The Supreme Court has ruled that a show cause notice (SCN) under section 74 of the CGST Act to an assessee must contain clear grounds for fraud or suppression, rather than simply saying that there is doubt about fraud or suppression of facts. Experts say this decision provides strong ground for challenge in cases where notices merely reproduce statutory language without disclosing the basis for alleging fraud or suppression.Section 74 deals with determination of tax (pertaining to the period up to the Financial Year 2023-24) not paid, short paid, erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts. The matter is related to a SCN issued by the tax department for the assessment year 2018-19 dated June 13, 2025. The question was whether the notice can be one deemed to have been issued under Section 74, as such an action is possible when there is a fraud, wilful misstatement or suppression of facts alleged and that has to come out from the notice itself.Appeal disposingDisposing an appeal against ruling by High Court, the apex court said that a bare reading of the notice would indicate that but for a bland statement of ‘fraud or concealment of facts’ nothing is stated as to how fraud was inferred or concealment of facts were detected. In fact, the ‘or’ employed indicates that even the assessing officer was not sure that the assessment was proceeded by reason of fraud or on the ground of concealment of facts.“What is required for the extended time to be applied are the allegations, which lead to the inference of a fraud or the concealment as attempted by the assessee resulting in suppression of facts, should emanate from the notice itself,” a division bench of justices J B Pardiwala and K Vinod Chandran said in its order.Bench overviewAccording to the bench, it cannot be a mechanical use of the words ‘fraud, wilful misstatement or suppression of facts’ without listing out the aspects which persuades the assessing officer to conclude that the assessee has employed either of these surreptitious devices. “We find absolutely no reason to sustain the SCN issued and find the High Court to have erroneously upheld the same,” it said while setting the aside the court order as also the SCN.It also directed the tax department to desist from taking any further proceedings in pursuance of the SCN challenged before the High Court, which has now been set aside.Commenting on the ruling, Harpreet Singh, Partner at Deloitte, said that the judgment reinforces that allegations of fraud, wilful misstatement or suppression cannot be made in a routine or mechanical manner and must be supported by specific factual assertions in the SCN itself.“The decision provides a strong ground for challenge in cases where Section 74 notices merely reproduce statutory language without disclosing the basis for alleging fraud or suppression,” he said.Published on August 25, 2026