LATEST CASE LAWS UNDER GST – 16.10.2026 – A2Z TAXCORP LLP

➡️ The Supreme Court dismissed the Revenue Department’s appeal against the NCLAT Chennai ruling in the case of Samyu Glass Private Limited as time-barred, without examining the merits of the dispute.

➡️ The NCLAT held that the Central Excise Department cannot claim the status of a secured creditor under Section 11E of the Central Excise Act, 1944, and that statutory dues under the IBC take priority over the Department’s claim of first charge.

➡️ The NCLAT distinguished the Supreme Court’s ruling in Rainbow Papers, which concerned the Gujarat VAT Act, clarifying that the treatment of government dues as secured debt depends on the specific statutory provisions creating such security.

➡️ The Revenue Department’s claim of Rs. 22.60 crore towards Central Excise duty, interest and penalty did not justify interference with the approved resolution plan, as the NCLAT found no violation of Section 30(2) of the Insolvency and Bankruptcy Code, 2016.

➡️ The NCLAT emphasised the finality of an approved and implemented resolution plan, noting that the successful resolution applicant had already paid Rs. 35.25 crore to creditors and nearly two years had elapsed since approval. The ruling reinforces the importance of timely claims and appeals by tax authorities in insolvency proceedings.

➡️ The Bombay High Court granted interim protection to the Assessee challenging an Order-in-Original passed under Section 122 of the CGST Act, 2017 and the MGST Act, raising concerns over procedural irregularities and legal validity.

➡️ The Assessee contended that the impugned order violated the principles of natural justice, particularly Section 75(5) of the CGST/MGST Acts, concerning the opportunity for adjournment during adjudication proceedings.

➡️ The Assessee further challenged the order for non-mention of the Document Identification Number (DIN), submitting that DIN issuance was mandatory under the applicable CBIC Circular to ensure transparency and authenticity of tax proceedings.

➡️ The Assessee argued that an order issued without the mandatory DIN is legally invalid and deemed never to have been issued under the applicable Circular. The Court recorded these submissions without conclusively deciding their merits at this stage.

➡️ The High Court restrained the Revenue from taking coercive action based on the impugned Order-in-Original until the next hearing, granted three weeks to file an affidavit-in-reply and one week thereafter for the Assessee’s rejoinder, and listed the matter for November 30, 2026.

➡️ The Bombay High Court (Nagpur Bench) issued notice to the Revenue and granted an interim stay on the Show Cause Notice (SCN) and consequential demand order issued under Section 74 of the CGST Act, 2017, involving alleged tax dues of approximately ₹2 crore, including interest and penalty.

➡️ The Assessee challenged the SCN concerning the period July 2017 to March 2018, contending that it was time-barred, as the statutory outer limit for issuing the notice had expired on August 5, 2024.

➡️ The Court recorded the Assessee’s submission that the SCN was served at 5:40 PM and the demand order was issued within one minute, allegedly without providing any opportunity to respond, a personal hearing, or time to make payment, and without recording reasons, raising serious concerns regarding compliance with principles of natural justice.

➡️ The Assessee further submitted that an earlier SCN dated April 7, 2021, concerning the dispute had resulted in partial appellate relief, whereby the interest component was set aside, while the appeal against the penalty component remained pending before the GST Appellate Tribunal.

➡️ Taking note of these alleged procedural and statutory irregularities, the High Court called upon the concerned Joint Commissioner to explain why action should not be recommended against him for failure to discharge his official duties. The Court stayed both the impugned SCN and demand order pending further proceedings, highlighting the importance of statutory limitation, procedural fairness, and adherence to principles of natural justice in GST adjudication.

➡️ The Bombay High Court issued notice and granted ad-interim relief to NCDEX E Markets Ltd., challenging the recovery proceedings initiated through an intimation dated September 30, 2026, for enforcement of the GST demand order dated April 30, 2024.

➡️ The Court observed that the Deputy Assistant Commissioner (ST)-1 initiated recovery proceedings despite expressly acknowledging the pending writ petition and the High Court’s subsisting stay dated March 7, 2025, restraining implementation of the demand order.

