LATEST GST CASE LAWS: 17.08.2026
🔥📛 Gujarat HC strikes down levy on pre- October 26, 2023 corporate guarantees; Reads down Rule 28(2)
➡️ The Gujarat High Court upheld the constitutional validity of Rule 28(2) of the CGST Rules, 2017 and Section 15(4) of the CGST Act, 2017, but read down the expression “whichever is higher” in Rule 28(2) to prevent an unduly harsh or unreasonable valuation of corporate guarantees.
➡️ GST cannot be imposed under Rule 28(2) on corporate guarantees for periods prior to October 26, 2023, when the provision came into force. The Court held that applying the prescribed 1% annual valuation to an earlier period would amount to an impermissible retroactive levy and would violate Articles 14 and 19(1)(g) of the Constitution.
➡️ Where a corporate guarantee was issued before October 26, 2023 but continues beyond that date, GST may apply for the period after Rule 28(2) became effective, since the Court regarded the taxable event or valuation requirement as arising on an annual basis during the continuance of the guarantee.
➡️ The Court rejected the challenge based on differential treatment of government guarantees, holding that exemption for guarantees extended by governments to public sector undertakings serves a distinct policy objective of avoiding artificial tax costs on sovereign-backed public infrastructure and welfare financing and therefore does not constitute unconstitutional discrimination.
➡️ Proceedings initiated by the Revenue under Section 74 on the basis of the invalidated interpretation were quashed, and Circular Nos. 204/16/2023-GST dated October 27, 2023 and 225/19/2024-GST dated July 11, 2024 were set aside to the extent inconsistent with the judgment; excess GST already deposited must be refunded or may be adjusted at the assessee’s option, with implementation directed within three months and liberty granted to the Revenue to issue fresh instructions consistent with the ruling.
✔️ Gujarat HC – Torrent Investment Pvt. Ltd. vs UOI & Ors. [R/SPECIAL CIVIL APPLICATION NO. 12175 of 2024]
🔥📛 SC: Issues notice on Revenue’s SLP challenging remand as illegal over non-service of arrest grounds
➡️ The Allahabad High Court held that an arrest under Section 69 of the CGST Act cannot be sustained where there is serious doubt whether the written “grounds of arrest” were actually furnished to the accused before arrest and production before the Magistrate; absence of any such recital in the remand order contributed to the finding that the remand was legally defective.
➡️ The Court stressed that CBIC’s instructions dated January 13, 2025 must be strictly followed: the grounds of arrest must not only be explained to the arrested person but also furnished in writing as an annexure to the arrest memo. Since the arrest memo in this case did not mention any annexure, the Court treated the procedural non-compliance as an additional ground for holding the remand illegal.
➡️ The High Court rejected the argument that the “reasons to believe” recorded by the Commissioner must also be supplied to the arrested person. It clarified that the observation in paragraph 34 of Radhika Agrawal requiring supply of both “grounds of arrest” and “reasons to believe” related to the PMLA framework and did not impose the same requirement under the GST Act.
➡️ At the same time, the Court emphasized that the Commissioner must independently ascertain and expressly record the “reasons to believe” on the basis of relevant material and evidence before authorising arrest. These reasons remain internal statutory records and need not be furnished to the accused, while the written grounds of arrest must be communicated in accordance with the prescribed safeguards.
➡️ The Supreme Court has now issued notice on the DGGI/Revenue’s SLP challenging the Allahabad High Court decision, with the matter returnable on September 28, 2026. The appeal therefore places the legality of the High Court’s approach to written grounds of arrest, remand scrutiny and procedural compliance under Section 69 before the Supreme Court, while the distinction between “grounds of arrest” and internal “reasons to believe” remains a key issue for GST enforcement practice.
✔️ SC – Directorate General of GST Intelligence & Anr. vs Jai Kumar Aggarwal & Ors. [SPECIAL LEAVE PETITION (CRIMINAL) Diary No(s). 41408/2026]
🔥📛 HC: Disposes 48 petitions on Section 168A notifications, preserves Luxmi Traders remedies for portal-only GST service
➡️ The Delhi High Court disposed of 48 writ petitions challenging Notifications Nos. 09/2023 and 56/2023 issued under Section 168A of the CGST Act, noting that the validity of these notifications is presently under consideration before the Supreme Court; the parties will therefore be governed by the Supreme Court’s eventual decision.
➡️ The Court also relied on the Punjab & Haryana High Court’s ruling in Luxmi Traders, which addressed the validity of serving GST show-cause notices and adjudication orders merely by uploading them on the GST Common Portal, and granted the assessees liberty to pursue the remedies recognised in that judgment.
