LATEST GST CASE LAWS: 26.10.2026
🔥📛 SC dismisses Revenue’s appeal against exemption from textile cess for job workers of power-loom manufacturers
➡️ The Supreme Court dismissed the Revenue’s appeal against the Allahabad High Court judgment, holding that bleaching, dyeing and processing of 100% man-made fabrics supplied by power-loom industries does not attract cess under the Textiles Committee (Cess) Act, 1963.
➡️ The Assessee challenged a cess demand of ₹2,68,293 for AYs 1997-98 to 2000-01, arguing that its job-work activities did not constitute ‘manufacture’ liable to cess under the 1963 Act.
➡️ The High Court clarified that the definition of ‘manufacture’ under the Central Excise Act cannot automatically be imported into the 1963 Act, as both statutes serve distinct legislative objectives.
➡️ The High Court observed that while the Central Excise Act seeks to levy duty on manufactured goods, the 1963 Act aims to improve textile standards, particularly for exports. Further, Section 5A exempts textiles manufactured by handloom and power-loom industries from cess.
➡️ The High Court held that job workers processing fabrics supplied by exempt handloom and power-loom manufacturers act as their ‘extended hand’ and are consequently not liable to cess. The ruling reinforces the principle that taxability and exemptions must be interpreted in accordance with the specific statutory framework, a principle relevant to GST law.
✔️ SC – Assessing Officer, Textiles Committee vs Premium Suiting Pvt. Ltd. & Anr.
🔥📛 HC: Construction cess applies to actual construction cost, not contract value; Excludes profit and outward taxes
➡️ The Punjab and Haryana High Court, in Larsen & Toubro Ltd., set aside orders levying construction cess on the entire contract value, holding that cess is payable strictly on the actual cost of construction, not the total contract value.
➡️ The Court clarified that “cost of construction” and “value of construction” are distinct concepts. Contractor profit margins may form part of the contract value but cannot be included in the cost of construction for calculating cess.
➡️ The Court held that service tax and GST collected on outward supplies and paid to the Government cannot form part of the cost of construction, as such taxes are recoverable from the service recipient and do not constitute actual construction expenditure.
➡️ Interpreting Section 3 of the Cess Act, 1996, read with Rule 3 of the Cess Rules, 1998, the Court held that cess applies to construction-related expenditure, excluding the cost of land and compensation paid or payable to workers or their dependants under the Workmen’s Compensation Act, 1923.
➡️ The judgment provides significant relief to construction contractors and infrastructure companies, establishing that construction cess cannot be mechanically levied on the gross contract value. Authorities must exclude contractor profits, recoverable outward taxes and other legally excluded components while determining cess liability.
✔️ P&H HC – LARSEN AND TOUBRO LIMITED v. STATE OF PUNJAB AND OTHERS [CWP-25490-2024 (O&M)]
🔥📛 HC: Refuses to read down Section 155; Leaves impact of missing seized records for appeal authority
➡️ Burden of Proving ITC Eligibility: The Delhi High Court refused to read down Section 155 of the CGST Act, holding that the burden of proving ITC eligibility remains on the person claiming such credit, even where relevant records seized by the Department are unavailable.
➡️ Non-Availability of Seized Records: The Court clarified that the statutory burden of proof and the Department’s failure to return seized documents are distinct issues. The difficulty faced by an assessee due to missing records can be examined independently without diluting Section 155.
➡️ Appellate Authority to Examine Prejudice: The appellate authority may examine the relevance of missing records, prejudice caused to the assessee, and adequacy of reconstructed electronic data. The Department’s inability to furnish seized documents must be considered while assessing whether the assessee has discharged the statutory burden.
➡️ Disputed ITC and Penalties: The case involved alleged fraudulent ITC of ₹12.8 crore based on invoices from non-existent suppliers, attracting demand, interest and penalties under Sections 74, 122(1A) and 123 of the CGST Act. The Court directed that the penalty under Section 122(1A) be examined in light of the Parag Garg judgment.
➡️ Statutory Appeal and Procedural Relief: The High Court declined writ interference and relegated the assessee to the appellate remedy under Section 107. It directed rectification of the duplicate demand in Forms GST DRC-07 within 15 days and permitted the assessee to seek exclusion of time under Section 14 of the Limitation Act, 1963.
