2026-VIL-629-MAD
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SGST High Court Cases

GST - Jurisdictional facts and foundational prerequisites for Invocation of Extended Period of Limitation in GST proceedings - The Proper Officers had invoked the extended period of limitation of five years under Section 74 without explicitly specifying or providing material evidence of fraud, wilful misstatement, or suppression of facts to evade tax as required under the statute - Whether the Proper Officer can validly invoke the extended period of limitation under Section 74 of the CGST Act without establishing jurisdictional or foundational facts of fraud, wilful misstatement, or suppression of facts with intent to evade tax, and whether such jurisdictional facts must be recorded and communicated to the assessee in the Show Cause Notice – HELD - The expression "where it appears" in Section 73 and Section 74 of the CGST Act imports only a prima facie view and not conclusive proof, requiring a lesser degree of probability than proof, but this does not eliminate the necessity of jurisdictional facts. The existence of fraud, wilful misstatement, or suppression of facts to evade tax constitutes mandatory jurisdictional or foundational facts that must be established before invoking the extended period of limitation. These jurisdictional facts are sine qua non for the Proper Officer to assume jurisdiction to issue a SCN under Section 74 - The satisfaction of the Proper Officer must be based on objective material and relevant facts, and such satisfaction should be explicitly expressed and recorded on the face of the Notice. Mere impression, appearance, or assumption in the mind of the Proper Officer regarding the commission of these offences is insufficient. The Proper Officer cannot invoke Section 74 arbitrarily or without rendering a finding that the alleged short-payment of tax was occasioned by fraud, wilful misstatement, or suppression of facts to evade tax - The SCN must put the assessee to notice of the specific allegations of fraud, wilful misstatement, or suppression of facts to provide him with a reasonable opportunity to meet the case and defend himself, as failure to do so violates the principles of natural justice - The GST Council's amendment to Section 67 of the Second Draft GST Model Law during the 8th GST Council Meeting, by inserting the phrase "where it appears to the Proper Officer" was based on an erroneous assumption regarding due process of law. The deliberations show that the GST Council was under the mistaken impression that the original draft did not provide adequate due process, when in fact the original draft prescribed a higher threshold for invoking the extended period of limitation. This amendment inadvertently diluted the safeguards originally contemplated. The Rules and procedures framed under the GST Act, particularly Rule 142 and the pre-notice intimation requirements in Form DRC-01A, provide necessary safeguards that must be strictly adhered to before invoking Section 74 - Where the Proper Officer fails to specify the requisite ingredients or foundational facts in the SCN, the notice becomes arbitrary and liable to be quashed. The burden of establishing the jurisdictional facts rests on the revenue, and mere allegation or assumption cannot substitute for concrete material evidence of fraud, wilful misstatement, or suppression of facts - The Show Cause Notices issued by the Proper Officers invoking Section 74 without explicitly specifying jurisdictional facts of fraud, wilful misstatement, or suppression of facts to evade tax, or without providing adequate material evidence of such facts, are quashed as being without jurisdiction and violative of the principles of natural justice. The Proper Officer is required to spell out the specific allegations and provide concrete material evidence supporting the invocation of Section 74 in the Show Cause Notice itself. The extended period of limitation cannot be invoked on mere appearance or assumption – Ordered accordingly
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