GST Notices for FY 2024-25 Onwards U/s 73/74 May Face Jurisdictional Challenge After S. 74A: Taxpayers Must Check Validity Before Replying [CASE LAW]

In a significant ruling with potentially far-reaching implications for GST assessments across the country, the Madras High Court has held that proceedings relating to Financial Year (FY) 2024-25 cannot be initiated under Sections 73 or 74 of the CGST/TNGST Act after the introduction of Section 74A. The Court quashed an assessment order issued under Section 74 for FY 2024-25, holding that the tax authority lacked jurisdiction to invoke the provision. The judgment provides a powerful jurisdictional defense to taxpayers who have received GST notices under Sections 73 or 74 for periods commencing from April 2024. Why This Judgment Matters The Finance Act, 2024 introduced Section 74A as a comprehensive provision governing determination of tax not paid, short paid, erroneously refunded, or input tax credit wrongly availed or utilized for tax periods from FY 2024-25 onwards. With effect from 1 November 2024, the legislature effectively replaced the separate mechanisms under Sections 73 and 74 for future tax periods and consolidated such proceedings under Section 74A. Despite this legislative change, several GST authorities across India have continued issuing notices under Sections 73 and 74 even for FY 2024-25. The present judgment directly addresses the legality of such notices. Facts of the Case The petitioner challenged an assessment order dated 9 April 2025 passed under Section 74 of the TNGST Act for Assessment Year 2024-25. The taxpayer contended that: The assessment order had been passed ex parte. The taxpayer had not effectively responded due to confusion arising from multiple notices uploaded on the GST portal. More importantly, proceedings for FY 2024-25 could only be initiated under Section 74A and not under Section 74. Revenue Admits the Error What makes this case particularly noteworthy is that the State itself conceded before the Court that the notice had been issued under the wrong provision. The Additional Government Pleader admitted that: The notice had been issued under Section 74. For FY 2024-25, proceedings ought to have been initiated under Section 74A. The department was required to invoke Section 74A and not Section 74. This concession substantially strengthened the taxpayer's challenge. Court's Legal Analysis The High Court unequivocally held that from 1 April 2024 onwards, proceedings must be initiated under Section 74A and not under Section 74. Justice Krishnan Ramasamy observed that the respondent had issued the show cause notice under Section 74 "without any authority of law" and subsequently passed the assessment order based upon that notice. Since the very foundation of the proceedings was legally defective, the resulting assessment order could not survive. The Court specifically recorded: "the respondent can initiate proceeding from 01.04.2024 in terms of the provisions of Section 74A of the Act and not through Section 74 of the Act." The Court therefore set aside the assessment order. Important: Court Did Not Quash the Proceedings Entirely While the taxpayer succeeded on the jurisdictional issue, the Court adopted a practical approach. Instead of directing the department to restart the proceedings through a fresh notice, the Court permitted the existing DRC-01 notice issued under Section 74 to be treated as a notice under Section 74A. The taxpayer was granted four weeks to file a reply, following which the department was directed to decide the matter afresh after granting personal hearing. Thus, the Court corrected the jurisdictional defect while ensuring that the substantive tax dispute could still be adjudicated. Key Legal Takeaways 1. Jurisdiction Is Not a Technical Objection The ruling recognizes that invocation of the correct statutory provision is a jurisdictional requirement and not merely a procedural formality. When Parliament creates a specific provision to govern future assessments, authorities cannot continue to invoke superseded provisions. 2. Section 74A Is the Governing Provision for FY 2024-25 Onwards The judgment lends judicial support to the view that notices issued under Sections 73 or 74 for FY 2024-25 onwards may be vulnerable to challenge. 3. Taxpayers Must Raise This Ground Immediately Even if taxpayers choose to contest the case on merits, they should specifically challenge the jurisdictional validity of notices issued under Sections 73 or 74 for FY 2024-25 onwards. Failure to raise the ground at the earliest stage may complicate future appellate proceedings. 4. The Defect May Not Always Result in Complete Quashing The judgment also indicates that courts may adopt a curative approach by permitting conversion of an incorrectly issued notice into a valid notice under Section 74A, particularly where limitation issues arise. Practical Action Points for Taxpayers Tax professionals and businesses should immediately undertake a review of all GST notices received for periods beginning April 2024 onwards. The following checklist may be useful: Review all DRC-01 notices and assessment proceedings. Verify whether the notice invokes Section 73 or Section 74. Examine whether the period involved falls within FY 2024-25 or later years. Specifically raise a jurisdictional challenge in the reply. Preserve the ground in appeals, writ petitions and other proceedings. Contest merits separately without waiving the jurisdictional objection. Wider Impact on GST Litigation The judgment is likely to be cited extensively in ongoing GST disputes involving FY 2024-25 and subsequent periods. Given that many notices across states were issued during the transition phase following the Finance Act, 2024 amendments, similar jurisdictional challenges may emerge before appellate authorities, High Courts and possibly the Supreme Court. While further judicial pronouncements will be needed to settle the issue conclusively, the Madras High Court has delivered one of the first clear rulings recognizing that invocation of Section 73 or Section 74 for FY 2024-25 proceedings may suffer from a fundamental jurisdictional defect. Case Details Case Title: Tvl. Fancy Agency v. Deputy State Tax Officer-I, Virudhunagar Assessment Circle Citation: JURISHOUR-1584-HC-2026(MAD) Case No.: W.P.(MD) No. 35371 of 2025 Date: 10/12/2025 Click Here To Read Order Read More: KYC Verification Of Importer By Customs Broker Through Govt. Portals Enough, No Physical Verification Required: CESTAT

GST Notices for FY 2024-25 Onwards U/s 73/74 May Face Jurisdictional Challenge After S. 74A: Taxpayers Must Check Validity Before Replying [CASE LAW]

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