LATEST GST CASE LAWS: 13.02.2026
🔥📛 Services rendered by Advocate to partnership-firm taxable under reverse-charge; Reiterates settled law
➡️ The Bombay High Court held that service tax cannot be levied on legal services provided by an individual advocate to a partnership firm of advocates, in view of Notification Nos. 25/2012-ST and 30/2012-ST dated July 1, 2012, which exempt or shift liability under the reverse charge mechanism. The Court reaffirmed that no tax liability arises on the individual advocate in such circumstances.
➡️ Relying on its earlier ruling in Advocate Pooja Patil, the Court reiterated that where the levy itself is barred under the applicable notifications, the Revenue lacks jurisdiction to proceed against the individual advocate. Consequently, adjudication and recovery actions initiated in such cases are unsustainable in law.
➡️ The Show Cause Notice (SCN), issued in October 2021 alleging mismatch between income tax data and ST-3 returns for FY 2016-17, was dispatched to the advocate’s old address and remained unserved. Despite this, the adjudicating authority confirmed a demand of approximately ₹26.81 lakhs along with interest and penalty, indicating procedural infirmity.
➡️ Following the adjudication order, recovery proceedings were initiated in October 2025, including freezing/lien on bank accounts. The Court held that once the foundational demand itself lacks legal validity, consequential recovery actions must also be quashed.
➡️ The judgment reinforces two critical principles relevant to GST practice:
–> Tax authorities cannot invoke jurisdiction where the levy is expressly barred under statutory notifications.
–> Procedural compliance, including proper service of notices, is essential for sustaining tax demands. Professionals should carefully examine exemption notifications and reverse charge provisions before advising on liability, especially in cases involving legal services rendered within professional entities.
✔️ Bombay HC – Manisha Rajiv Shroff v. Union of India & Ors. [WRIT PETITION (L) NO. 1684 of 2026]
🔥📛 Bombay HC stays Rs. 170 cr demand on Gateway Terminal’s ITC & refund denial Issue
➡️ Gateway Terminals India paid licence fees to Jawaharlal Nehru Port Trust for the “right to use port” and discharged GST on the same. The Revenue later held that the transaction does not qualify as a “service,” thereby disputing the very taxability of the licence arrangement.
➡️ Although GST was paid on the licence fee and input tax credit (ITC) was claimed, the Revenue rejected the ITC on the ground that the underlying transaction was not a “service.” This created a situation where tax was collected but corresponding credit was denied.
➡️ The assessee argued in the alternative that if the transaction is held not to be a “service,” then the GST collected must be refunded. However, the Revenue rejected this refund claim as well, effectively denying both ITC and refund.
➡️ The core legal contention raised by the assessee is that the Revenue cannot retain the tax collected while simultaneously denying ITC on the same transaction. Retaining tax without allowing credit or granting refund results in unjust enrichment of the State.
➡️ Taking note of the fact that the impugned order denies both ITC and refund, the Bombay High Court restrained the Revenue from initiating coercive recovery of the ₹170 crore demand until the next hearing date (March 4, 2026). The Court granted interim relief, providing temporary protection to the assessee pending adjudication.
✔️ Bombay HC – Gateway Terminals India Pvt Ltd Vs. Union of India & Ors [WRIT PETITION NO. 1482 OF 2026]
🔥📛 SC: Upholds HC order declining to entertain writ in fake ITC matter requiring factual probe
➡️ The Delhi High Court refused to entertain the writ petition as the matter involved detailed factual examination relating to alleged fraudulent ITC claims through bogus transactions and fake invoicing. The Court held that such issues fall outside the limited scope of writ jurisdiction.
➡️ The proceedings originated from intelligence gathered by the DGGI, involving scrutiny of multiple entities, their promoters, directors, addresses, and interconnections—requiring thorough factual verification at the adjudication stage.
➡️ The High Court declined interference primarily on the ground that the assessee had an effective alternative remedy under the GST appellate framework, reinforcing the principle that writ petitions are not maintainable when statutory remedies exist.
➡️ Considering the assessee’s concern that its replies may not have been duly examined by the Adjudicating Authority, the High Court granted liberty to avail statutory appellate remedies, even though the prescribed time for filing the appeal had expired.
➡️ The Supreme Court declined to interfere under Article 136, observing no valid ground to exercise its discretionary jurisdiction. The Special Leave Petitions were dismissed, thereby affirming the High Court’s reasoning and reinforcing judicial restraint in GST matters involving disputed facts.
✔️ SC – C L International & Anr. vs Additional Commissioner CGST (Delhi West) Commissionerate [Petition(s) for Special Leave to Appeal (C) No(s). 3393/2026]
🔥📛 SC: Courts cannot introduce mechanism alien to section 54 to disburse refund of unconstitutional levy
➡️ The Supreme Court held that the Gujarat High Court erred in devising a refund mechanism not contemplated under Section 54 of the CGST Act and the Rules. Courts cannot introduce alternative modalities (such as tariff adjustments) for refund disbursal when the statute prescribes a specific procedure.
