Facts of the Case

The petitioner, Tvl Alagarsamy Power Constructions Private Limited, challenged the assessment order dated 04.11.2025 passed by the State Tax Officer under Section 74 of the GST Act for the assessment year 2024–25. The petitioner contended that for the relevant assessment year, proceedings ought to have been initiated under Section 74A instead of Section 74. The petitioner therefore sought quashing of the impugned order and requested a fresh assessment after providing an opportunity of personal hearing.

Issues Involved

  • Whether proceedings relating to the assessment year 2024–25 could validly be initiated under Section 74 instead of Section 74A of the GST Act.
  • Whether the incorrect invocation of Section 74 was merely a clerical error or affected the legality of the assessment order and penalty imposed.
  • Whether the assessment order was liable to be quashed and fresh proceedings directed under the correct statutory provision.

Petitioner's Arguments

  • The petitioner argued that the proceedings relating to the assessment year 2024–25 should have been initiated only under Section 74A of the GST Act.
  • It was submitted that the assessment order passed under Section 74 was without jurisdiction and contrary to the statutory provisions.
  • The petitioner further contended that the assessment was passed in violation of the principles of natural justice and requested a fresh adjudication after granting an effective opportunity of personal hearing.

Respondent's Arguments

  • The respondent submitted that the proceedings had initially been commenced under Section 74A, including issuance of the relevant statutory form.
  • According to the department, the reference to Section 74 in the final order was only an inadvertent mistake in quoting the provision of law.
  • It was argued that merely mentioning an incorrect statutory provision would not invalidate the proceedings when the substance of the proceedings remained valid.

Court Order / Findings

The Madras High Court observed that merely quoting an incorrect statutory provision would not ordinarily invalidate proceedings if it was only an inadvertent error.

However, the Court found that the impugned order imposed a 100% penalty, which is applicable under Section 74, whereas proceedings under Section 74A would have attracted only a 50% penalty. Therefore, the Court held that the error was not merely a clerical or technical mistake but had a substantive impact on the assessment and penalty.

Accordingly, the Court:

  • Quashed the assessment order dated 04.11.2025.
  • Granted liberty to the department to initiate fresh proceedings strictly in accordance with law under Section 74A of the GST Act.
  • Closed the connected miscellaneous petition without any order as to costs.

Important Clarification

This judgment clarifies that an incorrect reference to a statutory provision may not always invalidate proceedings. However, where the wrong provision materially affects the legal consequences—such as the rate of penalty—the defect cannot be treated as a mere inadvertent error. Authorities must ensure that proceedings are initiated and concluded under the correct statutory provision, particularly where different provisions prescribe different penalties and procedural consequences.

Sections Involved

  • Section 74 of the GST Act
  • Section 74A of the GST Act
  • Article 226 of the Constitution of India

Link to Download the Order-https://mytaxexpert.co.in/uploads/1784629393_1794compressed.pdf

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