Juristway Blog

Tag: GST Law Reporter

  • Gauhati High Court Upholds Consolidated Show Cause Notices Under Sections 73 and 74 of the CGST Act: Tata Projects Limited v. Union of India

    Gauhati High Court Upholds Consolidated Show Cause Notices Under Sections 73 and 74 of the CGST Act: Tata Projects Limited v. Union of India

    Gauhati High Court Upholds Consolidated Show Cause Notices Under Sections 73 and 74 of the CGST Act: Tata Projects Limited v. Union of India

    Court: Gauhati High Court | Bench: Justice Devashis Baruah | Case No.: WP(C)/2922/2025 (with WP(C)/20/2026 and WP(C)/1113/2026) | Date: June 8, 2026 | Citation: 2026:GAU-AS:8028

    Key Takeaways

    • There is no statutory bar under the CGST Act, 2017 against issuing a consolidated show cause notice under Section 73(1) or Section 74(1) covering multiple financial years, provided limitation under Sections 73(2)/74(2) is independently satisfied for each year.
    • Proceedings under Sections 73 and 74 are adversarial and adjudicatory in character, falling under Chapter XV (“Demand and Recovery”) — they are structurally distinct from “Assessment” under Chapter XII, and the financial-year-specific architecture of Chapter XII does not control or restrict the demand machinery.
    • Where a consolidated notice covers some financial years that are within limitation and others that are time-barred, the doctrine of severability applies: the notice survives for the years within time and fails only for those that are not.
    • The Court expressly disagreed with the Kerala High Court (Tharayil Medicals, Dhanlaxmi Bank) and the Madras High Court (Oriental Lotus, Titan Company), and aligned with the Delhi High Court (Ambika Traders, Mathur Polymers), the Allahabad High Court (S.A. Aromatics), and the Karnataka High Court Division Bench (Chimney Hills Education Society).

    What the Case Was About

    Three unrelated writ petitions — filed by Tata Projects Limited (a works contract services provider), Quantum Infratech (a residential construction firm), and Bitchem Asphalt Technologies Limited (a road-building materials supplier) — were heard together because they raised a single, common jurisdictional challenge. Each petitioner had been served a show cause notice under Section 74 (or Section 73, in Tata Projects’ case for one year) of the CGST Act that clubbed together demands pertaining to multiple financial years — ranging from 2017-18 through 2022-23 in the most expansive case. Each petitioner contended that the entire proceeding was without jurisdiction because the CGST Act requires year-specific show cause notices and does not permit consolidation.

    The stakes were significant. Tata Projects had already exhausted its first appeal, with the Commissioner (Appeals) confirming the demand. Quantum Infratech’s case originated in DGGI search operations, involved allegations of fraud under Section 74 read with Section 122(1A), and had penalties imposed on individual partners. Bitchem faced a demand of over ₹12.34 crore. In each case, if the jurisdictional challenge succeeded, the entire demand edifice would collapse without any adjudication on merits.

    What the Court Decided — and Why

    Justice Devashis Baruah, in a reserved judgment, ruled squarely against the petitioners on the jurisdictional question: there is no bar, explicit or implicit, in the CGST Act against issuance of a consolidated show cause notice or a consolidated adjudication order covering multiple financial years (para 70).

    The reasoning proceeds through several distinct analytical steps.

    The text of Sections 73(1) and 74(1) imposes no financial-year restriction. The Court observed that Sub-Section (1) of both provisions confers jurisdiction on the Proper Officer upon satisfaction of certain material facts — tax not paid, short paid, erroneously refunded, or ITC wrongly availed. Nothing in the language limits the notice to a single financial year. The only temporal constraint appears in Sub-Section (2), which requires the notice to be issued a specified period before the limitation deadline — but that constraint is about timing, not about the scope of years that can be covered (paras 48–49).

    Limitation runs independently per financial year, but that does not mandate separate notices. This is the heart of the judgment. The Court acknowledged that Sections 73(10) and 74(10) compute limitation by reference to the due date for filing annual returns “for the financial year to which” the default relates. But the Court drew a critical distinction: limitation governs whether a particular year’s demand can validly be raised at all, not whether it must be raised in a standalone proceeding. If a consolidated notice is issued on a date when limitation is still open for all the covered years, there is no infirmity (paras 53–55). The Court illustrated this with detailed worked examples and tabular computations for both three-year (Section 73) and five-year (Section 74) timelines.

