In M/s Tata Steel Limited v. Union of India through the Secretary, Ministry of Finance & Ors., the Supreme Court examined whether a Show Cause Notice issued under Section 74 of the CGST Act, 2017, invoking the extended five-year limitation period, could be sustained merely on the basis of audit objections and generic allegations of “fraud” or “suppression of facts.” The Court also considered whether the Assessing Officer must independently record satisfaction regarding tax evasion before invoking Section 74 and whether the Department could issue protective notices merely to prevent limitation from expiring.The proceedings arose from C&AG audit observations alleging discrepancies in Input Tax Credit for FY 2018–19, 2019–20 and 2020–21 and short payment of tax for FY 2019–20. After the ordinary three-year limitation period under Section 73 had expired on 28 February 2025, the Department issued an SCN under Section 74 on 13 June 2025, relying upon generic allegations of suppression. The notice was subsequently placed in a “call book” while the Department contested the underlying audit objection before the Public Accounts Committee and was later revived as a “protective demand.” Tata Steel challenged the proceedings before the Supreme Court.

ISSUES OF LAW

( Whether a Show Cause Notice (“SCN”) issued under Section 74 of the CGST Act, 2017, availing the extended 5-year limitation period, can be sustained based on audit objections without explicit foundational allegations of fraud, willful misstatement, or suppression of facts. Whether the Assessing Officer must independently record personal satisfaction regarding tax evasion/suppression before issuing a notice under Section 74, rather than acting solely on Comptroller and Auditor General (“C&AG”) audit observations. Whether the practice of issuing a “protective notice” or transferring proceedings to a “call book” (keeping in abeyance) due to an impending limitation expiry is permissible under the GST legal regime. Whether the Department could rely on Explanation 2 to Section 74 (which defined non-declaration as suppression) after its omission from the statute w.e.f. November 1, 2024.

FACTUAL MATRIX

The proceedings originated from audit observations by the C&AG alleging a mismatch of Input Tax Credit (ITC) for three financial years (FY 2018–19, 2019–20, and 2020–21) and short payment of tax for FY 2019–20. Communications (Annexures P1 to P5) were exchanged between the assessee and the authorities in 2024. On June 13, 2025, an SCN under Section 74 of the CGST Act was issued to the appellant (M/s Tata Steel Ltd.) for the three financial years. On June 27, 2025, the Additional Commissioner intimated that the SCN was transferred to the “call book” (kept in abeyance) because the Department was contesting the underlying C&AG audit objection before the Public Accounts Committee. On July 1, 2025, a fresh notice was issued reviving the earlier SCN as a “protective demand” on the ground that limitation under the GST law was time-bound. Taking into account successive notifications extending annual return deadlines under Section 44(1) and the exclusory period granted by the Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020 (In Re Cognizance for Extension of Limitation) due to COVID-19, the normal 3-year limitation under Section 73(10) for FY 2018–19, 2019–20, and 2020–21 expired on February 28, 2025. Because the June 13, 2025 SCN was issued past the Section 73 limitation period, the Department sought to sustain it under the 5-year extended period under Section 74 by making generic statements of “suppression of facts”. The appellant challenged this before the Supreme Court. 

JUDGMENT

The Supreme Court held that invoking Section 74 requires more than “mere lip service” or mechanical recitation of words like “fraud” or “suppression of facts”. The SCN must explicitly detail the foundational facts that demonstrate a deliberate device or intent to evade tax or wrongly claim ITC. Proceedings under Sections 73 and 74 require the independent satisfaction of the Assessing Officer. The fact that the officer moved the SCN to a “call book” while the Department contested the audit objection before the Public Accounts Committee proved that the Assessing Officer lacked subjective satisfaction regarding any shortfall or suppression. The Court ruled that issuing notices as a “protective measure” to prevent claims from becoming time-barred is alien to the statutory structure of the CGST Act. The Revenue’s argument relying on Explanation 2 to Section 74 was rejected, as the provision stood omitted from the statute effective November 1, 2024. The Supreme Court allowed the appeal, quashing both the SCN dated June 13, 2025, and the consequential Order-in-Original dated December 26, 2025. The Court granted liberty to the Department to initiate fresh proceedings under Section 74, provided they state complete foundational facts in the notice and pass an order before February 28, 2027 (the outer limit of the 5-year extended period).

SUBSEQUENT DEVELOPMENTS

As of August 2026, this decision serves as an immediate binding precedent for GST adjudications across India. Key structural outcomes include:

• GST adjudicating authorities are required to review pending Section 74 notices issued purely on audit objections without independent officer satisfaction.
• The Central Board of Indirect Taxes and Customs (CBIC) and state tax departments must refrain from issuing template or protective notices without establishing preliminary evidence of intentional evasion.

LINK TO THE JUDGMENT HERE

COURT NAME

Supreme Court Of India

CASE NAME

M/s Tata Steel Limited v. Union of India through the Secretary, Ministry of Finance and Ors.

BENCH

Hon'ble Justice J.B. Pardiwala and Hon'ble Justice K. Vinod Chandran

DATE OF JUDGMENT

August 25, 2026

CASE NUMBER & NEUTRAL CITATION

Civil Appeal No. 11528 Of 2026 & 2026 INSC 920