GST LITIGATION UPDATE

One Demand, Two Proceedings? Supreme Court Stays Section 74 Notice Issued for a Demand Already Pending in Appeal

M/s Devendra Construction v. Deputy Commissioner — SLP (C) No. 24729/2026, Order dated 31.07.2026

By CA Chandrasekhar Kutty, Founding Partner, Sashthi Taxlegal Advisory Services LLP

The Development in One Line

Can the Department issue a fresh show cause notice under Section 74 of the CGST Act, 2017 for the very demand that already stands adjudicated and is pending in appeal before the appellate authority? On 31st July 2026, the Supreme Court signalled a firm “prima facie, no” — terming such issuance a jurisdictional error and staying all further proceedings pursuant to the notice.

Background of the Case

M/s Devendra Construction was facing a tax demand which had already travelled through adjudication and was pending in appeal before the Joint Commissioner (Appeals). While that appeal was alive, the Department issued a related show cause notice dated 21.02.2025 under Section 74 of the CGST Act, 2017 — for the same demand.

The taxpayer challenged the notice before the High Court of Uttarakhand at Nainital in WPMB No. 433/2026. By its judgment dated 30.05.2026, the High Court declined relief. The taxpayer carried the matter to the Supreme Court by way of a Special Leave Petition.

What the Supreme Court Held

A Bench of Hon’ble Mr. Justice Ujjal Bhuyan and Hon’ble Mr. Justice Atul S. Chandurkar, after hearing counsel for the petitioner, recorded that the show cause notice under Section 74 had been issued for the same demand which is now pending in appeal before the Joint Commissioner (Appeals). The Court then made three significant moves:

• It observed that “in such circumstances, there is a jurisdictional error in issuance of the show cause notice, which has been overlooked by the High Court” — elevating the objection from a mere procedural irregularity to one going to the root of jurisdiction.
• It issued notice in the SLP, returnable on 29.09.2026.
• Most importantly for the taxpayer, it directed that in the meanwhile there shall be a stay of further proceedings pursuant to the show cause notice dated 21.02.2025.

Why This Matters: The Anatomy of Duplication

The scheme of the CGST Act contemplates a single, linear journey for a tax demand: show cause notice, adjudication, and thereafter the appellate ladder under Section 107 onwards. Once a demand has crystallised into an Order-in-Original and the taxpayer has invoked the appellate remedy, the fate of that demand belongs to the appellate hierarchy. A second show cause notice seeking to re-assess the very same liability runs against this architecture — it amounts to the same demand being pursued on two parallel tracks at once.

What makes the Supreme Court’s language noteworthy is the choice of the expression “jurisdictional error.” A jurisdictional defect is not a curable irregularity; it strikes at the very authority of the officer to issue the notice. It is also precisely the category of defect for which writ jurisdiction remains available notwithstanding alternative remedies — which is why the Court found fault with the High Court for overlooking it.

Reading It With the Delhi High Court’s Ruling in Ramada Engineering

Interestingly, this order arrives in the same season as the Delhi High Court’s decision in M/s Ramada Engineering Industry v. Additional Commissioner (Adjudication) [W.P.(C) 1036/2026, judgment dated 23.04.2026]. There, the taxpayer argued that a Section 74 notice was barred by Section 6(2)(b) because of earlier Section 73 proceedings. The Delhi High Court rejected the plea — but on a crucial factual footing: the two proceedings covered different financial years (2018–19 versus 2019–20) and qualitatively different infractions (fraud-based availment of ITC on goods-less invoices versus declaration discrepancies in annual returns). The bar against duplication, the Court held, is attracted only where the proceedings involve the same tax liability, the same facts, the same contravention and the same period.

Devendra Construction is the mirror image of that test. Here, on the petitioner’s submission recorded by the Supreme Court, it was admittedly the same demand — and the moment that identity exists, the objection ceases to be a technicality and becomes jurisdictional. Read together, the two decisions map the boundary line with unusual clarity: different period or different infraction, the second proceeding survives; same demand, the second proceeding is prima facie without jurisdiction.

A Necessary Word of Caution

The order dated 31.07.2026 is an interim order at the notice stage. The observations on jurisdictional error are prima facie in nature, made while issuing notice and granting stay; the SLP itself is returnable on 29.09.2026. The question of law will attain finality only upon adjudication of the petition. Taxpayers and advisors should therefore treat the order as a strong directional signal — and as persuasive interim protection — rather than as conclusive law on the point.

Practical Takeaways for Taxpayers

• Maintain a demand register: map every fresh notice against demands already adjudicated or pending in appeal, GSTIN-wise and period-wise. Duplication is often discovered too late.
• Where a second notice targets a demand already in appeal, raise the jurisdictional objection at the reply stage itself — in clear, specific terms. Jurisdictional pleas are strongest when taken at the threshold.
• Test the duplication objection against the Ramada Engineering matrix before raising it: identical liability, identical facts, identical contravention, identical period. A loose overlap of “similar issues” across different years will not qualify.
• Where duplication is apparent on the face of the record, writ remedy remains a viable route — the Supreme Court has now signalled that High Courts should not brush such objections aside.
• Where proceedings are stayed by a superior forum, respond to any departmental communication by placing the stay on record rather than participating on merits.
• Diarise 29.09.2026 — the returnable date — for the next development in this matter.

Our Take

For some time now, field formations have shown a tendency to open a Section 74 front even while the same demand is being contested in appeal — effectively giving the Revenue two bites at the same cherry, with the added sting of the extended limitation and higher penalty that Section 74 carries. The Supreme Court’s intervention, even at the interim stage, restores a first principle of adjudication discipline: one demand, one proceeding, one appellate journey. Taxpayers facing overlapping Section 73/74 notices should audit their litigation portfolio against this order without delay.

Citation: M/s Devendra Construction v. Deputy Commissioner, SLP (C) No. 24729/2026, Supreme Court of India, order dated 31.07.2026 (arising out of WPMB No. 433/2026, High Court of Uttarakhand at Nainital, judgment dated 30.05.2026). Related reading: M/s Ramada Engineering Industry v. Additional Commissioner (Adjudication), W.P.(C) 1036/2026, Delhi High Court, judgment dated 23.04.2026.

Disclaimer: This update is for general information only and does not constitute professional advice. Positions stated are based on an interim order and may evolve. For case-specific guidance, please reach out to Sashthi Taxlegal Advisory Services LLP — Hosur • Bengaluru — www.sashthitaxlegal.com