LATEST GST CASE LAWS: 04.02.2026
🔥📛 Madras HC to examine adjudication based on audit sans Sec. 65(7) order; Stays proceedings
➡️ The Madras High Court found a prima facie case of procedural deviation because the Revenue failed to issue an audit conclusion order under Section 65(7), despite proceeding with further action.
➡️ The assessee argued that a full audit for FY 2017-18 and 2018-19 had already concluded with a report under Section 65(6), yet subsequent audit notices covering overlapping periods (2018-19 to 2022-23) were issued without ever passing a mandatory order under Section 65(7).
➡️ The assessee contended that issuing a consolidated Section 74 SCN for multiple years—despite no completion of the statutory audit process—was improper. It also claimed that key submissions were ignored, including exemption on import/export ocean freight, RCM tax already paid, and incorrect levy of 18% instead of 5%.
➡️ Revenue argued that the initial audit did not cover issues addressed in later notices, and that the absence of a Section 65(7) order does not restrict the department’s power to initiate adjudication under Section 74.
➡️ Based on the prima facie procedural lapse in the audit mechanism, the Court stayed the adjudication order and directed the Revenue to file a detailed reply, listing the matter for further hearing.
✔️ Madras HC – M/s. Expenditors International (India) Private Limited v. Union of India & Ors.
🔥📛 HC: Transfer of R&D unit as going concern not a taxable supply; Sets aside AAAR-ruling
➡️ The High Court, relying on pre-GST jurisprudence including Coromandel Fertilisers and Paradise Food Court, held that only sales made in the course or furtherance of business are taxable under GST—not the sale of the business itself. The transfer of the Vizianagaram R&D unit as a going concern therefore cannot be treated as a supply of goods or services.
➡️ The AAR had treated the transaction as an exempt supply of services (going concern transfer under Notification 12/2017-CTR) and allowed ITC transfer. The AAAR reversed this, but the High Court set aside the AAAR ruling, affirming that the transaction is a non-taxable transfer of business.
➡️ The Court rejected AAAR’s restrictive stance that “change in constitution” applies only to internal restructuring. It held that ITC is an asset of the business, and Section 18(3) explicitly enables its transfer in cases of sale, merger, demerger, lease, or amalgamation. The statute thus provides a legal basis for transferring unutilised ITC to the transferee unit.
➡️ Since the Andhra Pradesh and Karnataka units had separate GST registrations, they were distinct persons by legal fiction. The Revenue cannot claim a taxable inter-unit transfer based on this fiction, and at the same time argue that both units are “one person” to deny ITC transfer. The Court held that Revenue must accept the fiction consistently.
➡️ While the Court found no conceptual difficulty with transferring CGST/IGST credit, it noted that cross-State transfer of SGST (APGST → KGST) requires examination by the respective State tax authorities. The assessee was given liberty to approach APGST and KGST authorities for appropriate relief.
✔️ AP HC – Shilpa Medicare Limited vs Union of India & Ors [W.P. No. 15955 of 2021]
🔥📛 HC: Recovery u/s 75(12) without adjudicatory order permissible only on admitted return mismatches
➡️ The Andhra Pradesh High Court held that recovery under Section 75(12) is permissible only when tax liability is clearly self-assessed and disclosed in GSTR-3B, but remains unpaid. It cannot be invoked for alleged wrongful ITC utilisation.
➡️ When the department alleges wrong availment or utilisation of ITC (such as offsetting RCM liability with ITC), it must proceed under Section 73 or 74. Direct recovery under Section 75(12) is impermissible.
➡️ Before initiating action under Section 79 (bank attachment/recovery), the department must first issue a speaking order quantifying tax, interest, penalty, or late fee as per Sections 56, 73, or 74.
➡️ The Court rejected the department’s defence that admitted liability allows recovery without adjudication. Liability under dispute (like ITC utilisation for RCM) cannot be treated as admitted, even if disclosed in returns.
➡️ The HC directed the refund of interest recovered through bank attachment, while granting the department liberty to initiate proper proceedings under Section 73/74 for interest determination.
✔️ AP HC – Sona Enterprises v. Assistant Commissioner of Central Tax & Anr. [WRIT PETITION NO: 15151/2023]
🔥📛 HC: Refund rejection order non-est; Directs refund of unutilised Compensation Cess with statutory interest
➡️ The assessee’s refund application for unutilised Compensation Cess (FY 2017–18) was electronically shown as “sanctioned,” but no payment advice or actual refund was ever issued, creating an unresolved liability on the Department’s part.
➡️ The State Tax authorities later asserted that the refund had been rejected via an order dated 18.10.2019, but the order was not traceable, never served, and did not exist in official records, undermining the Department’s claim.
➡️ The Court held the alleged rejection non-est in law, as:
—> No show-cause notice (Form RFD-08) was issued,
—> No personal hearing was granted as required under Rule 92(3) of the CGST Rules, and
—> No valid speaking order was passed.
➡️ The Court rejected the Department’s suggestion to submit a fresh refund application, noting it would wrongly deprive the assessee of statutory interest under Section 56. Relying on Union of India v. Tata Chemicals, the Court reaffirmed that refund due is a debt owed by the State, and therefore interest accrues automatically on delays.
➡️ Authorities were ordered to process the refund based on the original application dated 04.03.2019 and grant 6% interest per annum from the expiry of 60 days until payment.
✔️ Jharkhand HC – Steel Authority of India Limited v. State of Jharkhand & Ors. [W.P. (T) No. 3983 of 2022]
🔥📛 SC: Refuses interference in refund of unutilised Compensation Cess to SAIL; Interest issue left open
➡️ The Supreme Court rejected the State of Jharkhand’s SLP, noting an unexplained delay of 676 days, which itself was sufficient ground for dismissal.
➡️ Even on substantive grounds, the SC found no justification to interfere with the Jharkhand High Court’s judgment directing refund of unutilised Compensation Cess to the assessee, Steel Authority of India Limited (Bokaro Steel Plant).
➡️ The High Court had highlighted inconsistencies—departmental systems showed the refund as “sanctioned”, while the Revenue later claimed it had been “rejected” via an order that was not traceable in official records. SC endorsed that no perversity existed in these findings.
➡️ The HC-directed refund of approximately ₹2.90 crore (FY 2017–18) along with statutory interest remains undisturbed due to the SC’s dismissal.
➡️ While denying relief to the State, the Supreme Court kept open the larger legal question regarding interest liability on delayed refunds of Compensation Cess, leaving room for future adjudication in similar matters.
✔️ SC – State of Jharkhand & Ors. v. Steel Authority of India Limited [SPECIAL LEAVE PETITION (CIVIL) Diary No. 38758/2025]
