Supreme Court & High Courts Weekly Round-Up

This weekly round-up analytically summarises the key stories related to the Supreme Court & High Courts reported at Taxscan.in during the previous week, from January 04, 2026 to January 10, 2026, PART - I.

SUPREME COURTSupreme Court classifies Imported Aluminium Shelves for Mushroom Cultivation as ‘Aluminium Structures’, Customs Duty Applies

COMMISSIONER OF CUSTOMS vs M/S WELKIN FOODS CITATION : 2026 TAXSCAN (SC) 101

The Supreme Court addressed a key classification dispute under the Customs TariffAct, 1975, overruling the CESTAT’s decision that treated imported aluminium shelves as “agricultural machinery” under Chapter Heading 8436, attracting nil duty. The Customs Department challenged this, arguing for classification under Customs Tariff Heading (CTH) 76109010 as “Aluminium Structures,” which incurs basic customs duty at 10%, countervailing duty at 12.5%, customs cess at 3%, and additional customs duty at 4%.

Justices J.B. Pardiwala and R. Mahadevan applied the General Rules of Interpretation (GRIs) sequentially, emphasizing GRI 1’s primacy of tariff headings, section notes, and chapter notes, while cautioning against overriding these with end-use or trade parlance tests in the absence of ambiguity. The Bench firmly held that the shelves, designed for mushroom cultivation, meet the two-part criterion for CTH 76109010: being made of aluminium and functioning as structures or parts thereof, based on their objective characteristics. It rejected CESTAT’s reliance on the shelves’ specific end-use, trade name as “mushroom growing racks,” and integration with other machinery, noting that the “mushroom growing apparatus” comprises independent machines not forming a composite or functional unit under Chapter 8436. Declaring the goods ineligible for agricultural machinery classification, the Court allowed the Customs Department’s appeal, mandating classification under CTH 76109010.

Electricity Supplied Ltd: Supreme Court Holds No Customs Duty Leviable on Electricity Supplied from SEZ to DTA

ADANI POWER LTD vs UNION OF INDIA & ORS CITATION : 2026 TAXSCAN (SC) 102

The Supreme Court ruled that no customs duty is leviable on electricity generated in a Special Economic Zone (SEZ) and supplied to the Domestic Tariff Area(DTA), setting aside a 2019 Gujarat High Court order and directing refund of duties collected. The legal issue centered on the validity of customs notifications issued between 2010 and 2012 under the Customs Tariff Act, 1975, and Section 30 of the SEZ Act, 2005, which attempted to impose duty (initially 16% ad valorem, later 10 paise and 3 paise per unit) on such supplies, despite the nil rate for imported electricity.

Justices Aravind Kumar and N.V. Anjaria held that these notifications lacked statutory authority, as they misused exemption powers without a valid charging event, violating Articles 14 and 265 of the Constitution. The Bench upheld a 2015 Gujarat High Court judgment declaring the levy unconstitutional across periods, criticizing the 2019 Bench for erroneously narrowing its scope to one notification without referring the conflict to a larger Bench, thereby undermining precedent. It emphasized that unchanged statutory provisions, nil tariff entry, the SEZ Act framework, and constitutional limits rendered subsequent notifications invalid, as they merely altered rates without curing the root deficiency.

Supreme Court dismisses Revenue’s Plea on Income Tax Addition from Sale of Penny Stock Shares for 154-Day Delay

COMMISSIONER OF INCOME TAX vs NEELU MAHANSARIA CITATION : 2026 TAXSCAN (SC) 103

The Supreme Court dismissed a Special Leave Petition (SLP) filed by the Principal Commissioner of Income Tax challenging a Gujarat High Court order that upheld long-term capital gains from penny stock sales for Assessment Year 2015-16. The core issue involved additions under Sections 68 (undisclosed income) and 69C (unexplained expenditure) of the Income Tax Act, 1961, where the Assessing Officer treated gains of ₹25,26,325 from shares of M/s Mishka Finance & Trading Ltd. as bogus, citing penny stock characteristics and broker commissions. The ITAT and the Gujarat High Court ruled in favour of the assessee, Neelu Mahansaria, based on documentary evidence such as demat statements, contract notes, and bank records, relying on the precedent in Himani M. Vakil v. CIT (2014).

Justices J.B. Pardiwala and K.V. Viswanathan rejected the SLP along with pending applications due to a 154-day delay beyond the limitation period following the High Court’s judgment dated 25.03.2025, finding the Revenue’s explanation inadequate and unsatisfactory. The Bench emphasized that such gross delay barred condonation, affirming the lower forums’ findings that the assessee proved transaction genuineness, precluding taxation of capital gains merely on suspicion of penny stock manipulation.

