Supreme Court & High Courts Weekly Round-Up

THE COMMISSIONER TRADE AND TAXDELHI vs M/S SHANTI KIRAN INDIA (P) LTD. CITATION : 2025 TAXSCAN (SC) 316

The Supreme Court under the Delhi Value Added Tax Act, 2004 (DVAT Act), has held that Input Tax Credit (ITC) cannot be denied to registered purchasing dealers merely because the selling dealer failed to deposit the Value Added Tax (VAT) collected with the government. The Court clarified that the fault lies with the defaulting selling dealer, not with a bona fide purchaser who has paid the tax in good faith against valid tax invoices. The issue arose under Section 9(2)(g) of the DVAT Act, which had earlier been interpreted by the Delhi High Court in On Quest Merchandising India Pvt. Ltd. v. Government of NCT of Delhi (2017) to ensure that genuine purchasers are not penalised for the seller’s non-compliance. The apex court examined this provision and reaffirmed the principle that denial of ITC in such bona fide cases would offend Article 14 of the Constitution.

The Bench comprising Justice Manoj Misra and Justice Nongmeikapam Kotiswar Singh, upheld the Delhi High Court’s decision, observing that the selling dealers were duly registered at the time of transactions and that there was no evidence indicating any collusion or irregularity in the invoices. Finding no reason to interfere with the High Court’s directions granting ITC to genuine purchasers, the Supreme Court dismissed the Department’s appeals in full.

Supreme Court Upholds VAT ITC Benefit to Bona Fide Dealers

THE COMMISSIONER TRADE AND TAXDELHI vs M/S SHANTI KIRAN INDIA (P) LTD CITATION : 2025 TAXSCAN (SC) 317

The Supreme Court under Section 9(2)(g) of the Delhi Value Added Tax Act, 2004 (DVAT Act) ruled concerning the eligibility of Input Tax Credit (ITC) where a selling dealer fails to deposit the tax collected with the Government. The case, Commissioner, Trade and Tax, Delhi v. Shanti Kiran India (P) Ltd., revolved around whether a bona fide purchasing dealer, who had paid tax to a registered selling dealer under valid invoices, could still claim ITC despite the selling dealer’s default in remitting the tax. The issue called for an interpretation of the statutory provision in light of constitutional protections under Article 14, as previously discussed in On Quest Merchandising India Pvt. Ltd. v. Government of NCT of Delhi (2017), where the Delhi High Court had “read down” Section 9(2)(g) to protect bona fide dealers.

A Bench comprising Justice Manoj Misra and Justice Nongmeikapam Kotiswar Singh, upheld the Delhi High Court’s interpretation and dismissed the Department’s appeals. The Court observed that the selling dealers were duly registered at the time of the transactions and that there was no material evidence suggesting collusion, fraud, or false invoicing. The Court reaffirmed that the appropriate remedy for the tax authorities lies in proceeding against the defaulting selling dealer rather than depriving the purchaser of ITC. Consequently, the Supreme Court upheld the High Court’s ruling, allowing the respondent’s ITC claims after due verification and directing the disposal of any pending applications.

HIGH COURT

GST dept fails to comply with Mandatory Process of Return scrutiny before Initiating Demand: Gauhati HC Quashes ₹19.5 Crore Notice against PepsiCo

M/S. PEPSICO INDIA HOLDINGS PVT.LTD vs THE UNION OF INDIA AND 3 ORS CITATION : 2025 TAXSCAN (HC) 2056

The Gauhati High Court quashed a Goods and Services Tax (GST) demand notice amounting to ₹19.5 crore issued to Pepsico India Holdings Pvt. Ltd., holding that the GST Department failed to comply with the mandatory procedure of return scrutiny under Section 61 of the Central Goods and Services Tax Act, 2017, before invoking jurisdiction under Section 73(1) of the same Act. The case arose from a show cause notice alleging a mismatch between the petitioner’s annual return in Form GSTR-9C and the reconciliation statement, claiming wrongful availment of Input Tax Credit (ITC) for the period from July 2017 to March 2018. The petitioner challenged the notice as being without jurisdiction.

The Bench of Justice Soumitra Saikia allowed the writ petition, holding that the jurisdictional conditions for invoking Section 61 of the CGST Act were not satisfied, rendering the subsequent issuance of the show cause notice under Section 73(1) ultra vires and without authority of law. The Court observed that the entire cause of action was contrary to the binding instructions and circulars issued by the Central Board of Indirect Taxes and Customs (CBIC) and that failure to issue a notice in Form ASMT-10 vitiated the proceedings ab initio. Consequently, the Court quashed the impugned show cause notice, emphasizing that non-compliance with the mandatory preconditions under Section 61 invalidates any subsequent proceedings under Section 73.

Failure to Verify Importer's Credentials by CHA Employees Attracts Penalty: Delhi HC Dismisses Appeals Upholding CESTAT Order

SUSHIL SHARMA vs COMMISSIONER OFCUSTOMS [EXPORT] CITATION : 2025 TAXSCAN (HC) 2057

The Delhi High Court upheld penalties imposed on two employees of a Customs House Agent (CHA) firm for their failure to verify the credentials of an importer and for facilitating the clearance of misdeclared goods. The matter arose under the Customs Act, 1962 and the Customs House Agent Regulations, following the seizure of foreign-origin cigarettes valued at over ₹3.4 crore concealed within a consignment of mattresses imported by M/s Digital Exports and cleared by the CHA firm M/s Dilip Kumar Thakur. The appellants, Sushil Sharma and Shekhar, both employees of the CHA firm, had challenged the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) which had upheld the penalties while granting partial relief by reducing them from ₹50 lakhs each to ₹10 lakhs each.

The Division Bench comprising Justice Prathiba M. Singh and Justice Shail Jain dismissed the appeals, holding that no substantial question of law arose from the CESTAT’s decision. The Court noted that Shekhar, as an ‘H’ card holder, was actively engaged in the clearance process and was aware of the consignment’s illegal nature, while Sharma, as a supervisor, bore responsibility for ensuring compliance and could not evade liability. The Bench observed that both appellants had failed to discharge their duties in accordance with the Customs House Agent Regulations, making them culpable for abetting the clearance of misdeclared goods. The Court affirmed the order and directed the appellants to deposit the penalty amount of ₹10 lakhs each within three months.

DRI Officers Held as 'Proper Officers' under Customs Act: Delhi HC Allows Revenue's Appeal Following Supreme Court Verdict

COMMISSIONER OF CUSTOMS, INLANDCONTAINER DEPOT (EXPORT)TUGHLAKABAD, DELHI vs SUDHIR GULATI CITATION : 2025 TAXSCAN (HC) 2058

The Delhi High Court allowed an appeal filed by the Commissioner of Customs, setting aside a remand order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The key issue before the Court concerned the jurisdiction of officers of the Directorate of Revenue Intelligence (DRI) to issue show cause notices under Section 28 of the Customs Act, 1962. CESTAT had earlier remanded the matter to the original adjudicating authority on the ground that the question of whether DRI officers were “proper officers” under Section 28 was sub judice.

The Division Bench comprising Justice Prathiba M. Singh and Justice Shail Jain relied on the Supreme Court’s review judgment in Commissioner of Customs v. M/s Canon India Private Limited (2021), which definitively held that DRI officers are ‘proper officers’ under Section 28 of the Customs Act and possess the authority to issue show cause notices. The Bench observed that the CESTAT’s remand order, based on an outdated legal position, could not be sustained in view of the Supreme Court’s clarification. Consequently, the High Court set aside the remand order, and restored the matter before CESTAT for adjudication on merits.

Printing Service Predominant over Supply of Goods: Kerala HC upholds 18% GST on Digital Photo Books

M/S. STARK PHOTO BOOK vs THEASSISTANT COMMISSIONER (INTELLIGENCE) CITATION : 2025 TAXSCAN (HC) 2059

The Kerala High Court dismissed a batch of writ petitions filed by several digital photo printing firms, including M/s Stark Photo Book and Indot Color World, concerning the classification and applicable Goods and Services Tax (GST) rate on printing services. The dispute centered on whether printing customer-supplied digital images onto paper constitutes a supply of goods or a supply of services under the Central Goods and Services Tax (CGST) Act, 2017.

