Restricting Rectification under Section 74 of the Finance Act, 1994:
Commentary on M/s Suman Construction v. Union of India, Bombay High Court (Aurangabad Bench, 14 November 2025)

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1. Introduction

This judgment of the Bombay High Court (Aurangabad Bench) in M/s Suman Construction through its Partner Kishor Nilkanth Potdar v. Union of India & Ors., Writ Petition No. 6467 of 2025, delivered on 14 November 2025 by a Division Bench of Smt. Vibha Kankanwadi and Hiten S. Venegavkar, JJ., clarifies and reinforces the limited scope of rectification of mistakes under Section 74 of the Finance Act, 1994.

The case arose in the context of service tax demands on road construction works executed for Government departments, which the petitioner claimed were exempt under Notification No. 25/2012-ST, dated 20.06.2012. However, the High Court deliberately did not adjudicate the merits of the exemption claim. Instead, the Court focused on two tightly linked procedural questions:

• Whether the petitioner could use Section 74 (rectification of mistakes) to challenge a substantive service tax demand order already passed by the Additional Commissioner; and
• Whether a writ petition under Articles 226/227 was maintainable when an alternative statutory appellate remedy under Section 85 of the Act was available.

The Court ultimately dismissed the writ petition, holding that:

1. An application under Section 74 must be confined to correcting “mistakes apparent from the record”—that is, patent, self-evident errors—and cannot be used to reopen or re-argue substantive issues or circumvent appeal limitations.
2. Only the authority that passed the original order can exercise rectification powers under Section 74(3).
3. Where a suitable statutory appeal is available, the Court will not ordinarily exercise its writ jurisdiction in the absence of demonstrated jurisdictional error or a clear violation of natural justice.

These holdings collectively create a clear precedent on the boundaries between rectification and appeal in service tax/indirect tax matters and reinforce the judicial policy of non-interference under writ jurisdiction when alternative remedies exist.

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2. Factual Background and Procedural History

2.1 The Petitioner’s Business and Exemption Claim

The petitioner, M/s Suman Construction, is a government-registered civil contractor engaged primarily in the construction of roads for various departments of the Government of Maharashtra, largely through the Public Works Department (PWD).

The petitioner’s core contention was:

• By virtue of Notification No. 25/2012-ST, dated 20.06.2012, issued under Section 93 of the Finance Act, 1994, services relating to the construction of roads for Government were wholly exempt from service tax.
• Relying on this exemption, the petitioner did not obtain service tax registration and did not treat its activities as taxable services.

2.2 Initiation of Service Tax Proceedings

On 21.01.2021, the Jurisdictional Range Superintendent of Central Excise issued a letter to the petitioner seeking details of turnover for the financial year 2015–16, based on data obtained from MAHAVAT (the State VAT database).

Subsequently, a show-cause notice was issued alleging that the petitioner had rendered taxable services and was liable to pay service tax on such turnover. In response, the petitioner, by its letter dated 12.05.2022, submitted:

• Income tax returns,
• Form 26AS,
• Balance sheets, and
• Certificates from the Public Works Department indicating that the works executed were road construction works for Government departments.

Despite this, the Deputy Commissioner confirmed a service tax demand by an order dated 24.03.2023 in relation to the financial year 2015–16.

2.3 First Round of Appeal for FY 2015–16

The petitioner filed an appeal under Section 85 of the Finance Act, 1994 before the Commissioner (Appeals), CGST & CEX, Nagpur-1.

By an order dated 26.07.2024, the Commissioner (Appeals):

• Partly allowed the appeal; and
• Finally confirmed a limited service tax demand of Rs. 30,272/- along with corresponding penalties under Sections 77 and 78 of the Finance Act, 1994.

Thus, as far as that specific proceeding for FY 2015–16 (culminating in the Deputy Commissioner’s order dated 24.03.2023) was concerned, the appellate order attained finality—at least to the extent the petitioner did not challenge it further.

2.4 The Additional Commissioner’s Common Order (20.03.2023)

The complication arose because, notwithstanding this earlier adjudication, the Additional Commissioner, CGST & Central Excise, Nagpur-1, passed a common order dated 20.03.2023 imposing service tax liability for:

• FY 2015–2016; and
• FY 2016–2017.

