LATEST GST CASE LAWS: 27.07.2026
🔥📛 SC to examine constitutional validity of extinguishing accumulated Compensation Cess ITC without transition mechanism
➡️The Supreme Court has issued notice in a constitutional challenge to Notification No. 2/2025-Compensation Cess (Rate), which discontinued Compensation Cess following the recommendations of the 56th GST Council meeting.
➡️The petitioner argues that Compensation Cess ITC, validly accumulated after satisfying Section 16 of the CGST Act read with Section 11 of the Compensation Cess Act, is a vested statutory right and cannot be extinguished merely by discontinuing the levy.
➡️It is contended that accumulated cess credit constitutes property protected under Article 300A of the Constitution, and its lapse without clear legal authority, public purpose, refund, or compensation is constitutionally impermissible.
➡️The challenge highlights the absence of any transitional mechanism permitting the carry-forward, utilisation, or refund of accumulated Compensation Cess ITC, exposing affected taxpayers, particularly automobile dealers, to substantial financial losses estimated at ₹2,500 crore.
➡️The Supreme Court has tagged the petition with the lead batch filed by the Federation of Automobile Dealers Association, condoned the delay in refiling, and listed the connected matters for hearing on March 25, 2026.
✔️ SC – Adityaa Energy Global Trading (India) Private Limited v. Union of India & Ors [Writ Petition(s)(Civil) No(s). 864/2026]
🔥📛 HC: SCN/proceedings against non-est entity invalid; Revenue may initiate fresh proceedings against amalgamated company
➡️On the effective date of amalgamation, all existing tax liabilities, claims, rights, notices, orders, and appeals of the amalgamating company pass to the amalgamated company and must thereafter be pursued by or against the successor entity.
➡️Any GST liability relating to a period before amalgamation must be imposed or recovered through proceedings initiated in the name of the amalgamated company; proceedings against the amalgamating company after it has ceased to exist are invalid.
➡️The Bombay High Court quashed the June 27, 2025 show-cause notice and December 19, 2025 order issued to IDFC Alternatives Limited, which had merged with IDFC First Bank Limited under the NCLT order dated November 22, 2022.
➡️Merely mentioning that the former company had merged, or showing that the successor knew of and participated in the proceedings, cannot cure the defect, particularly where the notice and order remained addressed to and uploaded on the GST portal of the non-existent entity despite authorities being informed of the merger.
➡️Relying on the principle that participation does not validate proceedings against a non-existent entity, the Court distinguished Mahagun Realtors, applied Maruti Suzuki, and clarified that the Revenue may initiate fresh proceedings against IDFC First Bank Limited as the successor company.
✔️ Bombay HC – IDFC First Bank Ltd Vs Union of India & Ors [WRIT PETITION NO. 1787 OF 2026]
🔥📛 HC: Appeal is a valuable statutory right, ordinarily not to be denied; Condones delay beyond limitation
➡️The Karnataka High Court, Dharwad Bench, restored the Assessee’s GST appeal despite the delay exceeding the statutory condonable period, holding that the valuable right of appeal should not be denied where the dispute has not been examined on merits.
➡️The Assessee claimed that the adjudication order dated January 8, 2025 was uploaded only under the portal’s “Additional Notices and Orders” tab, not the regular “View Notices and Orders” tab, and was therefore discovered only on September 8, 2025.
➡️Although the Revenue asserted that the order had also been sent by RPAD, the Court found that only the summary order, and not the complete adjudication order, had been properly served, which materially affected the Assessee’s ability to file the appeal within time.
➡️The Court acknowledged that the appellate authority had no statutory power to condone delay beyond the prescribed limit, but exercised its extraordinary writ jurisdiction in the peculiar circumstances to prevent the Assessee from losing the opportunity to contest the demand on merits.
➡️Relying on precedents including Simplex Infrastructures, Vishal Durgadas Jaiwant, Shaik Abdul Azeez and M.R. Traders, the Court restored the appeal and quashed the garnishee order issued during its pendency, reinforcing that procedural lapses in service should not defeat substantive appellate rights.
✔️ Karnataka HC – SEPL Infra Private Limited vs Joint Commissioner of Commercial Taxes (Appeals) & Ors. [WRIT PETITION NO. 104931 OF 2026 (T-RES)]
🔥📛 HC: Declines to examine taxability of diagnostic services; Directs AAR to decide after quorum restored
➡️The Delhi High Court declined to determine whether the assessee’s diagnostic services were taxable under GST, holding that such questions should ordinarily be decided through the statutory advance-ruling mechanism rather than under Article 226.
➡️Issues concerning classification of diagnostic services, applicability of exemption notifications and the resulting GST liability fall within the jurisdiction of the Authority for Advance Ruling under Chapter XVII of the CGST Act.
➡️The assessee had challenged a departmental communication stating that its diagnostic services attracted GST at 18% and sought directions for disposal of its pending advance-ruling applications, which could not earlier be heard due to lack of quorum.