Reassessment Based on Audit Objection without AO’s application of mind is Invalid: Supreme Court Decides in favour of Adani Power

ASSISTANT COMMISSIONER OF INCOME TAX vs ADANI POWER RAJASTHANLIMITED CITATION : 2026 TAXSCAN (SC) 104

The Supreme Court confirmed that reassessment under the Income Tax Act, 1961, cannot be initiated solely on audit objections without the Assessing Officer’s independent application of mind, dismissing the Revenue’s petition despite condoning delay. The dispute arose for Assessment Year 2016-17, where the assessee declared losses, scrutinized and accepted under Section 143(3) without additions. Post-acceptance, an internal audit objected to the deductibility of Corporate Social Responsibility (CSR) expenses, initially rejected by the AO, yet leading to a reopening notice; the Gujarat High Court quashed it on 20.02.2023, ruling it a colourable exercise lacking “reason to believe.”

Justices Dipankar Datta and Satish Chandra Sharma dismissed the SLP against the Gujarat High Court order, affirming that audit opinions cannot substitute the AO’s mind, echoing precedents such as CIT v. Kelvinator of India Ltd. and Lucas TVS Ltd., while distinguishing P.V.S. Beedies (P) Ltd. The Bench upheld that mechanical reliance on audit objections, especially after initial disagreement, constitutes mere change of opinion, rendering reassessment unsustainable under the Act.

Magistrate Cannot Take Cognizance of Time-Barred Cheque Dishonour Complaint Without Condoning Delay First: Supreme Court

S. Nagesh vs Shobha S. Aradhya CITATION : 2026 TAXSCAN (SC) 105

The Supreme Court ruled that a Magistrate cannot take cognizance of a cheque dishonour complaint under Section 138 of the Negotiable Instruments Act, 1881, if filed beyond the one-month limit without first condoning the delay under Section 142, setting aside a Karnataka High Court order refusing to quash proceedings. A complaint was filed on 09.10.2013, two days late, after a 10.07.2013 cheque for ₹5.40 lakh bounced on 17.07.2013, with legal notice issued on 13.08.2013; yet the Magistrate took cognizance the same day, condoning the delay only in October 2018, citing viral fever.

Justices Sanjay Kumar and Alok Aradhe held that Section 142 explicitly empowers cognizance of time-barred complaints only post-condonation, rejecting sequential reversal as impermissible. Noting the complainant’s misrepresentation of timeliness, the Bench quashed the complaint, allowed the appeal, and set aside the High Court’s dismissal, emphasizing strict procedural adherence to prevent circumvention of limitation periods.

Supreme Court Grants Bail to Amtek Group Promoter in alleged ₹673 Crore Bank Fraud Case under PMLA

Arvind Dham vs Directorate of Enforcement CITATION : 2026 TAXSCAN (SC) 106

The Supreme Court granted regular bail to Arvind Dham, former Amtek Group promoter, overturning the Delhi High Court’s order dated 19.08.2025 rejecting bail in a Prevention of Money Laundering Act (PMLA) case arising from alleged ₹673.35 crore loan fraud FIRs lodged by IDBI Bank and Bank of Maharashtra for cheating, forgery, and criminal conspiracy. The Enforcement Directorate (ED) investigated alleged laundering through Amtek group entities and arrested Dham on 09.07.2024.

Justices Sanjay Kumar and Alok Aradhe held that Dham’s 17-month incarceration violated Article 21’s guarantee of a speedy trial, as the investigation was complete, evidence was documentary, the trial had not commenced, and the maximum sentence prescribed was seven years. The Bench observed that prolonged custody without trial progress amounts to punishment, even in serious economic offences governed by PMLA’s twin conditions. Noting Dham’s cooperation, absence of evidence of witness tampering, and delays attributable to ED, the Court rejected objections based on gravity and flight risk. The High Court’s order was set aside, and the trial court was directed to impose appropriate conditions such as passport surrender and travel restrictions, reiterating that indefinite detention is impermissible without strong justification.

Village Officer Certificate Alone Not Enough to Prove Agricultural Land: Supreme Court upholds Capital Gains Tax on Sale of Land

GIJO GEORGE vs DEPUTY COMMISSIONER OF INCOME TAX CITATION : 2026 TAXSCAN (SC) 107

The Supreme Court upheld the levy of capital gains tax on the ₹9.77 crore sale of 5.21 acres of land at Kakkanad village, Kerala, for Assessment Year 2006-07, ruling that a Village Officer’s certificate alone is insufficient to establish agricultural land status under the Income Tax Act, 1961. The Assessing Officer rejected the exemption claim of late M.J. George after tracing bank credits to the sale proceeds. While the CIT(A) initially allowed the claim based on the certificate, the ITAT, on remand, taxed the gains, noting “Purayidom” classification in revenue records and absence of cultivation evidence. The Kerala High Court Division Bench dismissed the appeal filed by legal heirs, affirming the ITAT’s factual findings regarding evidentiary burden.

Justices Rajesh Bindal and Vijay Bishnoi dismissed the SLP, finding no perversity in the High Court’s view that exemption claims require cogent proof of actual agricultural use beyond certificates, especially when revenue records and surrounding circumstances were not rebutted by the assessee.

