SCN under Section 74 lacking specific allegations of fraud, wilful misstatement, or suppression is legally unsustainable and liable to be quashed.

By | August 18, 2026
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SCN under Section 74 lacking specific allegations of fraud, wilful misstatement, or suppression is legally unsustainable and liable to be quashed.

Issue

Whether a Show Cause Notice (SCN) issued under Section 74 is legally valid when it fails to disclose the foundational jurisdictional ingredients of fraud, wilful misstatement, or suppression of facts with intent to evade tax.

Facts

  • Period of Dispute: The matter pertains to the financial year 2020-21.
  • Issuance of Notice: The State tax authorities issued a Show Cause Notice (SCN) to the petitioner invoking the extended period of limitation under Section 74.
  • Writ Challenge: Aggrieved by the notice, the petitioner filed a writ petition under Article 226 of the Constitution of India challenging the validity of the SCN.
  • Grounds of Challenge: The petitioner asserted that the SCN suffered from a fatal jurisdictional defect as it failed to explicitly allege or establish statutory preconditions—namely fraud, wilful misstatement, or suppression of material facts with intent to evade tax.
  • Defect Identified: Perusal of the SCN confirmed that the statutory ingredients required to invoke Section 74 were absent, establishing a lack of statutory foundation.

Decision

  • In Favor of Assessee: The High Court ruled in favor of the petitioner and quashed the impugned Show Cause Notice.
  • Lack of Jurisdiction: The Court held that since the mandatory preconditions to invoke Section 74 were not disclosed, the continuation of proceedings based on the defective SCN was legally unsustainable.
  • Disposal with Liberty: The writ petition was disposed of with liberty granted to the respondent authorities to issue a fresh SCN strictly in accordance with law.

Key Takeaways

  • Mandatory Preconditions for Section 74: Invoking Section 74 requires clear, specific allegations of fraud, wilful misstatement, or suppression of facts with intent to evade tax within the notice itself.
  • Jurisdictional Defect: An SCN lacking these statutory ingredients suffers from an inherent lack of jurisdiction and cannot support valid demand proceedings.
  • Article 226 Maintainability: Writs against Show Cause Notices are maintainable when the notice suffers from a fundamental jurisdictional defect or fails to satisfy statutory preconditions.
HIGH COURT OF ALLAHABAD
S.S. Infrazone (P.) Ltd.
v.
State of U.P.
Shekhar B. Saraf and ABDHESH KUMAR CHAUDHARY, JJ.
WRIT TAX No. 1068 of 2026
AUGUST  7, 2026
Vaibhav Krishna for the Petitioner.
ORDER
1. Heard learned counsel appearing on behalf of the petitioner and Sri Sanjay Sarin, learned Additional Chief Standing Counsel appearing on behalf of the State.
2. This is a writ petition under Article 226 of the Constitution of India, wherein the writ petitioner has made the following main prayer:-
“A- Issue a writ, order or direction in the nature of certiorari quashing the impugned show cause notice dated 30.04.2026 (Annexure-1) issued by respondent no. 2 under Section 74 of the SGST/CGST Act, 2017 for the tax period 2020-21, as the same suffers from patent lack of jurisdiction and is also otherwise without jurisdiction.”
3. Upon perusal of the show cause notice, we find that the show cause notice issued under Section 74 of the SGST/CGST Act, 2017, does not contain the ingredients required under Section 74 of the SGST/CGST Act, 2017 in relation to any fraud, wilful misstatement or suppression of material facts with the intent to evade tax.
4. Learned counsel appearing on behalf of the petitioner has placed reliance upon a judgment of a Coordinate Bench of this Court in Writ Tax No.1396 of 2024 in re:Hcl Infotech Ltd. v. Commissioner, Commercial Tax [2024] 167 taxmann.com 125/90 GSTL 233/106 GST 325 (Allahabad)/2024:AHC:158274-DB.
5. Upon perusal of the said show cause notice, we are at consensus ad idem with the submissions advanced by learned counsel appearing on behalf of the petitioner as the show cause notice does not spell out the ingredients required under Section 74 of the SGST/CGST Act, 2017.
6. Accordingly, the impugned show cause notice is quashed and set aside with liberty granted to the respondent-authorities to issue a fresh show cause notice, in accordance with law.
7. With the above directions, the writ petition is disposed of.