LATEST GST CASE LAWS: 25.02.2026
🔥📛 Settles IGST-exemption issue on repaired aircrafts re-import in Indigo/SpiceJet favour; Dismisses Revenue’s review petition
➡️ The Supreme Court dismissed the Revenue’s review petition challenging CESTAT’s order that upheld IGST exemption for InterGlobe Aviation and SpiceJet on re-imported aircraft parts from August 2017 to March 2019 under Notification No. 45/2017-Customs, confirming that tax amendments cannot retrospectively impose fresh levies when they effectively create new tax obligations rather than merely clarifying existing ones.
➡️ CESTAT’s reasoning established that Notification No. 36/2021-Customs, which inserted “said duty, tax or cess” in place of “duty of customs,” was not a clarificatory amendment but a fresh imposition of IGST on the fair cost of repairs and associated charges, and therefore could not operate retrospectively to defeat the exemption already granted under the original notification.
➡️ The court affirmed that retrospective tax amendments are impermissible when they impose new tax burdens or change the tax incidence, emphasizing that tax authorities must demonstrate that any amendment was genuinely clarificatory rather than creating fresh tax liabilities that affect settled transactions.
➡️ This judgment reinforces the principle that once a tax exemption has been granted and relied upon, subsequent amendments cannot retrospectively withdraw or modify that benefit unless they are purely clarificatory in nature and do not impose additional tax burdens on taxpayers.
➡️ The decision maintains CESTAT’s authority to adjudicate complex GST disputes and underscores the limited grounds for Supreme Court interference, requiring clear evidence of jurisdictional error or manifest injustice rather than mere disagreement with the tax authorities’ interpretation of tax laws.
✔️ SC – Commissioner of Customs Air Cargo Complex (Import) vs Inter Globe Aviation Limited etc. [Diary No(s).58086/2025]
🔥📛 Madras HC quashes third-party recovery citing vendor’s impending GSTAT-appeal; Cites adjudication circumvention u/s-73/74
➡️ The Madras High Court has quashed recovery proceedings initiated under Section 79(1)(c) of the CGST Act, emphasizing that recovery machinery cannot be used to short-circuit the proper adjudicatory process when determining alleged tax liability of a recipient in cases of vendor default, particularly when the taxpayer has already discharged their obligations through legitimate banking channels.
➡️ The Court held that Revenue authorities cannot sit in judgment over the admissibility of appeals filed by vendors or the sufficiency of pre-deposit amounts required under Section 112, as these matters fall exclusively within the domain of the Appellate Tribunal, and must be respected throughout the recovery proceedings.
➡️ The Bench specifically questioned why no assessment proceedings were initiated under Sections 73 or 74 against the Assessee, reinforcing that determination of tax liability must follow due process and cannot be bypassed through recovery mechanisms when proper assessment procedures are available.
➡️ The Court granted liberty to Revenue to proceed in accordance with law, including proper initiation of assessment proceedings under Sections 73/74, while simultaneously quashing all underlying attachments, emphasizing that legitimate taxpayers cannot be subjected to recovery actions without following the correct procedural safeguards.
➡️ This ruling establishes important protection for GST taxpayers, ensuring that recovery proceedings cannot be used as a substitute for assessment processes, and that Revenue must respect the appeal and stay provisions while following proper due process before taking coercive measures against taxpayers who have already discharged their legitimate liabilities.
✔️ Madras HC – Folium Trading Pvt Ltd vs Deputy Commissioner (ST)
🔥📛 Bombay HC questions ‘voluntariness’ of deposit during search; Flags non-adjudication contrary to Circular
➡️ The Bombay High Court Nagpur Bench has critically examined the Revenue’s failure to properly adjudicate tax liability when treating amounts deposited during search proceedings as “voluntary” despite clear evidence of coercive collection circumstances, establishing that such treatment undermines fundamental tax administration principles.
