LATEST GST CASE LAWS: 21.09.2026
🔥📛 HC: Payments during investigation not voluntary absent ascertainment, acknowledgment; Directs refund with interest
➡️ Karnataka High Court (Dharwad Bench) held that amounts paid through Form GST DRC-03 during investigation cannot be treated as voluntary payments under Section 74(5) merely because they were deposited after inspection; there must be a prior ascertainment or quantification of tax liability forming the basis of such payment.
➡️ For a valid voluntary payment under Section 74(5), the taxpayer must discharge the applicable tax along with interest and penalty. Since the DRC-03 forms showed payment only towards tax, with interest and penalty reflected as nil, the Court found that the statutory requirements for treating the deposits as voluntary payments were not satisfied.
➡️ Rule 142(2) requires the proper officer to issue an acknowledgment in Form GST DRC-04 when payment is made under Section 73(5) or 74(5). The admitted failure of the department to issue DRC-04 was an important factor showing that the deposits could not legitimately be regarded as payments made pursuant to statutory self-ascertainment.
➡️ Relying on Radhika Agarwal, Bundl Technologies and Sri J. Ramesh Chand, the Court reiterated that tax authorities cannot effect recovery during search, inspection or investigation. Any payment at that stage must be genuinely voluntary, based on an ascertained liability, and the taxpayer should be informed of the prescribed DRC-03 mechanism without coercion.
➡️ Subsequent adjudication under Section 74(9), initiation of recovery under Section 79, or the passage of time between inspection and payment cannot retrospectively validate an earlier deposit lacking voluntary ascertainment. Accordingly, the Court directed refund of approximately ₹53.97 lakh with 6% interest, reinforcing that procedural and substantive safeguards must be observed before investigation-stage deposits can be retained as tax payments.
✔️ Karnataka HC (Dharwad Bench) – Hukkeri Taluka Samagra vs State of Karnataka and Ors [WRIT PETITION NO. 108177 OF 2025 (T-RES)]
🔥📛 HC: Sole-use test cannot override ‘triple test’ for classifying goods as automobile parts; Remands matter
➡️ The Madras High Court set aside the appellate orders that classified air and oil filters as automobile parts under Heading 8708, holding that the appellate authority had failed to properly examine the assessee’s principal classification arguments and therefore suffered from a defect in the decision-making process.
➡️ The assessee classified oil filters and intake air filters under Headings 8421 23 00 and 8421 31 00, relying on Note 2(e) to Section XVII, which excludes specified machinery and apparatus of Headings 8401 to 8479 from being treated as “parts” of vehicles, as well as the HSN Explanatory Notes specifically covering such filters under Heading 8421.
➡️ The Court emphasized that classification as a motor-vehicle “part” under Chapter 87 requires examination of the cumulative “triple test” contained in the HSN Explanatory Notes to Section XVII/Chapter 87; merely showing that the goods are principally or exclusively used in automobiles is not, by itself, sufficient to justify classification under Heading 8708.
➡️ The appellate authority relied substantially on the “sole or principal use” approach and judgments such as Westinghouse Saxby Farmer and Hanon, but failed to consider the assessee’s reliance on Supreme Court precedent including Uni Products Ltd. and CBIC Instruction No. 1/2022-Cus., which requires classification of parts to be determined by applying the collective principles emerging from relevant Supreme Court decisions.
➡️ Without deciding the correct tariff classification on merits, the High Court remanded the matter for fresh consideration, observing that classification disputes generally involve mixed questions of fact and law; however, judicial review is justified where material submissions, binding principles, relevant HSN Notes or departmental instructions have not been considered by the appellate authority.
✔️ Madras HC – Inzi Controls India Limited vs The Joint Commissioner (ST) Appeals & Ors [WP Nos. 31862, 31868, 31874, 31974, 31976 and 31987 of 2026]
🔥📛 HC: GST inapplicable on leasehold rights in industrial plot allotted by GIDC; Directs refund
➡️ The Gujarat High Court reiterated that GST is not leviable on the assignment or transfer of leasehold rights in an industrial plot allotted by GIDC, as such rights constitute benefits arising from immovable property and the transaction does not qualify as a taxable “supply” under Section 7 read with Schedules II and III of the CGST Act.
➡️ Where GST was wrongly charged by the supplier on transfer of leasehold rights, the tax itself lacked legal basis; consequently, any ITC reversal, interest or other amount recovered from the recipient solely on the assumption that GST was payable cannot be sustained or retained by the Revenue.
➡️ The Court rejected the Revenue’s reliance on Section 17(5)(d) relating to blocked credit, holding that the provision presupposes a taxable inward supply on which GST is lawfully leviable and paid. If the underlying transaction itself is outside the scope of GST, the question of treating the related ITC as blocked credit does not arise.