    The doctrine of severability rescues partially time-barred consolidated notices. In an important practical holding, the Court addressed the scenario where a consolidated notice covers some years within limitation and some that are time-barred. Drawing an analogy to civil suits involving recurring causes of action (such as arrears of rent, where each rental period generates an independent cause of action), the Court held that the time-barred years can simply be severed — the notice and order survive for the years that are within time (para 59).

    Sections 73 and 74 are not “assessment” provisions — they are demand and adjudication provisions. The petitioners had argued that since the entire GST architecture (returns, annual returns, self-assessment) is financial-year-specific, Sections 73 and 74, being part of the “assessment” mechanism under Section 2(11), must also be year-specific. The Court rejected this by drawing a sharp structural distinction between Chapter XII (Assessment) and Chapter XV (Demand and Recovery). Assessment provisions — self-assessment under Section 59, scrutiny under Section 61, best judgment under Section 62 — are largely non-adversarial. Sections 73 and 74, by contrast, are adversarial and adjudicatory, requiring notice, reply, hearing, and a reasoned order. They also uniquely involve penalty and, in Section 74’s case, findings on fraud — matters that do not arise in assessment proceedings proper (paras 60–61).

    Sub-Sections (3) and (4) of both Sections 73 and 74 confirm the legislative design. The Court noted that these provisions allow the Proper Officer, after issuing a notice under Sub-Section (1) for “any period,” to serve a supplementary statement (Form DRC-02) covering “such periods other than those covered under Sub-Section (1).” The phrase “those covered under Sub-Section (1)” is deliberately pluralistic — it contemplates that the original notice itself may have covered multiple periods (paras 62–64).

    The insertion of Section 74A and Sub-Section (12) in Sections 73 and 74 does not help the petitioners. The petitioners pointed to the Finance Act, 2024 amendments (effective November 1, 2024) introducing Section 74A — which applies from FY 2024-25 onward and is expressly year-specific — as proof that the pre-amendment regime was also intended to be year-specific. The Court implicitly rejected this by treating the amendment as a prospective structural change, not a clarification of pre-existing law.

    How This Changes Practice

    This judgment is the most analytically detailed single-judge pronouncement on the consolidated-SCN question to date, and it lands on the side of a growing judicial consensus. With Delhi, Allahabad, Karnataka (Division Bench), and now Gauhati aligned on permissibility, and with the Bombay High Court’s contrary line (Milroc, Marfani Steel, Aasawa Brother) already referred to a larger bench in Rollmet LLP (2026 SCC OnLine Bom 2613), the practical balance has shifted decisively in the department’s favour.

    For practitioners, several operational implications follow. First, jurisdictional challenges to consolidated notices are now a diminishing-returns strategy in most High Courts. Counsel should assess whether the stronger defence lies on merits — limitation for specific years, factual defences on fraud or suppression, computation disputes — rather than on the consolidation point. Second, the severability holding at para 59 is a double-edged sword: it means that even if some years in a consolidated notice are demonstrably time-barred, the notice will not be quashed in its entirety. Counsel must raise limitation year-by-year during adjudication and cannot rely on a wholesale jurisdictional knock-out. Third, for assessees who have already received consolidated notices, the Court’s direction granting 30 days to file statutory appeals (with limitation condoned) provides a narrow but real window to get before the Tribunal or the Appellate Authority on merits.

    Relevant Provisions

    • Sections 73 and 74, CGST Act, 2017 — Determination of tax not paid or short paid (non-fraud and fraud cases respectively); Sub-Sections (1), (2), (3), (4), (9), (10) extensively analyzed
    • Section 74A, CGST Act — Determination of tax for FY 2024-25 onward (inserted by Finance Act, 2024 w.e.f. 01.11.2024)
    • Section 2(11), CGST Act — Definition of “assessment”
    • Sections 59–64, CGST Act — Chapter XII assessment provisions (self-assessment, provisional, scrutiny, best judgment, summary)
    • Section 75, CGST Act — General provisions relating to determination of tax
    • Rule 142(1)(a) and (b), CGST Rules, 2017 — Issuance of notice (DRC-01) and statement (DRC-02)
    • Sections 107, 108, 112, CGST Act — Appellate remedies
    • Article 14 and Article 141, Constitution of India

