Daily Intelligence Capsule — 26 August 2026

Latest EditionLatest Edition — Wednesday, 26 August 2026

GST / Case Law

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

The Supreme Court holds that a GST Section 74 show cause notice cannot invoke the extended limitation period merely by using the words "fraud," "wilful misstatement" or "suppression of facts" — the notice itself must specify the allegations. G.R. Infra Projects' SCN quashed.

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GST / Case Law

AI-Generated Case Laws in a GST Order: Gujarat HC Quashes Proceedings, Issues Verification Protocol, Warns of Contempt

The Gujarat High Court quashes a GST cancellation order after finding the tax officer relied exclusively on AI-generated, non-existent case laws — and directs strict human verification of AI-assisted legal research going forward, warning that non-compliance will amount to contempt.

Read: AI-Generated Case Laws in a GST Order: Gujarat HC Quashes Proceedings, Issues Verification Protocol, Warns of Contempt

GST / Case Law

Additional ITC Benefit Withheld From 25 Homebuyers: GSTAT Orders 18% Interest From July 2017, Rejects Builder's Waiver Argument

GSTAT's Principal Bench holds that a builder who passed on the bulk of an additional GST input tax credit benefit to homebuyers, but fell short for 25 buyers, must pay the shortfall with 18% interest running from 1 July 2017 — rejecting the builder's argument that interest waivers on delayed customer payments should apply.

Read: Additional ITC Benefit Withheld From 25 Homebuyers: GSTAT Orders 18% Interest From July 2017, Rejects Builder's Waiver Argument

GST / Case Law

Raised Jurisdiction Only After Losing on Merits? Allahabad HC Says Doctrine of Election Bars the Belated Challenge

The Allahabad High Court (Lucknow Bench) holds that a taxpayer who contested a GST show cause notice on merits, and raised a jurisdiction objection only after losing, is barred by the doctrine of election from a writ challenge — and must pursue the statutory appellate remedy instead.

Read: Raised Jurisdiction Only After Losing on Merits? Allahabad HC Says Doctrine of Election Bars the Belated Challenge

Did You Know

A Departmental Memo Just Became a Contempt-Backed Court Order

The Gujarat High Court's order in the AI-generated case law matter didn't stop at quashing the proceedings in front of it. It reproduced an entire departmental verification protocol inside the judgment itself, then declared that breaking it "would amount to contempt of this Court." A state tax department's internal memo just got promoted to a court order — worth remembering next time an AI tool hands you a citation you haven't personally checked.

Quiz of the Day

"Fraud" Isn't a Magic Word

Your client's business, registered under the CGST and MPGST Acts, is searched under Section 67 of the CGST Act in August 2022. Following the search, the department issues a draft notice, then a DRC-01A intimation, and finally — on 13 June 2025 — a formal show cause notice under Section 74, proposing a GST demand of over Rs. 1.5 crore for FY 2018-19. The SCN states the alleged short-payment figure and asserts that your client "fraudulently availed and utilised input tax credit," but does not identify which invoices, which suppliers, or what specific conduct constituted the fraud. Your client's position is that the ordinary three-year limitation under Section 73 for FY 2018-19 had already run out well before June 2025, and that the department is using Section 74's "fraud" language purely to revive a time-barred demand. Is the department's Section 74 notice valid on these facts? Can the department, if your client files a writ petition, explain the fraud allegation for the first time in its counter-affidavit to the Court? Answer: No, the notice is not valid, and no, the department cannot cure it through a counter-affidavit — per the Supreme Court's ruling in M/s G.R. Infra Projects Limited Ratlam v. State of Madhya Pradesh & Ors. (19 August 2026), the extended limitation period under Section 74 cannot be invoked merely by mechanically using expressions such as "fraud," "wilful misstatement" or "suppression of facts" — the allegations and circumstances that led the assessing officer to infer such conduct must emanate from the notice itself. A deficiency in the notice cannot subsequently be cured through a counter affidavit filed before the Court. On near-identical facts, the Supreme Court computed that the ordinary Section 73 limitation period for FY 2018-19 had already expired on 28 February 2025 — before the Section 74 SCN was issued — and found the notice contained only a "bland statement" of fraud without supporting particulars. The Court set aside the SCN and directed no further proceedings pursuant to it.