Supreme Court Upholds ITAT Order Restoring Income Tax Appeal Despite Pending Settlement Proceedings

THE PRINCIPLE COMMISSIONER OF INCOME TAX vs M D INDUSTRIES PVTLTD CITATION : 2026 TAXSCAN (SC) 108

The Supreme Court affirmed the orders of the ITAT and the Gujarat High Court restoring M D Industries Pvt. Ltd.’s income tax appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], directing that it remain pending until the decision of the Income Tax Settlement Commission under Section 245HA of the Income Tax Act, 1961. The assessee had filed both an appeal challenging the assessment and a settlement application. With settlement proceedings stalled, the ITAT condoned delay and restored the appeal without adjudicating on merits. The Revenue contended that filing a settlement application barred parallel appellate proceedings.

Justices Abhay S. Oka and Ujjal Bhuyan dismissed the Revenue’s SLP, holding that the Gujarat High Court correctly interpreted Section 245HA, under which an appeal abates only upon rejection of the settlement application without settlement. The ruling clarified that pendency of settlement proceedings does not extinguish appellate jurisdiction, preserving the assessee’s right to keep proceedings alive in the interim.

Revenue’s “No ITR Filed” Claim Backfires: Supreme Court sustains Deletion of Income Tax Addition made without Proof

INCOME TAX OFFICER ITO WD 2(1)(1), RKT & ANR vs AMITKUMARCHANDULAL RAJANI CITATION : 2026 TAXSCAN (SC) 109

The he Supreme Court declined to interfere with a Gujarat High Court ruling quashing reassessment notices issued under Section 147 of the Income Tax Act, 1961, for Assessment Years 2013-14 and 2014-15 against Amitkumar Chandulal Rajani, resulting in deletion of a ₹1.68 crore addition as unexplained income. The Assessing Officer reopened the assessment based on unverified information received from the DCIT (Central Circle-1, Rajkot) following a search on M/s National Shroff & Co., erroneously assuming non-filing of returns and undisclosed transactions. Despite objections and proof of return filing by the assessee, no seized material linking him to escaped income was supplied. The Gujarat High Court held the reopening to be mechanical, based on “borrowed satisfaction,” and lacking tangible nexus.

Justices Manoj Misra and Manmohan dismissed the Revenue’s SLP under Article 136, finding no grounds for interference, as the High Court had correctly identified the absence of independent inquiry or evidence connecting the assessee to alleged undisclosed income.

Share Substitution on Amalgamation Involving Stock-in-Trade May be Taxable u/s 28 Subject to Realisability: Supreme Court

M/S JINDAL EQUIPMENT LEASING CONSULTANCY SERVICES LTD vsCOMMISSIONER OF INCOME TAX CITATION : 2026 TAXSCAN (SC) 110

The Supreme Court held that shares of an amalgamated company received in substitution for stock-in-trade of the amalgamating company can give rise to taxable business income under Section 28 of the Income Tax Act, 1961, subject to realisability and valuation, remanding the Jindal Group cases to the ITAT. Jindal entities held shares of Jindal Ferro Alloys Ltd. as stock-in-trade, though reflected as investments in balance sheets, which merged into Jindal Stainless Ltd. The assessees claimed exemption under Section 47(vii), which was rejected by the Assessing Officer, who taxed the value differential as business income. The Delhi High Court remanded the matter following partial ITAT relief, leading to SLPs.

Justices R. Mahadevan and J.B. Pardiwala ruled that such substitution becomes taxable when shares are realisable, quantifiable, and yield real commercial profits arising from business operations. The Bench distinguished non-taxable capital asset transfers under Section 47(vii), holding that tax liability arises on allotment, not scheme approval. Courts must apply tests such as nature of holding, restrictions on transfer, and trading intent. While amalgamation per se is not taxable, the Court clarified potential Section 28 liability where stock-in-trade is involved.

VAT Appeal Delay: Supreme Court Condones Walmart’s Delay in Filing SLP, Issues Notice to Commercial Tax Dept

WALMART INDIA PRIVATE LIMITED vs DEPUTY COMMISSIONER OFCOMMERCIAL TAXES

The Supreme Court condoned the delay in filing a Special Leave Petition (SLP) by Walmart India Private Limited concerning a VAT appeal against the order of the Madhya Pradesh High Court. The matter relates to a six-year delay in filing the VAT appeal, which had been dismissed by the High Court in July 2025. The High Court had observed that, given Walmart’s global presence and professional legal team, it was incumbent on the company to diligently follow up with the tax authorities after the hearing.

The bench comprising Justice Aravind Kumar and Justice Prasanna B. Varle entertained the SLP filed in November 2025 and issued notice to the respondent, the Deputy Commissioner of Commercial Taxes, directing that the reply be filed within four weeks. The apex court’s order condoning the delay allows Walmart India to challenge the High Court’s dismissal of its VAT appeal, and the matter is now pending consideration before the Supreme Court. Advocates representing Walmart India included Kumar Visalaksh, Gopal Mundhra, Udit Jain, Parth Parikh, Yash Prakash, and Abhishek Vikas (AOR).