✔️ Delhi HC – Blue Star International Pvt. Ltd. & Ors. vs Union of India & Ors. [W.P.(C) 3867/2025]
🔥📛 HC: Absent perversity in Single Judge order, declines interference in intra-court appeal against GST cancellation
➡️ The Karnataka High Court (Dharwad Bench) upheld the Single Judge’s refusal to entertain a challenge against GST registration cancellation, citing the availability of a statutory appellate remedy under Section 107 of the CGST Act.
➡️ The dispute arose when the assessee’s wife, who owned the land on which a hotel was constructed, informed GST authorities that she had not consented to obtaining GST registration in her husband’s name, leading to its cancellation.
➡️ The assessee alleged mala fide action by GST authorities, highlighting that his registration had been cancelled twice, and argued that the statutory appellate remedy was ineffective in the peculiar circumstances of the case.
➡️ Relying on the Supreme Court’s ruling in Bihar Industrial Area Development Authority, the Division Bench reiterated that interference in an intra-court appeal is unwarranted unless the Single Judge’s order suffers from perversity.
➡️ The High Court held that the absence of perversity in the Single Judge’s order and the availability of an appeal under Section 107 justified declining interference, reinforcing that GST registration cancellation disputes should ordinarily be pursued through the statutory appellate mechanism.
✔️ Karnataka HC (Dharwad Bench) – Sri. Mahadevappa vs Principal Chief Commissioner of Central Tax [WRIT APPEAL NO. 100413 OF 2026 (T-RES)]
🔥📛 GSTAT: Excess credit available in IGST account can be set off against shortfall in CGST /SGST credit
➡️ The GSTAT, Ernakulam Bench, set aside the GST demand arising from a mismatch between GSTR-2A and GSTR-3B, holding that surplus IGST Input Tax Credit (ITC) can be utilised to offset shortfalls in CGST and SGST liabilities, subject to prescribed utilisation rules.
➡️ Interpreting Section 49 of the CGST Act read with Rule 88A of the CGST Rules, the Tribunal held that taxpayers have a vested right to utilise surplus IGST credit towards CGST/SGST liabilities after discharging their IGST liability, rejecting Revenue’s contrary contention.
➡️ The Tribunal observed that against the alleged excess ITC of ₹13,97,613, the taxpayer had surplus IGST credit of ₹48,22,559.51. Even after adjusting CGST and SGST shortfalls of ₹1,37,242.10 and ₹1,36,452.71, respectively, an overall ITC balance of ₹45,48,864.70 remained, establishing that no actual tax shortfall existed.
➡️ Relying on the Kerala High Court’s ruling in Rejimon Padickapparambil Alex, the Tribunal held that a mere mismatch between GSTR-2A and GSTR-3B, without establishing actual short payment of tax, cannot justify a demand under Section 73 of the CGST Act. Since the SCN disclosed no independent grounds beyond the alleged ITC mismatch, the demand was unsustainable.
➡️ The Tribunal further held that passing the demand order without granting a personal hearing violated the mandatory procedural requirements and principles of natural justice. Accordingly, the demand was set aside, reinforcing taxpayers’ rights regarding lawful ITC utilisation, proper reconciliation and fair adjudication under GST.
✔️ GSTAT Ernakulam – Sansco Technologies (Kerala) Private Limited vs Commissioner of State Tax, State GST Department, Thiruvananthapuram [APPEAL NO: APL/26/ERN/2026]
🔥📛 GSTAT: GST refund cannot be rejected wholly or partly without RFD-08 notice and personal hearing
➡️ GSTAT, Thane Bench, held that under Rule 92(3) of the CGST Rules, 2017, a refund claim cannot be rejected, wholly or partially, without issuing a Show Cause Notice in FORM GST RFD-08 and providing an opportunity of personal hearing to the taxpayer.
➡️ Direct rejection of refund without notice is illegal, as issuance of FORM GST RFD-06 without prior notice in FORM GST RFD-08 deprives the taxpayer of the opportunity to explain the alleged ITC mismatch through a detailed reply in FORM GST RFD-09.
