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Section 74 SCN quashed for lacking specific allegations of fraud or suppression of facts

Issue

Whether a Show Cause Notice (SCN) issued under Section 74 of the GST Act is legally valid if it fails to specifically allege the mandatory ingredients of fraud, willful misstatement, or suppression of facts with an intent to evade tax.

Facts

The Challenge: The petitioner filed a Writ Petition under Article 226 challenging a Show Cause Notice dated 20.06.2025.

Provision Invoked: The Department issued the notice invoking Section 74 of the UPGST Act, which applies to cases involving fraud or suppression of facts.

Petitioner’s Defense: The petitioner contended that the notice contained no specific allegations of fraud, willful misstatement, or suppression of facts.

Jurisdictional Argument: It was argued that without these specific allegations “with intent to evade tax,” the Department had exceeded its jurisdiction by invoking the extended period and higher penalties under Section 74.

Decision

Absence of Ingredients: Upon examination, the Court held that the statutory ingredients required for invoking Section 74 were absent on the face of the notice.

Mechanical Application: The Court observed that the notice merely cited Section 74 in a mechanical manner without disclosing any material or particulars that indicated an intent to evade tax.

Jurisdictional Defect: It was ruled that in the absence of “foundational averments” regarding fraud or suppression, the assumption of jurisdiction under Section 74 was unsustainable.

SCN Quashed: The Show Cause Notice dated 20.06.2025 was quashed.

Liberty Granted: The writ petition was disposed of with liberty granted to the Department to proceed against the petitioner under other provisions (such as Section 73) in accordance with the law.

Key Takeaways

Specific Allegations are Mandatory: To invoke Section 74, the Revenue cannot simply quote the section number. The SCN must explicitly contain foundational averments and specific details of fraud, willful misstatement, or suppression of facts.

Intent to Evade: The core differentiator for Section 74 is the “intent to evade tax.” If the SCN fails to demonstrate this intent prima facie, proceedings under Section 74 are liable to be quashed for lack of jurisdiction.

HIGH COURT OF ALLAHABAD

Varanasi Sangam Expressway (P) Ltd

Commissioner of State Tax^*

Shekhar B. Saraf and Prashant Kumar, JJ.

WRIT TAX No. 1028 of 2025

OCTOBER 8, 2025

Saakshi Pandey and Om Shankar Tiwari for the Petitioner.

ORDER

1. Heard learned counsel for the parties.

2. This is a writ petition under Article 226 of the Constitution of India wherein the writ petitioner is aggrieved by the show cause notice dated 20.06.2025 issued by the respondent No.2 under Section 74 of the Uttar Pradesh Goods and Services Tax Act, 2017 (hereinafter referred to as the ‘U.P.G.S.T. Act’).

3. Shri Jatin Harjai, learned counsel for the petitioner submits that the show cause notice is bereft of the ingredients of Section 74 of the U.P.G.S.T. Act that require evidence of fraud, willful misstatement and suppression of facts to evade tax.

4. Upon perusal of the show cause notice, the contentions of the petitioner appears to be correct.

5. Learned counsel for the respondents also fairly submits that the show cause notice does not contain the necessary prerequisites that are required to issue a show cause notice under Section 74 of the U.P.G.S.T. Act.

6. In light of the same, the show cause notice dated 20.06.2025 is quashed and set aside with liberty to the Department to proceed under any other provision of the U.P.G.S.T. Act in accordance with law.

7. With the aforesaid direction, writ petition is disposed of.