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Informist, Wednesday, Aug. 26, 2026

 

--SC sets aside tax demand, penalty of INR 17.8 bln against Tata Steel 

 

NEW DELHI – The Supreme Court has set aside the Central Goods and Services Tax department's INR 17.8-billion demand and penalties against Tata Steel Ltd. over alleged irregular availing of input tax credit. The court gave the department liberty to initiate appropriate proceedings under Section 74 of the Central Goods and Services Tax Act, 2017, but with the foundational facts coming out of the notice itself and an order being passed before the limitation period up to Feb. 28.

 

The court said that when a notice under Section 74 of the 2017 Act is issued to an assessee, the assessing officer's satisfaction should not only be a mismatch of input tax credit and short payment of tax, as is alleged in this case. The assessing officer should also be satisfied that fraud, wilful misrepresentation, or suppression had led to such mismatch or short payment of tax.

 

Apart from a bland statement of Tata Steel availing input tax credit for the three years without documentary evidence and by suppressing facts, the department's show-cause notice did not contain any foundational facts to validate the allegation, the court said. The foundational facts which led to the inference of fraud, wilful misrepresentation, and suppression should be evident from the department's notice itself, the court said. The mere use of such words will not indicate application of mind and the words are not to be mechanically recited in the notice to enable recovery outside the normal limitation provided under the statute, it said.

 

"In the facts of the above case, we do not find any such factual facts having been stated to make out a case of a deliberate device employed to evade tax or avail excess ITC (input tax credit), as coming out from the SCN (show-cause notice)," the bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran said. The bland statement made in some places of suppression of facts, merely to avail the extended period of limitation, would barely suffice and puts to peril the notice under Section 74, the court said.

 

The tax department had alleged that Tata Steel had irregularly availed input tax credit from the financial year 2018-19 (Apr-Mar) to FY21, and issued a demand order in 2025 under Section 74, which provides for a five-year extended limitation period. The company said there was no fraud, wilful misstatement, or suppression of facts, bereft of which there can be no invocation of Section 74.

 

Wednesday, shares of Tata Steel ended at INR 188.01 apiece on the National Stock Exchange, up 0.6% from Tuesday.  End

 

Reported by Surya Tripathi

Edited by Shubhayan Bhattacharya

 

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