Thus, for FY 2015–16, two distinct proceedings/orders came into existence:

1. The proceeding initiated by the Deputy Commissioner (culminating in the order dated 24.03.2023, partially confirmed by the Commissioner (Appeals) on 26.07.2024); and
2. The common order dated 20.03.2023 by the Additional Commissioner, covering both FY 2015–16 and 2016–17, apparently arising out of a separate set of proceedings.

2.5 Rectification Application Dated 02.02.2025

Rather than immediately filing an appeal against the Additional Commissioner’s order dated 20.03.2023 under Section 85, the petitioner:

• Filed an application dated 02.02.2025 before multiple authorities, including the Joint Commissioner, CGST, Aurangabad;
• Purported to invoke Section 74 of the Finance Act, 1994 (rectification of mistakes); and
• Requested that the service tax for FY 2015–16 in the order dated 20.03.2023 be treated as erroneous because that period had already been the subject of adjudication and appellate decision.

The petitioner’s grounds in this rectification application included:

1. That construction of roads for Government departments was exempt under Notification No. 25/2012-ST;
2. That the common order dated 20.03.2023 was allegedly passed without notice;
3. That, by reason of the doctrine of merger, the prior appellate order for FY 2015–16 had attained finality, rendering any further imposition for the same year unlawful.

2.6 Rejection of Rectification by Joint Commissioner (19.03.2025)

The Joint Commissioner, CGST & Central Excise, Aurangabad, by an order dated 19.03.2025, rejected the rectification application on key grounds:

• Under Section 74(3), only the authority that passed the order can rectify it. Since the order dated 20.03.2023 had been passed by the Additional Commissioner, Nagpur-1, the Joint Commissioner lacked jurisdiction to correct or modify it.
• The application was not about any patent or clerical/arithmetical mistake but raised substantive disputes on liability, which fall outside the limited scope of Section 74.

Aggrieved, the petitioner filed the present writ petition under Articles 226 and 227 of the Constitution of India.

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3. Issues Before the High Court

On the facts presented, the High Court distilled the controversy into a core question (para 5 of the judgment):

“The principal question before this Court is whether the application dated 02.02.2025 filed by the petitioner can be treated as one under Section 74 of the Act and whether the Joint Commissioner erred in rejecting it.”

Implicit within this main issue were several sub-issues:

1. What is the scope and nature of “mistake apparent from the record” under Section 74 of the Finance Act, 1994?
2. Does an application seeking to nullify or modify a tax demand on exemption grounds and doctrine of merger fall within that scope?
3. Can a Joint Commissioner exercise rectification powers in respect of an order passed by the Additional Commissioner?
4. Is the writ petition maintainable in the face of an alternative statutory appellate remedy under Section 85, especially where no clear jurisdictional error or fundamental breach of natural justice is shown?

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4. Summary of the Judgment

The Division Bench dismissed the writ petition and upheld the order of the Joint Commissioner dated 19.03.2025. The key holdings can be summarized as follows:

4.1 Scope of Section 74: “Mistake Apparent from the Record”

• Section 74 empowers an adjudicating authority to amend or rectify its own order to correct a mistake apparent from the record, within two years of the original order.
• The Court reiterated that such a “mistake” must be:
  • Manifest, obvious, or self-evident;
  • Detectable without elaborate reasoning or long-drawn arguments;
  • Often clerical, arithmetical, or a patent legal error.
• Section 74 is not intended to:
  • Reopen concluded findings;
  • Enable reassessment of liability; or
  • Permit substitution of one plausible legal view with another.

4.2 Nature of the Petitioner’s Rectification Application

• The petitioner’s application dated 02.02.2025 raised substantive grounds:
  • Claim of exemption under Notification No. 25/2012-ST;
  • Allegation that the order was passed without notice;
  • Invocation of the doctrine of merger to contest re-imposition for FY 2015–16.
• These are not clerical or patent errors; they require factual verification and legal analysis.
• Therefore, the application was in the nature of an appeal, review, or revision, not a rectification request within the meaning of Section 74.