HIGH COURT

Mismatch in ICAI Charges with CBI Complaint: Karnataka HC quashes Disciplinary order against CA Practising 40+ Years

NAGINCHAND KHINCHA vs BOARD OF DISCIPLINE CITATION : 2026 TAXSCAN (HC) 101

The Karnataka High Court quashed a disciplinary order passed by the ICAI’s Board of Discipline against Naginchand Khincha, a Chartered Accountant practising since 1974, holding that mismatch between the CBI complaint and framed charges violated principles of natural justice under the Chartered Accountants Act, 1949, and the 2007 Rules. The proceedings originated from a CBI prosecution under the Prevention of Corruption Act, 1988, alleging that the CA acted as a conduit in bribing an Income Tax Officer for client settlement. The CBI referred only the allegation of excessive fees under Clause 7.7 of the ICAI Code of Ethics to ICAI; however, the disciplinary proceedings shifted focus to bribery and professional misconduct without notice.

Justice E.S. Indiresh held that the CA was denied a fair opportunity to defend himself due to lack of clarity regarding the exact charges. The Court distinguished the CBI’s fee-related complaint from bribery allegations introduced later, holding them to be “distinct and different,” and emphasized that precise charge awareness is mandatory before initiating disciplinary enquiry.

Satisfaction Note without Date Supplied to Petitioner after 2 years : Gujarat HC Quashes Notice u/s 153C of Income Tax Act

VIRAT ALLOYS PRIVATE LIMITED vs OFFICE OF THE ASSISTANTCOMMISSIONER OF INCOME TAX CIRCLE , GANDHINAGAR CITATION : 2026 TAXSCAN (HC) 102

The Gujarat High Court quashed notices and proceedings under Section 153C of the Income Tax Act, 1961, issued against Virat Alloys Pvt. Ltd. for Assessment Year 2015-16, holding that the undated satisfaction note recorded by the jurisdictional Assessing Officer and supplied after a delay of two years vitiated the proceedings. The satisfaction note was recorded on 06.05.2022/23.06.2022 but communicated only on 30.05.2024/31.05.2024. The proceedings arose from a search conducted on M/s World Window Group. The petitioner denied any transactions with the searched entity for FYs 2012-13 to 2018-19.

Justices A.S. Supehia and Pranav Trivedi relied on CIT v. Calcutta Knitwears (2014) and CBDT Circular No. 24/2015, holding that satisfaction must be timely, dated, and recorded prior to transmission of seized material. The Court extended the Supreme Court’s reasoning under Section 158BC to proceedings under Sections 153C and 153A, quashing the impugned notices.

GST ITC Refund Restricted to Direct Supply of Electricity to Bangladesh: AP High Court Rules SEIL’s Supplies Via PTC Domestic

SEIL Energy India Limited vs The Principal Commissioner ofCentral Tax CITATION : 2026 TAXSCAN (HC) 103

The Andhra Pradesh High Court ruled that SEIL Energy India Ltd. qualifies for Input Tax Credit (ITC) refund under Section 16 of the IGST Act, 2017, only for direct electricity supplies made to the Bangladesh Power Development Board (BPDB), holding that indirect supplies routed through the Power Trading Corporation of India (PTC) constitute domestic transactions ineligible for zero-rating. SEIL, operating thermal power plants in Andhra Pradesh, supplied electricity directly to BPDB and also substituted for Meenakshi Energy under PTC–BPDB agreements, claiming both as exports on the basis that electricity was “taken out of India” under Section 2(5) through tripartite arrangements. The Revenue contended that delivery at the Indian Bohronpur sub-station rendered the SEIL–PTC leg domestic.

Justices Raghunandan Rao and Subendhu Samanta applied Article 286 and CST Act precedents, holding that only the supply occasioning export, namely the PTC–BPDB transaction, qualifies as export. The SEIL–PTC supply, completed within India with separate transmission charges, was held ineligible for zero-rating despite BPDB’s termination rights. While direct SEIL–BPDB supplies remained zero-rated, the PTC route was characterized as a “supply for export” rather than an export per se. The petitions were dismissed, with liberty granted to refile Rule 89 refund claims within four weeks, excluding PTC-routed supplies.

Orissa HC Stays GST Demand Proceedings after Finding Audit Report Issued by Superintendent Instead of Proper Officer

Ayushi Galvano vs Commissioner (Audit), GST and Central Excise,Bhubaneswar Audit Commissionerate and others CITATION : 2026 TAXSCAN (HC) 104

The Orissa High Court stayed proceedings arising from a Section 73 demand-cum-show-cause notice issued against Ayushi Galvano, holding that the Form GST ADT-02 audit report was invalid as it had been issued by a Superintendent, who is not a “proper officer” under Section 2(91) of the CGST Act and Rule 101 of the GST Rules. The petitioner challenged the post-audit proceedings, relying on Circular No. 3/3/2017-GST dated 05.07.2017, which limits audit communication authority to Assistant and Deputy Commissioners.

