A GST Notice Alleging Suppression Must Say What You Suppressed: Supreme Court

The Supreme Court has set aside a Section 74 show cause notice that alleged fraud and suppression without stating the facts behind the allegation. The extended limitation period cannot be claimed by reciting the words alone.

On 25 August the Supreme Court set aside a show cause notice issued under Section 74 of the CGST Act, and the order in original that followed it, holding that the extended limitation period Section 74 allows cannot be claimed by reciting the words "fraud", "wilful misstatement" or "suppression of facts". The foundational facts behind that inference, the Court said, must be evident from the notice itself.

The department had alleged only that credit was taken without documentary evidence and that facts had been suppressed. That, the Court held, is a bland assertion. The officer must independently satisfy himself that the short payment was by reason of fraud or suppression; a mismatch thrown up by an audit does not by itself supply that satisfaction. The notice and the order were quashed, with liberty to the department to start fresh proceedings on properly stated facts. The same two judges took the same view six days earlier in a Madhya Pradesh case.

What this means for you

An ordinary demand has to be raised within a shorter period than a fraud demand, and carries a much lighter penalty. Alleging suppression is what buys the department the longer deadline. So read the notice you have received: if it uses these words but never says what was concealed, from whom, and how, that is now a ground of challenge before you argue the merits at all. CBIC's own flyer on recovery sets out both limbs and their deadlines at https://gstcouncil.gov.in/sites/default/files/e-version-gst-flyers/51_GST_Flyer_Chapter51.pdf

Topics:Section 74show cause noticesuppression of factsextended limitationGST demandSupreme Courtfraud allegationreplying to GST noticeChennai GSTTamil Nadu

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