4.3 Jurisdiction to Rectify: Same Authority Requirement

• Under Section 74(3), rectification must be performed by the very authority that passed the order sought to be rectified.
• In this case, the impugned order dated 20.03.2023 was passed by the Additional Commissioner, CGST & CEX, Nagpur-1.
• The petitioner had addressed the rectification application to multiple authorities, but it ultimately came to be decided by the Joint Commissioner, CGST, Aurangabad.
• The Joint Commissioner had no jurisdiction under Section 74 to rectify or modify an order of the Additional Commissioner and rightly observed so.

4.4 Doctrine of Merger and Parallel Proceedings

• The petitioner sought to rely on the doctrine of merger, citing Supreme Court decisions such as:
  • Chandi Prasad & Ors. v. Jagdish Prasad & Ors., (2004) 8 SCC 724;
  • Surinder Pal Soni v. Sohan Lal (Dead) through LRs, (2020) 15 SCC 771;
  • V. M. Salgaocar & Bros. Pvt. Ltd. v. CIT, (2000) 5 SCC 373.
• The Court held that the earlier appellate order dated 26.07.2024 pertained to an earlier adjudication for FY 2015–16.
• The order dated 20.03.2023 covered both FY 2015–16 and 2016–17 and arose from separate proceedings.
• Whether these two sets of proceedings related to identical issues or distinct taxable services would require factual verification, which:
  • Exceeded the limited scope of Section 74; and
  • Was inappropriate to resolve in writ jurisdiction when an appellate remedy exists.

4.5 Alternative Remedy and Writ Jurisdiction

• The Court agreed with the respondents that the proper remedy against the order dated 20.03.2023 lay in an appeal under Section 85 before the Appellate Authority.
• It reiterated that writ jurisdiction under Article 226 is discretionary and ordinarily not exercised when an adequate statutory remedy exists.
• Exceptional interference is justified only in cases of:
  • Clear lack of jurisdiction, or
  • Palpable violation of natural justice, or
  • Other grave procedural irregularities.
• In the present case, the petitioner failed to establish such exceptional circumstances.

4.6 Final Directions

The Court concluded that:

• The application dated 02.02.2025 was not a genuine rectification application under Section 74 but an attempt to reopen adjudicated issues through an improper forum.
• The Joint Commissioner’s order dated 19.03.2025 suffered from no illegality, perversity, or violation of natural justice.
• The writ petition was therefore dismissed, with no order as to costs.
• The petitioner was expressly granted the liberty to avail the alternative remedy against the original order dated 20.03.2023, “as available in law”.

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5. Detailed Legal Analysis

5.1 Statutory Framework

5.1.1 Section 74 – Rectification of Mistake

Section 74 of the Finance Act, 1994 (parallel in concept to rectification provisions in income-tax and other fiscal statutes) allows:

• Any adjudicating authority to amend an order it has passed,
• To correct a mistake apparent from the record,
• Within a specified period (two years from the date of the order).

The High Court emphasizes that “mistake apparent from the record” is a term of art in tax jurisprudence. Drawing from established interpretations (though not exhaustively cited in the judgment), the concept includes:

• Clerical or typographical errors (e.g., wrong name, date, or figure);
• Arithmetical errors (e.g., incorrect totals, calculation mistakes);
• Patent legal errors that are immediately obvious, such as:
  • Applying a wrong rate that is directly contradicted by the applicable notification;
  • Ignoring a mandatory statutory provision that is clearly on record.

Crucially, rectification cannot:

• Be used as a backdoor appeal to revisit debatable issues,
• Allow re-appreciation of evidence or fresh examination of facts, or
• Facilitate a change of opinion or substitution of one plausible legal view for another.

5.1.2 Section 85 – Appellate Remedy

Section 85 provides a regular appellate mechanism against certain adjudication orders to the Commissioner (Appeals) or, in relevant contexts, to other appellate fora/Tribunal.

An appeal under Section 85 is the appropriate remedy when:

• The assessee contests the very basis of tax liability,
• Raises questions of classification, exemption, valuation, limitation, or penalty, or
• Challenges the correctness or fairness of factual findings in the adjudication order.