➡️ Hearing at the appellate stage cannot cure procedural defects at the adjudication stage. The Tribunal emphasized that the right to a pre-decisional notice and hearing is a fundamental statutory safeguard based on the principle of audi alteram partem (hear the other side).
➡️ Non-compliance with mandatory statutory procedures renders the order void ab initio. Relying on the Supreme Court’s principles in Kranti Associates Pvt. Ltd., GSTAT reiterated that quasi-judicial authorities must follow due process, act fairly and pass reasoned orders.
➡️ GSTAT remanded a batch of 39 refund appeals relating to tax periods from June 2019 to September 2022 for fresh adjudication, holding that the First Appellate Authority should have remanded the matters rather than deciding them on merits despite procedural violations. The Tribunal left the substantive ITC mismatch and COVID-19 relief issues open for reconsideration.
✔️ GSTAT Thane – Vikram Inderjit Kapur vs Rajesh Chandrakant Vishe, Deputy Commissioner of State Tax [APL/33/THN/2026]
🔥📛 HC: Construction cess applies to actual construction cost, not contract value; Excludes profit and outward taxes
➡️ The Punjab & Haryana High Court ruled in favour of Larsen & Toubro Ltd., setting aside orders levying construction cess on the entire contract value, including contractor’s profit margins and outward taxes.
➡️ The High Court held that construction cess is leviable strictly on the actual “cost of construction” and not on the total contract value, under Section 3 of the BOCW Welfare Cess Act, 1996, read with Rule 3 of the Cess Rules, 1998.
➡️ The Court clarified that “cost of construction” is distinct from “value of construction”. While contractor’s profit may form part of the contract value, it does not constitute actual construction expenditure and must be excluded from the cess base.
➡️ The High Court held that Service Tax and GST collected on outward supplies and paid to the Government cannot be included in the cost of construction, as these taxes are recoverable from the service recipient and do not represent construction expenditure.
➡️ The Court further clarified that the cost of land and compensation paid or payable under the Workmen’s Compensation Act, 1923, are excluded from the cess base. The ruling provides significant relief to contractors and EPC companies by restricting cess liability to eligible construction costs rather than the gross contract value.
✔️ P&H HC – Larsen and Toubro Limited vs State of Punjab and Others [CWP-25490-2024 (O&M)]
🔥📛 HC: Actual institution of audit determines limitation amid dispute over timely document submission
➡️ The Gujarat High Court dismissed the Assessee’s writ petition challenging eight Show Cause Notices (SCNs) issued under Section 74 of the CGST Act for FYs 2017-18 to 2019-20, alleging that the audit was conducted in violation of Section 65(4) and was time-barred.
➡️ The HC clarified that, under the Explanation to Section 65(4), the commencement of audit is determined by the later of two events: (i) the date on which the registered person makes available the records and documents called for by the tax authorities, or (ii) the date of actual institution of audit at the place of business. Mere submission of documents does not automatically establish the commencement date.
➡️ The HC held that where a factual dispute exists regarding the completeness of documents furnished by the Assessee, the date of actual institution of audit at the place of business can be considered for determining the commencement of audit. Accordingly, the Revenue cannot be compelled to treat the initial submission of documents as the commencement date.
➡️ The HC observed that tax authorities must communicate any missing or outstanding documents to the registered person within a reasonable time to avoid unnecessary delays. Although the Revenue issued three notices in FORM GST ADT-01 without identifying the outstanding documents, such procedural lapses did not invalidate the audit, given the alternative statutory basis for determining its commencement.
➡️ The HC upheld the validity of the audit report dated August 2, 2024, holding that the audit commenced on June 19, 2024, at the Assessee’s place of business and was completed within the prescribed three-month period under Section 65(4). Declining to interfere with the SCNs at this stage, the HC directed the Assessee to submit its replies and avail the statutory appellate remedy under Section 107 of the CGST Act, if required.
✔️ Gujarat HC – Hubergroup India Private Limited Versus Union Of India & Ors. [R/SPECIAL CIVIL APPLICATION NO. 14772 of 2024]