➡️ The recovery officer justified the proceedings on the ground that the officer who issued the demand in Form GST DRC-07 on June 5, 2024, was not impleaded in the pending writ petition and, therefore, the outstanding demand remained recoverable.

➡️ The High Court prima facie held that the recovery proceedings were based on an untenable premise, contrary to its earlier stay order, indicating that non-impleadment of the officer issuing the demand could not justify recovery in disregard of the judicial stay.

➡️ Accordingly, the High Court issued notice to the concerned officers, permitted private service, and granted ad-interim relief in terms of prayer clause (b) until the next hearing scheduled for December 15, 2026, reinforcing the importance of compliance with subsisting judicial orders in GST recovery proceedings.

➡️ The Punjab and Haryana High Court, in favour of E&Y LLP, quashed Paragraph 4.6 of Circular No. 197/09/2023-GST dated July 17, 2023, declaring it “bad in law” insofar as it denies refund of interest paid under Rule 96A(1) of the CGST Rules, 2017, where the corresponding tax is subsequently refunded upon realisation of export proceeds.

➡️ The Assessee exported services under a Letter of Undertaking (LUT) but realised export proceeds beyond the prescribed period under Rule 96A, resulting in payment of GST along with interest. Upon subsequent realisation, the Department accepted the supplies as exports and refunded the tax but denied refund of interest, leading to the dispute.

➡️ The High Court held that once the Department accepts subsequent realisation of export proceeds and refunds the tax paid under Rule 96A, retention of the corresponding interest must have an independent statutory basis. Neither Rule 96A nor the CGST Act authorises such retention in these circumstances, whereas Section 54(1) expressly permits refund claims relating to tax and interest paid thereon.

➡️ Reaffirming the Supreme Court’s ruling in Ratan Melting & Wire Industries, the High Court emphasised that departmental circulars may clarify statutory provisions but cannot override, restrict or amend them. Accordingly, Paragraph 4.6 of the Circular, by imposing a prohibition on refund of interest without statutory backing, travels beyond the CGST Act and Rules and is legally unsustainable.

➡️ The High Court rejected the Revenue’s reliance on Rule 96B, clarifying that it governs recovery and restoration of refunds relating to exports of goods where proceeds are not realised, whereas Rule 96A operates independently. The absence of an express provision for refund of interest under Rule 96B cannot justify restricting refunds under Rule 96A, reinforcing that interest cannot be retained merely on the strength of a circular when the underlying tax has been refunded.

➡️ The Kerala High Court held that a Show Cause Notice (SCN) issued on the basis of audit observations that had not attained finality, without complying with Section 65 of the CGST Act, 2017 read with Rule 101(4) of the CGST Rules, 2017, is legally unsustainable.

➡️ The HC clarified that Section 65 requires completion of the GST audit within three months from its commencement, subject to permissible extensions, and communication of audit findings, along with the taxpayer’s rights and obligations, within 30 days of the audit’s conclusion.

➡️ Under Rule 101(4), the proper officer must communicate the discrepancies noticed during the audit, provide the taxpayer an opportunity to submit objections or explanations, and finalise the audit findings only after duly considering the taxpayer’s reply, thereby ensuring procedural fairness.

➡️ In the present case, the Department proceeded to issue an SCN based on draft audit observations without awaiting the taxpayer’s reply, despite a request for additional time. The HC held that treating unfinalised audit observations as conclusive and initiating proceedings prematurely violated the prescribed statutory procedure, rendering the SCN unsustainable.

➡️ The HC rejected the taxpayer’s limitation challenge under Section 65(4), clarifying that the audit commencement date is determined by the later of the two events specified in its Explanation. Accordingly, the audit report was not time-barred, but the SCN was held unsustainable. The HC directed the Department to allow the taxpayer one month from receipt of the judgment to file objections and thereafter finalise the audit proceedings expeditiously after considering the reply.

