Supreme Court quashes Rs 890-crore GST demand against Tata Steel

Tata Steel has secured relief from the Supreme Court in a Goods and Services Tax dispute, with the apex court quashing a Rs 890.52-crore tax demand, an equal penalty and applicable interest imposed on the steelmaker. The tax demand and penalty together amounted to about Rs 1,781 crore, excluding interest. The Supreme Court allowed Tata Steel's appeal and set aside a June 2025 show-cause notice as well as the subsequent order passed by the CGST and Central Excise authorities in Jamshedpur.

The ruling, however, does not completely close the door on the dispute. The court has allowed the Tax Department to initiate fresh proceedings under Section 74 of the Central GST Act if it considers such action necessary, subject to conditions laid down in the judgment.

Dispute over tax credit

The case dates back to June 2025, when the Office of the Commissioner of CGST and Central Excise, Jamshedpur, issued a show-cause notice alleging that Tata Steel had irregularly availed input tax credit (ITC) of Rs 890.52 crore between 2018-19 and 2020-21.

The authorities sought recovery of the amount along with interest and penalty. In December 2025, the adjudicating authority confirmed the Rs 890.52-crore demand and imposed an equivalent penalty.

Tata Steel contested the allegations, maintaining that it had not availed excess ITC. The company argued that the disputed credit related to one financial year but was availed in a subsequent year, which it said was permissible under GST law. It also challenged the proceedings on jurisdictional and limitation grounds.

The company approached the Jharkhand High Court in February this year. The High Court disposed of the petition in April, allowing Tata Steel to approach the appellate authority. The steelmaker instead challenged the order before the Supreme Court, which stayed further proceedings in May.

SC flags Section 74 invocation

A Supreme Court Bench of Justices J B Pardiwala and K Vinod Chandran held that tax authorities cannot invoke the extended limitation available under Section 74 merely by using expressions such as fraud, wilful misrepresentation or suppression of facts.

The court said the show-cause notice itself must contain foundational facts demonstrating how the alleged short payment of tax or wrongful availment of ITC resulted from fraud, wilful misstatement or suppression. In Tata Steel's case, the court found that the notice failed to establish a deliberate attempt to evade tax or improperly claim excess ITC.

The court consequently set aside the June 13, 2025 show-cause notice and the December 2025 order arising from it.

Fresh proceedings still possible

While quashing the existing demand, the Supreme Court gave the Tax Department liberty to initiate appropriate proceedings under Section 74 if permissible under law. Any fresh action must be based on the foundational facts emerging from the notice and an order must be passed before February 28, 2027.

The judgment therefore removes Tata Steel's immediate exposure to the Rs 890.52-crore tax demand, an equal penalty and associated interest, although the department retains a limited opportunity to revive proceedings in accordance with the conditions imposed by the court.