Invalidation of GST Orders under Omitted Section 74 (FY 2024-25 Onwards)

Invalidation of GST Orders under Omitted Section 74 (FY 2024-25 Onwards)

Case Reference: M Gnanaraj vs. Assistant Commissioner (ST) | Madras High Court (2025/2026)

Statutory Reference: Section 74 and Section 74A of the CGST/TNGST Act, 2017

1. The Core Dispute: Jurisdiction under Omitted Provisions

In this matter, the Revenue issued an assessment order under Section 74 for a period pertaining to Financial Year 2024-25. The taxpayer challenged the order, contending that the statutory framework for demand and recovery had undergone a fundamental shift following the Finance (No. 2) Act, 2024.

• Assessee’s Stand: Sections 73 (non-fraud) and 74 (fraud) were effectively omitted/superseded for transactions occurring from FY 2024-25 onwards. Therefore, any order passed under the old Section 74 for this period is without jurisdiction.

• Revenue’s Stand: The department admitted that the order was passed inadvertently under Section 74 instead of the newly inserted Section 74A.

2. Legal Analysis: The Transition from Section 74 to 74A

The court examined the legislative changes introduced to streamline GST litigation:

I. Insertion of Section 74A

The Finance Act, 2024 introduced Section 74A to unify the assessment process.

• Standardized Timelines: Unlike the previous regime, which had different limitation periods for fraud (5 years) and non-fraud (3 years) cases, Section 74A provides a unified limitation period for all cases pertaining to FY 2024-25 onwards.

• Effective Date: The new provision is applicable specifically for tax determination from April 1, 2024, effectively making Sections 73 and 74 redundant for current and future financial years.

II. Procedural Regularization

The court noted that while the Revenue made a “labeling error,” the substantive intent was to determine tax liability. However, because Section 74 no longer exists for this period, the order cannot be sustained as a final adjudication.

3. Final Ruling and Directions

The High Court set aside the impugned order, favoring the assessee on jurisdictional grounds but allowing the Revenue to regularize the proceedings.

• Verdict: The assessment order passed under Section 74 was quashed and set aside.

• Remand with Conditions: To avoid a total collapse of the tax demand due to a technicality, the court directed that:

  1. The quashed order be treated as a Show Cause Notice (SCN) under Section 74A.

  2. The petitioner (Assessee) is granted the opportunity to file a detailed reply within a specified period (typically 4 weeks).

  3. The Revenue must thereafter pass a fresh order strictly in accordance with the provisions of Section 74A.

Key Takeaway for Taxpayers

• Verification of Section: If you receive a notice for FY 2024-25 or later, ensure it is issued under Section 74A. A notice or order under Sections 73 or 74 for this period is legally “non-est” (does not exist).

• Unified Period: Under Section 74A, the department now has 42 months (from the due date of the annual return) to issue a notice, regardless of whether fraud is alleged.