LATEST GST CASE LAWS: 23.10.2025
🔥📛 Karnataka HC stays interest and penalty proceedings against Toshiba on employee secondment
➡️ The Karnataka High Court granted an interim stay on the recovery of interest and penalty demanded from M/s Toshiba Software (India) Pvt. Ltd. concerning GST liability on employee secondment services.
➡️ The Assessee challenged the Revenue’s order imposing interest and penalty for delayed payment of GST on secondment services received in earlier financial years, asserting that the delay caused no revenue loss since the entire tax paid was available as input tax credit (ITC).
➡️ The Assessee argued that interest under GST is compensatory, not penal, and since no loss was suffered by the exchequer (as the tax was creditable), there was no justification for demanding interest or penalty.
➡️ The Court noted reliance on CBIC Circular No. 210/4/2024-GST, which clarifies that where no invoice is issued and the recipient is eligible for full ITC, the value of service may be treated as ‘nil’, thereby negating any liability for tax, interest, or penalty.
➡️ Observing that a prima facie case existed in favour of the Assessee based on the circular and the compensatory nature of interest, the High Court stayed the recovery of interest and penalty pending final adjudication.
✔️ Karnataka HC – Toshiba Software (India) Private Limited v. Union of India & Ors.
🔥📛 HC: Payment during search not voluntary absent acknowledgment; Directs refund of coerced Rs. 10 cr recovery
➡️ The Karnataka High Court held that the Revenue’s collection of ₹10 crores during search and inspection was not voluntary, but coerced and unlawful. Since no notice, adjudication, or proceedings preceded the collection, it lacked legal authority under Article 265 and the CGST Act, rendering the action arbitrary and unconstitutional.
➡️ Reaffirming precedents such as Dabur India, Bundl Technologies, and the Supreme Court’s ruling in Radhika Agarwal, the Court emphasized that tax recovery can occur only after proper adjudication. Any payment obtained before adjudication or without a quantified demand has no legal backing and must be refunded with interest.
➡️ The Court clarified that invoking Section 74(5) (which presupposes fraud or wilful misstatement) inherently contradicts the idea of voluntary payment. It is inconceivable that an assessee would voluntarily admit guilt and make payment under coercive circumstances; hence, such recovery cannot be deemed self-ascertained.
➡️ The judgment noted multiple procedural lapses, including failure to issue Form GST DRC-04 acknowledgment after payment in Form GST DRC-03, and the absence of any pending demand under the CGST Act. These procedural violations reinforced the finding that the payment was forced and without statutory authority.
➡️ Reiterating CBIC’s directions (issued post-Bhumi Associates), the Court stressed that officers must not insist on payments during search or investigation and must strictly follow prescribed procedures. Non-compliance with these instructions amounts to abuse of power, inviting judicial censure and refund obligations.
✔️ Karnataka HC – J Ramesh Chand Vs Union Of India [WRIT PETITION NO. 9890 OF 2023 (T-RES)]
🔥📛 HC: Grants interest on IGST refund paid on ocean freight; Invokes unjust enrichment doctrine
➡️ The Bombay High Court held that the assessee was entitled to interest of ₹71.31 lakh on the refund of IGST paid under reverse charge on ocean freight, as the levy itself was declared unconstitutional by the Supreme Court in Mohit Minerals.
➡️ Since the tax collected was without authority of law (violating Article 265 of the Constitution), the Court ruled that Sections 54 and 56—governing refund of tax lawfully collected under the Act—could not be invoked to deny interest on such refund.
➡️ Referring to precedents like Ranbaxy Laboratories Ltd. and Hamdard (Waqf) Laboratories, the Court emphasized that the Revenue is obligated to pay statutory interest if the refund is not granted within the prescribed timeline, mirroring the 60-day period under Section 54 read with Section 56 of the CGST Act.
➡️ Citing Mafatlal Industries Ltd., the Court reiterated that no one can retain tax collected without legal authority, and the government, having utilized the assessee’s funds until refund, must compensate by paying interest.
➡️ The decision reinforces that interest is a rightful component of refund where tax collection is held unconstitutional, thereby protecting taxpayer equity and clarifying that interest cannot be denied merely because the refund was processed within 60 days under the GST framework.
✔️ Bombay HC – West India Continental Oils Fats Private Limited vs Union of India & Ors [WRIT PETITION NO. 3000 OF 2023]
🔥📛 Writ seeking permission to file appeal beyond condonable period to be dismissed as there was no violation of natural justice: HC
➡️ The petitioner company exported goods after paying IGST and sought a refund of ₹78.29 lakhs. When the refund was not granted, the petitioner approached the High Court, which directed the department to decide the claim.
➡️ The department rejected the refund claim, prompting the petitioner to file an appeal. The appellate authority partly allowed the appeal, sanctioning ₹32.5 lakhs as refundable.
➡️ Despite the appellate order, the department withheld the refund, citing a subsequent order dated 4-2-2025 that raised a demand against the petitioner for alleged fraudulent ITC availment.
➡️ The petitioner argued lack of knowledge about the demand order and sought condonation of delay in filing an appeal. The Court held that since the petitioner had participated in the original proceedings, there was no violation of natural justice, and delay could not be condoned.
➡️ The Court dismissed the writ petition for want of maintainability but directed that the refund order be passed and the sanctioned refund be adjusted against the outstanding demand under the order dated 4-2-2025.
✔️ Delhi HC – Moms Cradle (P.) Ltd. v. Union of India [W.P.(C) Nos. 12251 and 15509 of 2025]
