Prima facie satisfaction and not conclusive proof of fraud is sufficient to invoke Section 74 of the CGST Act

Last updated: 28 August 2026

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The Madras High Court has ruled that authorities only need a prima facie indication of fraud, wilful misstatement, or suppression of facts to issue a show cause notice under Section 74 of the CGST Act. Conclusive proof of fraud is not required at this initial stage. If fraud allegations ultimately fail during adjudication, the proceedings can be converted to Section 73, protecting taxpayers from invalidation.

Court :
Madras High Court

Brief :
The Hon’ble Madras High Court in Fastenex Private Limited & Ors. v. State Tax Officer & Ors. [W.P. Nos. 35967, 35970, 35974 and 35976 of 2024 & Ors. dated June 08, 2026] , while deciding a batch of nearly 250 writ petitions challenging proceedings initiated under Section 74 of the Central Goods and Services Tax Act, 2017 ( “the CGST Act” )/ Tamil Nadu Goods and Services Tax Act, 2017 ( “the TNGST Act” ), upheld the jurisdiction of the Proper Officer to invoke Section 74 at the show cause notice stage and held that the expression “where it appears” prescribes only a prima facie jurisdictional threshold and does not require a conclusive determination of fraud, wilful misstatement or suppression of facts before issuance of the notice. Further, held that where the allegation of fraud ultimately fails during adjudication, the proceedings do not become invalid ab initio and can be converted into proceedings under Section 73 of the CGST Act by virtue of Section 75(2) of the CGST Act.

Citation :
W.P. Nos. 35967, 35970, 35974 and 35976 of 2024 & Ors. dated June 08, 2026

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Attached File : 671907_6104_16_fastenex_private_limited.pdf

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Judgement posted by

Bimal Jain

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FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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