The Court underscores that the petitioner’s grievances plainly belonged to this category and not to the narrow category covered by Section 74.

5.2 Precedents on the Doctrine of Merger

The petitioner cited several Supreme Court precedents on the doctrine of merger, including:

• Chandi Prasad & Ors. v. Jagdish Prasad & Ors., (2004) 8 SCC 724
• Surinder Pal Soni v. Sohan Lal (Dead) through LRs, (2020) 15 SCC 771
• V. M. Salgaocar & Bros. Pvt. Ltd. v. Commissioner of Income Tax, (2000) 5 SCC 373

While the judgment does not deeply analyze each of these, their broad principle is that when an appellate court or authority passes an order, the original order of the lower forum “merges” into the appellate order, and the operative order thereafter is that of the appellate forum.

The petitioner attempted to use this doctrine to argue:

• That for FY 2015–16, once the Commissioner (Appeals) passed the order dated 26.07.2024 in the earlier proceedings, the original order (24.03.2023) stood merged; and
• That consequently, any fresh or parallel imposition of service tax for the same period (via the Additional Commissioner’s order dated 20.03.2023) should be treated as legally non est.

However, the High Court declined to apply the doctrine of merger in the manner suggested, for two reasons:

1. The two sets of proceedings seemed to be distinct: one led to the Deputy Commissioner’s order (appealed and partly confirmed), and another led to the Additional Commissioner’s common order (20.03.2023). Determining whether they related to precisely the same taxable events or services demanded a factual inquiry that could not be undertaken within Section 74 rectification proceedings.
2. Such a complex question of overlapping jurisdiction and proceedings was beyond the permissible scope of writ jurisdiction when an appeal under Section 85 was the appropriate and efficacious remedy.

Accordingly, while the Court did not dispute the validity of the doctrine of merger as a legal principle, it signaled that:

• The doctrine must be applied on a proper factual foundation, and
• Section 74 is not the correct procedural vehicle for adjudicating such fact-intensive contentions.

5.3 Court’s Interpretation of “Mistake Apparent from the Record”

The Court’s articulation (para 6) is consistent with long-standing jurisprudence under various tax statutes:

“… the phrase 'mistake apparent from the record' has been judicially interpreted to mean a manifest, obvious or self-evident error, error that does not require elaborate reasoning or long-drawn arguments. Applying the aforesaid scope of Section 74 of the Act which in our view is confined to correction of patent errors which may be clerical, arithmetical or legal and has to be noticed from the face of the record and it is not intended to reopen concluded findings or enable substitution of one view for another.”

From this, several operative propositions emerge:

1. Not every error is a “mistake apparent from the record”. Only those that strike one on a mere perusal of the record qualify.
2. Debatable points of law, or those on which two views are reasonably possible, are outside the ambit of Section 74.
3. Rectification cannot be used to change the mind of the authority on the same material, or as a substitute for appeal or review.

Applied to the present case, it follows that:

• Whether the petitioner is entitled to exemption under Notification 25/2012-ST;
• Whether the Additional Commissioner had given proper notice and opportunity;
• Whether the second proceeding for FY 2015–16 is barred in law by doctrine of merger; and
• Whether factual findings on the nature of services were correct

are all substantive and contestable questions, not “apparent mistakes.” They squarely belong to the domain of appeal.

5.4 Jurisdictional Limitation under Section 74(3)

The Court also emphasizes a jurisdictional requirement in Section 74: rectification must be carried out by the same adjudicating authority that passed the original order.

Therefore:

• Where an order is passed by the Additional Commissioner, only that Additional Commissioner (or, depending on administrative practice, his lawful successor in the same office) may exercise rectification powers under Section 74.
• The Joint Commissioner in another jurisdiction (here, Aurangabad) lacks power to rectify an order passed by the Additional Commissioner, Nagpur-1.

On this basis, the Court agreed that the Joint Commissioner’s refusal to assume rectification powers was correct:

“The Joint Commissioner rightly observed in the last two paragraphs that he cannot modify or correct the order of the Additional Commissioner.”

This reinforces the principle that rectification is a narrow, intra-authority remedy, distinct from appellate review.

