Madras High Court Quashes GST Orders Passed Under Section 74 for Lack of “Jurisdictional Facts”
(Based on Madras High Court judgment in Neeyamo Enterprise Solutions Pvt. Ltd. vs. CTO, dated 11.11.2025)
Background
The Madras High Court has delivered an important ruling affecting all taxpayers who have been issued notices or assessment orders under Section 74 of the GST law. The Court examined whether extended limitation under Section 74 can be invoked without specific allegations of fraud, wilful misstatement, or suppression of facts.
Key Findings of the Court
- Section 74 can be invoked only when fraud/suppression is alleged with supporting material
The Court held that fraud, wilful misstatement, or suppression of facts must be clearly stated in the Show Cause Notice (SCN) and the order. In this case, no such allegation existed, rendering the invocation of Section 74 invalid.
- Use of “determined” in SCN shows pre-determination
Section 74 requires the officer to “specify the sum payable”. However, the SCNs used the word “determined”, which the Court held reflects pre-judgment, rendering the notices legally unsustainable.
- Absence of jurisdictional facts → Entire proceedings must be quashed
The Court clarified that:
– If an order suffers from a procedural lapse, it may be remanded.
– But when jurisdictional facts are missing, the proceedings must be quashed outright, and remand is impermissible.
- Mere non-payment of tax ≠ fraud or suppression
Relying on Supreme Court judgments and CBIC Circular (13.12.2023), the Court reiterated that non-payment or short payment of tax by itself does not constitute fraud/suppression. The department must establish that such non-payment was “by reason of” the fraudulent conduct.
- Revenue permitted to proceed under Section 73
While quashing all orders from FY 2018–19 to 2023–24, the Court allowed the department to initiate proceedings under Section 73 (normal limitation), if applicable.
Implications for Taxpayers
– SCNs issued under Section 74 must be checked for proper allegation and evidence of fraud/suppression.
– Notices that mechanically invoke Section 74 are challengeable.
– If the jurisdictional foundation is absent, the entire proceeding is void.
– Businesses currently facing Section 74 notices should consider legal review.
Conclusion
This landmark ruling reinforces that Section 74 is an exceptional remedy, not a routine tool for demand recovery. Taxpayers receiving SCNs under Section 74 should carefully evaluate whether “jurisdictional facts” have been properly established.
Mohan & Chandrasekhar
Chartered Accountants