➡️ Where a show-cause notice was communicated only through portal upload and the assessee did not respond, resulting in an ex parte adjudication order, the proceedings may be restored to the show-cause notice stage; the assessee may file a reply within four weeks, after which the authority must adjudicate the matter after providing a proper opportunity of hearing.
➡️ Where an order-in-original was served only through portal upload, the limitation period for filing an appeal would not begin on the basis of such deficient service; consequently, the assessee may file an appeal within four weeks, and where an earlier appeal was dismissed as time-barred despite such service deficiency, the appellate order may be set aside and the appeal restored for decision on merits.
➡️ Where both an ex parte adjudication order and a consequential appellate order arose from service effected only through the GST portal, both orders may be set aside and the proceedings restored to the show-cause notice stage, enabling the assessee to contest the demand after proper service, filing of reply and opportunity of hearing.
✔️ Delhi HC – Gorki Contractors and Engineers vs UOI & ors [W.P.(C) 4118/2026]
🔥📛 HC: “Reasonable period” for Section 76 SCN is fact-dependent; Appellate Authority can examine issue
➡️ The Delhi High Court held that the First Appellate Authority is competent to determine whether a show cause notice under Section 76 of the GST law was issued within a “reasonable period,” as this issue falls within the scope of the statutory appellate remedy.
➡️ The Court rejected the Assessee’s argument that delay in issuing the SCN is purely a jurisdictional issue that can be examined only by the High Court in writ proceedings, holding that such a question can also be considered by the Appellate Authority.
➡️ The Court observed that what constitutes a “reasonable period” cannot be determined by a fixed rule and must be assessed on the facts and circumstances of each case, making it an issue suitable for factual adjudication in appeal.
➡️ The Assessee had challenged SCNs and consequential orders issued under Sections 76 and 74 for FYs 2017-18, 2018-19 and 2019-20 concerning alleged wrongful availment of input tax credit, principally contending that the notices had been issued after an unreasonable delay.
➡️ Emphasising that the appellate remedy under the GST framework is comprehensive and efficacious, the High Court declined to exercise writ jurisdiction and directed the Assessee to pursue the statutory appellate remedy, where the question of unreasonable delay could be fully examined.
✔️ Delhi HC – Armour Security India Limited vs UOI & anr [W.P.(C) 10738/2026]
🔥📛 HC: Directs reconsideration of construction ITC claims post-Safari Retreats; Extends Section 14 limitation benefit
➡️ The Delhi High Court disposed of a batch of writ petitions concerning developers’ entitlement to input tax credit (ITC) beyond the time limit prescribed under Section 16(4) of the GST Act, granting them liberty to approach the Adjudicating Authority for appropriate relief.
➡️ Referring to the Supreme Court’s decision in Safari Retreats, the High Court noted that the constitutional validity of Sections 17(5)(c) and 17(5)(d) stands settled; however, the Supreme Court’s “functionality test” requires a case-specific factual examination to determine whether a particular structure can qualify as a “plant” for ITC purposes.
➡️ The Court recognised that Safari Retreats clarified that immovable property constructed for leasing or renting may not fall within the expression “on his own account” in Section 17(5)(d), and therefore the ITC restriction under that provision may not automatically apply to such activities, subject to the facts of each case.
➡️ The developers argued that certain principles laid down in Safari Retreats continue to remain relevant despite the retrospective amendments to Section 17(5)(d), and consequently sought ITC for earlier periods even though the statutory time limit under Section 16(4) had expired.
➡️ Without directly granting the disputed ITC, the High Court permitted the developers to file applications before the Adjudicating Authority, directed that such claims be considered pragmatically and in accordance with law, and indicated that the period spent bona fide pursuing the writ proceedings could be excluded under Section 14 of the Limitation Act while considering consequential ITC relief.
✔️ Delhi HC – Riveria Commercial Developers Limited Vs Union of India & Ors [W.P.(C) 11633/2019]
🔥📛 GSTAT: Seven days timeline for passing of detention order from notice date mandatory; Quashes detention
➡️ The GSTAT, Thiruvananthapuram held that the seven-day period prescribed under Section 129(3) of the CGST/KGST Act for passing a penalty order is mandatory. Accordingly, an order issued beyond this statutory period is invalid and cannot sustain the penalty imposed.
➡️ The dispute arose from transportation of automobile parts under valid e-invoices but without an e-way bill, leading to detention and a penalty of about Rs. 1.38 lakh under Section 129. Although the goods and conveyance were released against a Bond and Bank Guarantee, MOV-09 was issued on 4 June 2022, 47 days after MOV-07 dated 18 April 2022.