The Bench of Justice Ziyad Rahman A.A. upheld the Revenue’s position, holding that the activity constituted a composite supply, wherein the principal supply is the service of printing, and not the sale of goods. The Court reasoned that the title to the content of the photographs or digital images remains with the customer, and the paper and ink are merely incidental to the service rendered. Applying the “principal supply” test under the CGST framework, the Court concluded that the dominant element was the service of printing, classifiable under SAC 998386, and therefore taxable at 18%. Consequently, the Court dismissed the writ petitions, affirming the higher tax rate.

Unutilized Goods Not Defective: Punjab & Haryana HC Dismisses SEZ Developer's Plea, Upholds Duty Refund Under Rule 25

M/s Quarkcity India (Pvt.) Ltd.vs Union of India and others CITATION : 2025 TAXSCAN (HC) 2060

The Punjab & Haryana High Court dismissed a writ petition filed by M/s Quarkcity India (Pvt.) Ltd, an SEZ developer, upholding the demand for a refund of customs duty exemptions on unutilized goods under the SEZ Rules, 2006. The petitioner had challenged the authorities’ action levying a duty of ₹47 lakhs and directing a deposit of ₹6,59,700/- for permission to dispose of unutilized goods, arguing that the goods had become unusable and should be dealt with under Rule 27(9), which applies to goods found defective or unfit for use.

The Division Bench comprising Justice Lisa Gill and Justice Meenakshi I. Mehta examined the statutory scheme and distinguished the scope of Rule 27(9) and Rule 25. The Bench observed that Rule 27(9) applies only to goods found defective or damaged, whereas Rule 25 applies when goods remain entirely unutilized. The Tribunal held that the goods became unutilized due to non-use within the permitted period and not due to defects, the High Court held the demand for refund of duty exemptions under Rule 25 to be legally valid, thereby affirming the authorities’ action.

Mere Reiteration of Order Not Wilful Disobedience: Delhi HC Drops Contempt Proceedings Against Principal Commissioner

COURT ON ITS OWN MOTION vsANURADHA MISRA CITATION : 2025 TAXSCAN (HC) 2061

The Delhi High Court disposed of contempt proceedings initiated against Ms. Anuradha Misra, the then Principal Commissioner of Income Tax (PCIT), holding that her order, though similar to a previously set-aside one, did not constitute ‘willful disobedience’ under the Contempt of Courts Act, 1971. The proceedings arose from the PCIT’s rejection of a stay application filed by assessee Dhruva Goel, who had challenged a tax demand exceeding ₹8 crores and sought a stay of the demand pending appeal. The PCIT, following CBDT circulars, directed the assessee to pay 20% of the demand. When the High Court set aside the order for lack of reasons and directed a fresh, reasoned order, the PCIT issued a subsequent order with similar directions. Observing this, the High Court initiated contempt proceedings, forming a prima facie opinion of possible willful disobedience.

The Bench of Justice Vikas Mahajan examined the matter and found that the PCIT’s second order was not devoid of reasoning, as it was grounded in CBDT circulars and an assessment of the assessee’s financial capacity. Relying on the principle that civil contempt requires willful disobedience with a bad motive, the Court concluded that there was no evidence of evil intent or deliberate defiance. The Bench held that the PCIT had applied her mind and that an error of judgment, absent improper motive, does not amount to contempt. Consequently, the Court dropped the contempt proceedings against the retired Principal Commissioner, reinforcing that the essential ingredient of “willful disobedience” was missing.

IBC Moratorium Not a Shield for Directors in Cheque Bounce Cases: Bombay HC Sets Aside Discharge Order

Ortho Relief Hospital andResearch Centre vs M/s. Anand Distilleries CITATION : 2025 TAXSCAN (HC) 2062

The Bombay High Court held that the moratorium under the Insolvency and Bankruptcy Code, 2016 (IBC) does not prevent criminal proceedings against natural persons, such as company directors, for offences under the Negotiable Instruments Act, 1881 (NI Act), even if insolvency proceedings against the company were initiated prior to the cheque dishonour. The case arose from a cheque bounce complaint filed by Ortho Relief Hospital and Research Centre against the directors of M/s Anand Distilleries. The petitioner had extended a loan of ₹15 lakhs to the company, which was dishonoured in December 2018. The trial court had discharged the directors on the ground that insolvency proceedings had commenced before the cause of action arose, rendering the criminal complaint allegedly non-maintainable.

The Bench of Justice M.M. Nerlikar overturned the trial court’s reasoning, holding that liability under Section 138 of the NI Act is personal and penal, distinct from civil remedies or claims under the IBC. The Court observed that the moratorium under Section 32A of the IBC applies only to the corporate debtor, not the individuals responsible for the company’s actions. The Court clarified that directors cannot evade personal liability under Section 141 of the NI Act by citing the company’s insolvency. Consequently, the High Court quashed the discharge order, set aside the trial court’s decision, and allowed the criminal proceedings against the directors to continue.

E-Way Bill Expiry Due to Vehicle Breakdown Not GST Evasion: Allahabad HC Quashes Seizure and Penalty Orders

M/S Trimble Mobility Solutions India Private Limited vs State Of Up And 2 Others CITATION : 2025 TAXSCAN (HC) 2063

The Allahabad High Court recently held that the mere expiry of an e-way bill due to unforeseen circumstances, such as a vehicle breakdown, does not constitute an intent to evade tax under the Goods and Services Tax (GST) Act. The case arose from actions against Trimble Mobility Solutions India Pvt. Ltd., a company providing vehicle tracking services across India, which had its goods intercepted by tax authorities after the e-way bill accompanying the consignment expired during transit. Despite promptly generating a fresh e-way bill before any seizure order was passed, the authorities proceeded to impose a penalty and seize the goods under Section 129(3) of the CGST Act, which was later upheld by the appellate authority.

The Bench of Justice Piyush Agrawal quashed the seizure and penalty orders, observing that technical lapses caused by unforeseen circumstances cannot be equated with tax evasion. The Court held that expiry of an e-way bill, without intent to evade tax, does not justify penalty proceedings. Since that a fresh e-way bill had been generated before the authorities acted, and that the goods were transported under valid tax documentation, the Court held that the proceedings under Section 129(3) were unsustainable in law. Consequently, the High Court set aside the seizure and penalty orders dated 27 December 2022 and 17 June 2023, allowing the writ petition.

Mandatory Pre-Deposit under S. 129E of Customs Act Cannot Be Waived Merely Due to Bank Account Freeze: Madras HC

M/s .R.R. Overseas vs TheCommissioner of Customs CITATION : 2025 TAXSCAN (HC) 2064

The Madras High Court dealt with the legal issue of whether the mandatory pre-deposit requirement under Section 129E of the Customs Act, 1962 could be waived on grounds of financial hardship, specifically where the assessee’s bank account had been frozen by the Department. The case arose from a writ petition filed by M/s R.R. Overseas, a partnership firm engaged in export operations, which challenged the rejection of its appeal by the Commissioner (Appeals) for non-compliance with the statutory pre-deposit requirement.

The Bench of Justice N. Anand Venkatesh ruled that the right to appeal under the Customs Act is a conditional statutory remedy and must be exercised strictly in accordance with legislative requirements. The Court held that Section 129E provides no discretion to waive or relax the mandatory pre-deposit, even in cases of financial difficulty or administrative restraint such as a frozen bank account. However, the Court granted limited relief by allowing the petitioner to make the requisite 7.5% deposit by 22 October 2025, after which the appeal would be revived and heard on merits. The writ petition was accordingly disposed of without costs, reaffirming the non-waivable and absolute nature of the pre-deposit condition under the Customs Act.

