Indian goods and services tax law imposes a time limit for initiating demand and recovery proceedings against taxpayers. The limit depends on the annual return filing date and whether fraud, wilful misstatement, or suppression of facts is involved.
Under Section 74(10) of the Central Goods and Services Tax Act, 2017 (the CGST Act), tax authorities may invoke an extended five-year period from the annual return filing date if these ‘ingredients’ exist, while the normal period is three years from the annual return filing date.
The broad definition of “suppression” under Explanation 2 to Section 74A of the CGST Act enables frequent invocation of Section 74, often merely to extend investigation timelines despite several Central Board of Indirect Taxes and Customs (CBIC) circulars cautioning against mechanical use of the provision without genuine acts of evasion.
Courts have ruled that extended limitation cannot be routinely alleged in interpretative disputes, classification issues, or subsequent period notices without evidence of intent to evade tax, yet authorities persist in issuing show cause notices (SCNs) or orders without setting out the reasons justifying Section 74 invocation.
This article explores recent judgments quashing such SCNs/orders for lack of jurisdictional facts warranting invocation of Section 74 and examines whether any settled judicial principle has emerged guiding the writ courts.
Recent judgments on challenges to SCNs/orders for want of jurisdictional facts
In Neeyamo Enterprise Solutions v Commercial Tax Officer (2025), the Madras High Court set aside six orders passed under Section 74 of the CGST Act, holding that neither the SCNs nor the impugned orders charged the assessee with fraud, wilful misstatement, or suppression of facts to evade tax.
The court declined to remand the matter, observing that when a jurisdictional defect strikes at the root of the proceedings and is resolved in the assessee’s favour, a writ court need not remit it for reconsideration. It clarified that tax authorities remain free to initiate fresh proceedings under Section 73 if applicable. The court’s findings are summarised below:
The SCN and order must indicate how the assessee is guilty of fraud, wilful misstatement, or suppression of facts. The SCN must disclose the material relied upon by the proper officer.
The court referenced a Madras High Court decision in S.S. Communications v Deputy State Tax Officer II (2024), which quashed an assessment order for failing to record findings on the above ingredients.
Indian Revenue relied on the Madras High Court’s single-judge decision in Writ Petition (MD) No. 28502 of 2022, dated January 28 2025, which held that the writ court can take note of the conduct of the assessee to evade tax and deny relief even if Section 74 ingredients have not been mentioned. This decision was distinguished for lack of reference to an earlier single judge’s order dated September 20 2024 and a CBIC circular dated December 13 2023 on the manner of invoking an extended period through, for example, evidence being made part of an SCN.
It is not necessary for statutory language to be reproduced. The requirements of the section can still be said to be satisfied if one can discern their presence by an overall reading of the SCN and the impugned order.
Similarly, in MRF v Additional Director, Directorate General of GST Intelligence (2025), the Madras High Court quashed an SCN under Section 74 issued by the Directorate General of GST Intelligence, finding it bereft of the requisite ingredients.
In this case, the assessee faced an SCN under Section 74 alleging suppression over a demand of 10% differential tax in respect of the supply of tyres, tubes, and flaps on the premise that the transaction qualified as a ‘composite supply’. Although the tax was paid via returns after the investigation began, the assessee had pre-notified the department of its intent to discharge the liability and chose not to litigate.
Affirming its jurisdiction, under Article 226 of the Constitution, to examine SCNs for Section 74 compliance, the Madras High Court quashed the notice, holding that the prior disclosure of an intention to pay the disputed tax before the commencement of an investigation precluded any allegation of suppression.
Does the writ court always interfere?
While recent judicial trends seem favourable to taxpayers, it is important to note that courts are circumspect in quashing an SCN or order in writ proceedings.
In Tata Engineering and Locomotive Co. Ltd. v State of Bihar and Others (1964), a Constitution bench of the Supreme Court dismissed writ petitions filed under Article 32 of the Constitution as not maintainable. These petitions challenged sales tax demands on alleged inter-state sales as violative of Article 286(1)(a), which prohibits states from taxing sales outside their state.
While the writ petitions were disposed of on the ground that Article 32 is not invokable by companies and that fundamental rights guaranteed therein are available only to individuals, the observations on the determination of ‘jurisdictional facts’ as an adjudication of the tax dispute are noteworthy.
On the question of whether Article 32 can be invoked to allege lack of jurisdiction by the sales tax officer due to violation of Article 286(1)(a), the court observed in passing that if such an argument is accepted, “it may mean that all questions the decision of which inevitably precedes the imposition of the tax, would be collateral jurisdictional fact; and that clearly cannot be the effect of the charging sections of the different Acts”. The above case does not set any precedent as it was ultimately decided on a different ground.
If deciding whether invocation of Section 74 of the CGST Act is warranted involves examining facts and adjudicating the contested issues, the High Courts may exercise restraint in becoming a forum of tax liability adjudication while exercising their writ jurisdiction.
Nevertheless, no settled principle has emerged that writ courts should not examine the existence of jurisdictional facts in a challenge to an SCN/order for wrongly invoking an extended period. On the contrary, High Courts, in their writ jurisdiction, have appropriately interfered to set aside SCNs/orders that invoke an extended period in, for example, classification disputes and settled issues, and when the SCN/order is silent on the reasons justifying extended period invocation. The Supreme Court has also maintained such interference by High Courts in Shahnaz Ayurvedics v Commissioner of Central Excise (2004) and Uttar Pradesh State Cement Corporation v Union of India (1999).
In exceptional cases, the Supreme Court has even interfered under Article 32 to quash SCNs demanding tax on a covered issue (one decided on the same facts by a higher forum in the prior period).
Key takeaways
While the principle that writ courts are not a substitute for statutory appellate remedies remains well entrenched, recent decisions mark a clear judicial consensus that invocation of the extended period under Section 74 cannot rest on form or assumption. It must stand on factual foundations of fraud, wilful misstatement, or suppression of facts.
The Madras High Court’s rulings in Neeyamo Enterprise Solutions and MRF underscore that the absence of these jurisdictional facts renders SCNs and resultant orders void ab initio, justifying writ court intervention at the threshold. An astute assessment of each case’s circumstances, coupled with a clear understanding of these judicial standards, is essential to making strategic and well-informed legal choices.
The views expressed in this article are entirely personal.
