Top 15 Supreme Court Tax Cases 2024 (GST)

Supreme Court rejects Constitutional Validity of Blocking of GST Input Tax Credit in Safari Retreats Case, allows Revenue Appeal Chief Commissioner of Central Goods and Service Tax & Ors vs Safari Retreats Private Ltd. & Ors CITATION: 2024 TAXSCAN (SC) 267

The Supreme Court, in a landmark ruling, upheld the validity of Section 17(5)(d) of the CGST Act, which restricts ITC on goods or services used for constructing immovable property. However, it clarified that ITC may be claimed if the construction is essential for supplying taxable services, such as renting, potentially classifying the property as “plant and machinery.” This overturned the Orissa High Court’s broader interpretation, which allowed ITC for constructing shopping malls used for leasing.

The judgment reaffirmed the government’s authority to impose ITC restrictions while allowing exceptions based on the property’s usage in taxable services. It emphasized that denying ITC does not violate constitutional rights but provides room for taxpayers to argue for specific classifications depending on the role of the property in facilitating taxable services.

Mining Tax Decision to Apply Retrospectively from April 1, 2005: Supreme Court Mineral Area Development Authority & Anr. vs M/S Steel Authority of India & Anr Etc. CITATION: 2024 TAXSCAN (SC) 255

The Supreme Court, in a landmark ruling on August 14, 2024, upheld the authority of state legislatures to impose taxes on mining activities, applying the decision retrospectively from April 1, 2005. The judgment in Mineral Area Development Authority vs. Steel Authority of India Ltd. reversed the 1990 India Cement case, clarifying that royalties are not taxes and empowering states to levy taxes under Entries 49 and 50 of List II of the Constitution. Chief Justice Dr. D.Y. Chandrachud emphasized that this decision resolves ambiguities in tax jurisprudence while maintaining constitutional consistency.

The ruling has significant implications, enabling states to levy taxes retrospectively with liabilities staggered over 12 years from 2026. Penalties and interest were waived for demands before July 25, 2024, providing relief to mining companies. While it boosts state revenues, the decision imposes substantial financial burdens on mining companies, potentially amounting to thousands of crores.

No VAT/Sales Tax on Hiring of Vehicles or Cranes When Control Remains with Contractor: Supreme Court Clarifies It as 'Service' Not 'Sales of Goods' M/s. K.P. Mozika vs Oil and Natural Gas Corporation Ltd. & Ors. CITATION: 2024 TAXSCAN (SC) 305

The Supreme Court, in a landmark ruling, clarified that hiring vehicles or cranes without transferring effective control to the user constitutes a "service" rather than a "sale" under VAT laws. K.P. Mozika, a contractor, had agreements with ONGC and IOCL for the supply of vehicles like trucks and cranes, but the operational control and possession of these vehicles remained with Mozika's team. When ONGC attempted to deduct VAT under the Assam VAT Act, the Gauhati High Court upheld the taxability under VAT, prompting Mozika to appeal to the Supreme Court. The key issue was whether these transactions qualified as deemed sales under VAT or services under the Finance Act, 1994.

Applying criteria from the BSNL v. Union of India case, the Supreme Court found that the agreements did not transfer exclusive legal rights or control of the vehicles to ONGC and IOCL. Distinguishing between licensing goods for use and transferring the right to use goods, the Court ruled that the agreements were service contracts since Mozika retained control and operational responsibility. Overturning the High Court's decision, the Supreme Court held that the transactions were taxable as services under the Finance Act, not as sales under VAT, and permitted the Revenue to recover applicable service tax.

DRI Officers can issue SCN under Customs Act: Supreme Court overturns its ‘Canon India’ Judgment [Read Judgment] COMMISSIONER OF CUSTOMS vs M/S CANON INDIA PVT. LTD. CITATION: 2024 TAXSCAN (SC) 285

The Supreme Court has overturned its 2021 judgment in the Canon India case, restoring the powers of Directorate of Revenue Intelligence (DRI) officers to issue show-cause notices and recover duties under Section 28 of the Customs Act, 1962. A three-judge bench led by Chief Justice DY Chandrachud acknowledged that the earlier judgment failed to consider key circulars and notifications that designated DRI officers as “proper officers” under the Customs Act, thereby affecting its correctness. The review petition filed by the Customs Department was allowed, reaffirming the authority of DRI and other similar agencies to initiate actions under the Customs Act.

