S.74 Finance Act Cannot Be Invoked To Seek Redetermination Of Service Tax Liability: Bombay High Court

The principal issue before the Court was whether the assessee could invoke a rectification application under Section 74 of the Finance Act to claim service-tax exemption for such government road projects, instead of filing a statutory appeal against the Order.

Background of the Case

The assessee was engaged solely in road construction projects for different departments within the Maharashtra government. In line with Notification No. 25/2012, dated June 20, 2012. The Central GST authorities initiated proceedings and confirmed service tax liability for 2015-16. The assessee partly succeeded in the appeal for that year, but a second order imposing tax for both 2015-16 and 2016-17 was issued later, initiating fresh litigation.

The assessee argued that the Construction of roads for government entities is exempt from service tax, and the department ignored the exemption notification. Further, the second tax order for 2015-16 was illegal because the earlier appellate order had already attained finality, and therefore, re-adjudication violated the doctrine of merger, thereby stating the rectification application under Section 74 of the Finance Act, 1994 to be the proper method since the department had repeated a mistake already settled in earlier proceedings.

Contentions of the Respondents/State

The Tax authorities/Respondents advanced their arguments for non-maintainability of the Writ Petition owing to the alternative statutory remedy of appeal under Section 85 of the Finance Act, 1994 (Appeals to the Collector of Central Excise). Further contented that Section 74 of the Finance Act, 1994 (Rectification of mistake) allows rectification only of apparent and clerical mistakes, not a fresh challenge on merits. Also, the Joint Commissioner had no authority to rectify an order passed by the Additional Commissioner, as the law requires rectification only by the same authority that issued the original order; and also advanced that the assesse used the rectification route only to bypass the lapse of the appeal limitation period.

Court's Observation

The Court observed that rectification under Section 74 cannot be used as a substitute for appeal and that tax disputes involving factual or substantive issues must be decided through the prescribed appellate mechanism rather than writ jurisdiction. The relevant paragraph of the judgment is reproduced hereunder as;

“This Court also finds merits in the submission of the respondent that the petitioner's appropriate remedy against the order dated 20.03.2023 lies in filing an appeal under Section 85 of the Act before the Appellate Authority. The writ jurisdiction is discretionary and cannot ordinarily be invoked when an alternate statutory remedy is available unless there is a clear violation of natural justice or lack of jurisdiction which is not established by the petitioner in the present case.”

The judgment also highlights that when multiple adjudication rounds exist, the assessee must challenge fresh tax proceedings individually and cannot rely on earlier appellate orders unless jurisdictional consistency is established. The court held:

“In view of the foregoing discussion, this Court is of the considered opinion that the Petitioner's application dated 02.02.2025, was not a genuine rectification application under Section 74 of the Act but rather an attempt to reopen adjudicated issues through an improper forum. The Joint Commissioner, CGST and Central Excise, Aurangabad has rightly observed that he is not able to rectify an order passed by the Additional Commissioner, Nagpur-1. The impugned order dated 19.03.2025 does not suffer from any illegality, perversity or violation of natural justice warranting interference under Article 226 of the Constitution of India. As far as original order dated 20.03.2023 passed by Additional Commissioner CGST and CEX Nagpur-1 is concerned, Petitioner is at liberty to adopt alternate remedy as available in law”

CORAM : HMJ SMT. VIBHA KANKANWADI & HMJ HITEN S. VENEGAVKAR

CASE NUMBER: WRIT PETITION NO. 6467 OF 2025

CASE TITLED:M/S SUMAN S. CONSTRUCTION VS UNION OF INDIA & ORS.