LATEST GST CASE LAWS: 08.01.2026
🔥📛 SC: Mushroom Growing Apparatus cannot be classified as ‘Agricultural Machinery’; Allows Revenue’s appeal
➡️ The Supreme Court of India allowed Revenue’s civil appeal and set aside the order of CESTAT Delhi, holding that mushroom shelving / growing apparatus cannot be classified as parts of agricultural machinery under CTH 8436.
➡️ The Court held that mushroom growing systems do not fall within Chapter Heading 8436, as mushroom cultivation does not qualify as “agriculture” for tariff classification purposes under the Customs Tariff Act, 1975.
➡️ The apparatus did not meet the criteria of either a composite machine or a functional unit. Individual systems (head filling, watering, compost spreading) perform independent functions and do not together achieve a single, unified specified function as required under the GRIs.
➡️ Accepting the Department’s view, the Court held that the imported goods are appropriately classifiable under CTH 7610 9010 as aluminium structures, attracting BCD @10%, CVD @12.5%, Cess @3%, and ADC @4%, thereby denying the benefit claimed under agricultural machinery parts.
➡️ The ruling reiterates that in classification disputes, courts and tribunals are bound to apply the General Rules for Interpretation (GRIs) strictly, and classification must be based on tariff headings and legal notes—not merely on end-use or the broader commercial activity (such as mushroom cultivation).
✔️ SC – Commissioner of Customs (Import) vs M/s Welkin Foods [CIVIL APPEAL NO. 5531 OF 2025]
🔥📛 SC to examine legal embargo u/s 142(6) prohibiting refund of transitioned credit; Admits Revenue’s appeal
➡️ The Supreme Court of India has admitted the Revenue’s appeal against the CESTAT order granting a cash refund of ₹256.45 crore of transitioned and reversed CENVAT credit, after hearing parties at the threshold on whether the appeal lies directly before it due to involvement of valuation, taxability, and allied substantial questions of law.
➡️ The core legal issue is whether the challenge must be filed exclusively under Section 35L (direct appeal to the Supreme Court where questions of rate/valuation arise) rather than Section 35G (appeal to the High Court), with the Assessee consistently asserting that valuation and taxability are central to the dispute.
➡️ The Bombay High Court declined to entertain the Revenue’s writ petition and appeal against CESTAT, Mumbai, holding that a partial or truncated adjudication would be inappropriate and granting liberty to the Revenue to approach the Supreme Court within eight weeks.
➡️ While disposing of the matter, the High Court stayed the operation of CESTAT’s direction to grant a cash refund, noting that the proviso to Section 142(6)(a) of the CGST Act, 2017—prima facie restricting cash refunds where CENVAT credit was carried forward—raises serious questions, and that the balance of convenience favored protecting the Revenue given the large refund amount and recovery risks.
➡️ The Supreme Court dismissed the Assessee’s connected SLP as infructuous and granted liberty to both parties to place all relevant documents on record; the matter is now listed for further consideration on February 4, 2026, keeping open the substantive issues on jurisdiction and permissibility of cash refunds of transitioned credits.
✔️ SC – Commissioner of CGST and Central Excise vs Tenormac Enterprises Pvt. Ltd. [Diary No. – 35034/2025]
🔥📛 HC dismissed writ petition as allegations of fraudulent ITC availment can be challenged before appellate authority
➡️ The assessee, a proprietor of a firm, was alleged to be part of a chain involved in availing manpower services from fake firms created to issue bogus invoices without actual supply of goods or services.
➡️ The assessee contended that the show cause notice was invalid as it was issued by a Superintendent of DGGI, whereas, according to the assessee, only a Joint Director of DGGI was competent to issue such a notice.
➡️ It was argued that proceedings were conducted in Faridabad, but the final order appeared to have been issued from both Delhi and Faridabad by the same officer, creating ambiguity regarding the correct appellate authority.
➡️ The assessee further objected that Form DRC-07 could not have been uploaded by the Delhi Commissionerate, given the alleged jurisdictional inconsistencies.
➡️ The Court held that since the adjudication order was passed by the Adjudicating Authority at Faridabad (despite DRC-07 being issued by the Delhi Commissionerate), the correct appellate forum was the Commissioner (Appeals), Gurugram. Consequently, the assessee was directed to avail the statutory appellate remedy.
✔️ Delhi HC – Manikjeet Singh Kals v. Union of India [W.P. (C) No. 4682 of 2025]
🔥📛 HC granted stay on recovery of tax as combined show cause notice was issued for different periods: HC
➡️ The assessee challenged a combined demand-cum-SCN issued under Section 74 covering multiple financial years (2017-18 to 2020-21), arguing that such a composite notice is invalid when it does not provide year-wise and item-wise tax details.
