74 SCNs/orders: does the notice specify the factual basis for alleging fraud, wilful misstatement or suppression, or does it merely state figures and recite statutory language?
For any SCN issued after the ordinary Section 73 limitation period would otherwise have expired, independently compute the limitation timeline (factoring in extended annual return due dates and the COVID-19 exclusion) before accepting the department’s position.
Where a deficient SCN is identified, cite G.R. Infra Projects Limited Ratlam v. State of Madhya Pradesh & Ors. (SC, 19 August 2026) in the reply/writ challenge, and note that any subsequent attempt by the department to “explain” the fraud allegation via counter-affidavit should be resisted as impermissible.
Do not wait until an adjudication order to raise this ground — it is available as early as the SCN reply stage.
Flag ongoing search/survey-triggered Section 74 proceedings for a similar specificity review, since these often carry the same boilerplate-language risk.

Relevant Sections / Rules / Notifications

Section 74, CGST Act, 2017 (extended-period demand for fraud/wilful misstatement/suppression)
Section 73, CGST Act, 2017 (ordinary-period demand; limitation reference point)
Section 67, CGST Act, 2017 (power of search — trigger for the underlying proceedings)
Rule 142(1A), CGST Rules, 2017 (DRC-01A intimation)
Supreme Court ruling: M/s G.R. Infra Projects Limited Ratlam v. State of Madhya Pradesh & Ors., Civil Appeal No. 11277 of 2026, 2026 LiveLaw (SC) 852 / 2026 LLBiz SC 281, decided 19 August 2026
Referenced: Uniworth Textiles Ltd. v. Commissioner of Central Excise, Raipur, (2013) 9 SCC 753 (analogous extended-period principle under Central Excise law)

FAQs

Q: Does this ruling mean Section 74 can never be invoked after the Section 73 limitation period expires?
A: No. Section 74 remains available where fraud, wilful misstatement or suppression genuinely exists — but the SCN itself must specifically set out the facts and circumstances supporting that inference. What the Court struck down was the mechanical use of the statutory phrase without particulars.

Q: Can the department fix a deficient SCN by explaining the fraud allegation in its reply to a writ petition?
A: No — per this ruling, the notice must be self-sufficient at the time of issuance. A counter affidavit filed later cannot cure a foundational deficiency in the SCN itself.

Q: How was the Section 73 limitation period computed in this case?
A: The Court took the extended due date for filing the FY 2018-19 annual return (31 December 2020) as the reference point, applied the ordinary three-year Section 73 period, and then added the COVID-19 limitation exclusion, arriving at an expiry date of 28 February 2025 — before the Section 74 SCN was issued on 13 June 2025.

Prepared by Finoscape Editorial Team — contact@finoscape.com. This article is for general informational purposes and does not constitute legal or tax advice. Practitioners should independently verify the current statutory position, compute limitation timelines specific to each client’s facts, and review the full text of the judgment before advising or filing on the strength of this ruling.