Challenge on Supply of Reagent with equipment is ‘Composite Supply’ or ‘Mixed Supply’: Delhi HC Leaves Issue to Appellate Authority

ORTHO CLINICAL DIAGNOSTICS INDIAPVT LTD vs UNION OF INDIA & ORS CITATION : 2025 TAXSCAN (HC) 2065

The Delhi High Court addressed the legal issue of whether the supply of reagents along with diagnostic instruments qualifies as a ‘composite supply’ or a ‘mixed supply’ under the Goods and Services Tax (GST) Act, 2017. The case arose from a writ petition filed by Ortho Clinical Diagnostics India Pvt. Ltd., which challenged an Order-in-Original dated 7 January 2025 confirming a demand of ₹39.82 crore, including tax, interest, and penalty. The Department had treated the petitioner’s supplies as ‘mixed supplies’ under Section 2(74) of the Central Goods and Services Tax (CGST) Act, 2017, attracting an 18% GST rate.

The Division Bench of Justice Prathiba M. Singh and Justice Shail Jain, held that determining whether the supply constitutes a composite or mixed supply is a question of fact requiring verification of contracts, invoices, and transaction details. The Court observed that since the impugned order was appealable under Section 107 of the CGST Act, the High Court would not adjudicate the issue under Article 226. Consequently, the Court relegated the petitioner to the appellate remedy, directing that an appeal may be filed by 15 November 2025 along with the mandatory pre-deposit, which shall be entertained on merits without dismissal on limitation grounds.

Delay in Challenging ₹550 Crore GST Demand Condoned: Delhi HC Allows Appeal Despite Late Knowledge of Order

PURSHOTTAM RAY vs PRINCIPALCOMMISSIONER OF CGST CITATION : 2025 TAXSCAN (HC) 2066

The Delhi High Court addressed the issue of delay in filing an appeal under Section 107 of the Central Goods and Services Tax (CGST) Act, 2017, in relation to a massive ₹550 crore GST demand raised against the petitioner, Purshottam Ray. The case arose from an investigation by the CGST Delhi North Commissionerate into fraudulent availment of Input Tax Credit (ITC) through fictitious invoices allegedly generated by M/s Montage Enterprises Pvt. Ltd. The petitioner’s firm, P.R. Traders, was one of the notices accused of receiving such bogus invoices. After the petitioner’s GST registration was cancelled and the final order uploaded on the GST portal without personal intimation, he sought the Court’s intervention to either quash the order or condone the delay in filing an appeal, citing lack of timely knowledge of the adjudication order.

The Division Bench of Justice Prathiba M. Singh and Justice Shail Jain declined to quash the Order-in-Original dated 31 January 2025 but accepted the petitioner’s explanation regarding delayed knowledge of the order, holding it to be bona fide given the cancellation of GST registration and absence of personal communication. The Court permitted the petitioner to file an appeal before the Appellate Authority by 15 November 2025, subject to statutory pre-deposit, and directed that the appeal be adjudicated on merits without being dismissed on limitation grounds. The Court also issued an administrative directive to the Registry to include a mandatory field for mentioning the Document Identification Number (DIN) and date of the impugned order while filing future writ petitions to avoid multiplicity and conflicting orders.

No Evidence of Business at Declared Place: AP HC Upholds GST Cancellation under Rule 21(a) of CGST Rules

DNC INFRASTRUCTURE PRIVATELIMITED vs THE SUPERINTENDENT OF CENTRAL TAX CITATION : 2025 TAXSCAN (HC) 2067

The Andhra Pradesh High Court dealt with the issue of cancellation of Goods and Services Tax (GST) registration under Rule 21(a) of the Central Goods and Services Tax (CGST) Rules, 2017, which empowers tax authorities to cancel registration if a taxpayer ceases to carry on business from the registered premises. The case concerned DNC Infrastructure Private Limited, whose registration was cancelled after an inspection revealed that no business activity was conducted from its declared address at Jammalamadugu, Kadapa District. The petitioner contended that cancellation violated Section 29(2) of the CGST Act, 2017 and the principles of natural justice, alleging denial of personal hearing and procedural impropriety.

The Division Bench of Justice Raghunandan Rao and Justice T.C.D. Sekhar upheld the cancellation order dated 4 September 2024, finding no merit in the petitioner’s claims. The Court noted that the petitioner failed to produce any evidence of conducting business from the declared premises and had also not intimated the change of address within the mandatory 15 day period prescribed under GST law. The Bench held that the petitioner’s authorised representative had appeared for the personal hearing and filed written submissions without requesting an adjournment. The Court ruled that non-operation from the registered address constituted a clear breach of registration conditions. Accordingly, the writ petition was dismissed, and the cancellation of GST registration was affirmed as legally valid.

Levy of GST on Compounded Basis Challenged: Allahabad HC says this issue May have Wider Ramifications, stays Proceedings

M/S Maa Vindhya Vasini TobaccoPrivate Limited vs State Of U.P CITATION : 2025 TAXSCAN (HC) 2068

The Allahabad High Court examined the legality of adjudication proceedings initiated under the Goods and Services Tax (GST) Act, where the tax authorities sought to levy GST on a compounded basis linked to manufacturing capacity. The issue arose from a show cause notice dated 4 December 2024 issued to M/s Maa Vindhya Vasini Tobacco Private Limited, a manufacturer of tobacco products. The petitioner contended that such a mechanism, resembling the pre-GST compounded levy scheme under the erstwhile Central Excise Act, has no statutory basis under the Central Goods and Services Tax (CGST) Act, 2017.

The Division Bench of Justice Saumitra Dayal Singh and Justice Indrajeet Shukla took cognizance of the petitioner’s arguments and observed that a prima facie jurisdictional issue arises, as the GST framework does not sanction taxation based on compounded or assumed production capacity. The Bench further noted that the issue carries wider legal implications with potential to affect several industries and lead to repetitive litigation if left unresolved. Accordingly, the Court decided to entertain the writ petition and issued notice to the Revenue, granting four weeks for a counter affidavit and two weeks for a rejoinder. Pending on further hearing, the Court stayed the adjudication proceedings initiated under the impugned show cause notice, directing that no coercive steps be taken against the petitioner until the next date of listing.

No Error on Record Justifying Review: Chhattisgarh HC upholds Dismissal of Contractor’s Plea for ₹9.18 Crore GST Reimbursement

M/s Kunal BSBK Joint Venture PvtLtd vs Chhattisgarh Housing Board CITATION : 2025 TAXSCAN (HC) 2069

The Chhattisgarh High Court dealt with the issue of whether a contractor could seek reimbursement of ₹9.18 crore towards Goods and Services Tax (GST) liability through a writ petition, or whether such a claim, being contractual, must be pursued through alternate remedies like arbitration or civil proceedings. The petitioner, M/s Kunal BSBK Joint Venture Pvt. Ltd., a contractor for the Chhattisgarh Housing Board, had earlier approached the Court seeking GST reimbursement along with interest, contending that the additional tax burden arose from the introduction of GST from July 1, 2017 and that similar benefits were extended to other state contractors. After the earlier dismissal of its writ petition, the petitioner filed a review petition under Order XLVII Rule 1 of the Code of Civil Procedure, alleging errors apparent on the face of the record.

The Division Bench of Chief Justice Ramesh Sinha and Justice Bibhu Datta Guru dismissed the review petition, holding that there was no error apparent on the face of the record to justify interference under review jurisdiction. The Court reiterated that the scope of review is extremely limited and cannot be used to reargue the matter or seek reconsideration on merits. The Court found no legal or constitutional infirmity in its prior decision and therefore dismissed the review petition, reaffirming that writ jurisdiction under Article 226 is not ordinarily maintainable for monetary claims arising from private contractual obligations.

