LATEST GST CASE LAWS: 23.02.2026
🔥📛 SC restores interim protection in challenge to Revenue’s power to access Assessee’s registered premises
➡️ The Marwadi Shares and Finance Limited secured restoration of interim protection after the Supreme Court of India held that allowing audit under Rule 5A during a pending constitutional challenge would undermine the relief originally granted in 2019.
➡️ The Court noted that the Gujarat High Court had modified its earlier order to permit departmental audit subject to cooperation, but this modification could affect the integrity of the ongoing writ petition questioning the vires of Rule 5A of the Service Tax Rules, 1994.
➡️ Emphasizing that the validity of Rule 5A is already under scrutiny both before the High Court and in related matters before the Supreme Court, the Court accepted the assessee’s argument that permitting audit in the meantime would prejudice the constitutional evaluation.
➡️ Recognizing the direct connection between the vires challenge and the audit proceedings initiated under the impugned rule, the Supreme Court considered it necessary to prevent any administrative action that could render the constitutional challenge ineffective.
➡️ The Court therefore ordered continuation of the original 2019 interim relief, effectively suspending the High Court’s modification and halting the audit process until the writ petition is finally adjudicated, ensuring full protection to the assessee during the pendency of the challenge.
✔️ SC – Marwadi Shares & Finance Ltd. vs. Union of India & Or
🔥📛 HC: ITC on transferring leasehold rights in sub-plots absent construction activity, not barred u/s 17(5)(d)
➡️ The Gujarat High Court held that input tax credit (ITC) claimed on invoices issued by the Gujarat Industrial Development Corporation—for charges incurred in relation to transferring leasehold rights in GIDC sub-plots—does not fall within the restriction under Section 17(5)(d), since the provision is intended to block credit only for construction-related expenditure.
➡️ The Court emphasized that the Revenue failed to demonstrate that the assessee engaged in any construction activity; the business consisted solely of acquiring GIDC leasehold rights, subdividing plots, and transferring leasehold rights, which does not trigger the bar under Section 17(5)(d), making the alleged ineligibility of ITC unsustainable.
➡️ The show cause notice under Section 74—based on the claim that ₹98 lakh of ITC was wrongly availed and used—was quashed, as the electronic credit ledger had been blocked without establishing violation of Section 17(5)(d), and the ITC was in fact directly linked to the taxable business activity of transferring leasehold rights.
➡️ The assessee’s arguments were accepted that the ITC had never been utilized for output tax payment, remained unutilized in the electronic credit ledger, and even if any portion were irregularly availed, the situation would be revenue-neutral because future outward supplies were not taxable.
➡️ The Court found no fraud, wilful misstatement, or suppression to justify Section 74 proceedings, especially since the assessee had already paid substantial GST liabilities in cash and voluntarily reversed inadvertently availed ITC through DRC-03; accordingly, it directed the Revenue to unblock the ₹98 lakh ITC balance.
✔️ Gujarat HC – Niket Bipinbhai Patel vs Assistant Commissioner (A.E.) CGST [R/SPECIAL CIVIL APPLICATION NO. 18068 of 2025]
🔥📛 SC: Dismisses Revenue’s SLP on refund of Compensation Cess on coal used for exports
➡️ The Gujarat High Court held that refund of Compensation Cess (CC) paid on coal used in manufacturing exported goods is allowable, emphasizing that no cess was paid at the time of export along with IGST, and therefore refund of accumulated CC credit falls within Section 54(3) of the GST Act read with Section 16 of the IGST Act.
➡️ The Court clarified that the scheme of the GST Act, IGST Act, and the Compensation to States Act must be read harmoniously, concluding that departmental reliance on Circular No.125/44/2019 was misplaced, as the circular did not apply to situations where cess is not payable on zero-rated supplies.
➡️ It observed that the proviso to Section 11(2) of the Cess Act—restricting utilization of CC credit only for payment of CC on outward supplies—does not bar refund where the taxpayer exports goods on payment of IGST, because cess is not leviable on such zero-rated outward supplies.
➡️ The judgment emphasized that when IGST is paid on export under Section 16(3) of the IGST Act, the taxpayer cannot use CC credit toward IGST liability due to statutory restrictions; therefore, denying refund would lead to unintended accumulation and defeat the zero-rating principle.
➡️ The Supreme Court of India dismissed the Revenue’s SLP, effectively affirming the Gujarat High Court’s interpretation and solidifying the position that exporters are entitled to refund of unutilized Compensation Cess paid on inputs used in zero-rated supplies.
✔️ SC – UOI & ors vs Patson Papers Private Limited [SPECIAL LEAVE PETITION (CIVIL) DIARY NO(S). 49578/2025]
🔥📛 SC: Dismisses SLP challenging refund of compensation cess against zero-rated-supplies effected on IGST payment
➡️ The Gujarat High Court held that unutilized ITC of Compensation Cess is refundable even when zero-rated supplies are made on payment of IGST, rejecting Revenue’s contention that such refunds are restricted only to exports made without payment of IGST.
➡️ The Court applied the ruling in Patson Papers, reiterating that refund of Compensation Cess ITC is permissible where the exported goods themselves are exempt from Compensation Cess, and that the statutory framework under Sections 16(3) and 54(3) of the CGST Act does not impose the limitation argued by Revenue.
➡️ Revenue’s appeal, premised on Section 11 of the GST (Compensation to States) Act and Rule 89(4) of the CGST Rules, was dismissed on the ground that these provisions do not curtail refund eligibility for accumulated cess when IGST has been paid on export of exempt goods.
➡️ The High Court therefore quashed the refund rejection orders and directed sanction of the claimed Compensation Cess refund for the relevant period, confirming that cumulative cess credit legitimately accumulated from inputs such as coal remains refundable.
