GST Officers Cannot Levy Tax, Interest or Penalty on VAT-Regime Works Contract: Allahabad HC Holds Authorities Acted Without Jurisdiction [Read Order]
The Judge held that the GST department “cannot assume jurisdiction” merely because the payments were made post-GST, as “no services were rendered under the GST regime
Allahabad High Court, GST Officers, Levy Tax, VAT-Regime Works
Allahabad High Court, GST Officers, Levy Tax, VAT-Regime Works
“This Court feels that the authorities have exceeded its jurisdiction for initiating the present proceeding under Section 73 of the Act” said the Allahabad High Court on the issue of the GST ( Goods and Services Tax ) department acting on the works executed entirely during the VAT regime.
The petitioner, Vimlesh Kumar Contractor, a registered works contractor, had executed civil construction contracts for UP Jal Nigam during Assessment Years 2015-16 and 2016-17, a period governed by the VAT Act.
Although the work was completed before the introduction of GST, payments were released later. The Jal Nigam had already deducted VAT @ 4% on such payments, and issued corresponding certificates.
However, the GST department issued a notice under Section 73 in January 2024 for FY 2018-19, alleging a mismatch and proceeded to pass an ex parte assessment order dated 28 April 2024, imposing tax, interest and penalty. The petitioner’s appeal was also dismissed on 21 January 2025.
Justice Piyush Agarwal noted that the entire proceedings was from a mere mismatch between Form 26AS and GSTR-3B, without any inquiry into whether the payments related to pre-GST work. After summoning and examining original records from UP Jal Nigam, the Court found clear evidence that the work orders pertained only to VAT-period contracts.
The Judge held that the GST department “cannot assume jurisdiction” merely because the payments were made post-GST, as “no services were rendered under the GST regime.”
The Court also said that if any doubt existed, the GST authorities should have referred the matter to the VAT assessing authority, instead of initiating proceedings under the GST law.
The State could not point to any provision under the GST Act or Rules enabling taxation of amounts received after GST implementation for work done entirely before its enforcement.
The Court held that the authorities had “exceeded their jurisdiction” in initiating proceedings under Section 73 for such pre-GST transactions and declared the assessment and appellate orders unsustainable.
The high court, while allowing the writ petition, not only quashed the impugned orders but also directed that any amount deposited by the petitioner be refunded with interest from the date of deposit until actual payment, within one month of producing the certified copy of the judgment.
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