Composite GST Assessment Order Invalid: AP HC Quashes Single Order Covering Multiple Tax Periods

M/S. SHRI VANNAPPA BOYA vs THEASSISTANT COMMISSIONER OF CENTRAL TAX CITATION : 2025 TAXSCAN (HC) 2070

The Andhra Pradesh High Court examined the legality of a composite Goods and Services Tax (GST) assessment order passed for multiple financial years under Section 74 of the Central Goods and Services Tax (CGST) Act, 2017 and the Andhra Pradesh State GST (APSGST) Act, 2017. The petitioner, M/s Shri Vannappa Boya, a sole proprietorship based in Anantapur District, challenged the order-in-original dated 18 April 2024, which consolidated tax demands for four distinct periods - 2018-19, 2019-20, 2020-21, and 2021-22 Into a single proceeding.

The Division Bench comprising Justice R. Raghunandan Rao and Justice T.C.D. Sekhar quashed the impugned composite assessment order, holding it procedurally invalid and contrary to law. The Court reaffirmed that a single consolidated assessment for multiple tax periods is impermissible under the GST statutes. The Bench clarified that while it would not examine the merits of the tax demand or the invocation of Section 74, the order suffered from a fundamental procedural defect by clubbing multiple financial years into one proceeding. Consequently, the matter was remanded to the assessing authority to issue separate assessment orders for each tax period, in accordance with law.

Taxpayers Cannot be Left at Mercy of Assessing Officer for Genuine Income Tax Refund Delays: Allahabad HC

U.P. Rajya Nirman Sahakari SanghLimited vs Union Of India Min.Of Finance Dept.Of Revenue CITATION : 2025 TAXSCAN (HC) 2071

The Allahabad High Court examined the issue of delay in granting genuine income tax refunds and whether an assessee could be denied refund merely because of a mismatch between Form 16A and Form 26AS. The case concerned U.P. Rajya Nirman Sahakari Sangh Limited, a cooperative society claiming exemption under Section 80P of the Income Tax Act, 1961, which sought refund of tax deducted at source (TDS). The Department had declined to release the refund on the ground that the TDS amount was not reflected in Form 26AS, despite the assessee producing valid Form 16A certificates.

The Division Bench of Justice Prashant Kumar and Justice Shekhar B. Saraf ruled that taxpayers cannot be left at the mercy of assessing officers for legitimate refund claims. The Court reaffirmed that refunds must be processed if Form 16A certificates substantiate TDS, even if not reflected in Form 26AS. The Bench emphasized that the Assessing Officer (AO) has ample authority under the Act and CBDT Instruction No. 05/2013 dated 08.07.2013 to verify TDS details from the deductor or TDS circle, rather than withholding refunds. Accordingly, the Court directed that the petitioner’s refund be processed upon verification of Form 16A, with the assessee to appear before the concerned authority on 28 October 2025. The AO was instructed to examine the documents and issue appropriate orders within four weeks.

Income Tax Reassessment Notices issued for Share Transfer: Delhi HC Sets Aside Notices, Remands for Fresh Consideration

FERRA ENGINEERING PTY LIMITED vsASSISTANT COMMISSIONER OF INCOME TAX CITATION : 2025 TAXSCAN (HC) 2072

The Delhi High Court dealt with the issue of validity of reassessment proceedings initiated against a non-resident assessee under Sections 148A(1), 148A(3), and 148 of the Income Tax Act, 1961, concerning the transfer of shares between foreign entities. The petitioner, Ferra Engineering Pty Limited, an Australian-incorporated company, had transferred its equity shares in Ferra Aero Space Pvt. Ltd. to Ferra U.K. for ₹7.43 crore during the Assessment Year 2020-21. The Assessing Officer (AO) issued a notice under Section 148A(1) alleging that the taxability of the transaction was unexplained and that income might have escaped assessment. The assessee, however, filed detailed replies with computations showing that the resultant income did not exceed ₹50 lakh and, therefore, the conditions for reopening under Section 149(1)(b) were not met.

The Division Bench of Justice V. Rameshwar Rao and Justice Vinod Kumar observed that the petitioner was willing to furnish all relevant documents, including the Tax Residency Certificate (TRC), bank statements, and foreign exchange reconciliations, for proper verification of the share transfer transaction. The Court set aside the notice and order dated 30.06.2025 issued under Sections 148A(1), 148A(3), and 148, and remanded the matter to the Assessing Officer for fresh adjudication. The AO was directed to provide due opportunity to the assessee, consider all documents and submissions afresh, and pass a reasoned and speaking order within 12 weeks. The petition was accordingly disposed of, and the pending application was dismissed as infructuous.

Subsequent Cancellation of Supplier’s GST Registration Not a Ground to Deny ITC: Allahabad HC Criticises Dept

M/S Singhal Iron Traders vsAdditional Commissioner And Another CITATION : 2025 TAXSCAN (HC) 2073

The Allahabad High Court has ruled that Input Tax Credit (ITC) under the Goods and Services Tax (GST) Act cannot be denied to a bona fide purchasing dealer solely because the supplier’s registration was cancelled at a later date, provided that the purchases were genuine and tax was duly paid at the time of the transaction. The petitioner, M/s Singhal Iron Traders, a proprietorship firm engaged in trading iron scrap, had purchased goods worth ₹44.26 lakh from M/s Shiv Iron Trading Co., a registered dealer in Agra, during February-March 2019. The transactions were supported by valid tax invoices, e-way bills, and payments through banking channels, and the supplier had filed GSTR-1 and GSTR-3B returns, evidencing that tax was paid to the government. However, the GST authorities invoked Section 74 of the CGST Act, 2017, alleging that since the supplier’s registration was later cancelled on 30 April 2019, ITC was wrongly availed. The Assistant Commissioner reversed the ITC and levied a penalty equal to the credit amount, which was upheld in appeal, prompting the petitioner to approach the High Court.

The Bench of Justice Piyush Agrawal held that subsequent cancellation of GST registration cannot retrospectively vitiate valid transactions undertaken when the supplier was duly registered. The Court emphasized that the petitioner had satisfied all statutory requirements under Section 16 of the CGST Act, including possession of valid invoices, e-way bills, and proof of payment through banking channels. The supplier’s filing of GSTR-3B returns, which necessarily implies payment of tax to the exchequer, further validated the genuineness of the transactions. The Bench criticized the authorities for relying on “borrowed information” without verifying the supplier’s existence at the time of supply and observed that, absent any evidence of collusion, fraud, or intent to evade tax, denial of ITC was legally untenable. Consequently, the High Court quashed the orders of the Assistant Commissioner and the Appellate Authority, holding that the proceedings under Section 74 were unsustainable in law.

Director Alone Cannot be prosecuted under Income Tax Act for Transferring Company assets to Daughter in law without consideration: Delhi HC

NILESH AGARWAL vs INCOME TAXOFFICE CITATION : 2025 TAXSCAN (HC) 2074

The Delhi High Court examined the legality of prosecuting company directors without impleading the company itself as an accused under the Income Tax Act, 1961, in a case involving alleged fraudulent transfer of company assets. The petitioners, Nilesh Agarwal and Rakesh Agarwal, directors of M/s SNR Buildwell Pvt. Ltd., sought quashing of criminal complaints filed against them under Section 276 of the Income Tax Act and Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (corresponding to Section 482 Cr.P.C.). The prosecution stemmed from allegations that the company, which had outstanding tax dues of ₹4.44 crore for the Assessment Years 2014-15, 2015-16, and 2016-17, had transferred an Audi car registered in its name to Rakesh Agarwal’s daughter-in-law without consideration, in violation of Section 281 of the Income Tax Act, 1961.

The Bench of Justice Ravinder Dudeja, sitting singly, held that directors cannot be prosecuted in isolation when the company itself the principal offender has not been made an accused, as mandated under Section 278B of the Income Tax Act, 1961. The Court ruled that prosecution based on vicarious liability requires the arraignment of the company as an essential party. The Court reiterated that omission to implead the company renders proceedings against directors unsustainable. Observing that the alleged offence arose entirely from the company’s tax liabilities and that the prosecution was predicated on acts attributed to the company itself, the Bench concluded that continuing proceedings against the directors alone would constitute an abuse of the process of law. Consequently, the High Court quashed Complaint Case Nos. 3067/2020 and 3068/2020, along with the summoning orders dated 06.06.2024, thereby setting aside the prosecution in its entirety.