➡️ The core objection was that the SCN lacked specific segregation of taxable transactions and tax amounts, making it difficult for the assessee to respond effectively—thereby violating principles of natural justice.
➡️ The Court observed that the matter raises substantial legal questions regarding the format and permissibility of composite SCNs under GST law, warranting detailed consideration rather than summary rejection.
➡️ A Coordinate Bench had earlier granted interim relief in a similar matter, and no contrary judicial view existed. Applying the rule of consistency, the Court found it appropriate to extend similar interim protection in the present case.
➡️ The Court also noted that three other High Courts had ruled in favour of assessees on the same issue, strengthening the case for interim relief. Accordingly, no coercive action was permitted against the assessee until the next date of hearing.
✔️ Allahabad HC – S.D. Freshners Ltd. v. Union of India [WRIT TAX No. 7500 of 2025]
🔥📛 Offline/physical communication prevails over portal upload for determining effective communication of SCN/orders: HC
➡️ Service of show cause notices and orders through the GST common portal or other electronic modes is legally valid. Among the modes prescribed in Section 169(1)(a) to (e), the law does not prescribe any hierarchy or priority—tax authorities are free to choose any of these modes. The requirement to record reasons of impracticability applies only when resorting to service by affixation under clause (f).
➡️ The deeming fiction of constructive service applies only to specific modes expressly provided under Section 169(1). It cannot be universally extended to all electronic communications. Consequently, merely uploading an order on the portal does not automatically establish the exact date of service unless the statutory conditions for constructive service are satisfied.
➡️ The IT Act supplements GST law only where GST law is silent. Its provisions on “dispatch” and “receipt” of electronic records may apply to electronic transmission, but they cannot override or redefine “service” or “communication” as specifically governed by Section 169 of the GST Acts. There is no conflict between the two statutes when applied within their respective domains.
➡️ Since the GST system currently does not generate acknowledgements confirming when an assessee actually accesses or downloads an order, the exact date of electronic service often cannot be conclusively established. Therefore, the limitation period for filing an appeal under Section 107 begins from the date of effective communication—actual or legally constructive—of the order to the assessee.
➡️ If an assessee files an appeal stating it is within limitation from the date of actual communication, a presumption arises in their favour. The burden then shifts to the revenue to prove earlier service. Where both electronic and physical service exist, the date of physical/offline service should ordinarily prevail for computing limitation, unless proven otherwise. Authorities are encouraged to continue reliable physical modes of service, as followed under the earlier VAT/Trade Tax regime, to avoid disputes.
✔️ Allahabad HC – Bambino Agro Industries Ltd v. State of Uttar Pradesh [WRIT TAX Nos. 1286, 2399, 2707, 2722, 2783, 3098, 3101, 3103, 3927, 3928, 3938, 4625, 7362 of 2025]
🔥📛 Regular bail granted in ITC fraud case as investigation complete, evidence documentary, and no flight risk: HC
➡️ The prosecution alleged wrongful availment of Input Tax Credit (ITC) of about ₹30.21 crore through invoices without actual movement of goods, involving non-existent firms, common premises for return filing, and use of non-transport vehicles. Based on these allegations under Sections 132(1)(b), (c), (i) read with Section 135(5) of the CGST Act, the petitioner was arrested during searches conducted at residential and business premises.
➡️ The petitioner challenged the legality of arrest on grounds of illegal detention and non-service of written grounds of arrest. The Court noted that a serious issue of over-detention was raised, which weighed in favour of judicial scrutiny at the bail stage.
➡️ The investigation was already complete and a complaint had been filed. The evidence relied upon by the department was primarily documentary in nature, and there was nothing further to be recovered from the petitioner, reducing the need for continued custodial detention.
➡️ The Court found no material suggesting flight risk, likelihood of tampering with evidence, or non-cooperation with the investigation. The offence was triable by a Judicial Magistrate and carried a maximum punishment of five years, which further supported the grant of bail.
➡️ Reiterating that bail is the rule and jail is the exception, and emphasizing the constitutional guarantee of a speedy trial, the Court held that continued incarceration was unwarranted. The petitioner was granted regular bail, subject to conditions including furnishing a security bond equivalent to the alleged tax and penalty amount.
