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Supreme Court Sets Aside GST Notice Against Tata Steel, Mandates Factual Basis for Suppression
The has set aside a goods and services tax (GST) issued to for the , holding that the under cannot be invoked merely by mechanically alleging , , or . The bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran delivered the judgment on , emphasizing that such allegations must be supported by evident from the notice itself.
Audit Objection Sparks Controversy Over Limitation
The dispute arose from audit observations by the concerning an alleged mismatch of for three financial years and short payment of tax for . The Department issued a on , under Section 74 of the CGST Act, which permits recovery within five years where non-payment or wrong availment of ITC is due to , wilful misstatement, or .
Tata Steel challenged the notice, arguing that it contained no specific factual allegations establishing or suppression, and that the Department had kept the proceedings in a "" (meaning kept in abeyance) before reviving them merely because the limitation period was expiring. The company contended that the concept of a was alien to the GST regime and that the notice was time-barred under the normal three-year limitation of .
Court Rejects of Legal Language
The Supreme Court first examined the limitation timelines. It noted that after accounting for extensions granted by notifications under and the extension of limitation by the Supreme Court during the pandemic, the under expired on for all three years. The challenged of fell after this date, making the Department’s reliance on the extended period under Section 74 critical.
The Court held that proceedings under Sections 73 or 74 can be initiated only upon the satisfaction of the . For invoking Section 74, the officer must be satisfied not merely that there was an ITC mismatch, but that such mismatch occurred because of , wilful misstatement, or suppression. The Court observed that the Department’s decision to take the audit objection before the showed a lack of such satisfaction.
Must be Evident from the Notice
The Court delivered a strong clarification on the standard required for alleging , wilful misstatement, or suppression. It held that the must disclose the from which such an inference can be drawn. Mere recitation of statutory language does not establish application of mind.
In the present case, the notice contained only a bland statement that ITC was availed "without documentary evidence" and that the assessee had "suppressed the facts". The Court found this insufficient to justify invocation of the extended limitation period. It observed that there was no material demonstrating a by Tata Steel to evade tax or avail excess ITC.
Key Observations from the Judgment
"The
which led to the inference arrived at of
/willful misrepresentation/suppression should be evident from the notice itself. The mere employment of such words will not indicate an application of mind, upon which alone the satisfaction can be arrived at."
"The words are not to be mechanically recited in the notice to enable recovery outside the normal limitation provided under the statute."
"It is not mere
to the provisions that is intended when an extended limitation period is provided for recovering an excess benefit availed, short payment or excess refund, from the assessee, especially when the allegation is of
/willful misrepresentation/suppression."
Decision and Liberty for Fresh Proceedings
The Supreme Court allowed the appeal, setting aside the dated and the consequential dated . However, it granted the Department liberty to initiate fresh proceedings under Section 74, if warranted, provided that the are included in the notice and an order is passed before . The judgment underscores that tax authorities cannot use the extended limitation as a protective mechanism without proper satisfaction and factual support, reinforcing procedural fairness in GST adjudication.