    What to Watch

    The consolidated-SCN question is now squarely headed for definitive resolution at two levels. The Bombay High Court’s larger bench reference in Rollmet LLP will be the most closely watched proceeding — if the larger bench disagrees with Delhi, Allahabad, Karnataka, and Gauhati, a genuine inter-High Court conflict crystallizes and a Supreme Court reference becomes almost inevitable. The SLP against Mathur Polymers was dismissed with the observation that the Supreme Court found “no good ground” to interfere, which the department treats as tantamount to approval under Kunhayammed principles — but whether that truly constitutes a declaration of law under Article 141, as the respondents argued here (para 31), remains contestable and will likely be tested. Practitioners should also monitor whether CBIC issues any clarificatory circular endorsing consolidated proceedings, which would give field formations explicit administrative cover. Finally, the interaction between this line of authority and the new Section 74A regime (which is expressly year-specific for FY 2024-25 onward) may itself generate fresh litigation on transitional cases straddling the old and new frameworks.

  • GSTAT Dismisses Dow Chemical’s ₹13.41 Crore GST Refund Claims, Holds Swiss Affiliate’s Services Are Not “Intermediary”

    GSTAT Dismisses Dow Chemical’s ₹13.41 Crore GST Refund Claims, Holds Swiss Affiliate’s Services Are Not “Intermediary”

    India’s GST Appellate Tribunal upholds the Revenue’s position that procurement services rendered by Switzerland-based Dow Europe GmbH to its Indian affiliate constituted an import of services — rejecting six consolidated refund appeals spanning January to June 2022 and holding that a centralised group hub providing core services to a sister concern cannot be characterised as a mere facilitator.

     

    In a closely watched ruling, the Goods and Services Tax Appellate Tribunal’s Division Bench — comprising President Justice (Retd.) Dr. Sanjaya Kumar Mishra and Technical Member Shri Anil Kumar Gupta — on June 4, 2026 dismissed six consolidated appeals filed by M/s Dow Chemical International Private Limited, confirming the rejection of IGST refund claims totalling approximately ₹13.41 crore.

    The appeals arose after Dow India concluded — following an internal review — that it had erroneously discharged Integrated GST under the Reverse Charge Mechanism on fees paid to Dow Europe GmbH, a Switzerland-incorporated affiliate that serves as the centralised procurement hub for the global Dow Group. Dow India had initially treated the payments as imports of services. It later formed the view that Dow Europe’s activities qualified as “intermediary services” under Section 2(13) of the IGST Act, which would have placed the supply outside India’s GST net entirely.

    Background

    Under a Procurement Agreement dated July 1, 2021, Dow Europe was engaged to identify and approve foreign suppliers, negotiate procurement terms, review and sign contracts and purchase orders, develop procurement strategies, manage supplier relationships, and oversee quality and spend analytics. In return, Dow India paid a service fee equal to 3.5 per cent of total monthly purchases — with no fee payable in months where no procurement occurred.

    Under Section 13(8)(b) of the IGST Act, the place of supply for intermediary services is the location of the service supplier. Since Dow Europe is based in Switzerland, Dow India argued the transaction fell outside India’s GST net altogether. It reversed the input tax credit previously availed and filed refund applications. Both the Adjudicating Authority and the First Appellate Authority rejected the claims, finding that Dow Europe was rendering a core procurement outsourcing service — not mere ancillary facilitation.

    Arguments Before the Tribunal

    Before the GSTAT, counsel for Dow India argued that the statutory definition of “intermediary” is deliberately wide, covering brokers, agents, and “any other person, by whatever name called” who arranges or facilitates supply between two or more parties. The three-party structure — Dow India, Dow Europe, and the foreign supplier — together with the commission-linked fee and advance rulings from Karnataka and West Bengal (including Airbus Group India and Global Reach Education Services) were cited to support the intermediary classification.

    “The manner of remuneration is a key indicator of the nature of services. A commission-based structure clearly reflects a facilitative role.”

