LATEST GST CASE LAWS: 07.11.2026
🔥📛 SC-judgment holding State’s power to levy turnover-based additional sales tax reference academic
➡️ A seven-judge Bench of the Supreme Court reaffirmed the continued authority of the five-judge decision in S. Kodar, as reaffirmed by the three-judge decision in Hoechst Pharmaceuticals, which held that an additional tax or surcharge computed as a percentage of the sales tax payable by a class of dealers identified by turnover is an enhancement of the rate of sales tax and is in substance a tax on the sale or purchase of goods under Entry 54 of List II.
➡️ The reference by a three-judge Bench arose from three sets of proceedings spanning nearly 27 years: Section 5A of the Orissa Sales Tax Act, 1947, which required dealers with turnover above ₹10 lakh to pay a 10% surcharge on the sales tax payable; Section 5(1-C) of the Punjab General Sales Tax Act, 1948, together with Section 30-AA making tax-exempt industrial units liable to an additional surcharge; and the Punjab Social Security Act, 2000, which imposed a cess computed as a percentage of sales tax payable.
➡️ The assessees argued that such a levy is a ‘tax on tax’ falling on the dealer’s income rather than on the sale or purchase of goods, and hence beyond State competence. The Court drew the distinction between the subject matter of a tax, which is the taxable event, and the measure by which the tax is quantified, and observed that computing a levy as a percentage of another tax is not novel, since Article 271 itself permits a surcharge computed as a percentage of income tax. A surcharge is an enhancement of the principal levy, partaking of its character and drawing validity from the same source, and the position is no different when a State enhances the tax on sale of goods for a class of dealers.
➡️ The Court noted that the legal landscape had fundamentally changed during the pendency of the reference: the five-judge decision in Kesoram Industries corrected India Cement by holding that royalty is not a tax, the nine-judge Bench in Mineral Area Development Authority overruled India Cement and displaced the very premise on which cess on royalty was characterised as a ‘tax on a tax’, and the GST regime ended the States’ general power to tax the sale or purchase of goods. With no subsisting decision in conflict with S. Kodar, the reference was held to be academic, and the residual questions on Section 30-AA and the Punjab Social Security Act were left open.
➡️ In a concurring judgment, Justice K.V. Viswanathan, referring to the treatment of ‘measure of tax’ in Mineral Area Development Authority, held that there is no conflict between S. Kodar and Hoechst, that India Cement dealt with different legislative entries and principles, and that S. Kodar was correctly decided, continues to be good law and needs no reconsideration. The subject-matter versus measure distinction remains relevant under GST for levies such as cess that are computed by reference to another tax.
✔️ SC – Arjun Flour Mills vs State of Odisha Finance Department Secretary & Ors. [CIVIL APPEAL NO. 8763 OF 1994]
🔥📛 Bombay HC to examine validity of CBIC’s Office Memorandum on retrospective RoDTEP recovery; Stays IEC alert
➡️ The Bombay High Court, in a writ petition challenging the retrospective denial and recovery of RoDTEP benefits of ₹22.76 crore already granted to the assessee on its exports, prima facie agreed that the Customs Act does not empower the authorities to stop unrelated exports as a means of recovering alleged past dues that have not yet been adjudicated.
➡️ The Revenue sought to deny the benefits on the strength of a CBIC Office Memorandum dated September 7, 2026, a Public Notice dated October 7, 2026 issued by Jawaharlal Nehru Custom House, Nhava Sheva, and a DGFT email dated March 23, 2026, and placed an alert against the assessee’s Importer Exporter Code on the ICEGATE system.
➡️ The assessee contended that RoDTEP benefits had been granted to exporters at ports across India and that the Customs EDI portal itself permitted such grants from March 2024 onwards, so the Revenue was effectively giving retrospective effect to the circulars, contrary to a catena of Supreme Court decisions holding that circulars prejudicial to an assessee operate only prospectively. It also relied on the Bombay High Court’s ruling in Biharilal Singhal that past duty liabilities cannot be recovered through coercive action without a show cause notice and adjudication.
➡️ On this prima facie view, the Court granted an ad-interim order until the next hearing directing that clearance of the assessee’s current and future export consignments shall not be delayed or detained, directly or indirectly, on account of the proposed recovery, that RoDTEP benefits shall not be granted on current and future consignments subject to the outcome of the petition, and that the alert placed against the assessee’s IEC shall remain stayed.
➡️ The validity of the Office Memorandum on retrospective RoDTEP recovery will now be examined on merits. Exporters facing similar clawback demands or IEC alerts can rely on the order to resist coercive recovery without adjudication, while the final entitlement to the benefit remains open.
