LATEST GST CASE LAWS: 15.06.2026
🔥📛 Bombay HC to examine if penalty proceedings can be initiated against independent director; Stays recovery
➡️ The Bombay High Court granted ad-interim protection to an independent director against penalty proceedings initiated under Section 122(1A) of the CGST Act, finding that the matter raised substantial legal questions warranting interim relief until the case is finally heard.
➡️ The petitioner argued that, as an independent director, she was not the taxable person against whom GST obligations were imposed and therefore could not automatically be subjected to penalty proceedings merely because of her association with the company.
➡️ Reliance was placed on the earlier decision in Shantanu Sanjay Hundekari, where a co-ordinate bench had held that an individual does not fall within the scope of a “person” liable for penalty under Section 122(1A) in the circumstances considered by the Court, thereby limiting the provision’s application to non-taxable individuals connected with the entity.
➡️ The Court noted that the precedent cited by the petitioner continued to hold the field, particularly as it had not been disturbed by the Supreme Court, and considered this factor significant in assessing whether a prima facie case for interim protection had been established.
➡️ Pending the Revenue’s response and further adjudication, the High Court directed that no coercive action be taken against the petitioner in relation to the impugned penalty proceedings, signalling judicial caution against extending Section 122(1A) liability to independent directors without clear statutory basis and specific evidence of their involvement.
✔️ Bombay HC – Bhavana Jain v. Union of India [WRIT PETITION NO. 988 OF 2026]
🔥📛 Madras HC to examine validity of Sec. 74 order founded on Sec.73 DRC-01A; Stays Recovery
➡️ The Madras High Court granted interim protection to the assessee by staying recovery proceedings arising from the adjudication order passed under Section 74 and directed the Revenue to file its response, observing that the dispute involves a substantive legal issue warranting detailed examination.
➡️ The assessee challenged the validity of the proceedings on the ground that the matter was originally initiated through Form GST DRC-01A with reference to Section 73, indicating a non-fraud case, but was ultimately concluded under Section 74 without a corresponding change in the factual allegations.
➡️ It was argued that invocation of Section 74 requires specific allegations and evidence establishing fraud, wilful misstatement, or suppression of facts, and that these statutory prerequisites cannot be presumed merely to justify a higher demand or extended limitation period.
➡️ The assessee further contended that the shift from Section 73 to Section 74 was an afterthought adopted solely to overcome the time limitation applicable under Section 73, emphasizing that the extended limitation under Section 74 is available only when the conditions expressly prescribed by law are satisfied.
➡️ The Revenue maintained that issuance of Form GST DRC-01A is only an optional pre-show cause consultation mechanism and does not restrict the authorities from subsequently invoking Section 74; however, considering the legal issues involved, the High Court stayed recovery and listed the matter for further hearing on July 10, 2026.
✔️ Madras HC – ADVANCED CONSTRUCTION TECHNOLOGIES PVT LTD VS THE JOINT COMMISSIONER (ST) INTELLIGENCE II
🔥📛 AAR: Section 16(5) creates no fresh opportunity to reclaim reversed ITC; Re-availment tantamount to refund
➡️ The West Bengal AAR held that ITC reversed by Eastern Coalfields Ltd. (ECL) pursuant to an earlier advance ruling cannot be re-availed merely because Section 16(5) was inserted retrospectively. According to the Authority, Section 16(5) only relaxes the time limit under Section 16(4) and does not create a fresh substantive right to reclaim credit that had already been reversed in compliance with a binding ruling.
➡️ Interpreting Section 150 of the Finance Act, 2024, the AAR emphasized that the legislature expressly barred refund of tax paid or ITC reversed that would not have been paid or reversed but for the earlier legal position. The inclusion of the phrase relating to “input tax credit reversed” was viewed as a clear indication that restoration of such reversed credit is not permissible.
➡️ The Authority rejected the taxpayer’s contention that the term “refund” in Section 150 should be confined to the meaning and mechanism prescribed under Section 54 of the CGST Act. It observed that such a narrow interpretation would render the reference to “reversed” ITC redundant and produce anomalous outcomes by treating taxpayers differently based solely on whether the underlying liability had been discharged in cash or through credit.
➡️ The ruling further clarified that Section 150 operates independently and does not refer to Section 54 for determining the scope of refund restrictions. Consequently, any attempt to reclaim ITC that had already been reversed pursuant to the earlier legal framework was considered, in substance, equivalent to seeking a refund, which the legislature intended to prohibit.
➡️ In the factual context, ECL had availed ITC on invoices issued by Gayatri Projects Ltd. for services rendered under a longwall mining project after assignment of the original contract by China Coal Overseas Development Co. Ltd. Although ECL argued that the retrospective insertion of Section 16(5) validated the disputed FY 2019-20 credits because the relevant returns had been filed before 30 November 2021 and corresponding GSTR-1 disclosures had been made, the AAR concluded that these developments did not permit restoration of the ITC that had already been reversed.
✔️ West Bengal AAR – In the matter of Eastern Coalfields Ltd [WBAAR 26 of 2025-26]
🔥📛 HC: Sets aside assessment order issued u/s 74 instead of 74A; Directs fresh hearing
➡️ The Madras High Court (Madurai Bench) held that proceedings initiated under Section 74 of the GST Act for AY 2024–25 were legally unsustainable, as from 1 April 2024 the Revenue was required to invoke Section 74A for such actions. Issuing a show cause notice under an inapplicable provision amounted to acting without authority of law, rendering the consequential assessment order liable to be quashed.
➡️ The Court emphasized that the validity of assessment proceedings depends upon strict adherence to the correct statutory provision. Since the impugned assessment order stemmed from a notice issued under Section 74 instead of Section 74A, the foundational defect in the notice itself vitiated the entire proceedings, irrespective of the merits of the tax demand.
➡️ The assessee contended that the assessment order had been passed ex parte because multiple notices uploaded on the GST portal created confusion, resulting in an inadvertent failure to submit a reply. While the Court recognized these procedural concerns, its decision primarily rested on the Revenue’s lack of jurisdiction to invoke the incorrect statutory provision.
➡️ The Court observed that merely setting aside the assessment order would not effectively resolve the dispute, as the Revenue still retained the ability to proceed under Section 74A within the prescribed limitation period. Accordingly, the Court adopted a pragmatic approach to balance procedural compliance with the need for adjudication on substantive issues.
➡️ The assessment order was therefore set aside, and the Court directed that the existing show cause notice be treated as one issued under Section 74A, permitting the assessee to file its reply and participate in the proceedings. The matter was remitted for fresh consideration on merits, reaffirming that procedural defects should be corrected in a manner that preserves both statutory safeguards and the opportunity for fair adjudication.
✔️ Madras HC – Tvl. Fancy Agency Vs The Deputy State Tax Officer-I [W.P.(MD) No. 35371 of 2025]
