Assessment Under Omitted Section 74 Held Unsustainable: Proceedings for FY 2024-25 Must Conform to Section 74A

R. Chandrasekar Versus The Assistant Commissioner (Inspection) (ST) (IU), Tirunelveli. - 2026 (1) TMI 1455 - MADRAS HIGH COURT

Background of the Dispute

The writ petition was filed against an assessment order dated 04.09.2025 passed by the respondent in relation to FY 2024-25 u/s 74 of the Tamil Nadu Goods and Services Tax Act.

Jurisdictional and statutory grounds relied on by the Petitioner:

• Section 74 was omitted through the Finance (No. 2) Act, 2024, and
• From FY 2024-25, Section 74A shall be effective.

Consequently, the authority lacked legal jurisdiction to continue the adjudication under the omitted provision.

Issue before the Court

The principal question before the court was whether an assessment order passed under Section 74 after the omission of that provision could survive in law when the governing statutory provisions required proceedings to be undertaken under Section 74A.

Court's Analysis

• There is no dispute about the facts of the case.
• During the hearing, the respondent acknowledged that the impugned assessment order had indeed been issued under Section 74 instead of Section 74A. The respondent explained that the invocation of Section 74 was inadvertent.
• Since the proceedings related to FY 2024-25 and the applicable statutory provisions are Section 74A, the invocation of Section 74 constituted a fundamental statutory defect.
• Once the authority itself accepted that the wrong statutory provision had been invoked, the validity of the order became unsustainable.

Findings

The Court held that:

• Section 74 was no longer the applicable provision governing proceedings for FY 2024-25.
• Proceedings ought to have been undertaken under Section 74A.
• The respondent had admitted that Section 74 had been invoked by mistake.
• An adjudicatory order founded upon an omitted statutory provision could not be sustained in law.

Accordingly, the assessment order was liable to be set aside.

Conclusions and outcomes:

Rather than setting aside the proceedings altogether, the Court adopted a corrective approach.

The impugned assessment order was directed to be treated as a show cause notice.

The Court further directed that:

1. To Petitioner: Petitioner granted six weeks to submit objections and supporting materials
2. To Respondent
   1. Respondent required to examine the objections
   2. Clear 14-day advance notice to be issued
   3. Matter to be decided afresh on merits and in accordance with law

Litigation Significance

1. Invocation of an omitted statutory provision is a jurisdictional defect capable of invalidating the resultant order.
2. Authorities must carefully identify the provision governing the relevant tax period before initiating adjudication.
3. Where proceedings are founded on the wrong statutory source of power, courts may set aside the order without entering into the merits of the tax demand.
4. Even after quashing such orders, courts may permit continuation of proceedings by treating the impugned order as a show-cause notice and directing fresh adjudication.