This ruling addresses significant procedural and jurisdictional issues raised in the Canon India case, where the classification of imported digital cameras was disputed by customs authorities. The earlier decision had invalidated DRI’s role, citing that they were not “proper officers” to reassess duties under the Act. The government, represented by Additional Solicitor General N Venkataraman, argued that the judgment overlooked six key errors. This decision now ensures that DRI and similar agencies retain their jurisdiction, with implications for customs law enforcement and ongoing reassessment cases.

Service Tax Not Separately Payable on Interchange Fee as Tax has been paid on Merchant Discount Rate: Supreme Court rules in Citibank Case COMMISSIONER OF GST AND CENTRAL EXCISE vs M/S CITIBANK N.A. CITATION: 2024 TAXSCAN (SC) 280

The Supreme Court, in the case involving Citibank NA, clarified that service tax is not separately payable on the interchange fee when tax has already been paid on the Merchant Discount Rate (MDR). The bench, led by Justices Sanjiv Khanna, Sanjay Kumar, and R. Mahadevan, upheld that MDR represents a unified service encompassing all related fees, including interchange fees. The Court emphasized that taxing the interchange fee separately would result in redundancy and complicate tax administration. Citing Justice S. Ravindra Bhat’s analysis from the case's 2021 judgment, the Court concluded that service tax on MDR inherently covers the entire transaction, simplifying tax collection and ensuring no revenue loss.

The Court further noted that the legislative intent under Section 65(33a) of the Finance Act supports unified taxation of card services to prevent double taxation. It rejected the Revenue's argument for separate taxation of the interchange fee, ruling that the existing tax paid on MDR by the acquiring bank suffices. By doing so, the Court upheld that the entire service tax obligation was fulfilled without any loss to the exchequer, ruling in favor of Citibank and dismissing the Revenue’s appeal.

Customs Duty payable by Owner with Interest on Confiscated Goods despite Payment of Redemption Fine: Supreme Court M/S NAVAYUGA ENGINEERING CO. LTD vs UNION OF INDIA & ANR CITATION: 2024 TAXSCAN (SC) 246

The Supreme Court ruled that importers must pay customs duty along with fines and other charges when confiscated goods are redeemed after paying a fine under Section 125 of the Customs Act, 1962. The bench, comprising Justices PS Narasimha and Aravind Kumar, clarified that duty liability under Section 125(2) is independent of the duty assessment under Section 28, and interest on delayed payments applies under Section 28AB once the duty determination process is invoked. The Court reaffirmed that the obligation to pay customs duty arises when the owner redeems confiscated goods by paying a fine, and this option is accepted by the Department.

Referencing the case Union of India v. M/s Security and Finance (P) Ltd (1976), the Court upheld the department's authority to levy duty and interest in addition to the redemption fine. It emphasized that Section 125 does not exempt the importer from duty or interest obligations. This ruling also clarified that duty assessment under Section 28 can proceed even when liability arises under Section 125(2), distinguishing it from earlier judgments. Importers must ensure compliance with both redemption fines and customs duty obligations to avoid additional interest on delayed payments.

Relief to Ambuja Cement Ltd: “Purchase Price” not Inclusive of VAT, Supreme Court upholds Exclusion of VAT already Paid on Purchases THE STATE OF GUJARAT vs M/S. AMBUJA CEMENT LTD CITATION: 2024 TAXSCAN (SC) 253

The Supreme Court ruled that value-added tax (VAT) is not included in the definition of "purchase price" under the Gujarat Value Added Tax Act, 2003 (GVAT), providing relief to Ambuja Cement. The bench, comprising Justices Abhay S. Oka and Augustine George Masih, clarified that VAT is excluded from the calculation of the purchase price for tax purposes, as it is not listed among the duties or taxes specified in Section 2(18) of the GVAT Act. The judgment emphasized that the legislative intent was to limit the inclusion of only specific levies, such as those under the Central Excise Tariff Act and the Customs Act, while excluding VAT. This strict interpretation aligns with the principles of statutory construction in tax laws.

The Court further explained that VAT already paid on purchases, and purchases on which no VAT credit was claimed or granted, should be excluded from the taxable turnover while computing tax liability under Section 11(3)(b) of the GVAT Act. It highlighted the importance of a precise and unambiguous reading of tax statutes, noting that the legislature’s mandate must not be expanded to include unintended categories. This ruling reinforces the need for strict adherence to the statutory language in tax law, ensuring taxpayers are only taxed as expressly provided by the law.

