Demand Proceedings Under Section 74 Are Invalid for FY 2024-25 –
Madras High Court
(Baskar Selvakumar vs Assistant Commissioner of CGST &
Central Excise Madras High Court (Madurai Bench) W.P.(MD) No. 2625 of 2026 | Order dated 03.02.2026)
Introduction
In a significant ruling
clarifying the post-amendment GST demand framework, the Madurai Bench of
the Madras High Court in Baskar Selvakumar vs Assistant Commissioner of CGST
& Central Excise held that show cause notices and assessment orders
issued under Sections 73 or 74 for FY 2024-25 are without jurisdiction, as
both provisions stood omitted w.e.f. 01.04.2024.
The Court categorically
ruled that only Section 74A governs demand proceedings for financial
year 2024-25 onwards, and any proceedings initiated under the old
provisions are legally unsustainable.
Facts of
the Case
The petitioner is a
registered GST dealer engaged in electrical works. For FY 2024-25, the
department:
- Issued a show cause notice under
Section 74 of the CGST Act
- Passed an Order-in-Original dated
28.10.2025
- Subsequently issued a rectification
order dated 24.11.2025 under Section 161, along with DRC-08
The petitioner challenged
the rectification order before the High Court on the ground that:
- Sections 73 and 74 were omitted
w.e.f. 01.04.2024
- The proceedings for FY 2024-25 should
have been initiated only under Section 74A
- The rectification order was passed without
granting an opportunity of hearing
Key Legal
Issue
Whether demand
proceedings for FY 2024-25 can be initiated under Section 74 after omission of
Sections 73 and 74 and introduction of Section 74A?
Arguments
of the Petitioner
- Sections 73 and 74 ceased to exist
from 01.04.2024
- Any SCN or assessment under Section
74 for FY 2024-25 is without jurisdiction
- Rectification under Section 161
cannot cure a fundamental jurisdictional defect
- Passing rectification order without
personal hearing violates principles of natural justice
Stand of
the Department
The learned Additional
Government Pleader fairly admitted that:
- Proceedings were wrongly initiated
under Section 74
- For FY 2024-25, Section 74A alone
applies
- The matter may be remanded for fresh
consideration
This candid admission
played a crucial role in the Court’s decision.
Court’s
Findings and Observations
The Madras High Court
held:
- Sections 73 and 74 stood omitted
w.e.f. 01.04.2024
- Section 74A is the only enabling
provision for demand proceedings from FY
2024-25 onwards
- The original assessment order dated
28.10.2025 was passed without jurisdiction
- Subsequent rectification under
Section 161 cannot validate an illegal proceeding
- The rectification order was also
defective as it was passed without opportunity to the petitioner
The Court emphasized that
jurisdictional errors go to the root of the matter and cannot be cured
through rectification.
Final
Directions of the High Court
The Court disposed of the
writ petition with the following directions:
1. Rectification
order dated 24.11.2025 was set aside
2. Matter
was remanded to the assessing authority
3. The
petitioner was directed to:
o Treat
the impugned order as a notice under Section 74A
o File
reply/objections with supporting documents within 4 weeks
4. The
department was directed to:
o Grant
14 days clear notice for personal hearing
o Pass
a fresh order on merits in accordance with law
No costs were imposed.
Conclusion
The decision in Baskar
Selvakumar is a landmark procedural ruling that reinforces the
importance of strict statutory compliance by GST authorities. It sends a
clear message that old provisions cannot be mechanically applied after
legislative overhaul.
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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