SC Stays GST Proceedings: Show-Cause Notice Under Section 74 Lacks Material Particulars

GR Infra Projects Ltd., engaged in highway construction and registered under GST laws, faced a Section 74 show-cause notice alleging fraud, wilful misstatement and suppression, based on earlier search proceedings and a detailed draft notice referencing a purported GST evasion of Rs. 1.52 crore for 2018-19. The company challenged the notice before the High Court, arguing that the allegations of fraud were vague and unsupported, particularly since it had cooperated during enquiry and had already filed detailed objections to the DRC-01A and draft notice.

The High Court, however, declined to quash the notice, holding that once proceedings under Section 74 had been initiated based on search material, the petitioner must participate in adjudication and exhaust statutory remedies rather than invoke writ jurisdiction. Aggrieved, the company approached the Supreme Court through an SLP.

Main Issue before SC: Whether a Section 74 GST show-cause notice can be quashed at the threshold when the assessee alleges absence of material particulars regarding fraud, wilful misstatement or suppression.

SC Ruled: The Supreme Court noted that the notice did not disclose the underlying material, and the petitioner’s objection was prima facie justified. It held that the absence of material particulars raised a valid concern about whether the notice met the statutory threshold required for invoking the extended-limitation provision based on fraud or suppression. The Court therefore issued notice returnable in four weeks, permitted dasti service, and stayed further proceedings in the meantime.

The Bench had held that the show-cause notice contained specific allegations and that a detailed search report running into 191 pages formed its basis under Section 67. It reasoned that the validity of invoking Section 74 could not be examined at the writ stage and that disputed factual questions must go to adjudication. Citing the Greatship (India) Ltd., the High Court concluded that writ jurisdiction should not displace the statutory remedy of appeal under Section 107. Nonetheless, it left all issues open for the proper officer to decide without being influenced by its observations. The Supreme Court’s interim order, however, pauses the adjudication and brings the adequacy of the show-cause notice under direct scrutiny.

To Read Full Judgment, Download PDF Given Below