➡️Since the appointment of the Union Government Member restored the AAR’s quorum and made the statutory forum functional, the Court found no justification to independently adjudicate matters already placed before the AAR.
➡️The writ petitions were disposed of without any finding on merits, with all factual and legal questions left open; the AAR was directed to decide the applications independently and expeditiously, without being influenced by the departmental communication.
✔️ Delhi HC – Hemogenomics Private Limited Vs Government of NCT of Delhi & Ors [W.P.(C) 1973/2026]
🔥📛 SC: Refers consolidated SCN issue to Justice P.S. Narasimha Bench; Tags all connected matters
➡️The Supreme Court has directed that all pending matters concerning the validity of a single show-cause notice and adjudication order covering multiple financial years be tagged together and listed before a Bench presided over by Justice P.S. Narasimha. Lakshmi Mobile Accessories, being the oldest matter, will serve as the lead case.
➡️The immediate challenge arises from the Delhi High Court’s decision in JBN Impex Private Limited, which upheld a consolidated notice and adjudication under Section 74 of the CGST Act. The High Court held that the Act does not expressly prohibit consolidation and that a combined proceeding may be justified where fraudulent input tax credit claims arise from interconnected transactions spanning several years.
➡️The issue is already pending before the Supreme Court in connected matters, including Brilliant Metals and Pramur Homes. Their tagging with the present appeals indicates that the Court may provide an authoritative ruling on whether GST authorities can combine multiple tax periods or financial years in one proceeding.
➡️High Courts have adopted conflicting approaches. The Bombay High Court has questioned the legality of clubbed notices and referred the issue to a larger Bench, while decisions such as Jagruteshwar Metals and ICAD School of Learning have preferred rulings against consolidation over the Delhi High Court’s view. The Gujarat proceedings have also recorded the Revenue’s submission that legislative amendments addressing clubbed notices are under consideration.
➡️The Kerala, Karnataka and Madras High Courts have generally required year-wise proceedings. They have held that combining multiple financial years may disregard statutory time limits, obscure the distinction between Sections 73 and 74, and prejudice the taxpayer’s defence; accordingly, consolidated notices or orders have been set aside or directions issued for separate adjudication for each financial year.
✔️ SC – JBN Impex Private Limited vs Additional Commissioner and Ors [Petition(s) for Special Leave to Appeal (C) No(s). 21345/2026]
🔥📛 HC: Absent tax incidence within territory, Transit State cannot invoke Section 129; Quashes penalty
➡️The Allahabad High Court quashed penalty orders under Section 129, holding that Uttar Pradesh, being only a transit State, lacked jurisdiction where goods originated in West Bengal, were destined for Delhi, and were accompanied by a valid tax invoice and e-Way Bill.
➡️A transit State may inspect goods and examine their documents, but it can assume penalty jurisdiction only when the stated origin or destination is doubtful, since that enquiry may affect whether any tax is payable within that State.
➡️Where the origin and destination are undisputed and no tax is payable in the transit State, Section 129 cannot be used to detain goods or impose penalties merely for non-generation of an e-tax invoice, purchases from unregistered persons, or later suspension of the recipient’s GST registration.
➡️The Court held that penalising goods in every State through which they pass, despite no local tax liability, could expose the same movement to repeated penalties and unconstitutionally restrict the free movement of trade under Article 301.
➡️Cross-empowerment under the IGST Act permits Union and State GST authorities to act regarding taxable transactions within their respective territorial scope; it does not create nationwide authority for one State’s GST officers to penalise transactions taxable in another State, nor can a purchaser be blamed for an e-tax invoice dependent on facts known only to the supplier.
✔️ Allahabad HC – Maruti Enterprises vs State of U.P. and another [WRIT TAX No. – 1423 of 2026]
🔥📛 HC: Quashes Section 128A waiver rejection over non-speaking SCN, erroneous Form GST SPL-05 order
➡️The Madras High Court set aside the order rejecting the assessee’s application for waiver of interest and penalty under Section 128A of the CGST Act.
➡️The Court held that the show cause notice issued in Form GST SPL-03 was defective because it did not state any reasons for proposing to reject the waiver application.
➡️Although the assessee replied to the notice, the authority later issued Form GST SPL-05, which is prescribed for allowing a waiver application, while granting no actual waiver of interest or penalty.
➡️The Court rejected the Revenue’s argument that Form GST SPL-05 had been issued inadvertently and that independent grounds existed to justify rejection, emphasizing the need for a clear and lawful decision-making process.
➡️The Revenue was permitted to issue a fresh, reasoned show cause notice and re-adjudicate the application in accordance with law, with recovery of interest and penalty barred until the fresh proceedings are completed.
✔️ Madras HC – Murugesan Kaliyappan Vs The Commercial Tax Officer [WP No. 16892 of 2026]