Allahabad HC Grants Bail to Accountant in ₹180 Crore Fake GST ITC Scam

Gaurav Tomar vs Union Of India And Another CITATION : 2025 TAXSCAN (HC) 2075

The Allahabad High Court recently addressed the issue of bail in cases involving alleged fake Input Tax Credit (ITC) frauds under the Goods and Services Tax (GST) regime, interpreting the provisions of Sections 132(1)(b), 132(1)(c), and 132(1)(i) of the Central Goods and Services Tax Act, 2017. The applicant, Gaurav Tomar, an accountant, was accused of assisting the co-accused Chattar Pal Sharma in forming shell entities and availing as well as passing on fake ITC worth over ₹180 crore.

The Bench of Justice Sameer Jain, deciding the bail plea, observed that the co-accused, alleged to be the principal conspirator, had already been granted bail earlier the same day and that the applicant’s case stood on an equal, if not stronger, footing. The Court noted that the prosecution’s reliance on documentary evidence reduced the need for continued detention and that prolonged custody served no practical purpose. The Bench reiterated that in economic offences where investigation is complete, “bail is the rule and jail the exception.” Accordingly, the Court allowed the bail application, directing that the applicant be released upon furnishing a personal bond and two sureties, subject to conditions of regular appearance and non-involvement in any criminal or anti-social activities.

Allahabad HC Declines to Interfere in 100% ITC Penalty Dispute, Allows Rectification Application to be Decided within Fixed Timeline

Kartik Enterprises vs State Of U.P And Another CITATION : 2025 TAXSCAN (HC) 2076

The Allahabad High Court recently dealt with the issue of maintainability of a writ petition under Article 226 of the Constitution of India in matters concerning penalty imposed on disallowed Input Tax Credit (ITC) under the Goods and Services Tax (GST) Act, 2017. The petitioner, Kartik Enterprises, challenged a penalty order passed under Section 22 of the GST Act for the financial year 2020–21, contending that the imposition of a 100% penalty on the disputed ITC amount was excessive and arbitrary. The petitioner, however, had not filed an appeal against the order but had instead moved a rectification application under Section 161 of the Act on April 2, 2025, which was still pending before the concerned authority.

The Division Bench of Justice Saumitra Dayal Singh and Justice Indrajeet Shukla declined to exercise the Court’s extraordinary jurisdiction, observing that since the petitioner had already invoked an alternative statutory remedy through a pending rectification application, interference under Article 226 was not warranted at this stage. The Court directed the authorities to decide the rectification application on or before November 30, 2025, after affording the petitioner a fair opportunity of hearing in accordance with law. Accordingly, the writ petition was disposed of, granting the petitioner liberty to pursue the available statutory remedies under the GST Act.

Amount Deposited under Protest During GST Search can be Adjusted as 10% Pre-Deposit for Appeal: Allahabad HC

M/s R M Dairy Products LLP vs State of UP and others CITATION : 2025 TAXSCAN (HC) 2077

The Allahabad High Court recently ruled on an important question under the Goods and Services Tax (GST) Act, 2017, concerning whether amounts deposited under protest during GST search proceedings can be adjusted towards the mandatory 10% pre-deposit required for filing an appeal under Section 107(6) of the Act. The case arose when R M Dairy Products LLP, engaged in the manufacture and trading of dairy products, deposited ₹1.40 crore under protest during a search conducted by the Directorate General of GST Intelligence (DGGSTI). Following an adjudication order under Section 74 of the CGST Act, the petitioner’s appeal was dismissed by the appellate authority as non-maintainable for want of proof of the statutory pre-deposit, prompting the petitioner to approach the High Court.

The Bench of Justice Piyush Agrawal, who held that an amount deposited under protest during investigation or search retains its character as a deposit and can validly be appropriated towards the pre-deposit requirement for filing an appeal, provided it has not been adjusted against any specific demand. Relying on the Supreme Court’s decision in VVF (India) Ltd. v. State of Maharashtra (2023) and CBIC Circular No. 172/04/2022-GST dated 6 July 2022, the Court found that the petitioner’s ₹1.40 crore deposit sufficiently covered the required 10% of the ₹7.06 crore disputed tax demand. The Court accordingly quashed the orders of the appellate authority, directed that the deposit be treated as compliance with Section 107(6), and remanded the matter for adjudication on merits, while allowing the petitioner 15 days to make up any shortfall in the pre-deposit, if necessary.

Govt Contractor seeks Direction to Govt to Pay GST on his Behalf: Allahabad HC Dismisses Plea

M/S Shree Dev Builders And Construction Pvt. Ltd vs State Of U.P CITATION : 2025 TAXSCAN (HC) 2078

The Allahabad High Court recently dealt with a writ petition filed under Article 226 of the Constitution, concerning the question of whether the State Government can be directed to discharge GST dues on behalf of a contractor under the U.P. Goods and Services Tax (GST) Act, 2017. The petitioner, M/s Shree Dev Builders and Construction Pvt. Ltd., sought a writ of mandamus directing the State authorities to pay its entire tax and interest liability arising from an assessment order dated 8 January 2025, and to restrain coercive recovery until such payment was made. The dispute stemmed from an assessment made under Section 74(9) of the Act, against which a statutory appeal was available under Section 107 of the U.P. GST Act, but the petitioner chose to file a fresh writ petition instead of pursuing that remedy.

The Division Bench of Justice Sangeeta Chandra and Justice Brij Raj Singh dismissed the writ petition, observing that the petitioner had already challenged the same assessment order earlier in Writ Tax No. 357 of 2025, which had been disposed of with clear directions to pursue the appellate remedy. The Court reiterated that once a statutory appellate mechanism exists, a second writ petition to bypass the appeal process is not maintainable. It further held that tax liability under the GST law arises independently on the registered person and cannot be shifted to the Government through judicial directions. Rejecting the plea that the Government, as the ultimate consumer, should bear the GST, the Court emphasized that such a contention is contrary to the statutory scheme. Consequently, the petition was dismissed, with the Court reiterating that the proper remedy lies under Section 107 of the U.P. GST Act, 2017, and that no mandamus could be issued to compel the Government to act contrary to law.

Movement of Crane for Execution of Works Contract Not a ‘Supply’ under GST: Allahabad HC

M/S Earth Minerals vs State OfU.P. And 2 Others CITATION : 2025 TAXSCAN (HC) 2079

The Allahabad High Court recently adjudicated a significant issue under the Goods and Services Tax (GST) Act, 2017, concerning whether the inter-State movement of cranes or similar equipment for use in a works contract amounts to a “supply” attracting GST liability. The case arose when M/s Earth Minerals, engaged in executing a six-lane Greenfield highway project under the Bharatmala Pariyojana, transported a motor grader (crane) from Rajasthan to Bihar for project execution. The vehicle was detained by GST authorities under Section 129(1) of the Central Goods and Services Tax (CGST) Act, 2017, on the ground of alleged movement without proper documentation, leading to imposition of tax and penalty. The petitioner contended that the transfer of the crane constituted only the movement of capital goods for internal use, not a “supply” as defined under Section 7 of the CGST Act, and relied on CBEC Circular No. 1/1/2017-IGST, as amended by Circular No. 21/21/2017 dated 22.11.2017, which clarifies that such inter-State movements are “neither a supply of goods nor a supply of services.”

The Bench of Justice Piyush Agrawal, deciding the matter, accepted the petitioner’s contention and held that movement of cranes, rigs, or other movable machinery for own use in works contracts does not constitute a taxable supply under GST. The Court emphasized that administrative circulars issued by the CBEC are binding on field officers. It was observed that the authorities’ act of detention and imposition of penalty was contrary to the settled legal position and reflected an erroneous disregard of binding clarifications. Noting that the crane was moved solely for project execution and not for sale or further supply, the Court found no evidence of tax evasion. Accordingly, the High Court quashed the seizure and penalty orders, holding that movements of goods for internal use or stock transfer do not amount to supply under GST, and directed the immediate release of the detained equipment.