✔️ Bombay HC – PGP Glass Limited vs The Union of India and Ors. [WRIT PETITION (L) NO. 35276 OF 2026]
🔥📛 Delayed refund interest cost public money; Bombay HC directs GST Council to address refund-order delays
➡️ The Bombay High Court, in a matter concerning refund of amounts allegedly paid under coercion during search proceedings under Section 67 of the CGST Act, observed that the reasons for setting aside the refund-rejection order indicated apparent lapses on the part of the officer, with the result that interest became payable to the assessee out of public money.
➡️ The assessee alleged that GST officials coerced it into depositing tax and penalty during the search, and the Revenue rejected its refund application citing unspecified deficiencies in supporting documents. The Court had quashed the rejection as passed on vague grounds and restored the application, and when the Revenue cited the absence of a portal mechanism to process a restored application, directed it to submit corrective steps, upon which the Revenue undertook to credit the refund within three working days.
➡️ Referring to Section 56, the Court emphasised that once a refund application is filed the officer is obliged to pass an order, and if the refund is not made within 60 days of the application, interest at the notified rate of 6% becomes payable. The longer the delay in passing the order, the greater the interest burden on the exchequer, so proper officers must adhere to the prescribed timelines.
➡️ Noting that the application was filed on January 13, 2025, rejected on January 23, 2025 and the rejection set aside only on November 2, 2026, the Court directed the GST Council to inquire into the matter and address the issue of delays in passing refund orders, to examine the difficulties arising from portal limitations that prevent officers from recording detailed reasons while accepting or rejecting refund requests, and to complete the exercise within six weeks.
➡️ The Court granted liberty to the State Government or the GST Council to recover the interest from the officer responsible for the delay, subject to the inquiry establishing lapses on the officer’s part, and listed the matter for further consideration on December 14, 2026. The order introduces personal accountability for refund delays and may lead to systemic changes in how refund orders are processed and reasoned on the portal.
✔️ Bombay HC – Modern Traders Vs Deputy Commissioner/Joint Commissioner, CGST, Nagpur – II & Ors.[ WRIT PETITION NO. 4344 OF 2025]
🔥📛 HC: Metro viaduct, station works-contract, a ‘composite supply’, not ‘construction’; Upholds ITC refund under IDS
➡️ The Karnataka High Court dismissed the Revenue’s writ appeal against a Single Judge order allowing the assessee a refund of unutilised ITC of about ₹3.11 crore for May 2020 under the inverted duty structure, both on merits and on account of the Revenue’s 402-day delay in filing the appeal.
➡️ The assessee, a joint venture of ITD Cementation India Ltd. and Italian-Thai Development Public Co. Ltd., was awarded a BMRCL contract for construction of an elevated viaduct and metro stations, on which it paid GST at 12% on its output while inputs such as cement, steel and HDPE pipes attracted 18% to 28%, resulting in accumulated credit.
➡️ The adjudicating authority rejected the refund relying on Notification No. 15/2017-Central Tax (Rate), treating the outward supply as construction services under sub-item (b) of Item 5 of Schedule II to the CGST Act, and the appellate authority upheld that view.
➡️ The Court held that there was no doubt the assessee provides composite supplies in the form of works contracts covered by Item 6 of Schedule II, observing that the Revenue’s own appeal averments were at variance with its argument that the contract had not been examined, that neither authority below had disputed the works contract claim, and that the appellate order itself recorded that the assessee undertook works contract services for construction of metro stations.
➡️ On delay, the Court found no explanation why the Single Judge’s judgment was not placed before the concerned officer for more than ten months after the Department had a copy, and declined to condone it. Concurring with the Single Judge that the refund could not be denied by treating the services as falling under clause (b) of Item 5 of Schedule II, the ruling confirms that the bar in Notification No. 15/2017 applies to construction services and not to works contracts, enabling infrastructure contractors to claim inverted-duty refunds.
✔️ Karnataka HC – State of Karnataka and Anr vs ITD Cemindia JV [WRIT APPEAL NO. 1528 OF 2026 (T-RES)]
🔥📛 HC: Wrong column disclosure in TRAN-1 insufficient to deny transitional credit; Quashes consequential recovery
➡️ The Bombay High Court allowed the assessee’s writ petition and set aside the Commissioner (Appeals) order upholding reversal of transitional credit of ₹6,29,02,146 carried forward through TRAN-1 under Section 140(5) of the CGST Act instead of Section 140(1), holding that in the absence of any dispute about eligibility the order was wholly without jurisdiction.