Chief Justice Harish Tandon and Justice M.S. Raman held that the Superintendent lacked authority under Rule 101(5) to communicate audit findings, thereby vitiating the very foundation of the Section 73 proceedings. The Revenue conceded the legal position while seeking adjournment. Finding a prima facie case, balance of convenience, and potential prejudice, the Court stayed proceedings until 15 January 2026, subject to filing of counter-affidavits.

No Interest Payable after GST Deposit in Electronic Cash Credit Ledger: Calcutta HC stays Recovery

R.A.A. Arsalan Enterprise Pvt. Ltd. & Anr vs SuperintendentCGST and CX (TAR) CITATION : 2026 TAXSCAN (HC) 105

The Calcutta High Court granted interim stay on recovery proceedings against R.A.A. Arsalan Enterprise Pvt. Ltd. concerning a ₹64.15 lakh GST demand, relying on the Gujarat High Court’s ruling in Arya Cotton Industries v. Union of India, which held that deposits in the Electronic Cash Ledger constitute payment of tax once adjusted through return filing, thereby exempting interest liability under Section 50 of the CGST Act in light of Rule 88B. The petitioner had already deposited ₹56.35 lakh towards interest.

Justice Om Narayan Rai held that once the Assessing Officer favorably considered the petitioner’s Section 220(6) application and declared it not to be in default after deposit exceeding 20%, the Revenue could not adjust refunds against the stayed demand. The Court directed refund of adjusted amounts pertaining to AY 2024-25, excluding the petitioner’s deposit, within six weeks. It further directed expeditious disposal of the petitioner’s 2016 appeal before the CIT(A). The Revenue’s settlement plea was rejected, affirming statutory protection.

Dropping Issue During Income Tax Scrutiny for Lack of Material is Not ‘Change Of Opinion’: Calcutta HC validates Reopening based on New Material

Mark Steels Limited vs Assistant Commissioner of Income Tax CITATION : 2026 TAXSCAN (HC) 106

The Calcutta High Court upheld reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961, for Assessment Year 2021-22 against Mark Steels Ltd., holding that dropping an issue during original scrutiny due to lack of verifiable material does not constitute a “change of opinion” barring reopening. During the original Section 143(3) assessment, alleged cash coal purchases from the Majee Group were dropped for want of evidence. Subsequently, the Assessing Officer issued Section 148A notices based on fresh tangible material not available earlier. The petitioner contended that prior examination precluded reopening.

Justice Raja Basu Chowdhury held that a “change of opinion” presupposes an express or implied conclusion in the original assessment, whereas dropping an issue due to non-verifiability indicates absence of any final view. The availability of new tangible material post-scrutiny justified reopening. The Court declined to quash the Section 148A(3) order and Section 148 notice, while staying final assessment pending further leave. The writ petition was disposed of accordingly.

ITAT has Power to Stay Cancellation of Charitable Registration Even Without Income Tax Demand: J&K & Ladakh HC

J&K Yateem Foundation vs Income Tax Appellate Tribunal,Amritsar Branch, Amritsar CITATION : 2026 TAXSCAN (HC) 107

The Jammu & Kashmir and Ladakh High Court set aside the ITAT, Amritsar Bench’s refusal to stay cancellation of J&K Yateem Foundation’s registration under Section 12A/12AB(4)(ii) by the CIT (Exemptions), Chandigarh, dated 19.01.2024. The ITAT had declined stay on the ground that no tax demand was involved. The Foundation, whose registration was granted on 12.10.2021, filed an appeal, but the stay application dated 24.04.2025 was rejected, prompting a writ petition.

Justices Sindhu Sharma and Shahzad Azeem held that ITAT’s appellate jurisdiction under the Income Tax Act, 1961, includes incidental and ancillary powers to grant stay even beyond tax recovery matters, to preserve the efficacy of appellate proceedings. The Court found the ITAT’s jurisdictional refusal legally untenable where cancellation would render the appeal infructuous. The matter was remanded for fresh consideration of the stay application without examining merits. The writ petition was disposed of accordingly.

Calcutta HC Examines Whether GST Adjudication is Vitiated for Non-Supply of Seized Documents and Digital Data

M/s. Priti Builders vs Deputy Commissioner of State Tax CITATION : 2026 TAXSCAN (HC) 108

The Calcutta High Court is examining whether a GST adjudication order passed under Section 74 of the WBGST and CGGST Acts against M/s Priti Builders is vitiated due to non-supply of seized documents and digital data relied upon by the department. The petitioner alleged violation of principles of natural justice on account of denial of copies of documents and CPU data seized during investigation, despite repeated requests.