➡️ Since Torrent Power Ltd. had admittedly passed on the IGST burden to consumers, the principle of unjust enrichment applied. Under Section 54(5) read with Section 54(8), once tax incidence is passed on, the refundable amount must be credited to the Consumer Welfare Fund (CWF) and cannot be paid back to the assessee.
➡️ The Supreme Court clarified that the exception under Section 54(8) (which allows refund to the applicant in specified cases) did not apply in this situation. Therefore, the statutory route under Section 54(5) mandating credit to CWF prevailed.
➡️ The Court observed that implementing the High Court’s proposed mechanism (refund via tariff reduction subject to regulatory approval) would involve over one crore consumers across Ahmedabad and Surat. Verifying whether the actual tax-bearers benefited would be administratively unworkable and legally unsound.
➡️ The Supreme Court allowed the Revenue’s appeal, set aside the Gujarat High Court’s order, and directed the assessee to transfer ₹19.28 crore to the concerned authorities within three months for credit to the Consumer Welfare Fund under Section 57.
✔️ SC – Union of India and Anr vs Torrent Power Ltd [Petition for Special Leave to Appeal (C) No. 13084/2025]
🔥📛 HC: Refund under inverted duty structure allowed despite identical tax rates for inputs & output
➡️ The Karnataka High Court held that refund under Section 54(3)(ii) of the CGST Act cannot be denied where accumulated ITC arises due to an inverted duty structure (inputs taxed higher than outputs), even if certain inputs and outputs attract the same GST rate.
➡️ The Court clarified that Section 54(3)(ii) does not mandate comparison of tax rates between the principal input and the principal output supply. The existence of accumulated ITC due to rate inversion is the relevant consideration.
➡️ The Revenue’s reliance on Circular No. 135/05/2020-GST to deny refund was rejected. The Court held that:
–> The circular was inapplicable,
–> It cannot restrict a statutory benefit,
–> Administrative circulars cannot curtail the scope of Section 54(3)(ii).
➡️ The Court noted that the restrictive portion of Circular 135/2020 was deleted by Circular 173/05/2022-GST, and such deletion is clarificatory in nature. Therefore, the clarification applies retrospectively, strengthening the assessee’s entitlement.
➡️ Following its earlier ruling in the Indian Oil Corporation case, the High Court set aside the rejection orders and directed the Revenue to grant the refund of accumulated ITC along with applicable interest within three months.
✔️ Karnataka HC – South Indian Oil Corporation v. Assistant Commissioner of Central Tax & Ors. [WRIT PETITION NO. 22068 OF 2024 (T-RES)]
🔥📛 GSTAT Delhi: FAA/Tribunal cannot convert section-74 adjudication to section-73 proceedings; Remands to proper officer
➡️ The GSTAT Delhi (Principal Bench) has clarified that where proceedings are initiated under Section 74(1) of the CGST Act (fraud/suppression cases) but the ingredients of fraud or intent to evade tax are not established, the First Appellate Authority or the Tribunal cannot simply convert the demand into one under Section 73. Instead, once Section 74 is held to be inapplicable, the matter must be remanded to the original Proper Officer for fresh adjudication under Section 73.
➡️ The Tribunal rejected the Revenue’s contention that Section 75(2) empowers appellate authorities to modify the nature of the demand from fraud-based to non-fraud-based and re-determine tax, interest and penalty. Referring to CBIC Circular No. 254/11/2025-GST, it observed that no Proper Officer has been specifically assigned for action under Section 75(2), and therefore, only the original Proper Officer who issued the notice under Section 74 can re-determine the liability under Section 73.
➡️ On the scope of appellate powers, GSTAT held that Section 112 of the CGST Act grants plenary jurisdiction to the Tribunal, making it the final fact-finding authority. It distinguished Section 112 from Section 100 of the CPC and rejected the Revenue’s objection that factual issues cannot be raised in second appeal, affirming that the Tribunal can examine both facts and law comprehensively.
➡️ The Tribunal also distinguished Supreme Court rulings in Dilip Kumar & Co. and Hamida, holding that principles of strict interpretation applicable to exemption notifications do not apply to reconciliation disputes involving alleged short payment of tax. The present case was not about interpretation of an exemption but about mismatch between GSTR-1 and GSTR-3B and related accounting treatment.
➡️ Noting that the First Appellate Authority itself found no fraud or suppression and that transactions were recorded in the books, the Tribunal observed that the dispute was essentially reconciliatory in nature. Since the issue related to non-reflection of credit/debit notes and inability to establish ITC reversal by recipients, the assessee deserved an opportunity to amend returns and substantiate reconciliation. Accordingly, GSTAT set aside the orders sustaining demand under Section 73, affirmed that Section 74 was inapplicable, and remanded the matter for fresh adjudication with liberty to file amendments and supporting documents.
✔️ GSTAT Delhi – Sterling & Wilson Pvt. Ltd. vs Commissioner, Odisha, Commissionerate of CT GST & ors. [APL/1/PB/2026]