➡️ The assessee, a manufacturer of Ethyl Acetate with two units under a common GST registration, had imported or procured Superior Denatured Spirit stored at Unit 2 and transferred to Unit 1, and transitioned the credit on those inputs under Section 140(5). The Revenue’s SCN alleged that the credit was wrongly transitioned under Section 140(5) rather than Section 140(1), which was confirmed in adjudication and upheld in appeal.
➡️ The Court noted that the quantum of credit was not disputed, TRAN-1 was filed within time, the assessee had applied to the jurisdictional Commissioner for extension beyond 30 days under Section 140(5), and the impugned order itself recorded the assessee’s entitlement under Section 140(1).
➡️ The Court held that TRAN-1 is a declaration subject to verification and scrutiny by the Revenue, and that transitioning credit under a wrong category or column cannot by itself be a ground to disallow it. Unutilised credit arising from duty or tax paid is a vested and indefeasible right that cannot be taken away on technical grounds, and mentioning an incorrect provision or column is not sufficient to deny it.
➡️ Relying on the coordinate Bench judgment in Heritage Lifestyles and Developers and the Supreme Court’s decision in Mangalore Chemicals and Fertilizers, the Court quashed the order and declared that once eligibility is undisputed and the credit is transitioned within time, it cannot be disallowed merely because it was claimed under an incorrect provision. Taxpayers facing TRAN-1 disputes over the choice of sub-section can rely on this ruling.
✔️ Bombay HC – Laxmi Organic Industries Limited Vs Union of India & Ors [WRIT PETITION NO. 5508 OF 2024]
🔥📛 HC: Tax paid under wrong head, no ground to invoke Sec.74; Directs transfer of CGST/SGST paid to IGST-head
➡️ The Bombay High Court allowed the assessee’s writ petition and set aside an Order-in-Original confirming an IGST demand under Section 74 of the CGST Act on transactions on which GST of about ₹7.65 crore had already been discharged under the CGST and SGST heads, holding that the Revenue could simply have transferred the amount to the IGST head and that Section 74 could in no event be invoked.
➡️ The assessee facilitates the sale of medical equipment by overseas suppliers to Indian buyers and provides marketing, distribution and support services to foreign group companies. It had paid CGST and SGST on amounts received towards replacement of parts under warranty support services, which the Revenue treated as inter-State supplies liable to IGST for the same period.
➡️ The Revenue argued that CGST, SGST and IGST are credited to distinct sovereign accounts, that the Department is not obliged to adjust CGST and SGST against an IGST demand, and that misclassifying inter-State supplies as intra-State amounted to suppression. The Court noted that the Revenue’s affidavit did not deny the deposit of about ₹7.65 crore under the CGST and SGST heads.
➡️ Referring to Section 77 of the CGST Act, Section 19 of the IGST Act and Rule 4(1) of the GST Refund Rules, and relying on the Kerala High Court’s judgment in Saji S., the Court held that tax paid under a wrong head should be transferred to the correct head. Relying on the Supreme Court’s decision in Tata Steel Ltd., it held that this was not a case of any deliberate attempt to evade tax, so invoking Section 74 was uncalled for.
➡️ The Court clarified that it had decided only the adjustment of tax paid under the wrong head and not the quantum of IGST payable, leaving the Revenue free to recover any amount over and above ₹7.65 crore if due. It quashed the order, directed the assessee to apply for transfer within three weeks with proof of payment, directed the Revenue to transfer the amount forthwith from the CGST and SGST heads to IGST, and left it open to the assessee to appeal the balance demand.
✔️ Bombay HC – DHR Holding India Private Limited vs Union of India & Ors [WRIT PETITION NO. 1214 OF 2025]
🔥📛 SC: Dismisses Revenue’s SLP against HC-judgment that assignment of leasehold rights is not taxable supply
➡️ The Supreme Court dismissed the Revenue’s Special Leave Petition against the Gujarat High Court judgment which quashed a GST demand of ₹1,45,80,000 against the assessee, holding that the assignment of leasehold rights in an industrial plot allotted by GIDC to a third party for consideration is a transfer of benefits arising out of immovable property and not a supply of service under Section 7(1)(a) of the GST Act.
➡️ The assessee had been allotted an industrial plot by the Gujarat Industrial Development Corporation and later assigned its leasehold rights to Jal Aqua International. The Revenue issued a show cause notice under Section 74 treating the assignment as a supply of service and confirmed the demand by an Order-in-Original, which the assessee challenged in writ.