➡️ The Court emphasized that under clause 5 of the May 25, 2022 Circular, Revenue authorities are legally obligated to investigate taxpayer complaints regarding force or coercion used by officers to obtain deposits during search, inspection, or investigation proceedings, making this a mandatory duty rather than discretionary.
➡️ The judgment highlighted the precedential importance of the Delhi High Court’s Sushil Kumar ruling, which clearly establishes that tax deposits made during search operations or immediately after completion cannot be classified as voluntary payments, thereby creating binding precedent that Revenue authorities must follow.
➡️ Revenue authorities demonstrated significant procedural lapses by failing to address the Delhi HC’s interpretation in their additional affidavits despite being fully aware of this binding precedent, with the Court warning that successive affidavits without addressing contradictory judicial interpretations amount to improper “improvisation” of legal positions.
➡️ The Court has granted additional time to Revenue authorities to justify their position on the delayed filing of their stand and the inconsistent treatment of coercive deposits as voluntary, listing the matter for further hearing on March 6, 2026, while emphasizing that proper adjudication of tax liability must precede any characterization of such payments.
✔️ Bombay HC – Modern Traders v. Deputy Commissioner/Joint Commissioner, Nagpur–II & Ors. [WRIT PETITION NO. 4344 OF 2025]
🔥📛 HC: Revenue retaining goods/vehicles pending confiscation proceedings interferes with owner’s proprietary rights ; Directs release
➡️ The Kerala High Court ruled that GST authorities cannot retain goods in transit merely because confiscation proceedings under Section 130 of the CGST Act have been initiated, as such detention interferes with proprietary rights recognized under Article 300A of the Constitution. The Court emphasized that officers must follow proper detention procedures under Section 129 to legally possess goods, and in absence of such procedures, any possession becomes illegal, granting owners the right to seek release of their articles.
➡️ The Court definitively interpreted Section 130(2) as providing for final release of goods after confiscation proceedings are completed and fine amounts are determined by the final order, rather than any form of provisional release. This interpretation rejects the Revenue’s contention that provisional release can be contemplated only after finalization of confiscation proceedings, emphasizing that the legislature consciously excluded provisional release from Section 130.
➡️ Regarding the timeline for detention orders, the Court held that Section 130 does not contain any provision enabling retention of goods merely due to ongoing proceedings, and officers cannot invoke Section 130 to retain goods and conveyances without proper detention orders under Section 129. This prevents GST officers from exercising uncontrolled powers and ensures adherence to the specific timeline requirements for issuing detention orders.
➡️ The Court clarified that mere notice to initiate confiscation proceedings under Section 130 does not constitute authorization for confiscation, as authorization comes into force only when the final order of confiscation is passed. During the adjudication process, proceedings can only be considered a proposal to confiscate goods, which falls short of actual authorization to confiscate.
➡️ In this case involving a scrap trader’s copper scrap detained during transit, the Court applied principles from Y. Balakrishnan to order the release of goods, emphasizing that authorities cannot retain vehicles and goods indefinitely pending adjudication. The judgment reinforces that penalties paid in lieu of confiscation must be invoked within the time limit under Section 130(7), and authorities cannot retain goods indefinitely by misinterpreting provisional release provisions.
✔️ Kerala HC – Authentic Metals vs The Enforcement Officer [WP(C) NO. 881 OF 2026]
🔥📛 ITC cannot be denied to bona fide purchaser solely for supplier’s GST default in absence of fraud: HC
➡️ The Supreme Court upheld the statutory condition linking Input Tax Credit (ITC) to supplier’s GST deposit but read it down to protect bona fide purchasing dealers, holding that it would violate Article 14 to impose an impossible burden on purchasers to ensure suppliers deposit tax.
➡️ The Court established that the condition linking ITC denial to supplier non-payment applies only to non-bona fide, collusive, or fraudulent transactions, thereby protecting genuine business transactions from being penalized for supplier defaults beyond the purchaser’s control.