GST Evasion allegation of ₹20 Crore: Allahabad HC Grants Bail to Accused based on SC Rulings

Azharuddin vs Union of India CITATION : 2025 TAXSCAN (HC) 2080

The Allahabad High Court recently granted bail to an accused in a high-value GST evasion case, where alleged fraudulent input tax credit (ITC) claims resulted in purported tax evasion exceeding ₹20 crore. The applicant faced prosecution under Sections 132(1)(b), 132(1)(c), and 132(1)(i) of the Central Goods and Services Tax (CGST) Act, 2017. It was argued on behalf of the accused that the charges were documentary in nature, the investigation was complete, and the applicant had been in judicial custody since June 13, 2025, over four months, with no prior criminal record. The prosecution contended that substantial loss was caused to the exchequer, but did not dispute that the maximum sentence prescribed was five years and that trial would be before a Magistrate.

The Bench of Justice Sameer Jain observed that in GST cases involving documentary or electronic evidence, the risk of tampering or influencing witnesses is minimal, and prolonged pre-trial detention serves no purpose once the investigation is complete. The Court noted that the trial would be time-consuming given the nature of the evidence and emphasized the applicant’s clean record. Accordingly, the Court allowed bail, directing release upon furnishing a personal bond and two sureties, subject to conditions requiring the applicant to appear before the trial court as scheduled, avoid criminal activity, and refrain from influencing witnesses. The Bench clarified that the observations were strictly confined to the bail stage and did not impact the merits of the trial.

Hydraulic Excavator Sent for Repair Not ‘Supply of Goods or Services’: Allahabad HC

M/S Abhay Prakash Katariar vsState Of UP CITATION : 2025 TAXSCAN (HC) 2081

The Allahabad High Court addressed the legal issue of whether the inter-State movement of a hydraulic excavator sent for repair amounts to a supply of goods or services under the Goods and Services Tax (GST) Act, 2017, attracting tax and penalty under Section 129(3). The petitioner, M/s Abhay Prakash Katariar, had transported the excavator for repair with proper documentation, including an e-way bill and delivery challan, but the GST authorities seized the machinery and imposed a demand of ₹3.42 lakh, alleging that the movement was taxable.

The Bench of Justice Piyush Agrawal, held that the movement of the excavator solely for repair purposes does not constitute a supply under the GST Act, relying on CBIC Circulars dated 7 July 2017 and 22 November 2017 and Supreme Court precedents. The Court observed that the authorities could not disregard binding administrative circulars and that the petitioner had no intention to evade tax. Accordingly, the High Court quashed the seizure and penalty orders, ruling them legally unsustainable.

Interest on Delayed GST Refunds to Accrue from Original Application Date, Not from Post-Appeal Refiling: Bombay HC

Altisource Business SolutionsIndia Pvt Ltd vs Union Of India CITATION : 2025 TAXSCAN (HC) 2082

The Bombay High Court dealt with the legal issue of the calculation of interest on delayed GST refunds under the Central Goods and Services Tax (CGST) Act, 2017, specifically under Sections 54 and 56. The petitioner, Altisource Business Solutions India Pvt. Ltd., had filed a refund application for unutilized input tax credit on exports, which was initially rejected. The dispute centered on whether interest should be calculated from 60 days after the original refund application dated 23 April 2020, or from the re-application filed on 28 November 2023 following an appellate order allowing the refund.

The Division Bench of Justice M. S. Sonak and Justice Advait M. Sethna, held that once the appellate authority set aside the refund rejection, the original application is deemed to subsist, and interest must accrue from the expiry of 60 days after the original filing. Relying on the precedent in Lupin Limited, the Court quashed the order denying interest and directed the department to pay interest at 6% per annum from 60 days after 23 April 2020 until the refund was actually credited, giving the respondents six weeks to comply.

Deposit under MCD's Amnesty Scheme cannot be made 'subject to' outcome of writ petition: Delhi HC

P.P. INTERNATIONAL SCHOOL vsMUNICIPAL CORPORATION OF DELHI CITATION : 2025 TAXSCAN (HC) 2083

The Delhi High Court addressed the legal issue of whether a taxpayer could deposit property tax under the Municipal Corporation of Delhi’s (MCD) One Time Property Tax Amnesty Scheme 2025-26 (SUNIYO) “subject to the outcome” of a pending writ petition challenging the tax calculation. The appellant, P.P. International School sought permission to deposit the calculated tax without prejudice to its rights in W.P.(C) 14836/2025, contending that the MCD’s calculation was significantly higher than their own and that the deposit should preserve the school’s right to challenge the assessment.

The Division Bench of the Chief Justice and Justice Tushar Rao Gedela, dismissed the appeal, holding that the court could not override a Supreme Court injunction issued in August 2023 in a similar matter, which restrained interference in the terms of the Amnesty Scheme. The Court emphasized that the Amnesty Scheme is a voluntary policy decision of the MCD, and no interim relief could be granted to permit a conditional deposit. The Bench clarified that no observations were made on the merits of the underlying tax dispute, leaving the appellant free to pursue all contentions in the original writ petition.

Parallel GST Proceedings on Same Issue Invalid under Section 6(2): Orissa HC quashes DGGI Demand

M/s. Tansam Engineering andConstruction Company vs CGST and Central Excise Rourkela Commissionerate CITATION : 2025 TAXSCAN (HC) 2084

The Orissa High Court dealt with the legal issue of whether parallel proceedings under Section 74 of the CGST/OGST Acts, 2017 could be initiated by the Directorate General of GST Intelligence (DGGI) when the same subject matter had already been adjudicated by the State GST authorities. The Court examined the applicability of Section 6(2)(b) of the CGST Act, which bars multiple proceedings on the same issue by different authorities, and considered whether prior summons or preliminary investigation steps could constitute “initiation of proceedings.”

The Division Bench of Chief Justice Harish Tandon and Justice Murahari Sri Raman, in W.P.(C) No. 15935 of 2025, quashed the DGGI’s show cause notice dated August 13, 2021, and the consequential Order-in-Original dated January 30, 2025, holding that the Central authority had no jurisdiction to reopen a matter already adjudicated by the State GST Proper Officer. The Court clarified that formal commencement of proceedings via a show cause notice marks initiation, and concluded that the DGGI’s actions were ultra vires, rendering all related demands void.

Rule 86-A of CGST Rules Can’t Be Invoked to Block ITC When Electronic Credit Ledger Shows Nil Balance: Bombay HC bars “Negative Blocking“

Rawman Metal & Alloys vs TheDeputy Commissioner of StateTax CITATION : 2025 TAXSCAN (HC) 2085

The Bombay High Court addressed the legal issue of whether Rule 86-A of the Central Goods and Services Tax (CGST) Rules can be invoked to block Input Tax Credit (ITC) when the Electronic Credit Ledger has a nil balance. The Court examined the scope of the rule under the CGST framework and clarified that the power to block ITC arises only when credit is actually available in the ledger, rejecting the notion of “negative blocking” or preemptive blocking of future or non-existent credits.

The Division Bench comprising Justices M.S. Sonak and Advait M. Sethna quashed the order dated 9 December 2024 that had blocked ITC of Rs. 12,84,273, holding that the Deputy Commissioner had no jurisdiction to block credit when the ledger showed a nil balance. The Court emphasized the plain language of Rule 86-A, aligned with precedents from Gujarat, Telangana, and Delhi High Courts, and directed restoration of the blocked ITC within fifteen days, allowing the writ petition.

S. 144(C)(13) Timeline Mandatory: Bombay HC rules Transfer Pricing Addition Non Est for Delay in DRP Directions Implementation

Archroma International (India)Private Limited vs Deputy Commissioner of Income Tax CITATION : 2025 TAXSCAN (HC) 2086

The Bombay High Court dealt with the issue of whether the timeline under Section 144C(13) of the Income Tax Act, 1961 is mandatory and whether failure to complete assessment within this period renders a transfer pricing addition as non est. The Court examined the case where the petitioner challenged the inaction of the Income Tax authorities in giving effect to the directions issued by the Dispute Resolution Panel (DRP) on 19th March 2020 concerning a transfer pricing adjustment of Rs. 5,26,86,111 related to corporate service charges for Assessment Year 2010-11.