➡️ The Revenue argued that the limitation issue could not be raised for the first time before the GSTAT. The Tribunal rejected this objection because the dates of MOV-07 and MOV-09 were undisputed facts already available on record, allowing the legality of the order on limitation grounds to be examined.
➡️ Interpreting the word “shall” in Section 129(3), the GSTAT held that the seven-day requirement reflects a binding legislative mandate and cannot be treated as merely procedural or directory simply because the statute does not expressly state the consequence of delay. The limitation period is definite and must be strictly followed by the proper officer.
➡️ Relying on decisions including Deepam Roadways, Pawan Carrying Corporation and Allcargo Logistics, the GSTAT observed that courts have consistently required strict compliance with Section 129(3) timelines. Since MOV-09 was passed after the permissible seven-day period, it was held illegal and without jurisdiction; the appellate order was set aside and the Revenue was directed to release the Bank Guarantee furnished by the appellant.
✔️ GSTAT Thiruvananthapuram Bench – Siddhi Vinayak Automobiles vs The Commissioner of Kerala GST, Thiruvananthapuram [APPEAL NO: APL/2/TVP/2026]
🔥📛 GSTAT: Penalty u/s 129 not leviable for goods transport without e-way bill, when transport undertaken on account of stock transfer
➡️ GSTAT Thiruvananthapuram held that penalty under Section 129 of the CGST Act cannot be imposed merely because goods were transported without an e-way bill when the movement was a stock transfer between premises registered under the same GSTIN. The goods were moved under a delivery challan from the appellant’s premises to its own godown, with no sale, outward taxable supply or transfer to another taxable person.
➡️ Interpreting Sections 7 and 9, GSTAT observed that a taxable “supply” ordinarily requires a transaction between two distinct persons or entities. Since the stock transfer involved only the appellant, with no second party and no consideration, the movement did not constitute a taxable supply and consequently gave rise to no tax liability under Section 9.
➡️ GSTAT held that, where no tax is payable on the underlying movement, the tax-linked penalty mechanism under Section 129 cannot be applied by notionally calculating GST on the value of the transported goods. Section 129 cannot therefore be invoked mechanically merely because a transport-related requirement has been breached, without considering the nature and taxability of the transaction.
➡️ At the same time, GSTAT recognized that Rule 138(1)(ii) independently requires an e-way bill even when goods are moved “for reasons other than supply”. Accordingly, a stock transfer between the same registered person’s premises may still involve a statutory contravention if no e-way bill is generated, notwithstanding that the movement itself does not attract GST.
➡️ GSTAT distinguished the consequences of an e-way bill violation from detention and penalty under Section 129, holding that document-related contraventions involving non-supply movements are appropriately addressed under Section 122(1)(xiv). It therefore set aside the Order-in-Appeal, held Section 129 penalty inapplicable to the stock transfer, and allowed the appeals with consequential relief.
✔️ GSTAT Thiruvananthapuram Bench – M S Steels vs The Commissioner of Kerala State GST, Thiruvananthapuram [APPEAL NOS: APL/1/TVP/2026]
🔥📛 HC: Portal only SCN insufficient for ex-parte order; Restores proceedings and permits appeal without limitation objection
➡️ The Delhi High Court held that merely uploading a GST show-cause notice (SCN) on the common portal is not sufficient service where the taxpayer neither acknowledges receipt nor files a reply, following the Punjab & Haryana High Court’s ruling in Luxmi Traders.
➡️ Where the taxpayer had neither replied to the SCN nor participated in the adjudication, the resulting ex parte demand order was set aside and the proceedings were restored to the SCN stage, as effective service of the notice could not be established.
➡️ In the restored proceedings, the taxpayer was granted four weeks to file a reply, after which the Adjudicating Authority was directed to provide an opportunity of personal hearing and pass a fresh, reasoned order in accordance with law.
➡️ Where the taxpayer had replied to the SCN and participated in adjudication, restoration to the SCN stage was not permitted because such participation demonstrated knowledge of the proceedings; however, portal-only service of the final demand order justified protection against a limitation objection in statutory appeal.
➡️ Accordingly, the participating taxpayer was allowed four weeks to file the statutory appeal, which must be entertained without objection on limitation subject to other statutory requirements; the Court left the challenge to Notification No. 40/2021-Central Tax and the corresponding Delhi notification open and expressed no view on the merits of either tax demand.
✔️ Delhi HC – Saraswati Printers Vs Sales Tax Officer Class Ii/Avato, State Tax Ward 91, Zone 8 Delhi & Ors. [W.P.(C) 10640/2025]