5.5 Alternative Remedy and Restraint in Writ Jurisdiction

The Court applied the well-established principle that where a statutory appeal lies against an order, the writ court will normally insist that the aggrieved party exhaust that remedy first.

Notable aspects in this case:

• The respondents argued that the petitioner had failed to file an appeal within limitation under Section 85 and was attempting to bypass that failure by invoking Section 74.
• The Court observed that an efficacious alternative remedy was available, and no compelling grounds—such as total lack of jurisdiction or clear non-observance of natural justice— were demonstrated to justify bypassing it.

Thus, the judgment reaffirms:

1. Writ jurisdiction under Article 226 is not an appellate forum for re-assessing tax liability;
2. Parties must ordinarily use the hierarchy of statutory appeals provided by tax legislation;
3. Writ relief may be refused even where, on the merits, the petitioner raises colourable or arguable points, if the correct procedural route is an appeal.

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6. Impact of the Judgment

6.1 On the Use of Section 74 in Service Tax/GST Disputes

This decision has significant implications for assessees and tax administrators:

• Assessees must recognize that:
  • Section 74 is not a “second chance” to reopen concluded assessments;
  • It should be invoked only for clear, undisputed errors apparent on the face of the record;
  • Attempts to use Section 74 to raise exemption, classification, or valuation disputes are likely to be rejected.
• Tax authorities can rely on this judgment to:
  • Strictly scrutinize rectification applications and reject those that are in substance appeals or reviews;
  • Clarify, in internal instructions, that the same adjudicating authority must handle rectification, reinforcing accountability and propriety.

6.2 On Procedural Strategy and Limitation

Perhaps the most practical impact is that the Court sends a clear message that:

• Assessees must be vigilant about appeal limitation periods under Section 85.
• A failure to appeal within time cannot generally be cured by:
  • Filing a rectification application under Section 74; or
  • Directly approaching the High Court under Article 226.

Lawyers and tax practitioners, therefore, must:

• Carefully advise clients not to rely on Section 74 as a panacea;
• Ensure that appeals are filed promptly where substantive disputes exist; and
• Use Section 74 only for genuine, limited corrections of patent mistakes.

6.3 On the Doctrine of Merger in Parallel Tax Proceedings

While the Court did not pronounce an exhaustive rule on overlapping proceedings for the same assessment year, its reasoning suggests:

• The doctrine of merger cannot be mechanically invoked where different proceedings with potentially different factual bases exist.
• Taxpayers alleging that multiple proceedings for the same period are impermissible must establish factual identity and procedural overlap before the appellate fora, where evidence can be evaluated.
• Such issues are ill-suited for rectification or summary writ adjudication.

6.4 On Writ Jurisdiction in Fiscal Matters

The case is another reaffirmation of judicial restraint in tax matters:

• High Courts will generally decline to interfere at the pre-appellate stage if suitable statutory remedies exist.
• Even when important legal issues are involved—such as the scope of a tax exemption notification— the Court may leave them open for determination by the appellate authorities, especially when the petitioner has taken an incorrect procedural route.

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7. Simplifying Key Legal Concepts

7.1 “Mistake Apparent from the Record”

In simple terms, a “mistake apparent from the record” means:

• An error that is clear just by looking at the order and the documents already on record,
• Which does not require argument, debate, or detailed reasoning to identify, and
• Which is usually a clerical or calculation mistake or a very obvious legal mistake (for example, applying 18% tax when the clear statutory rate is 12% for that transaction).

If there is room for two opinions or if the authority has to re-evaluate the evidence or legal arguments, it is not a “mistake apparent from the record.” In that case, the correct course is an appeal, not rectification.

7.2 Rectification vs. Appeal vs. Review

• Rectification:
  • Limited to obvious mistakes on the face of the record;
  • Does not change the substance of the decision based on a different view of facts or law.
• Appeal:
  • Broad remedy to challenge factual findings and legal conclusions;
  • Permits re-examination of the law, evidence, and procedure followed by the lower authority.
• Review (where provided by statute):
  • Re-consideration of a decision by the same authority on limited grounds, such as discovery of new evidence, mistake apparent, or other specific statutory grounds.