    — Shri Mihir Prashant Deshmukh, Counsel for Dow Chemical India

    The Revenue’s counsel countered by pointing to Appendix 1 of the Procurement Agreement, which detailed how Dow Europe independently conducted procurement strategy development, governance, supplier risk management, analytics, strategic sourcing, and quality audits. She characterised these as substantive, core operations rather than ancillary facilitation, and relied heavily on the Karnataka High Court’s April 2025 ruling in Columbia Sportswear India Sourcing Pvt. Ltd. — which held that a group entity providing buying-support services was an independent service provider, not an intermediary.

    The Tribunal’s Reasoning

    The GSTAT acknowledged a genuine tension in the existing case law. Two competing streams have emerged: one treating intra-group facilitation as intermediary services; the other — endorsed by the Karnataka and Delhi High Courts — treating substantive support rendered on a principal-to-principal basis as independent services. The Tribunal noted that Revenue has applied these standards inconsistently depending on the direction of cross-border supply, observing that “both views cannot be taken — one view is to be taken.”

    Applying the four prerequisites for intermediary classification laid down in CBIC Circular No. 159/15/2021-GST, the Bench found that while the first requirement — a minimum of three parties — was satisfied, the second was not. The services provided by Dow Europe could not be characterised as an ancillary supply facilitating a main supply between two independent principals because Dow Europe is itself a dedicated procurement hub whose very existence and purpose is to serve the global Dow Group — including Dow India — as a core, structural function of the group’s operations.

    The Tribunal aligned with the reasoning in Columbia Sportswear and the Delhi High Court’s Blackberry India ruling, holding that Dow Europe renders services on its own account as an independent contractor without authority to bind Dow India. The place of supply was therefore confirmed to be India, and the transaction held to constitute an import of services outside the scope of Section 13(8)(b) — which was itself omitted by the Finance Act, 2026 with effect from March 30, 2026.

    The Final Holding — Para 26 : Operative finding of the Tribunal

    The Tribunal expressly held that Dow Europe’s services cannot be termed “intermediary services” and are not in the nature of ancillary services. Rather, they constitute a core service rendered by Dow Europe to a sister concern — Dow India — both being subsidiaries operating within the same global group, Dow Inc. The intra-group, global-hub character of the arrangement was itself a decisive ground for rejecting the intermediary classification, independent of the principal-to-principal analysis.

    This framing is significant for practitioners. The Tribunal did not merely apply the Columbia Sportswear/Blackberry line of reasoning about independent contractors. It went a step further: where a foreign entity exists specifically as a centralised service hub for an entire global group, the very nature of that entity’s role makes it structurally incapable of being a “facilitator” between two other principals — it is itself the principal service provider to each group company it serves.

    On the Refund Claim

    The Tribunal did take issue with one finding of the First Appellate Authority. The lower authority had partly dismissed the refund claims on the ground that Dow India had originally paid tax voluntarily and was raising the intermediary argument as an afterthought. The GSTAT rejected this characterisation, noting that Section 54 of the CGST Act expressly provides for refund of taxes paid within a prescribed limitation period, and that a bona fide change of legal interpretation cannot disentitle a taxpayer from seeking a statutory refund. That observation, however, carried no practical weight given the Tribunal’s conclusion on the substantive issue.

    All six appeals were dismissed and the orders of the First Appellate Authority confirmed.

    Significance

    The ruling carries two practical lessons. First, where a foreign group entity functions as a dedicated centralised hub — for procurement, treasury, IT, HR, or any other shared function — serving the entire group worldwide, courts and tribunals are likely to treat its services to Indian affiliates as core imports rather than intermediary facilitation, regardless of the fee structure or three-party appearance of individual transactions. Second, the Tribunal’s pointed observation that Revenue has applied contradictory standards to outbound versus inbound intra-group services may give future litigants a basis to press for parity in cases where the flow runs the other way. The omission of Section 13(8)(b) by the Finance Act, 2026 will, going forward, significantly narrow the practical scope of such disputes.

    Dow Chemical International Private Limited was represented by Shri Mihir Prashant Deshmukh and Shri Shamik Gupte. The Commissioner of State Tax, Mazgaon, Mumbai was represented by Ms Shwetal Shepal.