Labelling or Re-labelling Cartons Constitute ‘Manufacture’ under Central Excise Act for Cenvat Credit and Rebate: Supreme Court COMMISSIONER OF CENTRAL EXCISE BELAPUR vs JINDAL DRUGS LTD CITATION: 2024 TAXSCAN (SC) 212

The Supreme Court ruled that labeling or re-labeling containers qualifies as "manufacture" under the Central Excise Act, 1944, allowing Jindal Drugs to claim Cenvat credit and rebates. The bench, comprising Justices Abhay S. Oka and Ujjal Bhuyan, highlighted the 2008 amendment to Note 3 of Chapter 18 of the Central Excise Tariff Act, which expanded the definition of manufacturing to include labeling, repacking, or any process rendering goods marketable. The Court dismissed the Excise Department’s demand for recovery, affirming that Jindal Drugs’ relabeling activities at its Taloja unit met this criterion.

Rejecting the department's argument that labeling already marketable goods does not constitute manufacturing, the Court clarified that any process enhancing marketability qualifies under Section 2(f)(ii) of the Act. It upheld CESTAT’s decision, ensuring Jindal Drugs’ right to claim Cenvat credit and rebates while dismissing associated penalties. This judgment reinforces taxpayers’ rights and provides a crucial interpretation of the amended manufacturing definition under the law.

Import of Cameras Stabilizer different than mentioned in Bill of Entry Amounts to Mis Declaration: Supreme Court upholds Penalties Imposed by CESTAT M/s Global Technologies and Research vs Principal Commissioner of Customs CITATION: 2024 TAXSCAN (SC) 194

The Supreme Court upheld the Customs, Excise & Service Tax Appellate Tribunal’s (CESTAT) order, holding that the import of camera stabilizers differing from those described in the Bill of Entry constitutes misdeclaration. The Court noted discrepancies between the hardware and software of the imported goods and earlier versions, confirming the undervaluation and misdeclaration. The bench, comprising Justices Abhay S. Oka and Pankaj Mithal, supported the adjudicating authority’s assessment of the value at ₹66,18,575 against the declared ₹12,87,742. Penalties were imposed under Sections 112(a) and 114AA of the Customs Act, with a redemption fine and differential customs duty of ₹16,22,228 also ordered.

The appellant argued that the imported goods were different from earlier items, citing market conditions and manufacturer invoices, but the Court found these claims unsubstantiated. The Court noted the absence of evidence for lower versions in the market and inconsistencies in the appellant’s explanations. Upholding the CESTAT’s decision, the Court concluded that the valuation rules were correctly applied, penalties were justified, and there was no merit in the appeal. Consequently, the appeal was dismissed, affirming the Customs authorities' findings and penalties.

Mobile Tower, PFBs are “Goods”, Not immovable Property making them Valid Inputs: Supreme Court allows Cenvat Credit Claim M/S BHARTI AIRTEL LTD vs THE COMMISSIONER OF CENTRAL EXCISE CITATION: 2024 TAXSCAN (SC) 289

The Supreme Court ruled that mobile towers and pre-fabricated buildings (PFBs) are "goods" rather than immovable property, allowing Mobile Service Providers (MSPs) to claim CENVAT credit under the CENVAT Credit Rules, 2004. Resolving conflicting rulings from the Bombay and Delhi High Courts, the Court held that these structures, delivered in a knocked-down state and fastened for stability, remain movable as they can be dismantled and relocated without damage. The judgment clarified that fastening to the ground does not make an object immovable unless intended as a permanent fixture.

Applying functionality and utility tests, the Court deemed mobile towers and PFBs integral to telecom operations, qualifying them as capital goods or inputs under the Rules. This decision provides significant tax relief to the telecom sector, ensuring that operational stability does not affect the classification of movable property. The ruling has far-reaching implications, clarifying disputes involving movable versus immovable property classifications in tax administration.

Imported Cars: No Duty Liability on Mere Possession, rules Supreme Court NALIN CHOKSEY vs THE COMMISSIONER OF CUSTOMS CITATION: 2024 TAXSCAN (SC) 292

The Supreme Court ruled that subsequent purchasers of imported vehicles cannot be held liable for customs duty evasion committed by the original importer. In a case involving a Porsche Carrera imported in 2002 and later sold to Nalin Choksey, the Court reversed the Kerala High Court’s decision, reinstating the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT)’s finding that Choksey was a bona fide purchaser with no involvement in the importation process.

Clarifying Section 28 of the Customs Act, the Court held that customs duty liability rests solely with the importer and cannot extend to subsequent purchasers. It noted that Section 125(1) allows liability to shift to the possessor only when the owner is unidentified, which was not applicable here. The Court emphasized that the vehicle’s registration under the Motor Vehicles Act remained with the original importer, confirming Choksey’s innocence. It directed the Customs Department to pursue claims against the original importer, quashing the High Court’s ruling.