➡️ The fact that the assessee had initially availed ITC under a bona fide belief and later voluntarily reversed it with interest through DRC-03 did not validate an otherwise non-taxable transaction; therefore, proceedings under Section 74 for recovery of ITC, interest and penalty based on such transaction were legally unsustainable.
➡️ The ruling follows the consistent judicial position in Gujarat Chamber of Commerce, Jubilee Engineers, Aerocom Cushions, Life Sciences Chemical, Alfa Tools, Hindustan Equipment Craft and Panacea Biotec; notably, the Supreme Court’s dismissal of Revenue’s SLPs in similar matters strengthens the view that assignment of industrial leasehold rights is outside the GST levy.
✔️ Gujarat HC – Kor Chems Through Partner Sanjay Rameshchandra Soni Vs Assistant Commissioner, Cgst And Central Excise & Anr [R/SPECIAL CIVIL APPLICATION NO. 6623 of 2026]
🔥📛 GSTAT: Value of goods sent for job work not includable in consignment value declared in e-way bill
➡️ GSTAT Thiruvananthapuram held that when goods are returned by a job worker to the principal after completion of job work, the taxable supply is only the job-work service. Accordingly, the consignment value for the e-way bill should comprise the job-work charges and applicable tax/duties, and the value of the principal’s original goods need not be included.
➡️ The Tribunal rejected the Revenue’s contention that the e-way bill must reflect the value of the original material along with the job-work charges. Since ownership of the goods continues with the principal and the job worker merely supplies services, the appellant was required to declare only the value attributable to the taxable job-work supply.
➡️ On facts, the Tribunal found that the goods were accompanied by a valid tax-paid invoice and the Department’s own records contradicted the allegation that no e-way bill accompanied the consignment. It further held that where goods are covered by a valid tax invoice, a separate delivery challan is not required, and documents whose genuineness is not questioned in the SCN must ordinarily be treated as bona fide.
➡️ The Tribunal ruled that the Revenue cannot introduce or improve upon grounds at the appellate stage which were neither stated in the SCN nor relied upon in the original order. The subsequent argument that the e-way bill misrepresented the physical contents of the consignment was therefore rejected, and the orders were also found unsustainable for violation of natural justice, reliance on incorrect facts, and consideration of matters beyond the SCN.
➡️ Concluding that issuance of an e-way bill itself was not mandatory in the circumstances and that the appellant had correctly declared the value of the taxable job-work supply, GSTAT held that proceedings based on absence or defect in the e-way bill were void ab initio. Consequently, no penalty under Section 129 was leviable, and the appeal was allowed with consequential relief.
✔️ GSTAT Thiruvananthapuram – Metalloids India, Pathanamthitta vs The Commissioner of State Tax Keralam State, Thiruvananthapuram [Appeal No: APL/27/TVP/2026]
🔥📛 GSTAT: Supreme Court’s limitation extension applies to departmental proceedings; Missing tax-invoices/EWB indicate tax evasion intent
➡️ GSTAT Bengaluru upheld the Revisional Authority’s order restoring tax and penalty under Section 129, dismissing the assessee’s appeal both on limitation and merits where goods were unloaded at a different destination without the required tax invoice and e-way bill.
➡️ On limitation under Section 108, the Tribunal held that the period from March 15, 2020 to February 28, 2022, excluded by the Supreme Court’s suo motu orders on extension of limitation, must also be excluded while computing the three-year period available for revision proceedings; accordingly, the Revisional Authority’s order was held to be within time.
➡️ The Tribunal rejected the contention that the Supreme Court’s COVID-related limitation extension applied only to judicial proceedings and not to statutory or departmental authorities. Relying on the Supreme Court’s decision in G.R. Infra Projects Limited, it held that the benefit of the excluded period extends to departmental revision proceedings as well.
➡️ On merits, the goods were originally covered by invoices and an e-way bill issued by the Kerala supplier to the assessee at Belagavi, but were actually unloaded at REC Flow Technology LLP without fresh documents covering that movement. The assessee generated the required invoice and e-way bill only after detention and failed to establish any technical glitch preventing earlier generation.
➡️ GSTAT held that Sections 68 and 129 read with Rule 138 require goods in movement to be accompanied by valid statutory documents relevant to the actual transportation. Generation of documents after interception was treated as an afterthought, and the absence of documents at the time of interception was viewed as a wilful contravention indicating intent to evade tax; therefore, the penalty under Section 129(1) was held legal and valid.
✔️ GSTAT Bengaluru – Heramb Enterprises vs C Pushpalatha, Additional Commissioner of Commercial Taxes [APL/142/BUR/2026]
🔥📛 GSTAT: Works contract services to statutory authority cannot avail concessional GST rate applicable to local authority
➡️ GSTAT Thiruvananthapuram held that the Kerala Water Authority (KWA), though constituted under the Kerala Water Supply and Sewerage Act, 1986, is a statutory/governmental authority and not a “local authority” within the exhaustive definition under Section 2(69) of the CGST Act.