➡️ The Gujarat High Court quashed the Order-in-Original issued under Section 74 of the CGST Act against Gujarat Co-operative Milk Marketing Federation Ltd. (Amul), setting aside the IGST demand of Rs. 43.43 crore, along with interest and penalty. The Court held that mere non-adoption of cross-charging for internally generated services supplied by the Head Office (HO) to Branch Offices (BOs) does not automatically establish wilful tax evasion, fraud or suppression of facts with intent to evade tax.

➡️ The Court clarified that HO and BOs holding separate GST registrations are treated as distinct persons under Sections 25(4) and 25(5), read with Entry 2 of Schedule I of the CGST Act. Accordingly, services supplied between such establishments may attract GST even without consideration. However, offices operating under the same GST registration are not distinct persons, and cross-charging provisions do not apply to transactions between them.

➡️ Relying on CBIC Circular Nos. 199/11/2023-GST and 210/4/2024-GST, the Court observed that where the recipient BO is eligible for full Input Tax Credit (ITC) and the HO has not issued a tax invoice for internally generated services, the taxable value may be deemed ‘Nil’ under Rule 28 of the CGST Rules. Consequently, Revenue cannot arbitrarily determine taxable value by proportionately allocating common corporate expenses, including employee salaries, advertisement, IT infrastructure, audit and legal expenses, without considering the applicable valuation provisions and clarifications.

➡️ Following the decision in Metal One, the Court held that the adjudicating authority had failed to properly examine the implications of the CBIC Circulars concerning ‘Nil’ valuation where no tax invoices were issued by the HO. Merely referring to the Circulars without examining their applicability, while rejecting the Assessee’s contentions on ITC eligibility, reflected non-application of mind, rendering the impugned demand legally unsustainable.

➡️ Relying on the Supreme Court’s decision in Tata Steel Ltd., the Court held that invoking the extended limitation and penal provisions under Section 74 requires clear evidence of fraud, wilful misstatement or suppression of facts with intent to evade tax. Since the disputed expenditure was duly disclosed in the Assessee’s books, ledgers and financial statements, and GST paid on cross-charged services would ordinarily be available as ITC to eligible recipient branches, the transaction was revenue-neutral. In the absence of evidence establishing deliberate tax evasion, invocation of Section 74 was unjustified.

➡️ The GST Appellate Tribunal (GSTAT), Delhi, dismissed Revenue’s appeal and upheld the First Appellate Authority’s order, holding that retrospective cancellation of a supplier’s GST registration does not, by itself, render inadmissible the Input Tax Credit (ITC) availed by a recipient on invoices issued when the supplier was registered.

➡️ Interpreting Sections 16(2)(a) and 29(2) of the CGST Act, the Tribunal clarified that retrospective cancellation of registration does not automatically invalidate invoices issued during the period when the supplier was registered or extinguish ITC already availed by recipients. Section 29(2) does not create an automatic disqualification of ITC merely because the supplier’s registration is subsequently cancelled retrospectively.

➡️ Referring to Paragraph 7 of Annexure B to Instruction No. 02/2022-GST, the Tribunal observed that the Instruction addresses ITC on invoices issued after the effective date of cancellation. However, administrative instructions cannot introduce additional restrictions beyond Section 16 of the CGST Act and are not binding on appellate authorities deciding statutory appeals.

➡️ The Tribunal noted that the disputed invoices were reflected in FORM GSTR-2A, confirming their declaration by the supplier, while portal verification showed that the supplier had filed FORM GSTR-3B returns. Neither the SCN nor the adjudication order alleged non-payment of tax on the disputed invoices; they merely stated that payment remained unverified. Revenue’s reliance on Ecom Gill Coffee Trading was therefore rejected, as the genuineness of purchases was never disputed, and the sole ground for denying ITC was retrospective cancellation.

