Jurisdictional Chaos: Sections 73/74 vs. the New Section 74A

The Legal Issue

The core dispute centers on the jurisdictional validity of a Show Cause Notice (SCN) and subsequent assessment order issued for FY 2024-25. Specifically, the court examined whether GST authorities can still invoke Section 74 (fraud/wilful misstatement) for periods beginning after April 1, 2024, following the legislative introduction of Section 74A, which consolidated and replaced the previous adjudication framework for newer financial years.

Facts of the Case

The Period: The dispute pertains to the financial year 2024-25.
The Change in Law: Effective from April 1, 2024, Sections 73 and 74 were largely superseded by the new Section 74A for all future tax periods.
The Error: The GST Department issued an SCN and an assessment order under Section 74 (the “old” fraud provision). However, in the body of the same notice (Form DRC-01), the officer also referred to Section 74A(5) (the “new” consolidated provision).
The Contradiction: This “hybrid” notice reflected a “total non-application of mind,” as the officer appeared uncertain about which law actually governed the demand for the post-April 2024 period.

The Decision

The Madras High Court (2026) ruled in favour of the assessee, setting aside the assessment order:

Lack of Jurisdiction: The Court held that for any period starting April 1, 2024, the authority must strictly adhere to the new Section 74A. Invoking Section 74 for this period is a jurisdictional error that vitiates the entire proceeding.
Non-Application of Mind: The discrepancy between the section cited in the header and the section referenced in the text created “unnecessary confusion and hardship,” preventing the taxpayer from filing an effective reply.
Remand for Correct Process: While the order was quashed, the Court remanded the matter back to the Department. This allows the authorities to issue a fresh, legally sound notice under the correct provision (Section 74A).
Outcome: Order Set Aside; Matter Remanded.

Key Takeaways

The 2024-25 Milestone: If you receive a notice for any period starting April 1, 2024, check the section cited. If it still references “Section 73” or “Section 74,” the notice is technically flawed and open to a jurisdictional challenge.
Unified Limitation Period: One of the most significant changes in Section 74A is the removal of the separate limitation periods for “fraud” and “non-fraud” cases. All notices for FY 2024-25 onwards must follow the unified timelines of the new section.
Scrutinize the DRC-01: Always compare the header of the Form DRC-01 with the actual text of the attached SCN. Discrepancies are strong grounds for a Writ Petition based on “non-application of mind” by the issuing officer.

HIGH COURT OF MADRAS

Tvl. RB Communication

State Tax Officer^*

Krishnan Ramasamy, J.

W.P.(MD) No.3819 of 2026
W.M.P(MD) No.3129 of 2026

FEBRUARY 11, 2026

Sudalai Muthu N. for the Petitioner. R.Suresh Kumar, AGP for the Respondent.

ORDER

1. This writ petition has been filed challenging impugned order dated 19.08.2025 passed by the respondent.

2. Mr.R.Suresh Kumar, learned Additional Government Pleader, takes notice on behalf of the respondents.

3. By consent of the parties, the main writ petition is taken up for disposal at the admission stage itself.

4. The learned counsel for the petitioner would submit that the provisions of Sections 73 & 74 of the GST Act stood omitted with effect from 01.04.2024 and only the provisions of Section 74A of the GST Act will apply for the financial years 2024-2025 onwards. However, without considering the same, in the present case, which is pertaining to the year 2025-2026, the respondent had issued the show cause notice under Section 74 of the GST Act and subsequently, passed the impugned assessment order without any jurisdiction.

5. Further, he would submit that while issuing the notice in DRC-01, though the respondent had assumed jurisdiction under Section 74, in the later portion of the said notice, he had highlighted the provisions of Section 74A(5) of the GST Act. Hence, he would contend that the respondent is not certain on the aspect of invocation of appropriate provision at the time of issuance of show cause notice. Therefore, he requests this Court to set aside the impugned order passed by the respondent.

6. In reply, the learned Additional Government Pleader had fairly admitted the submissions made by the petitioner and submitted that the proceedings were wrongly invoked under Section 74 instead of Section 74A. Hence, he requests this Court to set aside the order and remand back this matter to the respondent.

7. Heard the learned counsel for the petitioner and the learned Additional Government Pleader for the respondents and also perused the entire materials available on record.

8. In this case, as rightly contended by the petitioner, the provisions of Sections 73 & 74 of the GST Act stood omitted with effect from 01.04.2024 and only the provisions of Section 74A of the GST Act will apply from the financial years 2024-2025 onwards. Hence, it is clear that the show cause notice dated 04.07.2025 and assessment order dated 19.08.2025 came to be passed without any jurisdiction.

9. Further, upon perusal of the show cause notice dated 04.07.2025, it appears that though the respondent had assumed jurisdiction under Section 74, in the later portion of the said notice, he had highlighted the provisions of Section 74A(5) of the GST Act. In such case, it is clear that the respondent had issued the said show cause notice in total non-application of mind, which leads to unnecessary confusion and hardship to the petitioner in filing their reply. In such view of the matter, this Court is inclined to set aside the impugned order dated 19.08.2025 passed by the respondent. To avoid any further delay and inconvenience to both the parties, this Court is inclined to direct the petitioner to treat the impugned assessment order as a notice issued under Section 74A of the GST Act and file reply to the same.

10. Accordingly, this Court passes the following order:-

(i)

The impugned order dated 19.08.2025 is set aside and the matter is remanded to the respondent for fresh consideration

(ii)

The petitioner is directed to treat the impugned order dated 19.08.2025 as a notice issued under Section 74A and file their reply/objection along with the required documents, if any, within a period of four weeks from the date of receipt of a copy of this order.

(iii)

On filing of such reply/objection by the petitioner, the respondent shall consider the same and issue a 14 days clear notice, by fixing the date of personal hearing, to the petitioner and thereafter, pass appropriate orders on merits and in accordance with law, after hearing the petitioner, as expeditiously as possible.

11. With the above directions, this writ petition is disposed of. No costs. Consequently, the connected miscellaneous petition is also closed.