LATEST GST CASE LAWS: 15.11.2025
🔥📛 AAR: No ITC on GST paid for long-term land lease for setting car-battery cell factory
➡️ The AAR held that GST paid under RCM on long-term lease rentals for 321 acres of land taken to build a battery cell factory is ineligible for ITC, as Section 17(5)(d) bars credit on goods/services used for construction of immovable property. This follows earlier rulings like Bayer Vapi and GACL-NALCO.
➡️ ITC remains blocked irrespective of whether lease rentals are paid before or after the construction of the factory. The restriction under Section 17(5)(d) is purpose-based, not timing-based.
➡️ Credit on GST for repairs, renovations, or alterations of the factory is also disallowed because “construction” under the law includes renovation, additions, and alterations. Vacant land leased for industrial use is similarly covered by the restriction.
➡️ Rejecting the argument that Section 17(5)(d) applies only to inputs directly used in construction, the AAR—relying on SC in Oblum Electrical Industries—clarified that the word “for” enlarges the scope. Thus, even indirect supplies related to construction fall within the block.
➡️ The applicant’s claim of discriminatory treatment (exempt upfront premium vs taxable annual rentals) was rejected. The AAR held that the two are fundamentally different transactions, citing Panbari Tea Co. and GST Council deliberations. Hence, the taxability distinction is valid and does not affect ITC restriction.
✔️ Gujarat AAR – In the matter of Agratas Energy Storage Solutions Pvt Ltd. [GUJ/GAAR/R/2025/46]
🔥📛 AAR: Liquidated damages under concession contract are ‘pre-agreed cash compensation’, not taxable under GST
➡️ The Gujarat AAR held that liquidated damages imposed for material default, breach, or non-performance under the Concession Agreement are not taxable under GST.
➡️ The ruling traces the project’s contractual journey—from initial acceptance of the bid by CESL on behalf of SMC, to execution of a concession agreement with SMC, and subsequent transfer to Surat Sitilink Ltd. (SSL)—to frame the Applicant’s query on GST applicability to compensation paid to SSL.
➡️ Relying on CBIC Circular No. 178/10/2022-GST, the AAR clarified that liquidated damages represent compensation for loss and are merely a flow of money, not consideration for any underlying supply of goods or services.
➡️ On examining the agreement clauses, the AAR noted that the prescribed liquidated damages constitute “genuine pre-estimated loss and damage” to SMC for contractual breach, reinforcing their classification as non-taxable.
➡️ Referring to AAAR rulings in GSPC and Achampet Solar, and CESTAT Delhi’s decision in South Eastern Coalfields, the AAR held that the principles in CBIC Circular No. 245/02/2025-GST (on penal charges for loan term non-compliance) apply similarly, thereby affirming that the liquidated damages under the Concession Agreement are not liable to GST.
✔️ Gujarat AAR – In the matter of JBM Ecolife Mobility Surat Pvt. Ltd. [GUJ/GAAR/R/2025/47]
🔥📛 HC: Quashes order demanding ITC reversal on purchases from “non-existent” supplier; Remands matter for considering evidence
➡️ The Bombay High Court (Nagpur Bench) noted a substantial gap between the FY 2018–19 transactions and the June 2024 physical verification, holding that subsequent non-existence of the supplier cannot automatically invalidate the earlier ITC.
➡️ The Court found that the Assistant Commissioner erred by ignoring the assessee’s documentary evidence (invoices, e-way bills, returns, payments) and relevant case law submitted during adjudication.
➡️ The authority’s conclusion—that all documents and case laws were irrelevant solely because the supplier was later found non-existent—was held to be unsustainable and contrary to principles of adjudication.
➡️ The Court quashed the demand order and directed the Assistant Commissioner to re-decide the case afresh after properly considering all documentary evidence and legal precedents furnished by the assessee.
➡️ The High Court clarified that failure of the adjudicating authority to consider material evidence constitutes an apparent error, warranting judicial interference despite availability of appellate remedies.
✔️ Bombay HC – Parshv Industries LLP vs Assistant Commissioner, CGST & Central Excise [WRIT PETITION NO. 2287 OF 2025]
🔥📛 HC: Demand for past dues from Company sold as ‘going concern’ via CIRP-process, invalid
➡️ The Calcutta High Court quashed a GST demand issued under Section 73 for periods prior to the sale of the corporate debtor, holding that such demands are invalid once the company is sold as a going concern through liquidation under the IBC.
➡️ Relying on its earlier ruling in Kashvi Power Steel, the Court reiterated that a purchaser of a corporate debtor as a going concern cannot be burdened with any pre-existing tax or statutory dues.
➡️ The Court emphasized that the primary objective of the IBC is corporate revival, and imposing past liabilities on the successful buyer would defeat this objective.
➡️ Since the disputed GST demand related to FY 2017-18 to 2019-20—periods preceding the going-concern sale—the Court held that such dues stand extinguished once the sale is completed on a “clean slate” basis.
➡️ The Court reaffirmed the settled principle that, following completion of CIRP or a going-concern sale in liquidation, all historic dues are frozen and creditors can recover only through the waterfall mechanism under Section 53 of the IBC.