Justice Om Narayan Rai directed the State Tax authorities to seek instructions on whether copies of seized documents and digital data could be supplied to the petitioner. The matter was listed for hearing on 06 January 2026, with liberty granted to apply for interim relief. The Court underscored the importance of procedural safeguards in GST fraud adjudications.

Refund Adjustment against stayed Income Tax Demand Violates S.220(6) of Income Tax Act: Calcutta HC

Little More Engineering Private Limited vs Union of India &Ors. CITATION : 2026 TAXSCAN (HC) 109

The Calcutta High Court held that adjustment of refunds for AY 2024-25 against a stayed income tax demand for AY 2013-14 violated Section 220(6) of the Income Tax Act, 1961. The petitioner had deposited more than 20% of the disputed tax and was granted non-default status by the Assessing Officer during pendency of appeal before the CIT(A).

Despite the stay, the Revenue adjusted the refunds. Justice Om Narayan Rai held that once a stay under Section 220(6) is operative, no recovery, including refund adjustment, is permissible. The Court directed refund of the adjusted amounts, excluding the petitioner’s deposit, within six weeks. It also directed expeditious disposal of the pending appeal. The Revenue’s plea for settlement was rejected.

Functional Dissimilarity Justifies Exclusion of Comparables: Delhi HC Dismisses Revenue’s Transfer Pricing Appeal

PR. COMMISSIONER OF INCOME TAX vs M/S TCK ADVISERS PVT. LTD. CITATION : 2026 TAXSCAN (HC) 110

The Delhi High Court dismissed the Revenue’s appeal against the ITAT’s exclusion of six comparables in the transfer pricing analysis of M/s TCK Advisers Pvt. Ltd., which provided investment advisory services exclusively to its AE. The assessee operated on a cost-plus model, bore no risks, and earned 100% export revenue.

The Court upheld the ITAT’s findings that the excluded comparables failed the functional similarity and 75% export filter tests. Justices Suresh Kumar Kait and Manoj Jain also noted an unexplained delay of 1,285 days in re-filing the appeal, holding that the findings were purely factual and did not warrant interference.

Income Tax Final Assessment Passed While DRP Objections Still Pending: Gujarat HC Quashes Order for S. 144C Violation

MILACRON INDIA PRIVATE LIMITED vs THE ASSESSMENT UNIT, INCOMETAX DEPARTMENT & ORS. CITATION : 2026 TAXSCAN (HC) 111

The Gujarat High Court quashed a final assessment order passed against Milacron India Pvt. Ltd. for AY 2022-23 while objections before the DRP were pending, holding the action violative of Section 144C of the Income Tax Act, 1961. The petitioner had filed objections before both the DRP and the Assessing Officer within limitation.

Justices A.S. Supehia and Pranav Trivedi held that the Revenue should have guided the assessee to rectify any procedural lapse rather than proceeding with a premature final assessment. The DRP was wrongly rendered functus officio. The matter was remanded for fresh consideration.

Andhra Pradesh HC Sets Aside 18% GST Levy on Public Road Works, Orders Fresh Assessment Based on IALA Certificate

RK INFRACORP PRIVATE LIMITED vs .ASSISTANT COMMISSIONER STATETAX CITATION : 2026 TAXSCAN (HC) 112

The Andhra Pradesh High Court set aside an adjudication order imposing 18 percent GST on RK Infracorp Private Limited's public road works ordering fresh assessment based on Industrial Area Local Authority certificates. The works contractor received show cause notice post 2021-22 and 2022-23 audit alleging wrong 12 percent payment instead of 18 percent on APIIC internal roads. Petitioner claimed 12 percent concessional rate under Notification No. 24/2017 Entry 3 supported by Executive Officer certificates confirming public roads serving industries transport and general public.

Justices R Raghunandan Rao and T C D Sekhar held IALA certificate material for rate determination warranting reconsideration. The court set aside an 18 percent levy portion directing Assistant Commissioner to reassess separately per financial year. Other order components including non-road works interest and penalty undisturbed. Writ allowed recognising public infrastructure character.

Time-Barred S.73 GST Demand Challenged: Calcutta HC Grants Recovery Stay on 10% Pre-Deposit

Prakriti Eminent Height LLP vs Senior Joint Commissioenr ofRevenue & Ors CITATION : 2026 TAXSCAN (HC) 113

The Calcutta High Court admitted writ petition by M/s Prakriti Eminent Height LLP challenging time-barred Section 73 WB GST Act adjudication order for 2018-19 upheld on appeal despite three-year limitation expiry. The department relied on Notification 13/2022-CT and 1389-FT extending timelines under Section 168A claiming force majeure. Petitioners argued no extraordinary circumstances justified extensions rendering proceedings illegal.

Justice Om Narayan Rai found prima facie merit in limitation challenge admitting petition. The court directed 10 percent disputed tax deposit under Section 112(8) WB GST Act within two weeks restraining recovery per 02.05.2023 adjudication and 02.08.2024 appellate orders till further orders. Recovery notice 21.07.2025 also stayed post deposit. Matter listed after respondents file affidavits.