The Division Bench of Justice B.P. Colabawalla and Justice Amit S. Jamsandekar held that Section 144C(13) imposes a strict and mandatory timeline requiring the Assessing Officer to complete assessment within one month from the end of the month in which DRP directions are received, and this applies even in remand proceedings. Consequently, the Court ruled that the transfer pricing addition of Rs. 5,26,86,111 is barred by limitation and treated it as non est, directing the Respondent to recompute the petitioner’s total income and refund the amount along with statutory interest under Section 244A within eight weeks.

GST ITC on electricity supplied to Township not Permissible: Chhattisgarh HC dismisses BALCO’s Appeal

Bharat Aluminum Company Limitedvs State of Chhattisgarh CITATION : 2025 TAXSCAN (HC) 2087

The Chhattisgarh High Court dealt with the issue of whether Input Tax Credit (ITC) on GST Compensation Cess paid for imported coal is permissible for electricity generated and supplied to an employee township under the Central Goods and Services Tax (CGST) Act, 2017. The Court examined the appeal of Bharat Aluminum Company Limited (BALCO), which claimed ITC on the portion of electricity supplied to its residential township, arguing that such supply was “in the course or furtherance of business” under Sections 2(17) and 16(1) of the CGST Act and that amendments to Rule 43 of the CGST Rules were clarificatory and should apply retrospectively.

The Division Bench comprising Chief Justice Ramesh Sinha and Justice Ravindra Kumar Agrawal held that ITC is a statutory concession and not a substantive right, and electricity supplied to a township does not qualify as “in the course or furtherance of business.” The Court further ruled that the amendment to Explanation 1(d) of Rule 43 is prospective, not retrospective. Accordingly, the Court dismissed BALCO’s appeals, affirming the Single Judge’s order that the ITC claim for electricity supplied to the township is inadmissible and the amendment to the CGST Rules cannot be applied retrospectively.

Tax Authorities must Consider Late Replies to SCNs before Passing Orders: J&K HC Sets Aside GST Demand

Zakir Hussain vs Union of India CITATION : 2025 TAXSCAN (HC) 2088

The High Court of Jammu & Kashmir and Ladakh addressed the issue of whether tax authorities are obliged to consider replies to show cause notices submitted after the stipulated period but before the final order under the State Goods and Services Tax Act, 2017 (SGST Act). The case involved Zakir Hussain, a registered GST contractor, who challenged a tax demand of Rs. 15,44,922/- raised by the State Taxes Officer under Section 73(1) and Section 73(9) of the SGST Act for the financial year 2020-21, contending that his late reply to the show cause notice had been ignored, violating the principles of natural justice.

The Division Bench of Justice Sanjeev Kumar and Justice Sanjay Parihar held that the proper officer is obliged to consider any reply received before the passing of the final order, even if submitted after the initially fixed period. Observing that Section 73(9) uses mandatory language requiring consideration of representations, the Court quashed the impugned order and directed the State Taxes Officer, Circle Kishtwar, to pass a fresh order after taking the petitioner’s reply into account and providing an opportunity for oral hearing.

SARFAESI Act vs GST Act: Karnataka HC Rules Canara Bank's Earlier Charge Takes Priority Over Tax Authorities

THE CANARA BANK vs THE STATE OFKARNATAKA CITATION : 2025 TAXSCAN (HC) 2089

The Karnataka High Court dealt with the legal issue of whether a charge created by the GST authorities over a property could take precedence over a prior charge created by a bank under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The case involved Canara Bank, which challenged the encumbrance created by the State Tax Department over a residential flat mortgaged to the bank. The dispute centered on Section 26-E of the SARFAESI Act, which grants the bank a “first, prior, and exclusive charge” on secured assets, vis-à-vis Section 82 of the GST Act, which provides that tax shall be a “first charge on property.”

The single bench of Justice Suraj Govindaraj held that when two statutory non-obstante clauses conflict, the principle of “priority in time” governs, giving precedence to the charge created earlier. Since Canara Bank’s SARFAESI charge was created and recorded in July 2017, prior to the GST charge in April-November 2019, the bank’s charge prevailed. The Court allowed the writ petition, issued a writ of mandamus directing the GST authorities to remove their encumbrance within 15 days, and permitted the bank to proceed with auction, with any surplus proceeds to be applied towards GST dues.

₹40 Crore Fake GST ITC Allegation: Allahabad HC Releases Accused on Bail

Manoj Kumar Garg vs Union ofIndia CITATION : 2025 TAXSCAN (HC) 2090

The Allahabad High Court dealt with the legal issue of grant of bail in a high-value GST evasion case where the accused, Manoj Kumar Garg, was alleged to have fraudulently availed Input Tax Credit (ITC) exceeding ₹40 crore through fake invoices. The charges were framed under Sections 132(1)(c) and 132(1)(i) of the Central Goods and Services Tax Act, 2017, which are non-bailable and cognizable offences carrying a maximum imprisonment of five years. The case primarily involved documentary and electronic evidence, and the trial had not progressed beyond the pre-charge evidence stage.

The single bench of Justice Sameer Jain granted bail to the accused, observing that the investigation had been completed, the complaint had already been filed, and there was no likelihood of tampering with evidence or influencing witnesses. The Court emphasized that continued detention would serve no useful purpose given the slow pace of the trial, the documentary nature of the case, and the accused’s clean record and cooperation. Bail was allowed on furnishing personal bond and two sureties, with conditions to appear before the trial court, abstain from tampering with evidence, and refrain from criminal activity. The Court clarified that its observations were restricted to the bail stage and would not affect the merits of the trial.

When Genuineness of Purchases is Doubtful but Sales Are Genuine, Only Profit Element 15% Can Be Added to Income: Bombay HC

Pr. Commissioner Of Income Tax-3Pune vs Ramelex Private Ltd CITATION : 2025 TAXSCAN (HC) 2091

The Bombay High Court addressed the issue of determining the quantum of addition on alleged bogus purchases for tax purposes under the Income Tax Act. The Court examined whether the entire value of purchases could be treated as bogus when the genuineness of purchases was doubtful, but sales were genuine, and clarified that only the profit element of 15% on such purchases could be added to the assessee’s income. The matter arose in the case of Ramelex Private Limited for the assessment year 2009-10, where additions were challenged by the Principal Commissioner of Income Tax after the Assessing Officer treated Rs. 2.05 crore as entirely bogus based on information from the Maharashtra Sales Tax Department.

The Division Bench of Justice G.S. Kulkarni and Justice Aarti Sathe upheld the decisions of the CIT(A) and ITAT, noting that the Assessing Officer’s approach violated principles of natural justice by relying solely on general information without providing the assessee an opportunity to cross-examine or access supporting material. The Court observed that the lower authorities had relied on invoices, bank statements, ledger accounts, and the VAT auditor’s certificate to reasonably estimate the addition at 15% of the purchase value. Consequently, the High Court dismissed the Revenue’s appeal, confirming that the addition should be restricted to the profit element rather than the entire alleged bogus purchases.

Delhi HC Rules S.69(2) of Partnership Act cannot Bar Unregistered Firm from Challenging CGST Demand or Enforcing Statutory Rights

AMIT KUMAR BASAU & ANR vsSALES TAX OFFICER CLASS CITATION : 2025 TAXSCAN (HC) 2092

The High Court of Delhi addressed the issue of whether an unregistered partnership firm could challenge a CGST demand and enforce its statutory rights despite the bar under Section 69(2) of the Indian Partnership Act, 1932. The case arose from a writ petition filed by Amit Kumar Basau & Anr., challenging an order dated 20th February 2025 issued by the Sales Tax Officer, which raised a tax demand of Rs. 59,05,232/- and a total demand of Rs. 1,09,02,348/- including interest and penalty, as well as a Show Cause Notice dated 27th November 2024 for the financial year 2020-21.