✔️ Calcutta HC – Rabirun Vinimay Pvt. Ltd. & anr. vs UOI & ors [WPA 27722 of 2024]
🔥📛 Ex-parte GST orders for periods in question set aside as no effective hearing was given after change in registration: HC
➡️ The petitioner had taken over an earlier proprietorship and obtained a fresh GST registration, but the earlier registration remained active. Show cause notices (SCNs) for specific past periods were issued to the erstwhile concern.
➡️ Since the petitioner did not monitor the old GST portal, the SCNs and subsequent orders escaped notice, resulting in ex-parte orders being passed without submission of replies.
➡️ The High Court held that absence of a reply and lack of an effective opportunity of hearing constituted a breach of natural justice, particularly as the orders were passed without any personal hearing.
➡️ The impugned orders were quashed and the matter remanded, with liberty to the petitioner to file replies within the prescribed time and to avail a personal hearing before fresh orders are passed.
➡️ The Court refrained from ruling on the validity of the challenged notifications, keeping adjudication of those issues subject to outcomes in pending proceedings.
✔️ Delhi HC – Kalyr Retail (P.) Ltd. v. Commissioner of Goods and Services Tax, Delhi [W.P.(C) Nos. 15918 and 16530 of 2025]
🔥📛 Premature SCN and delayed audit beyond three months violated natural justice; case remanded to pre-SCN stage: HC
➡️ The Court reiterated that, under the GST law, a registered person must receive at least 15 days’ notice before commencement of an audit, forming part of the statutory scheme to ensure fairness.
➡️ Although the assessee was granted three days to respond to the pre-show cause notice, the department issued the final SCN before the reply period expired, violating principles of natural justice.
➡️ The assessee filed its final reply on 11-10-2024, and therefore the department was required to conclude the audit within three months from that date, as mandated by the statutory timeline.
➡️ The audit report was dated 11-02-2025 and communicated on 13-02-2025, which exceeded the permissible audit period. The Court held that the audit was time-barred.
➡️ Due to the limitation breach and premature issuance of the SCN, the Court set aside the SCN and directed that proceedings be relegated to the pre-show-cause-notice stage for proper compliance with law.
✔️ Delhi HC – Varian Medical Systems International India (P.) Ltd. v. Union of India [W.P. (C) nos. 1064 and 13605 of 2025]
🔥📛 SCN and demand under sec. 73 quashed as scrutiny accepted ITC explanation, creating embargo on further action: HC
➡️ Once the proper officer accepts the taxpayer’s explanation in Form ASMT-12 under Section 61, the scrutiny for that period stands concluded.
➡️ Acceptance of the explanation bars the department from initiating fresh proceedings on the same issues for the same tax period, as Section 61 does not permit reopening when scrutiny is duly closed.
➡️ Since Section 73 lacks an overriding clause, it cannot be invoked to revisit issues already settled through scrutiny closure under Section 61.
➡️ The subsequent SCN under Section 73 and the resultant demand order—based on the same ITC mismatch grounds earlier scrutinised and accepted—were declared legally unsustainable.
➡️ The High Court set aside both the SCN and the demand order, reaffirming that once scrutiny is closed through ASMT-12, further proceedings on identical grounds are impermissible unless the explanation had been rejected or corrective action was not taken.
✔️ Delhi HC – Kemexel Ecommerce (P.) Ltd. v. Sales Tax Officer, Avato [W.P. (C) no. 16555 of 2025]
🔥📛 Recovery demand exceeding show cause notice unsustainable as tax already paid; attachment invalid: HC
➡️ The Show Cause Notice (DRC-01) explicitly acknowledged that the taxpayer had already paid the CGST and SGST liability and proposed recovery only of the interest component; therefore, authorities could not later demand the already-paid tax.
➡️ Since the DRC-07 order demanded tax that was not proposed in the SCN, the demand was held prima facie unsustainable and contrary to natural justice.
➡️ Because the underlying recovery of already-paid tax was invalid, the consequential bank account attachment was also held to be unlawful.
➡️ The court upheld the interest demand, as it was properly proposed in the SCN and undisputed, and permitted recovery of only this confirmed amount.
➡️ The writ petition was disposed of with a direction to the department to lift the bank attachment after recovering only the confirmed interest, modifying the impugned orders accordingly.
✔️ Madras HC – Tvl.Sri Balaji Sago Products v. State Tax Officer [W.P. No. 40615 of 2025]
🔥📛 Penalty for delayed ITC reversal unjustified as no undue benefit accrued and credit proportionately reversed: HC
➡️ The dispute related to delayed reversal of Input Tax Credit (ITC) on slow-moving or obsolete inventory for the period 1 July 2017 to 23 October 2019, which the assessee reversed voluntarily on 23.10.2019.
➡️ A Show Cause Notice (SCN) was issued alleging wrongful transition of such credit into the GST regime and proposing penalty under the GST law.
➡️ The adjudicating authority partly confirmed the SCN and imposed penalty, but dropped interest, noting that the assessee maintained sufficient credit balance, implying no revenue loss.
➡️ In writ proceedings, the assessee challenged both the maintainability of the SCN despite an alternate appellate remedy and the sustainability of the penalty, arguing that delayed reversal conferred no benefit.
➡️ The Court held that since the proportionate credit had already been reversed and no undue advantage accrued due to the delay, penalty was unjustified. The writ petition was therefore allowed.
✔️ Madras HC – GE T & D India Ltd v. Deputy Commissioner of GST & Central Excise [W.P. No. 2040 of 2024]