GST Penalty Paid Beyond 15‑Day Limit: Andhra Pradesh HC Directs Release of Detained Goods & Vehicle

SAI KRISHNA CONTRACT WORKS vs DEPUTY ASSISTANT COMMISSIONER CITATION : 2026 TAXSCAN (HC) 114

The Andhra Pradesh High Court ordered release of detained goods and vehicles belonging to Sai Krishna Contract Works despite penalty payment 57 days after 19 September 2025 Section 129 GST Act order exceeding 15-day limit. A truck carrying iron metal scrap seized 07.09.2025 attracted Rs 56193 CGST and SGST penalties. Full payment was made 15.11.2025 but authorities refused release causing hardship.

Justices R Raghunandan Rao and T C D Sekhar held delayed payment immaterial where authorities took no confiscation steps post 15-day expiry under Section 129(6). Continued detention illegal after penalty satisfaction without further action. Writ allowed directing immediate release without costs pending applications closed.

GST Refund Claim for Jan-Mar 2019 Not Barred by Amended Limitation u/s 54: J&K&L HC

Bharat Oil Traders vs Assistant Commissioner & anr. CITATION : 2026 TAXSCAN (HC) 115

The Jammu and Kashmir and Ladakh High Court ruled Section 54 GST Act amendment from 01.02.2019 applies prospectively allowing Bharat Oil Traders refund claims for inverted duty ITC buildup from July 2017 to March 2019. Partnership refilling edible oil ghee filed 02.02.2021 application within two-year limit using pre-amendment relevant date as financial year end. Department rejected citing post-amendment return due date and ineligible January-March 2019 inputs.

Justices Sindhu Sharma and Shahzad Ajeem held amendment cannot retrospectively curtail accrued pre-February 2019 refund rights absent express provision. Supreme Court COVID exclusion 01.03. 2020 to 28.02.2022 and Notification 13/2022 extended limitation covering all claims. Appellate rejection 30.11.2022 set aside remanded for fresh reasoned determination writ allowed rejecting technical denial.

105 Kg Silver Seized by GST Dept. Stolen in Part from Police Station: Andhra Pradesh HC Directs Return of Silver as Tax & Penalty Paid

G R M JEWELLERS vs THE ASSISTANT COMMISSIONER OF STATE TAX CITATION : 2026 TAXSCAN (HC) 116

The Andhra Pradesh High Court directed return of 23.44 kg pure silver shortfall to G R M Jewellers after 105 kg seized during Hyderabad-Salem transit stolen from Kurnool police custody. GST registrant paid Rs 39.2 lakh tax penalty fine securing release order. Police recovered 81.567 kg silver Rs 10 lakh cash from miscreants but returned 54.567 kg 60 percent pure and 27 kg pure against original 105 kg pure Rs 2.05 lakh cash.

Justices R Raghunandan Rao and T C D Sekhar rejected Kasturi Lal sovereign power defence holding that police custody theft reflects negligence impinging Article 19(1)(g) trade rights. State liable for shortfall compensation. Court directed return in kind or equivalent value within stipulated time writ allowed.

Composite GST Assessment Covering Multiple Years Invalid: Andhra Pradesh HC Cites Violation of S. 73 & 74

MADEENA STEELS vs THE ASSISTANT COMMISSIONER OF STATE TAXES CITATION : 2026 TAXSCAN (HC) 117

The Andhra Pradesh High Court quashed composite GST assessment and appellate orders against Madeena Steels covering July 2017 to January 2022 violating Sections 73 and 74 CGST Act. Assistant Commissioner issued a single show cause notice and assessment order spanning multiple periods. Additional Commissioner Appeals dismissed statutory challenge through single appellate order prompting Article 226 writ petition.

Justices R Raghunandan Rao and T C D Sekhar relied on prior Division Bench precedent holding composite notices and assessments of unsustainable post-statutory timelines. Sections 73 and 74 envisage period-specific proceedings consolidation defeats legislative schemes and assess safeguards. Authorities granted liberty for fresh year-wise proceedings excluding impugned order period from limitation no costs writ allowed.

GST Recovery Orders Passed due to Non- Reply to DRC-01: Madras HC Directs to file Consolidated Reply on 10% Deposit from E-Cash Register

M/S.V.M.N.N Blue Metals vs State Tax Officer CITATION : 2026 TAXSCAN (HC) 118

The Madras High Court allowed M/s V M N N Blue Metals to file consolidated replies to multiple DRC-07 assessment orders passed for non-reply to DRC-01 notices across assessment years. Petitioner sought remand opportunity claiming inability to respond earlier. The state opposed citing Section 107 alternate remedy.

Justice V Lakshminarayan relied on prior similar decisions directing 10 percent disputed tax deposit from Electronic Cash Ledger within 30 days. Petitioner must file a consolidated reply with documents treating DRC-07 as addendum to DRC-01 notices. Failure revives department recovery powers.