Chewing Tobacco Packed in HDPE Bags Cannot be Taxed as Retail Product Under Excise Act: Supreme Court Commissioner of Central Excise vs M/s Miraj Products Pvt. Ltd. CITATION: 2024 TAXSCAN (SC) 243

The Supreme Court ruled that chewing tobacco packed in High-Density Polyethylene (HDPE) bags does not qualify as a retail product for excise duty under the Central Excise Act, 1944. In a case involving Miraj Products Pvt. Ltd., the Revenue argued that the HDPE bags, containing smaller pouches, constituted retail packaging under Rule 2(g) of the Packaged Commodity Rules, 1977. However, the respondent claimed these were wholesale packages sold to distributors, not retail consumers.

The bench of Justices A.S. Oka and Pankaj Mithal upheld the Central Excise Appellate Tribunal’s decision, finding that the HDPE bags were wholesale packages under Rule 2(x) and did not meet the criteria for retail sale under Rule 2(q). Even if the individual pouches were retail products, their grouping within HDPE bags aimed at distribution to intermediaries classified them as wholesale. The Court dismissed the appeal, affirming that such packaging is not subject to retail excise provisions.

No Application of S. 71, Customs Act on Imported Goods stored outside Notified Public Bonded Warehouse with Permission: Supreme Court M/S. BISCO LIMITED vs COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE CITATION: 2024 TAXSCAN (SC) 196

The Supreme Court held that Section 71 of the Customs Act, 1962, does not apply when imported goods are stored outside a notified public bonded warehouse with authorized permission. For 264 cases stored outside the warehouse but within the appellant’s factory premises with the Superintendent’s approval, the Court deemed the invocation of Sections 71, 72, and the levy of interest under Section 28AB unjustified. However, for 27 cases missing from both the warehouse and the factory premises, the Court upheld the CESTAT's finding of improper removal, justifying customs duty and interest.

The judgment partially modified the CESTAT order, affirming liability for the missing 27 cases but setting aside penalties and interest for the 264 cases stored outside the warehouse. The Court clarified that goods stored with proper authorization are not considered improperly removed, offering guidance on warehousing provisions under the Customs Act.

No Legal Action against GST Officers Acting in Good Faith: Supreme Court Expunged Gujarat HC’s Tentative Opinion THE STATE OF GUJARAT & ANR vs PARESH NATHALAL CHAUHAN CITATION: 2024 TAXSCAN (SC) 290

The Supreme Court expunged observations made by the Gujarat High Court in an interim order regarding the "good faith" clause under Section 157 of the GST Act. The High Court had tentatively opined that statutory protection under this clause “may not” be available to GST officers in cases of alleged unauthorized or illegal actions during search operations. The Supreme Court clarified that the good faith clause serves as a defense for statutory functionaries, protecting their actions if carried out in good faith, and that its applicability must be adjudicated based on specific circumstances during legal proceedings.

The apex court held that the High Court’s tentative observations amounted to premature rulings and could compromise fairness in future adjudications involving the officers. It emphasized that the determination of good faith should occur only in proceedings initiated against a functionary, not during unrelated writ petitions. Consequently, the Supreme Court expunged the contentious portion of the High Court’s interim order to preserve judicial impartiality and disposed of the appeal.

Challenge on Constitutional Validity of Circular imposing Central Tax on Intra-State Supply of Services: SC directs to Approach HC ZONASHA ESTATES AND PROJECTS vs UNION OF INDIA & ORS CITATION: 2024 TAXSCAN (SC) 108

The Supreme Court dismissed a writ petition filed under Article 32 by Zonasha Estates and Projects challenging the constitutional validity of paragraph 2 of Notification No. 11 of 2017-Central Tax (Rate). The circular, issued under the Central Goods and Services Tax Act, 2017, pertains to the imposition of a central tax on the intra-state supply of services. The petitioner contended that the provision, which deems one-third of the total value in such transactions to be attributable to land, is unconstitutional. The two-judge bench, comprising Justice B.V. Nagarathna and Justice Augustine George Masih, declined to entertain the petition, directing the petitioner to approach the High Court under Article 226 for redressal.

The Court observed that writ jurisdiction under Article 32 was not the appropriate forum for the matter and left the petitioner at liberty to seek relief through the High Court. The bench emphasized the need for the petitioner to challenge the issue at the High Court level, ensuring adherence to the procedural framework of the Constitution. This decision highlights the importance of following judicial hierarchy when contesting the constitutional validity of legislative or administrative actions.

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