➡️ Emphasizing that a recipient cannot be required to prove allegations never raised against it, the Tribunal held that retrospective cancellation may justify departmental investigation but cannot independently sustain ITC denial. If the Department possesses evidence of non-receipt of goods or services, non-payment of tax to the Government, or recipient involvement in fraud, it must issue a specific notice stating such allegations and provide the recipient an opportunity to respond before proceeding against the ITC claim.

➡️ The GST Appellate Tribunal (GSTAT), Visakhapatnam, set aside the First Appellate Authority’s (FAA) order rejecting the Assessee’s refund claim for excess interest paid on delayed GST liability discharged partly through Input Tax Credit (ITC), holding that the retrospective amendment to Section 50(1) of the CGST Act and the statutory exclusion of the specified period under Section 54 must be considered while determining refund eligibility.

➡️ The Tribunal held that the FAA violated the principles of natural justice by rejecting the refund claim on a fresh ground of limitation without giving the Assessee an opportunity to respond, particularly when the original authority had rejected the claim solely on the ground that the amendment to Section 50(1) had not been notified at the relevant time. Any new ground relied upon by an appellate authority must be communicated to the affected party with a reasonable opportunity of hearing.

➡️ The Tribunal observed that Notification No. 13/2022-Central Tax excludes the period from March 1, 2020, to February 28, 2022, while computing the limitation period for filing refund applications under Section 54. Accordingly, rejection of the refund claim as time-barred without considering this statutory exclusion was unsustainable, and the limitation period must be freshly computed.

➡️ Referring to the administrative instructions dated September 18, 2020, and Section 112 of the Finance Act, 2021, the Tribunal held that the amendment to Section 50(1) operates retrospectively from July 1, 2017, restricting interest on delayed GST payments to the portion of tax discharged through the electronic cash ledger. Consequently, interest paid on the portion of tax discharged through ITC cannot be retained merely because the Assessee had voluntarily paid it before the retrospective amendment took effect.

➡️ The Tribunal directed the authorities to reconsider the refund claim in accordance with the retrospectively amended Section 50(1), Section 54, and Notification No. 13/2022-Central Tax, recompute the limitation period after allowing the prescribed exclusion, and verify and quantify the eligible refund. The ruling reinforces that excess interest collected contrary to the retrospectively applicable law is refundable, subject to statutory conditions and proper verification.

➡️ The Telangana High Court dismissed the Assessee’s writ petition challenging the jurisdiction of GST authorities to impose penalties under Sections 122(1)(ii) and 125 of the CGST Act, holding that the subsequent issuance of CBIC Circular No. 254/11/2025-GST does not invalidate penalty proceedings adjudicated by the Joint Commissioner.

➡️ The Court observed that CBIC Circular No. 254/11/2025-GST designates the Joint Commissioner as the proper officer for issuance of show-cause notices and adjudication of cases involving monetary amounts exceeding Rs. 2 crores. Since the disputed amount exceeded Rs. 2 crores and the Order-in-Original was passed by the Joint Commissioner, the Court upheld the competence of the adjudicating authority.

➡️ Invoking Section 160 of the CGST Act, the Court held that proceedings cannot be invalidated merely on technical or procedural grounds relating to the assignment of functions, particularly when the officer who passed the Order-in-Original and the officer subsequently designated as the proper officer are one and the same, namely, the Joint Commissioner.

➡️ The dispute arose from a DGGI investigation alleging issuance of invoices without actual supply of goods or services to facilitate fraudulent availment and passing on of ITC. The Assessee challenged the penalties under Sections 122(1)(ii) and 125, raising objections regarding jurisdiction, improper service of notice, violation of natural justice, reliance on allegedly coerced statements, double penalisation under Sections 122(1)(ii) and 122(1A), and absence of prior or simultaneous determination of tax liability under Section 74.

➡️ While rejecting the jurisdictional challenge, the High Court expressly refrained from examining the merits of the penalty proceedings and kept all other objections open for adjudication by the appellate authority. Accordingly, the Assessee was relegated to the statutory appellate remedy, reaffirming that disputes concerning procedural fairness, evidentiary reliability, double penalisation and substantive tax liability may be examined in appeal.