✔️ P&H HC – Baldeep Singh Sapra v. State (Directorate General of GST Intelligence), Chandigarh [Criminal Misc. No. M-47385 of 2025]
🔥📛 HC: Clarifies clinical-trial services to overseas entities as exports, holds place-of-supply notification retrospective
➡️ The dispute arose from proceedings under Section 73 of the CGST Act, where Revenue sought to levy IGST on clinical trial/R&D services performed in India for overseas recipients (USA) under a tripartite arrangement, contending that the services were taxable prior to Notification No. 04/2019–IGST.
➡️ Revenue argued that Notification No. 04/2019–Integrated Tax, issued under Section 13(13) of the IGST Act clarifying the place of supply as the location of the foreign recipient, was prospective and therefore inapplicable to earlier periods.
➡️ The Assessee contended that the notification merely clarified the existing legal position under Section 13(2), supported by the 37th GST Council recommendations, and that clinical trial services provided to foreign entities constitute “export of services” since the recipient was located outside India.
➡️ The Karnataka High Court held that amendments and notifications that are beneficial, clarificatory, or elucidatory in nature operate retrospectively, particularly when they clarify ambiguities in existing law rather than introduce a new levy.
➡️ Holding that Notification No. 04/2019–IGST was retrospective, the High Court quashed both the adjudication and appellate orders, granting relief to the Assessee. The ruling provides strong jurisprudential support for treating pre-notification cross-border R&D and clinical trial services as exports, reducing litigation exposure for Indian pharmaceutical and research entities.
✔️ Karnataka HC – Iprocess Clinical Marketing Pvt Ltd Vs Asst. Commissioner Of Commercial Taxes [WRIT PETITION NO. 10989 OF 2025 (T-RES)]
🔥📛 HC: No general penalty u/s 125 once ‘late fee’ is payable on belated GSTR-9 filing
➡️ The Court held that the late fee levied under Section 47(2) of the CGST Act is in substance a penalty, as it arises only upon default, lacks quid pro quo, acts as a deterrent, escalates with delay, and carries civil consequences. Consequently, imposition of an additional “general penalty” under Section 125 amounts to double jeopardy and is legally unsustainable.
➡️ Taxpayers who filed GSTR-9 for FYs 2017-18 to 2021-22 within the time window prescribed under Notification No. 7/2023-CT (as amended by Notification No. 25/2023-CT) are entitled to the concessional late fee (capped at ₹10,000) and cannot be subjected to any general penalty under Section 125.
➡️ The Court ruled that taxpayers who filed annual returns before 01.04.2023 (i.e., prior to the waiver window) cannot be denied the benefit of the partial late-fee waiver merely because the 49th GST Council meeting did not expressly address their situation. Denying them relief would result in hostile discrimination.
➡️ Singling out early filers for harsher treatment violates Article 14 of the Constitution. The Court emphasized that selective suspension or denial of late-fee relief would erode trust in tax administration and is constitutionally impermissible. Hence, uniform application of the waiver is mandatory.
➡️ For taxpayers who filed GSTR-9 after the cut-off date, the Court clarified that no waiver of late fee under Section 47 is permissible. However, even in such cases, there is no scope for imposing a general penalty under Section 125, reaffirming that late fee itself fulfills the penal function.
✔️ Madras HC – Kandan Hardware Mart vs The Assistant Commissioner (ST) (FAC) [W.P. Nos. 27029, 27032, 27036, 32599, 19967, 34352, 34357, 35186 of 2025]
🔥📛 HC: Reading down Section 16(2)(c), allows ITC availed by bona-fide recipient despite supplier’s default
➡️ The Court held that Section 16(2)(c) fails to distinguish between bona fide purchasing dealers who have complied with all statutory requirements and those involved in non-genuine transactions. Penalising compliant buyers for a supplier’s failure to remit GST amounts to an unfair and unintended consequence of the provision.
➡️ The Court recognised the practical impossibility for a purchaser to verify whether a supplier will ultimately deposit GST with the Government. Since the law provides no mechanism for such verification, denying ITC on this basis alone is unreasonable.
➡️ While upholding the constitutional validity of Section 16(2)(c), the Court read it down to apply only in cases of non-bona fide, collusive, or fraudulent transactions, thereby protecting genuine taxpayers from automatic ITC denial.
➡️ The Court observed that denying ITC to a purchaser who has already paid tax to the supplier effectively results in double taxation. Since GST is designed to eliminate cascading tax effects, such denial defeats the very purpose of the ITC mechanism.
➡️ Relying on established jurisprudence (including Delhi and Gauhati High Court rulings affirmed by the Supreme Court), the Court affirmed that ITC should not be denied to bona fide purchasers without evidence of fraud, collusion, or revenue loss caused by the buyer.
✔️ Tripura HC – Sahil Enterprises v. Union of India & Ors. [WP(C) No. 688 of 2022]