➡️ The High Court observed that it had already held in various decisions that assignment by sale and transfer of leasehold rights in a GIDC plot by the lessee in favour of a third-party assignee for consideration is an assignment of benefits arising out of immovable property.
➡️ Relying on its ruling in Gujarat Chamber of Commerce, the High Court held that Section 7(1)(a) providing for the scope of supply, read with clause 5(b) of Schedule II and clause 5 of Schedule III, does not apply to such a transaction of assignment of leasehold rights of land and building, and that it is not subject to levy of GST under Section 9.
➡️ The Supreme Court declined to interfere with the High Court’s order in exercise of its jurisdiction under Article 136 of the Constitution. Although dismissal of an SLP does not amount to a declaration of law, the Gujarat High Court ruling stands undisturbed and strengthens the position of industrial plot lessees facing GST demands on assignment of leasehold rights.
✔️ SC – Union of India & Ors. vs Luna Chemicals Industries Private Limited & Anr. [SPECIAL LEAVE PETITION (CIVIL) Diary No(s). 47463/2026]
🔥📛 HC: Section 73 demand based on return scrutiny without ASMT-10 notice, without jurisdiction; Participation in SCN, no waiver
➡️ The Gauhati High Court set aside a DRC-01 notice and the consequential adjudication order demanding about ₹1.12 crore for FY 2018-19, holding that the Revenue could not invoke Section 73 of the CGST Act without first communicating the discrepancies in Form GST ASMT-10 under Section 61 read with Rule 99, a requirement that is not an empty formality.
➡️ The assessee was alleged to have under-declared its tax liability in the annual return, based on a comparison of GSTR-2A, GSTR-3B, e-way bills and departmental records. The assessee also contended that its request for a personal hearing in its reply dated February 9, 2024 was not granted, in violation of Section 75, and the Court noted that the Revenue filed no affidavit despite several opportunities.
➡️ Relying on the coordinate Bench ruling in PepsiCo India Holdings, the Court held that bypassing the Section 61 procedure renders the assumption of jurisdiction under Section 73 unauthorised.
➡️ Rejecting the Revenue’s contention that ASMT-10 is not always necessary, the Court held that the source and foundation of the proposed demand determine the applicable procedure: a proper officer may proceed under Section 73 on independently available information or material, but where the demand is founded on discrepancies noticed during scrutiny of returns, the procedure under Section 61 read with Rule 99 must be followed, and later initiation of proceedings under Section 73 does not dispense with it.
➡️ The Court held that the assessee’s reply to the SCN cannot be regarded as a substitute for compliance with Section 61 and cannot be construed as a waiver of a statutory safeguard. It granted the Revenue liberty to proceed afresh subject to limitation and clarified that the merits of the tax liability had not been examined.
✔️ Gauhati HC – R Ess Iron and Steel Pvt. Ltd. vs Union of India and Ors. [WP(C)/2033/2025]
🔥📛 HC: Defective SCN merely borrowing reasons from DGGI report cannot sustain registration cancellation
➡️ The Karnataka High Court allowed a writ petition challenging the cancellation of GST registration, holding that a show cause notice proposing cancellation must disclose specific reasons that enable the registered taxable person to respond effectively.
➡️ The underlying SCN merely cited the reason as ‘Others’ and referred to a communication from the Directorate General of GST Intelligence, Pune, without disclosing the allegations or the specific grounds warranting cancellation. Although the assessee sought clarification of the reasons, no response was furnished.
➡️ The subsequent cancellation order merely recorded that most of the assessee’s suppliers had been deregistered and that the assessee had availed ITC from such entities, without these allegations ever having been put to the assessee in the notice.
➡️ Observing that a show cause notice, which is intended to extend a reasonable opportunity, must contain the details that enable the noticee to respond to the reason proposed for the action, the Court held that the SCN was fundamentally defective for failure to disclose the allegations and that the cancellation order consequently could not be sustained.
➡️ The Court clarified that its decision does not preclude the Revenue from initiating fresh proceedings if the assessee had indeed availed ITC through transactions with entities whose registrations stood cancelled, provided the assessee is put on definite notice of the allegations. Notices that simply borrow conclusions from an intelligence report without stating the case against the taxpayer will not survive.
✔️ Karnataka HC – Moin Khan vs Superintendent, Central GST, Bengaluru [WRIT PETITION NO. 30697 OF 2026 (T-RES)]
🔥📛 HC: Appellate order passed without actual personal hearing violates natural justice; Remands matter
➡️ The Gujarat High Court allowed a writ petition challenging an appellate order passed under Section 107 of the CGST Act, holding that issuing multiple hearing notices without actually affording an opportunity of personal hearing violates the principles of natural justice.