➡️ The Tribunal clarified that only bodies specifically covered by Section 2(69) can qualify as “local authorities”; merely being described as a “local body” under a State law does not confer such status for GST purposes. A statutory corporation or authority created by Parliament or a State Legislature is a separate juridical entity and cannot automatically be treated as the Central/State Government or a local authority.
➡️ Consequently, works contract services supplied to KWA were held ineligible for the concessional GST rate applicable to specified services supplied to a local authority under Sl. No. 3(iii) of Notification No. 11/2017-CT (Rate). Such services became taxable at 18% GST under the amended notification with effect from January 1, 2022.
➡️ The Tribunal also relied upon Circular No. 245/02/2025-GST, which clarifies that statutory authorities, including development authorities constituted under specific statutes, do not qualify as “local authorities” under Section 2(69), reinforcing the distinction between statutory authorities and local authorities for GST rate purposes.
➡️ On interest, GSTAT held that where differential tax was discharged partly through the Electronic Credit Ledger and partly through the Electronic Cash Ledger, interest was payable only on the portion paid through cash. The interest demand attributable to tax discharged through available ITC in the Electronic Credit Ledger was therefore set aside.
✔️ GSTAT Thiruvananthapuram – Shree Contractor vs The Commissioner of CGST & CE Thiruvananthapuram [APPEAL NO: APL/12/TVP/2026]
🔥📛 GSTAT: Section 129 penalty unsustainable without specific contravention alleged in SCN and established by evidence
➡️ GSTAT Thiruvananthapuram allowed the assessee’s appeal and set aside the First Appellate Authority’s order confirming penalty under Section 129, holding that a penalty cannot be sustained unless the alleged contravention of the GST Act or Rules is specifically stated in the show cause notice and proved by evidence.
➡️ The Tribunal held that a show cause notice must clearly disclose the precise statutory violation alleged against the assessee; a vague allegation, without identifying the relevant provision of the Act or Rules, does not provide a valid foundation for penalty proceedings under Section 129.
➡️ Relying on the Supreme Court’s decision in Brindavan Beverages, the Tribunal reiterated that where the show cause notice itself lacks the essential factual and legal foundation on which the department seeks to build its case, the subsequent adjudication cannot cure that fundamental defect.
➡️ The allegation that goods were unloaded at a place different from the destination mentioned in the e-way bill was found to be vague, unsupported by adequate particulars, and unconnected to any specifically identified statutory provision; consequently, the proceedings were held to be vitiated for breach of natural justice.
➡️ The Tribunal further held that statements or other incriminating material proposed to be relied upon against an assessee must be supplied to the assessee; failure to provide such statements constitutes a serious violation of natural justice and independently renders the penalty proceedings liable to be set aside.
✔️ GSTAT Thiruvananthapuram – Excel Steel vs The Commissioner of State Tax Keralam State, Thiruvananthapuram [Appeal No. APL/25/TVP/2026]
🔥📛 HC: Advocate-Client privilege not absolute bar against GST investigation into Advocate’s conduct; Upholds CPU seizure
➡️ The Delhi High Court held that advocate-client privilege is not an absolute shield against investigation into an advocate’s own conduct. Where the GST Department has prima facie material suggesting that the advocate’s role went beyond providing legal advice and may have extended to participation in the transactions under investigation, lawful proceedings under Section 67 of the CGST Act can continue.
➡️ The Court clarified that the privilege under Section 132 of the Bharatiya Sakshya Adhiniyam protects confidential communications made in the advocate-client relationship and is essentially meant for the client’s protection. Merely because documents, electronic data or other material are found in an advocate’s office does not automatically make them privileged; the nature, purpose and circumstances of the communication determine whether privilege applies.
➡️ Accordingly, search of the advocate’s office and seizure of material, including the CPU, could not be declared illegal merely because the premises belonged to a law firm. Material relating to the advocate’s independent transactions, activities or alleged involvement remains open to investigation, while the confidentiality of communications and documents relating to other clients unconnected with the inquiry must be safeguarded.
➡️ The Court further held that absence of a show-cause notice to the advocate’s client at the investigation stage does not invalidate the search or summons. Alleged non-compliance with procedures contained in the CBI Manual concerning seizure of digital evidence, or absence of a prior personal hearing before seizure of the CPU, cannot override or nullify the statutory powers available to GST authorities under Section 67 of the CGST Act.
➡️ The High Court declined to interfere with the investigation, observing that the material relied upon by Revenue was sufficient only to justify examining whether the advocate had a role beyond professional representation and did not establish final liability or wrongdoing. Earlier, the Delhi High Court had protected advocates from harassment in the absence of material showing personal involvement, while the Gujarat High Court has also upheld search and seizure against a practising lawyer where legally justified.
✔️ Delhi HC – Puneet Batra vs Union of India & Ors. [W.P.(C) 11021/2025]
