Supreme Court Stays Adjudication: Show Cause Notice Containing "Nothing Beyond Figures" and Lacking Material Particulars on Fraud is Unsustainable

Supreme Court Stays Adjudication: Show Cause Notice Containing “Nothing Beyond Figures” and Lacking Material Particulars on Fraud is Unsustainable

ISSUE

Whether a Show Cause Notice (SCN) issued under Section 74 (invoking the extended period of limitation for fraud) is valid if it merely cites figures regarding mismatches and ITC denials without providing specific material particulars substantiating the allegation of wilful suppression or fraud, and whether the High Court was justified in dismissing the writ petition against such an SCN.

FACTS

The Petitioner: A GST-registered entity engaged in road and highway construction.
The Investigation: A search and seizure operation was conducted at the petitioner’s premises. Summons were issued, and an intimation in Form DRC-01A was served.
The SCN: A Show Cause Notice (SCN) was issued under Section 74 proposing a demand of approx Rs. 1.53 Crores. The allegations included mismatches between GSTR-3B and E-way bills, ineligible ITC for a site office, and ITC reversal due to post-supply cancellation of GST registration by vendors.
High Court Ruling: The petitioner challenged the SCN before the High Court, arguing vagueness and time-bar (limitation). The High Court dismissed the writ, holding that the draft notice (191 pages) contained sufficient material from the search to invoke the extended period. It ruled that the sufficiency of “fraud” allegations should be decided by the Adjudicating Authority, not the Court at the threshold.
The Appeal: Aggrieved by the High Court’s refusal to interfere, the petitioner filed a Special Leave Petition (SLP) before the Supreme Court.

HELD (SUPREME COURT)

Prima Facie Observation: The Supreme Court examined the impugned SCN issued under Section 74 and observed that it appeared to be “bereft of material particulars” and contained “nothing beyond figures.”
Lack of Specifics: Mere tabulation of figures (mismatches) without a narrative explaining the “wilful misstatement” or “suppression of facts” does not meet the legal threshold for invoking the extended period under Section 74.
Interim Relief: Consequently, the Supreme Court issued notice to the Revenue and ordered that further proceedings pursuant to the impugned Show Cause Notice shall remain stayed.
Verdict: [Notice Issued / Stay Granted in Favour of Assessee]

KEY TAKEAWAYS

Vagueness is Fatal: An SCN cannot just be a balance sheet of differences. It must explicitly state how the fraud was committed and why the extended period applies. If an SCN contains only figures without the accompanying “material particulars” (evidence/reasoning), it violates the principles of natural justice.
Supreme Court Intervention at SCN Stage: Typically, Courts do not interfere at the Show Cause Notice stage (Alternative Remedy rule). However, this case proves that if an SCN is fundamentally defective (vague/no jurisdiction), the Supreme Court will step in and stay the proceedings.
High Court vs. Supreme Court: While the High Court focused on the volume of the notice (191 pages), the Supreme Court focused on the quality of the content (lack of particulars). Quantity of paper does not equal quality of accusation.

SUPREME COURT OF INDIA

GR Infra Projects Ltd.

State of Madhya Pradesh

J.B. PARDIWALA and K.V. Viswanathan, JJ.

SLP Appeal (C) No. 33594 of 2025^†

NOVEMBER 21, 2025

Jatin Harjai, Mohit Kumar Soni, Nikshubha Sharma, Advs. and Vatsalya Vigya, AOR for the Petitioner.

ORDER

1. Exemption Applications are allowed.

2. The principal argument of the learned counsel appearing for the petitioner (Assessee) is that the show cause notice issued by the Department invoking Section 74 of the GST Act is bereft of any material particulars.

3. The petitioner has no idea why the Department says that there has been fraud, willful misstatement on facts to evade tax and willful suppression of facts to evade tax.

4. The show cause notice was challenged before the High Court on the ground of being very deficient. However, the High Court declined to entertain the writ petition. Prima facie, the petitioner seems to justified in saying that the show cause notice is bereft of material particulars. Except figures, there is nothing else stated in the show cause notice.

5. Issue notice returnable after four weeks.

6. Dasti service, in addition, is permitted.

7. In the meantime, the further proceedings shall remain stayed.

8. The learned counsel appearing for the petitioner shall furnish one set of his entire paper book to Mr. V.C. Bharathi, the learned counsel who ordinarily appears for the Revenue Department.