"Numbers Without Narrative" - Supreme Court Puts Section 74 SCNs Under the Microscope
1) Why this Supreme Court order matters
In GST practice, the difference between Section 73 and Section 74 is not cosmetic-it changes the entire temperature of a case. Section 74 is the "serious track": it is meant for situations where tax is short-paid / ITC is wrongly availed by reason of fraud, wilful misstatement, or suppression of facts with intent to evade tax, carrying harsher consequences (including penalty exposure) and a longer limitation framework than ordinary cases.
That is precisely why the Supreme Court’s interim order in GR Infra Projects Limited, Ratlam v. State of Madhya Pradesh & Ors. [2025(10)LCX0431] is significant. The Court has sent a clear signal: if the department wants to invoke Section 74, the Show Cause Notice (SCN) must plead the foundations of "fraud/suppression" in concrete terms-not merely paste demand figures.
This is not a final judgment on merits (the matter is pending), but an important threshold intervention: the Supreme Court has stayed further proceedings because the SCN appeared, prima facie, bereft of material particulars.
2) The case in brief: search → DRC-01A → Section 74 SCN → writ → SLP
GR Infra Projects Limited, Ratlam is engaged in road/highway construction and is registered under CGST/MPGST. Following a search under Section 67, the department moved towards demand proceedings.
Key milestones (as recorded in the Supreme Court "Record of Proceedings"):
The dispute relates to FY 2018–19.
The department issued DRC-01A (intimation under Rule 142(1A)) and thereafter a Section 74 SCN dated 13.06.2025 proposing a demand of about Rs. 1.52 crore, broadly referencing issues like mismatches, ineligible ITC, and vendor cancellations (as reported in case summaries and the litigation history).
The taxpayer challenged the SCN before the Madhya Pradesh High Court (WP No. 40749/2025). The High Court declined interference at the SCN stage, effectively pushing the assessee to participate in adjudication.
The assessee approached the Supreme Court via SLP(C) No. 33594/2025 [2025(11)LCX0332] arising out of the MPHC order dated 29-10-2025.
The Supreme Court, by order dated 21-11-2025 (Bench: Justice J.B. Pardiwala and Justice K.V. Viswanathan), issued notice and stayed further proceedings.
3) The Supreme Court’s core concern: "Except figures, nothing else"
The heart of the Supreme Court’s prima facie view is simple but powerful:
A Section 74 notice must disclose why the case falls in the fraud/suppression bucket.
In this matter, the Court recorded:
the assessee’s principal argument that the SCN invoking Section 74 is bereft of material particulars; and
prima facie, "Except figures, there is nothing else stated" in the SCN, warranting a stay of further proceedings during pendency.
That observation matters because fraud/suppression is not a label. It is a serious allegation that must be pleaded with basic facts so the noticee can respond meaningfully.
4) What does "material particulars" mean in a Section 74 SCN?
A GST SCN is not meant to be a full adjudication order-but it must contain the minimum factual foundation of the charge. In the context of Section 74, "material particulars" typically include:
1. The specific act/omission alleged (what exactly was done or not done).
2. The factual basis/evidence (documents, statements, returns, third-party data) relied upon to allege fraud/suppression.
3. The linkage to "intent to evade" (how the conduct indicates deliberate concealment or wilful misstatement).
4. Period-wise and issue-wise narration (not just consolidated numbers).
5. Clear classification of issues: which part is mere mismatch/interpretational vs which part is alleged fraud/suppression.
Without these, the SCN risks becoming a demand spreadsheet with a threatening heading-incapable of meeting the standards of fairness that tax law demands, especially when extended limitation and penalty are triggered.
5) Why Section 74 cannot be invoked as a "default option"
A frequent practical grievance in GST litigation is that Section 74 gets invoked routinely-sometimes because the period is older and Section 73 limitation may be tight, or because the department wants the deterrent effect of penalty language.
But jurisprudentially, the "fraud track" is exceptional. Courts have repeatedly emphasized that extended limitation / penal tracks require strict pleading and proof-the department bears the burden to justify why the case is not merely "tax not paid" but "tax not paid due to fraud/suppression."
This principle is not new. It is anchored in older indirect tax law too-particularly in the Supreme Court’s reasoning in Uniworth Textiles Ltd. v. CCE (in the context of extended period invocation), where the Court stressed that the Revenue must show the required mens rea elements and cannot rely on assumptions.