➡️ In non-fraud proceedings where no finding of non-bona fide transaction, collusion, or fraud is made, the presumption favors the purchaser as a bona fide buyer, and denial of ITC solely due to supplier’s tax non-payment is legally unsustainable.
➡️ The judgment clarifies that the burden of proof shifts to authorities to establish collusion or fraud to deny ITC, rather than placing the impossible task on purchasers to verify supplier tax compliance across their supply chain.
➡️ Practitioners must distinguish between fraud and non-fraud proceedings when challenging ITC denials, as the legal standard and evidentiary requirements differ significantly, with the Court emphasizing protection of commercial certainty and legitimate business transactions.
✔️ Tripura HC – Malaya Rub-Tech Industries v. Union of India [WP (C) No. 849 of 2022]
🔥📛 HC set-asides order rejecting restoration of GST registration as claim of petitioner was found to be genuine
➡️ The case establishes that GST registration amendment applications must be supported by proper documentation, especially when changing principal place of business, and failure to provide adequate evidence can lead to rejection of amendments and subsequent legal challenges through writ proceedings in High Courts.
➡️ Physical verification procedures conducted by GST authorities must be conducted fairly and based on sufficient evidence, as allegations of dealer non-existence during verification cannot be the sole basis for cancellation when documented proof of business existence and operations is presented by the taxpayer.
➡️ The appellate process remains available to GST taxpayers when SCNs are issued or orders passed, and courts will intervene when authorities act arbitrarily or fail to consider genuine representations, particularly when field verification confirms the taxpayer’s claims of genuine business operations.
➡️ High Courts have jurisdiction to set aside GST orders when authorities fail to follow proper procedures or act unreasonably, emphasizing that taxpayer rights must be protected and authorities cannot rely solely on technicalities when substantive evidence supports the taxpayer’s position.
➡️ The final outcome demonstrates that GST authorities must provide proper hearing opportunities and consider all evidence before taking adverse action, and restoration of registration should be granted when verification confirms the taxpayer’s genuine business claims and allegations of non-existence are proven false.
✔️ Delhi HC – D K Freight Carrier v. Union of India [W.P. (C) no. 7881 of 2025]
🔥📛 SLP dismissed: pre-SCN consultation not mandatory after Notification 79/2022-CT, SCN valid without prior consultation
➡️ The Supreme Court upheld the High Court’s dismissal of a writ petition challenging a GST demand order, emphasizing that the petitioner must first exhaust statutory remedies under Section 107 of the CGST Act rather than approaching writ jurisdiction directly when contesting tax demands involving alleged fake Input Tax Credit (ITC) and fraudulent transactions.
➡️ In cases involving large scale fraudulent availment of ITC across multiple entities, the court held that the mandatory pre-show cause notice consultation requirement may be dispensed with, as such circumstances render the consultation process ineffective and inconsequential to the core issue of fraud detection and tax recovery.
➡️ The constitutional validity challenge to Notification No. 79/2022-Central Tax, which amended rule 142(1A) by changing ‘SHALL’ to ‘MAY’, was deemed premature when the same challenge was already pending before the Supreme Court, and the show cause notice (SCN) was issued after the notification’s modifications were implemented.
➡️ The High Court correctly applied the principle that when substantial questions of law or constitutional validity are involved, and statutory remedies under the CGST Act are readily available, writ jurisdiction becomes discretionary and courts may decline intervention if the petitioner can effectively pursue the appeal mechanism under Section 107.
➡️ The Supreme Court’s final ruling reinforces the hierarchy of remedies in GST matters, establishing that challenges to tax demands and procedural requirements must first utilize the specialized appellate framework of the CGST Act before entertaining writ petitions, particularly where questions of fraud, constitutional interpretation, or complex regulatory provisions are involved.
✔️ SC – Manpar Exim Inc v. Additional Director Directorate General of GST Intelligence [SLP to Appeal (C) No. 3361 of 2026]
