LATEST GST CASE LAWS: 21.04.2025
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🔥📛 HC: ‘Rule 86A does not empower creation of negative entry vis-a-vis fraudulent supply’; Grants interim-stay ➡️ The Bombay High Court has granted an interim stay on an order related to the negative blocking of Input Tax Credit (ITC) under India’s Goods and Services Tax (GST) laws. ➡️ The assessee had procured goods during the financial years 2021-22 to 2023-24. Upon inspection, it was discovered that these goods lacked legal documents, leading to the cancellation of the assessee’s registration. ➡️ The court’s interpretation of Rule 86A(1) of the GST Rules indicates that this rule does not empower the Commissioner or any authorized officer to create a negative entry in the assessee’s Electronic Credit Ledger. ➡️ Instead, the rule only allows for the blocking of input credit entries that are linked to fraudulent supply. ➡️ The case is scheduled for final disposal on May 5, 2025. ✔️ Bombay HC – Advance Engineering Stores vs. State of Maharashtra & Ors. [WRIT PETITION NO. 2043 OF 2025] |
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🔥📛 HC: Contractor liable to tax prevalent on tender-receipt date; Council’s recommendation not rate-notification ➡️ The Jammu & Kashmir High Court dismissed a review petition filed by an assessee who contested a judgment that held a contractor liable to pay GST at the rate of 18% prevalent on the day of receipt of the tender, rather than the reduced rate of 12% when the work was allotted. The court clarified that the recommendations of the GST Council are not legally binding as new rates until they are notified through proper statutory procedures, in accordance with Article 265 of the Constitution. ➡️ The assessee argued that since the GST Council’s recommendation to reduce the GST rate on Works Contract Services from 18% to 12% was made before the work was allotted, and the order allotting the work was issued after the notification of the rate reduction, the contractor should pay the reduced rate. However, the court pointed out that the recommendation only became effective through a statutory notification on September 21, 2017, which was after the last date for submitting bids. ➡️ The High Court emphasized that the assessee, as a contracting party, is bound by Special Condition No. 49 of the contract, which requires the contractor to include the existing tax rate prevailing on the last due date for receipt of tenders. Since there was no challenge to this condition, the assessee could not argue that it was inconsistent with the GST Act. ➡️ The court found that the judgment being reviewed did not contain any apparent errors or new facts that would warrant a review. It also stated that the incidence of GST and changes in tax rates do not provide a basis for the review petitioner’s claims, as the contractor is still bound by the contractual condition regarding the tax rate. ➡️ The High Court explained that the SRO-GST-2(Rate) dated August 22, 2017, did not change the 18% GST rate for the composite supply of works contracts in general. Instead, it only altered the GST rate for specific composite supplies of works contracts related to government projects involving construction, erection, commissioning, installation, etc., of specified items like historical monuments, canals, pipelines, etc. Therefore, the 18% GST rate was applicable at the time of submission and on the last due date for submitting bids. ✔️ J&K HC – Vishal Verma vs UOI & ors [RP No.43/2024] |
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🔥📛 HC: Cannot transition credit on capital-goods received after GST rollout; Cites distinction with inputs ➡️ The Patna High Court ruled that excise duty paid on capital goods in transit, which were received in the factory after June 30, 2017, cannot be claimed as CENVAT credit under the GST regime. This is because the definition of “input” under Rule 2(g) of the CENVAT Credit Rules, 2017, does not include capital goods. ➡️ The court upheld an order confirming the recovery of Rs 8,62,566 worth of CENVAT credit claimed as transitional credit under TRAN-1 by the assessee. The court observed that there is no facility for the assessee to claim transitional credit of the excise duty paid on capital goods received on or after July 1, 2017. ➡️ The Revenue justified the recovery by relying on Section 140(5) of the Central Excise Act and the judgment in the RSPL Ltd case by the Gujarat High Court. The Revenue contended that the definition of “input” does not include capital goods, and the court agreed with this contention. ➡️ The court traced the restriction on claiming credit of duty paid on capital goods used by manufacturers in factories after a certain date back to Rule 57(q) of the erstwhile Central Excise Rules, 1944. It noted that the GST regime continued with the same facility, albeit in a different format. ➡️ The court concluded that while the GST Act does not distinguish between duty paid on capital goods or inputs, the distinction in giving the benefit of CENVAT credit on capital goods can be found in sub-section (5) of Section 140. Therefore, the court accepted the Revenue’s contention and adopted the same view as the Gujarat High Court in the RSPL case. ✔️ Patna HC – JMD Alloys Ltd vs UOI & ors [Civil Writ Jurisdiction Case No. 15940 of 2023] |
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🔥📛 Order to be set aside as SCN was served only through e-mode without physical delivery: HC ➡️ The registration of the assessee was cancelled during the period 2018-19. ➡️ Following the cancellation, a show cause notice was sent to the assessee through electronic mode. ➡️ An adjudication order was then passed against the assessee. ➡️ The revenue department did not establish that the assessee was obligated to visit the portal after the registration was cancelled. Additionally, no physical notice was served on the assessee before the adjudication order was passed. ➡️ The requirement of the rules of natural justice was not fulfilled. Therefore, the adjudication order was set aside, and the assessee was treated as if they had received a notice. ✔️ Allahabad HC – Agra National Transport Company v. State of U.P. [WRIT TAX No. – 1357 of 2025] |
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🔥 📛 GST levy upheld by Hon’ble Patna HC on mining royalties ➡️ Nature of Royalty for Mining Leases: The royalty paid by petitioners for mining leases is considered a consideration for the grant of mineral rights, not a tax. This is based on the Supreme Court’s ruling in the case of Mineral Area Development Authority And Anr. Vs. M/s Steel Authority of India, which clarified that royalty is a contractual consideration for the enjoyment of mineral rights. ➡️ Supply Under GST: According to Clause (a) of Sub-Section (1) of Section 7 of the CGST Act, 2017, all forms of supply of goods or services, including licensing, rental, and leasing for consideration, are included in the definition of “supply.” Therefore, the leasing of mines and the grant of mineral rights are considered a supply of services under GST laws. ➡️ Levy of GST on Royalty: Since the royalty is a consideration for the grant of the mining lease, it can be used as a measure to levy tax under GST laws. The GST Council recommended an 18% GST rate for residuary services, including the supply of mineral rights. The Appellate Authority on Advance Ruling correctly applied this rate for the period from 01.07.2017 to 31.12.2018. ➡️ Exemption for Liquor Licenses: The exemption granted to liquor licenses from GST does not apply to mining leases. The GST Council, as a Constitutional body, has the authority to provide specific exemptions based on its recommendations. The grant of liquor licenses is not considered a supply of services for consideration, unlike the grant of mineral rights under a lease deed. ➡️ No Discrimination: The petitioners’ contention that the imposition of GST on mining leases while exempting liquor licenses is discriminatory is not well-founded. The GST Council’s decision to exempt liquor licenses does not necessitate a similar exemption for mining leases. The petitioners’ challenge to the AAAR Ruling on the grounds of discrimination is dismissed. ✔️ Patna HC – Broad Son Commodities Private Limited v. Union of India [Civil Writ Jurisdiction Case No.3531 of 2022]
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