➡️ The Supreme Court, noting that the SLP against Patson Papers had already been dismissed, declined to entertain Revenue’s challenge and dismissed the SLP, thereby affirming the Gujarat High Court’s interpretation and solidifying the permissibility of such refunds.
✔️ SC – Union of India & Ors. vs Atul Limited & Anr. [Petition(s) for Special Leave to Appeal (C) No(s). 6586/2026]
🔥📛 Lessee not liable for interest as no invoice issued; respondent to refund interest recovered: HC
➡️ The dispute centered on the respondent demanding transfer charges along with outstanding GST and interest, despite the petitioners having no prior invoice or clarity regarding the GST amount payable under the lease-premium arrangement.
➡️ The petitioners paid the GST and interest under protest, asserting that GST liability could not arise without an invoice and that they were unaware of the quantum due until the respondent’s sudden demand.
➡️ The court held that the statutory obligation to raise a tax invoice within thirty days rested solely on the respondent, making it responsible for timely GST payment to the government.
➡️ Since the petitioners were not legally obligated to pay GST without an invoice, they could not be faulted for any delay; the respondent’s attempt to shift interest liability onto them lacked legal justification.
➡️ The recovery of interest from the petitioners was deemed illegal and unsustainable, and the court directed the respondent to refund the interest amount wrongfully collected.
✔️ Bombay HC – Oam Industries India (P.) Ltd. v. Maharashtra Airport Development Company Ltd. [WRIT PETITION No. 1653 of 2025]
🔥📛 Retrospective GST registration cancellation upheld as dual registration at same premises enabled ITC misuse: HC
➡️ The tax authorities retrospectively cancelled the assessee’s GST registration from the original date of registration on grounds of issuing invoices without actual supply, misusing input tax credit (ITC), and failing to furnish supplier-wise payment details.
➡️ During appeal, the site inspection revealed that the assessee and another firm, Gaurav Metal, were operating from the same principal place of business without any additional premises, and the premises were locked, making verification of physical stock or segregation of goods impracticable.
➡️ The appellate authority found major inconsistencies between the assessee’s claimed ITC and the corresponding transport and supply records, concluding that the credits availed were not supported by genuine movement of goods.
➡️ It was also established that on the date of registration, another active GST registration already existed for the same premises, and the transactions of a related partnership firm were being used to mask the assessee’s activities and facilitate illegitimate ITC from suppliers such as Shree Padmavathi Metal and Alloys.
➡️ The court held that there was no valid justification for dual registrations at the same location, upheld the appellate authority’s findings on fraudulent ITC practices, and determined that the cancellation order required no interference, resulting in dismissal of the writ petition.
✔️ Madras HC – Tvl. Sri Balajee Udyog v. Assistant Commissioner (ST), Chennai [W.P. No. 7643 of 2025]
🔥📛 Notices served via CA acting as agent of assessee were valid; GST liability continued despite misappropriation of tax funds by CA: HC
➡️ The assessee challenged GST demands under Section 73 by filing a writ petition without invoking the statutory appellate remedy under Section 107, even though the impugned orders clearly specified the appeal authority. The court held that bypassing the prescribed appeal mechanism was unjustified.
➡️ Allegations that the assessee’s Chartered Accountant had misappropriated tax amounts and failed to deposit them with the department did not create grounds for writ intervention. The court noted that such grievances constitute a separate criminal or civil remedy, not a basis to invoke writ jurisdiction against tax orders.
➡️ Notices and opportunities for hearing had been duly provided, and service of notices through the assessee’s Chartered Accountant was considered valid. Since the assessee admitted the CA acted on its behalf, actions and omissions of the agent were attributable to the principal.
➡️ The assessee did not dispute its tax liability under the orders; instead, it attributed non-payment to the fraud committed by its Chartered Accountant. The court clarified that internal arrangements or misconduct by an agent do not affect statutory tax obligations owed to the department.
➡️ As the petition was framed as a violation of natural justice despite adequate opportunities being granted, and because statutory appeal remedies remained unexhausted, the court held the writ petition to be misconceived and dismissed it for lack of merit.
✔️ P&H HC – Knight Fly Boyz v. Deputy Commissioner of State Tax (SGST) [CWP No. 17615 of 2025]
🔥📛 Challenge to Circular 3/3/2017-GST appointing officer to issue Sec 70 summons failed; petitioner must comply summons: HC
➡️ In an inquiry involving Midas Marketing Inc., the petitioner challenged a summons issued under Section 70 of the CGST Act by a Senior Intelligence Officer, arguing that the summons rested on Circular No. 3/3/2017-GST, which they claimed was issued without lawful authority.
➡️ The petitioner asserted that the Central Board of Excise and Customs (CBEC) (“the Board”) lacked the power to assign functions to proper officers, contending that such power vested exclusively in the “Commissioner in Board” under Section 2(25) of the CGST Act.
➡️ The Court held that the Commissioner is an integral part of the Board, and Section 168(2) requires that assignments of functions to Central Tax Officers be made on the proposal of the Commissioner and approved by the Board, aligning with the statutory framework.
➡️ Since nothing on record indicated that the circular was issued without such a proposal or approval, the Court presumed that the statutory process under Sections 2(16), 2(25), and 168(2) was duly followed and that the circular was therefore within the Board’s lawful authority.
➡️ Concluding that the circular was valid and required no judicial interference, the Court directed the petitioner to comply with the summons and appear before the competent officer on the specified date.
✔️ Delhi HC – Lovelesh Singhal v. Central Borad of Indirect Taxes & Customs [W.P.(C) No. 1426 of 2026]