That philosophy translates neatly to GST Section 74: you cannot allege fraud by implication; you must plead it.
6) The MP High Court approach vs Supreme Court’s threshold intervention
The Madhya Pradesh High Court took a restraint-based approach: once a Section 74 SCN is issued, the writ court should generally not examine whether Section 74 was "wrongly invoked," and the assessee should raise all issues in adjudication; the High Court also observed that if fraud is not established, an order could be passed under Section 73.
The Supreme Court has not finally rejected that approach-but it has clearly indicated that a foundationally deficient Section 74 SCN can be questioned at the threshold, because the very jurisdictional trigger (fraud/suppression particulars) appears missing.
So, the emerging message is a balanced one:
Not every SCN deserves writ interference, but
a Section 74 SCN that contains only figures and conclusions, without the fraud/suppression narrative, may cross the line into jurisdictional deficiency.
7) Reinforcement from High Courts: HCL Infotech and Varanasi Sangam Expressway
This is also consistent with how some High Courts have dealt with vague Section 74 notices.
(A) HCL Infotech Ltd. v. Commissioner, Commercial Tax (2024(09)LCX0205) The Allahabad High Court quashed a Section 74 SCN where the notice did not even "whisper" the necessary ingredients of fraud/wilful misstatement/suppression, holding that proceedings under Section 74 become without jurisdiction if such ingredients are absent; however, it granted liberty to issue a fresh, properly pleaded notice if grounds truly exist.
(B) Varanasi Sangam Expressway Pvt. Ltd. v. Commissioner of State Tax (2025(10)LCX0166)
In this line of cases, the consistent theme is the same: fraud/suppression must be pleaded as foundational averments, not assumed from mismatches. (Various legal reporting databases reflect the same thrust.)
The Supreme Court’s interim stay in GR Infra therefore sits in a broader judicial mood: Section 74 is not a shortcut; it is a charge that must be articulated.
8) Practical guidance: what a legally sustainable Section 74 SCN should contain
If departments want Section 74 notices to survive judicial scrutiny, the drafting discipline must improve. A robust SCN should:
Identify the alleged fraud/suppression conduct: e.g., "ITC availed on invoices without receipt of goods/services," "circular trading," "deliberate non-reporting," etc.
State the factual basis: statements recorded, seizure findings, vendor confirmations, e-way bill trail, bank trail, site verification, etc.
Explain the "intent" element: why this is not an error, but deliberate.
Segregate issues:
○ "Mismatch-type" disputes (often Section 73 territory), and
○ "Fraud-type" disputes (Section 74 territory).
Attach/offer relied upon documents (or at least list them clearly), so the noticee can effectively rebut.
When an SCN skips the narrative and jumps straight to totals, it invites the exact reaction seen in GR Infra: numbers are not particulars.
9) Practical guidance for taxpayers: how to respond when Section 74 is invoked vaguely
If you receive a Section 74 SCN that reads like a demand chart with a fraud heading, consider a structured strategy:
1. Ask: where is the fraud/suppression pleaded?
If it is missing, raise a preliminary objection that jurisdictional ingredients are absent.2. Demand relied upon material (documents/data on which allegations are based). A reply without access to relied-upon material becomes guesswork.
3. Separate "quantum dispute" from "mens rea dispute"
Even if figures are arguable, highlight that mens rea cannot be presumed.4. Use DRC-01A stage effectively
Many cases can be softened at pre-SCN stage if explanations and reconciliations are placed early.5. Writ remedy: sparingly, but not never
Courts often discourage writs against SCNs, but jurisdictional defects (like absence of foundational allegations for Section 74) are increasingly being treated as an exception-exactly what GR Infra and HCL Infotech illustrate.
10) The larger takeaway: "Fraud" is a pleading, not a presumption
The Supreme Court’s stay order in GR Infra Projects is a timely reminder that Section 74 is not merely a longer limitation tool; it is a serious accusation that must be supported by pleaded facts from the very first document-the SCN.
For the GST ecosystem, this has two healthy effects:
It protects taxpayers from being pushed into penal proceedings on the basis of generic language; and
It nudges the administration towards better investigations and better-drafted notices-because the "fraud track" must be earned through particulars, not asserted through arithmetic.
Until the Supreme Court finally decides the SLP, the interim stay itself already conveys the principle in a memorable line: "Except figures, there is nothing else" is not how Section 74 is supposed to begin.
Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.