The Division Bench of Justice Prathiba M. Singh and Justice Shail Jain held that Section 69(2) does not bar unregistered firms from enforcing statutory or common law rights. The Court observed that the unregistered partnership firm was registered under the CGST Act for tax purposes, and the partner was impleaded as Petitioner No.1, making the writ petition maintainable. The Court allowed the petitioner to file an appeal with the required pre-deposit by 30th November 2025 and directed that the appeal be decided on merits, while further proceedings before the Appellate Authority would remain subject to the outcome of the decision in the Sarens case.

Lawyer’s Office in Residential Basement not a ‘Commercial Activity’: Delhi HC quashes NDMC proceedings

B. K. SOOD vs NORTH DELHIMUNICIPAL CORPORATION CITATION : 2025 TAXSCAN (HC) 2093

The High Court of Delhi addressed the issue of whether running a lawyer’s office from a residential basement constitutes a commercial activity under Section 252 read with Section 369(1) of the NDMC Act, 1994. The case arose from Complaint No. 487/2004 filed against B.K. Sood, a practicing advocate, alleging that he had carried out a commercial activity by running his professional office from the basement of his residential premises without prior permission from the Chairperson.

The Bench of Justice Neena Bansal Krishna observed that professional legal services are not commercial activities, as they involve intellectual labor rather than capital investment or profit-making risk. The Court noted that the basement complied with the Delhi Building Bye-Laws, 1983, and Master Development Plan, 2001, and that the allegations were unsubstantiated. The Court quashed the complaint and all consequential proceedings, holding that the continued prosecution would amount to abuse of the legal process.

Seizure of 15,000 USD for Lack of RBI Proof: Delhi HC Allows Delay in Filing Appeal with Rs. 10,000 Fine

RINKU DUBEY vs UNION OF INDIAAND ORS CITATION : 2025 TAXSCAN (HC) 2094

The High Court of Delhi recently dealt with a case concerning the delay in filing an appeal against confiscation of foreign currency by the Customs Department. The legal issue centered on whether a petitioner could file an appeal beyond the statutory limitation period under Section 128(1) of the Customs Act, 1962, after 15,000 U.S. Dollars were seized for lack of proof of legal possession under Reserve Bank of India (RBI) regulations. The petitioner challenged the Order-in-Original dated 24th December 2024, which directed absolute confiscation of the currency and imposed a penalty under the Customs Act, 1962 and the Foreign Exchange Management Act, 1999.

The Bench of Justice Prathiba M Singh and Justice Shail Jain held that delays in filing appeals could be condoned if sufficient cause is shown. The Court allowed the petitioner to file the appeal by 30th November 2025, to be heard on merits despite the limitation period, and directed the petitioner to deposit Rs. 10,000 as costs with the Customs Department. The petition and any pending applications were disposed of accordingly.

Delhi HC refuses to Condone Delay in GST Appeal, upholds Strict 4-Month Statutory Limitation in Moms Cradle Case

M/S MOMS CRADLE PRIVATE LIMITEDvs UNION OF INDIA CITATION : 2025 TAXSCAN (HC) 2095

The Delhi High Court recently addressed the issue of whether the statutory limitation period for filing a GST appeal under Section 107 of the Central Goods and Services Tax (CGST) Act, 2017 can be condoned. The case arose from writ petitions filed by M/s Moms Cradle Private Limited, an exporter of readymade garments, challenging the withholding of a GST refund and seeking permission to file a delayed statutory appeal against an Order-in-Original dated 4th February 2025 raising a demand for allegedly fraudulent availment of Input Tax Credit (ITC).

The Division Bench of Justice Prathiba M. Singh and Justice Shail Jain held that Section 107 of the CGST Act constitutes a complete and self-contained code for limitation, excluding the general principles of condonation of delay under the Limitation Act, 1963. Observing that the petitioner had actively participated in the proceedings and failed to disclose material facts, the Court dismissed the writ petitions, holding that the delay in filing the appeal could not be condoned. The Court directed that the GST refund be passed and adjusted against the demand in accordance with law, thereby disposing of both matters.

DGFT Policy vs Customs Action: Delhi HC Directs Strict Implementation of Minimum Import Price on Soda Ash

ALKALI MANUFACTURERS ASSOCIATIONOF INDIA vs UNION OF INDIA AND ORS CITATION : 2025 TAXSCAN (HC) 2096

The Delhi High Court recently addressed the enforcement of Minimum Import Price (MIP) on Soda Ash under Notification No. 46/2024-25, following a writ petition filed by the Alkali Manufacturers Association of India (AMAI) under Article 226 of the Constitution. The petitioner contended that the Customs Department was allowing imports of Soda Ash below the prescribed MIP of Rs. 20,108 per metric ton, adversely affecting domestic manufacturers. The Court examined whether the authorities were complying with the MIP notification and whether any exemptions for pre-notification shipments were being improperly applied.

The Division Bench of Justice Prathiba M. Singh and Justice Shail Jain observed that the authorities had already implemented measures to enforce the MIP, and any alleged exceptions related only to shipments where bills of entry or bills of lading pre-dated the notification, which were legally exempt. The Court disposed of the petition while directing all Customs authorities to strictly enforce the MIP notifications in letter and spirit, warning that any Commissionerate permitting imports below the MIP would face stringent legal action.

Madhya Pradesh HC Slaps ₹2 Lakh Cost on Tobacco Company for Filing Repetitive Plea to Stall ₹200 Cr GST Evasion Proceedings

M/S ELORA TOBACCO COMPANYLIMITED vs UNION OF INDIA CITATION : 2025 TAXSCAN (HC) 2097

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The Madhya Pradesh High Court recently dealt with a case involving alleged misuse of writ jurisdiction in a GST evasion matter of over Rs. 200 crore. The petitioner, Elora Tobacco Company Limited, approached the Court seeking certified copies of departmental reports and the opportunity to cross-examine officers whose statements were relied upon in the show cause notice. The legal issue centered on whether a repetitive writ petition could be entertained when the same reliefs had already been sought and provided, and whether the petitioner could shift the statutory duty of maintaining records to the tax authorities under Section 35 of the CGST Act, 2017 and Rule 56 of the CGST Rules.

The Division Bench of Justice Vivek Rusia and Justice Binod Kumar Dwivedi observed that the petition was identical to an earlier one decided by the High Court and affirmed by the Supreme Court, and found that it was filed with the intent to delay adjudication proceedings. The Court held that maintaining records is the taxpayer’s responsibility, not that of excise officers, and dismissed the writ petition. Additionally, the Bench imposed a cost of Rs. 2 lakh on the petitioner to be paid to the GST Department within four weeks, emphasizing that repetitive petitions to stall proceedings would not be tolerated.

Directors Remain Criminally Liable for Dishonoured Cheques Despite Company Insolvency: Orissa HC

Syed Najam Ahmed vs State ofOdisha CITATION : 2025 TAXSCAN (HC) 2098

The Orissa High Court recently addressed the issue of whether directors of a company can escape criminal liability for cheque dishonour under Section 138 of the Negotiable Instruments Act, 1881 merely because the company has been admitted into insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC). The petitioner, Syed Najam Ahmed, Managing Director of Zenith Mining Private Limited, challenged the trial court’s order refusing discharge in a complaint filed by Dewy Developers Private Limited for dishonoured cheques. The legal question revolved around the interplay between insolvency proceedings, Section 32A of the IBC, and the penal nature of offences under the N.I. Act.

The Bench of Justice Chittaranjan Dash observed that insolvency proceedings and moratorium under the IBC do not shield directors or officers from personal liability for criminal offences under Section 138. The Court noted that Section 32A protects only the corporate debtor post-resolution plan approval and does not affect individual liability. The High Court dismissed the petition, affirming that prosecution against directors can continue despite the company being under insolvency.

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