- The Supreme Court quashed a Rs 1,781-crore tax demand against Tata Steel including penalty and GST liability
- The case involved alleged irregular input tax credit claims by Tata Steel from 2018-19 to 2020-21
- Tata Steel argued the tax credit was permissible and challenged the notice on jurisdiction, limitation grounds
The Supreme Court has quashed a Rs 1,781-crore tax demand against Tata Steel, setting aside a Rs 890.52-crore GST liability along with an equivalent penalty imposed on the company.
However, the court granted the tax department liberty to initiate fresh proceedings, provided the foundational facts supporting its allegations are clearly set out in the notice and the matter is concluded by Feb. 28, 2027.
The ruling relates to a show cause notice issued by the Commissioner of CGST and Central Excise, Jamshedpur, in June 2025.
The notice alleged that Tata Steel had irregularly availed input tax credit (ITC) in violation of provisions of the Central Goods and Services Tax Act.
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The ITC pertained to the financial years 2018-19 to 2020-21 and amounted to Rs 890.52 crore. The department sought recovery of the amount along with interest and an equivalent penalty.
Tata Steel contested the allegations, maintaining that there was no excess or irregular availment of ITC.
According to the company, the tax credit related to one financial year but was availed in a subsequent year, which it said was permissible under GST law. Tata Steel also challenged the notice on grounds of jurisdiction and limitation.
The adjudicating authority confirmed the tax demand in December 2025, along with an equivalent penalty and interest.
Tata Steel subsequently approached the Jharkhand High Court, which disposed of its petition in April 2026 and granted the company liberty to pursue the matter before the appellate authority.
The company then moved the Supreme Court, which stayed further proceedings in May.
In its Aug. 25 judgment, the Supreme Court allowed Tata Steel's appeal and set aside both the June 2025 show cause notice and the December 2025 order.
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The court held that merely invoking allegations of suppression was insufficient. Tax authorities were required to establish the foundational facts supporting such allegations in the notice itself.
While quashing the proceedings, the Supreme Court allowed the tax department to initiate fresh proceedings under Section 74 of the CGST Act.
Any fresh action must clearly set out the foundational facts in the notice and culminate in an order by Feb. 28, 2027.
For Tata Steel, the ruling removes the immediate Rs 1,781-crore tax and penalty exposure, although the dispute could be revived if the department initiates fresh proceedings within the stipulated deadline.
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