The present case confirms that the petitioner’s grievance belonged to the category of appeal, but it was incorrectly styled as a rectification application.

7.3 Doctrine of Merger

The doctrine of merger means that:

• When you appeal against an order and the appellate authority passes an order, the original order is said to merge into the appellate order.
• After merger, the effective order is the appellate order, not the original one.

However, this doctrine:

• Applies only to the same proceedings and the same cause of action;
• Does not automatically nullify other, separate proceedings unless it is shown that they cover exactly the same subject matter and period.

The Court in this case held that determining whether such overlap existed would require detailed fact-finding, which cannot be done via rectification or in a summary writ proceeding.

7.4 Alternative Remedy and Writ Petitions

Generally, if a statute provides a specific appeal mechanism against an order, courts expect that:

• You must first file an appeal before seeking writ relief;
• The writ jurisdiction is reserved for cases where:
  • The authority had no power at all to pass the order (lack of jurisdiction);
  • There was a glaring violation of natural justice (e.g., no notice or hearing at all); or
  • Other exceptional circumstances exist (e.g. proceeding is ex facie mala fide or patently illegal).

In this case, the Court found that no such exceptional situation was clearly established, and therefore declined to exercise its writ jurisdiction.

7.5 Service Tax Exemption for Road Construction under Notification 25/2012-ST

The petitioner had a potentially strong substantive contention:

• Notification No. 25/2012-ST (Mega Exemption) exempts certain categories of services, including construction of roads for Government or specified entities, from service tax.

However, the High Court:

• Did not examine or decide this issue on the merits;
• Left it open to be raised before the appropriate appellate forum (Section 85) when the petitioner challenges the order dated 20.03.2023 in accordance with law.

Therefore, while the case is procedurally important, it does not settle the substantive law on the applicability of Notification 25/2012-ST to road construction contractors for Government departments; that remains to be tested on facts and merits in the appeal.

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8. Conclusion

The decision in M/s Suman Construction v. Union of India is a significant procedural precedent in the realm of service tax (and, by analogy, GST and other fiscal statutes). The Court’s principal contributions are:

1. Clarification of Section 74’s Narrow Scope: Rectification is confined to correcting mistakes apparent from the record—patent, obvious, and often clerical or arithmetical errors. It cannot be used to revisit debatable issues or to re-open concluded determinations of liability based on fresh arguments or a change in legal perspective.
2. Requirement that the Same Authority Rectify: Only the authority which passed the order may exercise rectification powers under Section 74(3). One adjudicating officer cannot rectify another’s order, reinforcing the limited and intra-office nature of rectification.
3. Reinforcement of the Alternative Remedy Rule: Where an appellate remedy under Section 85 is available, the High Court will not generally entertain writ petitions unless there is a clear jurisdictional error or gross violation of natural justice. Procedural shortcuts or attempts to bypass limitation through Section 74 will not be countenanced.
4. Cautious Use of the Doctrine of Merger: The Court acknowledges the doctrine but indicates that its application in situations involving parallel or overlapping proceedings requires careful factual analysis, appropriate for appellate forums, not rectification or writ jurisdiction.
5. Substantive Exemption Issues Left Open: Importantly, the Court did not decide whether services of construction of roads for Government departments are exempt under Notification 25/2012-ST in the petitioner’s case. That substantive tax issue remains open for determination in the appropriate appellate proceedings.

In a broader legal context, the judgment underscores the judiciary’s consistent approach in tax matters:

• Respect for statutory schemes of appeals and minimal interference at the writ stage;
• The imperative for taxpayers and their advisors to be procedurally diligent—especially with regard to limitation periods and the choice between rectification and appeal; and
• A clear demarcation between minor corrective powers (like Section 74) and substantive adjudicative processes (appeals, reviews, revisions).

For practitioners, this judgment should serve as a cautionary reminder: do not rely on rectification or writs to cure strategic or procedural lapses in invoking the correct appellate remedy. For administrators, it provides judicial backing for a strict and text-based reading of rectification powers, thereby contributing to greater procedural discipline in the adjudication of indirect tax disputes.