SCN Under Section 73/74 of the CGST Act: Common Illegalities and How Courts Quash Them
A Practical Guide for Taxpayers, Lawyers and GST Practitioners
By Advocate Mamta Sharma
Show Cause Notices (SCNs) issued under Sections 73 and 74 of the CGST Act are meant to ensure fair tax administration. However, in the last few years, courts and tribunals across India have repeatedly struck down GST notices for being arbitrary, vague, or issued in complete violation of due process.
For taxpayers, these illegalities cause harassment; for lawyers, they open strong grounds for challenging SCNs through writ petitions. This article breaks down the most common illegalities in GST notices and explains when and how High Courts quash them.
- Understanding Sections 73 and 74: The Basic Framework
Section 73 – Cases without allegation of fraud
Covers situations involving:
- mistakes,
- omissions,
- incorrect reporting, or
- misinterpretation of law.
Section 74 – Cases with allegations of fraud
Covers situations where the department imputes:
- fraud,
- suppression of facts,
- willful misstatement.
Because Section 74 involves serious allegations, the courts expect a higher standard of reasoning and evidence in these notices.
- Common Illegalities in SCNs that Courts Routinely Strike Down
Below are the defects that have consistently caused courts to quash SCNs under the CGST Act:
**(A) Vague and Template-Based SCNs (Most Common Ground)
Many SCNs are nothing more than:
- copy-paste templates,
- pre-filled formats, or
- notices without specific facts.
High Courts have held this to be a violation of natural justice, because the taxpayer cannot respond meaningfully unless:
- exact allegations,
- precise computations,
- and specific documents relied upon
are clearly disclosed.
Courts quash such SCNs outright.
(B) SCNs Issued by an Officer Who Is Not the Proper Officer
Section 2(91), Sections 3–5, and relevant Notifications define “proper officer.”
Notices issued by:
- DGGI without cross-empowerment,
- officers outside jurisdiction, or
- officers below the rank competent under the Act
are held jurisdictionally invalid.
Jurisdictional defects go to the root, and cannot be cured later.
(C) Failure to Provide Relied-Upon Documents and Computation Sheet
Courts have repeatedly held that GST authorities must supply:
- all relied-upon documents,
- audit objections,
- statements,
- worksheets for tax calculation.
A notice demanding crores of rupees without showing how the figure was arrived at is considered arbitrary and illegal.
(D) Using Section 74 Without Proving ‘Fraud’ or ‘Suppression’
Section 74 must specify:
- the exact act of fraud,
- the precise material suppressed,
- the intent to evade tax.
Merely using words like “suppression” or “fraud” does not satisfy the statutory requirement.
Courts routinely convert such SCNs to Section 73 or quash them outright.
(E) SCN Issued Beyond Limitation
Under the CGST Act:
- Section 73 → 3 years
- Section 74 → 5 years
Many SCNs are issued:
- after the limitation period,
- without any valid extension,
- or after expiry of the financial year.
Courts hold such SCNs to be time-barred and unenforceable.
(F) Group / Collective SCNs (Held Illegal by Several High Courts)
Authorities often issue one consolidated SCN against multiple entities/branches.
Courts have held this to be:
- contrary to Sections 73 and 74,
- violative of natural justice,
- based on mechanical clubbing of pasting data.
Each taxable person requires a separate notice, with individual reasoning.
(G) Absence of Pre-SCN Consultation (Mandatory Where Circulars Apply)
CBIC Circular No. 107/26/2019-GST mandates pre-show-cause consultation in many cases.
Where pre-SCN consultation is mandatory, failure to follow it has resulted in:
- quashing of SCN, or
- direction to start proceedings afresh.
(H) SCNs Based Entirely on Third-Party Data (Without Independent Inquiry)
Common examples:
- ITC mismatch based solely on GSTR-2A/2B
- Notices based only on DGGI reports
- Action based only on another state’s investigation
Courts hold that:
- independent application of mind is mandatory
- raw data cannot replace a reasoned allegation
SCNs must establish a clear nexus between the taxpayer and the alleged tax liability.
(I) Not Providing Reasonable Opportunity of Hearing
Violation occurs when:
- hearing is denied despite request,
- short or unreasonable time is given,
- hearings fixed on Sundays/holidays,
- order passed before the hearing date.
High Courts regularly strike down such proceedings as procedurally unfair.
(J) Parallel Proceedings by Different Wings of GST
Example:
- DGGI issues a 74 notice,
- State SGST also issues a 73 notice for the same period.
Courts hold such duplication as:
- arbitrary,
- abusive of process,
- contrary to cooperative federalism under GST.
One authority must lead the investigation, not multiple.
- How Courts Grant Relief: Common Judicial Remedies
Courts have adopted the following approaches in GST writ matters:
✔ Quashing of the SCN entirely
(Where the notice is vague, jurisdictionally defective, or time-barred)
✔ Remand with directions
(Where some procedural lapse occurred)
✔ Interim stay on proceedings
(Where the demand is prima facie illegal)
✔ Prohibiting coercive action
(Particularly in Section 74 matters involving alleged fraud)
✔ Ordering fresh SCN with proper reasoning
(Where the authority failed to apply mind)
- Why Taxpayers Should Act Immediately
Illegal SCNs—if not challenged—lead to:
- attachment of bank accounts under Section 83,
- blocking of ITC under Rule 86A,
- garnishee orders under Section 79,
- cancellation of registration under Section 29.
The earlier the challenge, the better the chances of relief.
- Conclusion: Courts Intervene When Due Process Is Violated
While GST law gives wide powers to the department, courts insist that these powers must be exercised:
- fairly,
- transparently,
- within jurisdiction, and
- with proper reasoning.
Any violation of natural justice or statutory procedure becomes a strong ground for quashing SCNs under Sections 73 and 74 of the CGST Act.