TaxTMI 
TaxTMI 
Extended Limitation u/s 74 of the CGST Act: Foundational Facts for Fraud, Wilful Misstatement and Suppression
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....ng the extended period cannot be sustained by mechanically reproducing statutory expressions. The foundational facts from which fraud, wilful misrepresentation or suppression can reasonably be inferred must appear in the show cause notice itself. This requirement protects both the statutory limitation scheme and the taxpayer's right to answer the precise case alleged. Legal & Statutory Context Under Section 73(1), the proper officer may issue a notice where tax has not been paid or has been short paid, refund has been erroneously made, or input tax credit has been wrongly availed or utilised, "for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax". Section 73(2) requires the notice to be issued at least three months before the order deadline. Under Section 73(10), the order must be issued within three years from the due date for furnishing the annual return for the relevant financial year, or within three years from the date of erroneous refund. Section 74(1) is differently framed. It permits the fraud-based proceeding only where the tax shortfall, erroneous refund, or wrongful input tax credit is "by reason of f....
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....nt or suppression of facts to evade tax. The provision therefore requires more than a perceived tax discrepancy. There must be pleaded material connecting the alleged conduct of the taxpayer with the discrepancy and supporting the statutory inference of deliberate evasion. Wilful misstatement necessarily imports a conscious misrepresentation. Suppression, in this context, is not synonymous with every omission, imperfect disclosure, erroneous claim, or disputed legal position. It concerns a deliberate withholding of material information in circumstances supporting an inference of intent to evade tax. Whether that threshold is met remains fact-dependent; however, the notice must disclose the factual foundation, rather than reserve it for the adjudication order. Detailed Commentary & Analysis In 2026 (8) TMI 1587 - Supreme Court, the demand notice covered three financial years and was described as one under Section 74. The ordinary Section 73 limitation, after taking account of the applicable annual-return timelines and the exclusion of limitation directed during the pandemic period, had expired before the notice. The question was therefore whether Section 74 could be invoked....
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....the notice; and Section 75(10) deems adjudication concluded if the order is not issued within the prescribed statutory period. A defective fraud allegation cannot, therefore, be repaired by a new factual basis at the order stage. Judicial / Administrative Perspective 2024 (9) TMI 1753 - MADRAS HIGH COURT treats fraud, wilful misstatement and suppression to evade tax as jurisdictional facts and conditions precedent for Section 74. Where the assessment order contained no finding on those matters, invocation of the extended period was held to vitiate the proceedings. The decision also recognises that absence of jurisdiction may justify writ review despite an alternative statutory remedy. 2024 (9) TMI 1644 - ALLAHABAD HIGH COURT similarly holds that the show cause notice must disclose the specific Section 74 ground and the prima facie information or evidence underlying it. An allegation of excess input tax credit without an assertion that it arose through fraud, wilful misstatement or suppression was insufficient to confer jurisdiction. The decision further treats reopening of concluded Section 73 proceedings as impermissible without a properly articulated fraud-based foundati....
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....oth a statutory requirement and a facet of natural justice. 1989 (2) TMI 116 - Supreme Court holds that something positive beyond inaction or an interpretative mistake is required. Where departmental officers knew the relevant facts and the taxpayer acted on a bona fide interpretation, extended limitation was unavailable. 2007 (8) TMI 11 - Supreme Court states that suppression and wilful misstatement require deliberate conduct directed at evasion, and places the burden of proving suppression upon the revenue. Genuine uncertainty arising from conflicting departmental positions may be inconsistent with a finding of mens rea. 2005 (9) TMI 331 - Supreme Court treats suppression as deliberate, positive withholding of correct information to evade duty. Where the department had inspected the process, obtained samples and received a flow-chart, mere absence of fuller particulars did not amount to suppression. 2021 (3) TMI 384 - Supreme Court shows the relevance of full disclosure at the assessment stage: where specifications and supporting material were available to the assessing authority and the goods were examined, wilful misstatement or suppression could not be inferred for....