➡️ The assessee had specifically opted for a personal hearing in Form GST APL-01 and had deposited 10% of the disputed tax, about ₹85.55 lakh. Three notices, all dated April 16, 2026, fixed separate hearing dates of April 18, 21 and 24, 2026, and the appellate order dated May 26, 2026 recorded that the assessee and its advocate had been heard on all three dates.
➡️ The order sheet obtained under the Right to Information Act, however, did not disclose that any hearing had actually taken place on any of the three dates.
➡️ The Revenue explained that the GST portal enabled generation of multiple hearing notices on the same date as part of its scheduling mechanism and tendered an apology for the manner in which the notices were issued. Rejecting the validity of the appellate proceedings, the Court held that since the proceedings sheet did not reflect any hearing, the appellate order was in violation of natural justice and liable to be set aside.
➡️ The Court took note of the fresh hearing afforded to the petitioner on October 21, 2026 with a further hearing scheduled for October 27, 2026, and recorded the Revenue’s undertaking to pass a fresh appellate order after hearing the petitioner or its representative. An order that records a hearing which the file shows never happened cannot stand.
✔️ Gujarat HC – Mustufamiya Hussainmiya Shaikh, Proprietor of M/s Mustufa Sales Agency vs State of Gujarat & Ors. [R/SPECIAL CIVIL APPLICATION NO. 14717 of 2026]
🔥📛 HC: Grants bail to director arrested in alleged offence u/s 132
➡️ The Telangana High Court granted bail to a company director who had been arrested for an alleged offence under Section 132 of the CGST Act, 2017, holding that the petitioner was entitled to be enlarged on bail.
➡️ The director filed a criminal petition under Sections 480 and 483 of the Bharatiya Nagarik Suraksha Sanhita seeking bail. The arrest memo stated that he had committed an offence specified in clause (a), (b), (c) or (d) of Section 132(1), punishable under clause (i) or (ii) of Section 132(1) or under Section 132(2), and the reasons and grounds of arrest were also served on him.
➡️ He was arrested and remanded to judicial custody on September 24, 2026 and had remained in jail since then.
➡️ The Revenue had filed an application before the trial court to record the voluntary statement of the accused, which was allowed, so the investigative purpose of custody stood addressed.
➡️ Bail was granted subject to conditions: a personal bond of ₹20,000 with two sureties for a like sum to the satisfaction of the Special Judge, appearance before the Revenue as and when called on two days’ advance notice, and an undertaking not to involve himself in similar offences. The criminal petition was accordingly allowed.
✔️ Telangana HC – Shaik Mohammed Abdul Jabbar vs The Principal Commissioner/Commissioner, CGST & Anr. [CRIMINAL PETITION NO: 16412 OF 2026]
🔥📛 HC: Directs Revenue to issue SCN in detention case; Grants Asssesse opportunity to explain alleged undervaluation
➡️ The Gauhati High Court directed the Revenue to issue a show cause notice to the consignee in a case involving detention of goods, granting the assessee an opportunity to explain the alleged undervaluation and underweight declarations by producing the necessary documents.
➡️ Goods belonging to the assessee were intercepted at the Amingaon Railway Yard by officials of the Principal Commissioner of State Tax, Assam, on the suspicion that unscrupulous traders were procuring marbles, granites and tiles from Gujarat and Rajasthan in railway containers loaded at ICD Amingaon with undervalued and underweight declarations.
➡️ The assessee claimed that, out of the 80 containers, its three containers were not undervalued or underweight and involved no evasion of tax, that it had fully complied with the IGST Act, and that the Revenue had issued notice only to the transporter proposing a penalty of 200% on the tax amount of ₹1,47,565.
➡️ The Court found that the detention was made to verify the records of movement of goods, that the dealer did not appear at the time of verification, and that the transporter’s representative appeared and admitted non-uploading of Part-B of the e-way bill, which is why notice was issued only to the transporter. While the auction was stayed, service on the transporter was yet to be completed, and the assessee was suffering losses from the continued detention.
➡️ Holding that the basic grievance was that the consignee ought to have been issued the SCN so that it could show that the goods were neither undervalued nor underweight, the Court disposed of the petition with a direction to the Revenue to issue a fresh notice within 15 days. Owners of detained goods are entitled to be noticed and heard in their own right, and not merely through the transporter.
✔️ Gauhati HC – Rishi Stonex vs The State of Assam and 5 Others [WP(C)/2841/2025]
