The Case
MS TATA STEEL LIMITED VS UNION OF INDIA THROUGH THE SECRETARY MINISTRY OF FINANCE
Case No.: C.A. No.-012020-012020 – 2026
Decided on: 08/25/2026
Diary No.: 28063/2026 ·
Supreme Court of India
The Legal Issue Before the Supreme Court
The appellant challenged the Show Cause Notice dated 13.06.2025 and the consequential Order-in-Original dated 26.12.2025 issued purportedly under Section 74 of the CGST Act for the financial years 2018-2019 to 2020-2021. The question before the Court was whether the SCN could be sustained based on the extended period of five years available under Section 74, which can be availed by the Department only if there is an allegation of fraud, willful misrepresentation or suppression of facts. The Court also examined whether the notice was within the extended limitation period and whether the assessing officer had recorded the requisite satisfaction.
Facts of the Case
The SCN was issued for three financial years, viz. 2018-2019 to 2020-2021, purportedly in pursuance of an audit objection raised by the office of the Comptroller and Auditor General of India, and was termed to be one under Section 74 of the CGST Act. The proceedings commenced with Annexure P1 dated 27.05.2024, issued with respect to audit observations regarding mismatch of input tax credit for the three financial years and short payment of tax for the financial year 2019-2020; replies were submitted and on 27.06.2024, documents were sought in support of the explanations offered. By Annexure P12 dated 27.06.2025, the Additional Commissioner intimated that the SCN had been transferred to 'call book', meaning kept in abeyance, and that the Department had contested the issue raised as an audit objection before the Public Accounts Committee. A fresh notice was later issued on 01.07.2025, reviving the earlier notice and proposing a protective demand since the proceedings are time bound under the GST law. The annual returns for the relevant years were to be filed as extended by notifications under Section 44(1), and the SCN dated 13.06.2025 was issued thereafter.
Summary of the Decision
The Supreme Court held that proceedings under Section 73/74 can be initiated only on the satisfaction of the Assessing Officer; even if observations or objections are made on audit, the Assessing Officer should enter his satisfaction before a notice is issued, and for a notice under Section 74 the satisfaction must be that fraud, willful misrepresentation or suppression had led to the mismatch or short payment of tax. The Court rejected the argument that Explanation 2 to Section 74 applies, since it stood omitted with effect from 01.11.2024, and equally rejected the argument that proceedings were initiated prior to the expiry of limitation under Section 73. The Court found that the Department's taking up of the audit objections with the Public Accounts Committee itself indicated that there was no satisfaction at the end of the Assessing Officer, and that but for a bland statement of availing ITC for the three years 'without documentary evidence and suppress the facts', the SCN did not contain any foundational facts to validate the allegation of suppression. Noting that the SCN dated 13.06.2025 was past the extended limitation period, the Court set aside the SCN and the consequential Order-in-Original dated 26.12.2025, observing that mere employment of the words of fraud, willful misrepresentation or suppression will not indicate an application of mind and the words are not to be mechanically recited to enable recovery outside the normal limitation. The Court however noted that the extended period of two years is not yet over for all the three years since the three-year limitation expired only on 28.02.2025 for all the subject financial years, and left it open to the Department, if thought fit, to initiate an appropriate proceeding under Section 74 with the foundational facts coming out from the notice itself and an order being passed before 28.02.2027. With the above reservation and liberty, the appeal stands allowed, and pending application(s), if any, shall stand disposed of.
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