The Madras High Court consisting of the bench of Justice Senthilkumar Ramamoorthy has granted interim relief to a taxpayer by staying a GST demand order passed under Section 74 of the GST laws after finding a prima facie case in the challenge against the proceedings. 

The dispute raises an important legal issue concerning the validity of initiating proceedings under Section 74 when the earlier intimation was issued under Section 73 and whether the show cause notice contained the necessary ingredients required for invoking allegations of fraud or suppression.

A writ petition was filed challenging an adjudication order dated March 28, 2026, passed by the Joint Commissioner (ST) Intelligence-II, Chennai, for the tax period 2019-20.

The petitioner argued that the GST authorities had initially issued an intimation in Form GST DRC-01A under Section 73 of the GST enactments. However, the final proceedings culminated in an order under Section 74, which deals with cases involving fraud, wilful misstatement, or suppression of facts with intent to evade tax. According to the petitioner, such a course of action was legally unsustainable.

The taxpayer further contended that the show cause notice itself did not contain the essential allegations and ingredients necessary for invoking Section 74. It was also argued that the authorities had resorted to Section 74 as an afterthought because proceedings under Section 73 would have been barred by limitation. The petitioner therefore challenged the validity of the entire adjudication process.

Appearing for the State Tax Department, the Government Counsel submitted that the show cause notice had been issued under Section 74 and that issuance of a prior intimation was not mandatory under the GST framework. The Department sought time from the Court to file a detailed counter-affidavit defending the impugned order.

The Court directed that the interim protection would continue until the next date of hearing and posted the matter for further consideration on July 10, 2026.

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