A small mining lease holder in Madhya Pradesh came to Accorg Consulting after receiving a single consolidated GST Show Cause Notice that covered five financial years spanning 2019 to 2024. The notice demanded GST under the Reverse Charge Mechanism (RCM) on the royalty the lease holder had paid to the State Government for the right to extract minerals. It was issued under Section 74 of the CGST Act, the fraud provision, and alleged that the lease holder had deliberately suppressed the royalty in its returns with an intent to evade tax. With interest and a one hundred percent penalty loaded on top, the total demand stood at roughly Rs 1.9 crore.

For a business of this size, that figure was existential. Three features of the notice made it especially unfair.

First, the legal character of mining royalty had been disputed for more than three decades. It was settled only on 25 July 2024, when a nine judge bench of the Supreme Court in Mineral Area Development Authority v. Steel Authority of India (the MADA ruling) overruled India Cement and held that royalty is not a tax. For the entire period covered by the notice, the binding precedent treated royalty as a tax, which could not logically also be a taxable service.

Second, the department had bunched five years into one notice, quietly reviving years whose limitation had already expired under Section 74(10).

Third, the numbers were lifted from third party data that was never shared with the client, and the notice itself surfaced only as an upload on the GST common portal, with no physical service on the lease holder.

In short, our client was being treated as a fraudster for not paying tax on a transaction whose very taxability was still being argued in the highest court of the land.

Because the matter sat at the meeting point of tax law and constitutional litigation, it was handled with our combined Chartered Accountant and legal bench, with CA Harshaditya Kabra leading the strategy personally.

We began with a forensic read of the notice, the portal records and the royalty payment trail, mapping exactly which of the five financial years were already beyond the limitation window under Section 74(10), and which the department had no jurisdiction to reopen.

We challenged the consolidated notice as void for want of jurisdiction. We relied on Titan Company Ltd. v. Joint Commissioner of GST and Central Excise (Madras High Court) and M/s Pramur Homes and Shelters v. Union of India (Karnataka High Court), together with the Bombay High Court view in Parinee Realty and Min Chem India. These rulings hold that limitation under Sections 73 and 74 runs separately for each financial year, and that a bunched notice cannot be used as a device to revive years that the statute has already closed.

We dismantled the Section 74 foundation by showing there was no mens rea, no guilty mind. A taxpayer cannot be branded fraudulent for not discharging tax on a transaction whose constitutional validity was itself pending before a nine judge bench. We anchored this in CBIC Instruction No. 05/2023 dated 28 December 2023, which expressly bars field officers from invoking Section 74 mechanically to grab a longer limitation period and a heavier penalty.

We raised a natural justice defence on the third party data. Relying on Kothari Filaments v. Commissioner of Customs and T. Takano v. Securities and Exchange Board of India, we argued that material relied upon by the department but never supplied to the taxpayer cannot sustain a demand, and that withholding it breaches the audi alteram partem rule.

We pressed the defective service ground under Section 169. Citing Sharp Tanks and Structurals Private Limited v. Deputy Commissioner (GST), we showed that merely uploading a notice or order on the portal is not valid communication, and that the department was obliged to serve it physically as well.

On the retrospective reach of MADA, we positioned the client for phased relief. The Supreme Court limited recovery to transactions on or after 1 April 2005, and its follow on directions contemplated payment in instalments with relief on interest and penalty, so we built the client reconciliation to fit that framework rather than the lump sum the department wanted.

The strategy held. Coercive recovery was stayed at the threshold, so the client was not forced to pay or pledge security while the matter was argued. The years that were already time barred were dropped from the consolidated demand for want of jurisdiction. Once the absence of any guilty intent was established, the Section 74 fraud footing fell away and the matter moved to a Section 73 basis, which removed the one hundred percent penalty exposure. After the third party figures were reconciled against the client audited records, the sustainable demand came down from roughly Rs 1.9 crore to a small fraction of that, payable in phases. For a small lease holder, that was the difference between staying in business and shutting the gate.

Illustrative outcome. Figures are anonymised and ranged. Every GST notice turns on its own facts, and recovery of time barred years, conversion of Section 74 to Section 73 and the reach of the MADA ruling remain live questions before the courts.

What mining lease holders should take from this:

One notice covering several financial years is open to challenge. Limitation under Sections 73 and 74 runs year by year, and bunching cannot revive a year the statute has closed.

Section 74 is not a default setting. It needs proof of fraud or deliberate suppression. An honest position taken while the law was unsettled is not fraud, and CBIC has said so in writing.

You are entitled to every document the department relies on. A demand built on figures you were never shown can be set aside on natural justice grounds.

A portal upload alone is not valid service. The department is expected to communicate notices and orders to you, not merely publish them.

The MADA ruling applies from 1 April 2005 and contemplates phased recovery with relief on interest and penalty, so a single crushing lump sum demand is often open to question.