GST ITC on Stereo Systems Used in E‑Rickshaws Eligible for Refund u/s 54 of GST Act: Calcutta HC

Hooghly Motors Pvt. Ltd vs The State of West Bengal & Ors. CITATION : 2026 TAXSCAN (HC) 119

The Calcutta High Court ruled stereo systems used in e-rickshaw manufacturing qualify as inputs under Section 2(59) GST Act eligible for inverted duty ITC refund under Section 54(3)(ii). Hooghly Motors Pvt Ltd claimed Rs 8.94 lakh refund rejected October 2023 upheld December 2024. Another appellate authority allowed identical claims May 2024 creating inconsistency.

Justice Om Narayan Rai held adjudicating appellate rejections unsustainable per Section 2(17) business definition and 01.07.2025 Additional Commissioner clarification explicitly recognizing stereo eligibility. Inputs broadly cover business use beyond raw materials. Appellate order was set aside with refund directed within six weeks post verification.

Andhra Pradesh HC rules Notification Only Fixes Officers’ Territorial Jurisdiction, Not Power to Invoke S.122 CGST Act

GANAPATI ISPAT vs UNION OF INDIA CITATION : 2026 TAXSCAN (HC) 120

The Andhra Pradesh High Court quashed Section 122 CGST Act show cause notice issued to Ganapati Ispat by Additional Commissioner Central Tax based on Visakhapatnam CCO intelligence revealing circular trading. Petitioner challenged SCN lacking authority to invoke penalty provisions. Revenue cited Notification 2/2017-Central Tax and Circular 254/11/2025-GST claiming Assistant Commissioners empowered under Section 5.

Justices R Raghunandan Rao and T C D Sekhar held Notification 2/2017 fixes territorial jurisdiction for existing statutory powers not conferring Section 122 authority. Court avoided broader procedural safeguards question setting aside SCN with liberty for fresh notice if legally permissible. Writ allowed recognising jurisdictional limits.

Retrospective Application of TMA Scheme Impermissible Under FTDR Act: Delhi HC Partly allows Chilli Exporters’ Plea

CHILLIES EXPORTERS ASSOCIATION INDIA vs DIRECTORATE GENERAL OFFOREIGN TRADE & ANR CITATION : 2026 TAXSCAN (HC) 121

The Delhi High Court ruled retrospective application impermissible under FTDR Act 1992 holding Chillies Exporters Association entitled to TMA Scheme incentives only for shipments post 09 September 2021 notification till 24 March 2022 foreclosure. Petition challenged DGFTs 19 March 2024 rejection and 25 March 2022 foreclosure notification claiming vested rights for April-September 2021 exports under retrospectively notified scheme.

Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela relying on DGFT v Kanak Exports held Sections 3 and 5 of the FTDR Act authorize no retrospective subordinate legislation absent express statute. No scheme operated pre-notification negating legitimate expectation. Foreclosure prospective only processing directed for an eligible period within three weeks no costs petition partly allowed.

P&H HC Upholds District Magistrate’s Denial of SARFAESI S. 14 Possession as Loan Assignment Pending Before DRT

ASREC (INDIA) LTD vs STATE OF PUNJAB AND ORS CITATION : 2026 TAXSCAN (HC) 122

The Punjab and Haryana High Court upheld Additional District Magistrates refusal of Section 14 of SARFAESI Act possession assistance to ASREC India Ltd holding pending DRT approval of Allahabad Bank loan assignment barred relief. Rs 7.97 crore NPA declared 26 June 2013 led to DRT recovery certificate 12 July 2017 unchallenged. Assignment executed 27 February 2018 registered 16 April 2018 awaited DRT recognition.

Chief Justice Sheel Nagu and Justice Sanjiv Berry held Magistrates ministerial roles that required statutory compliance verification including valid secured creditor status. Pending DRT assignment approval justified refusal without adjudicating merits. The petitioner failed to show the final DRT order. Writ petition dismissed upholding Magistrates order.

Rectification Application filed within Limitation not be Examined with ‘Microscope’: Allahabad HC sets aside GST Order

M/S Prakash Medical Stores vs Union Of India And 3 Others CITATION : 2026 TAXSCAN (HC) 123

The Allahabad High Court set aside the appellate dismissal of M/s Prakash Medical Stores’ appeal under Section 107 of the GST Act, holding that the time spent in pursuing a timely rectification application under Section 161 is excludable by applying the principles of the Limitation Act, 1963. An ex parte order under Section 73 of the UP GST Act dated 23 April 2024 had raised a demand exceeding ₹15 lakh towards tax, interest, and penalty for FY 2018–19.

Justices Saumitra Dayal Singh and Vivek Saran applied the Supreme Court ruling in MP Steel Corporation v. Commissioner, extending the principle under Section 14 of the Limitation Act to GST proceedings. The Court held that bona fide and timely pursuit of rectification proceedings warrants exclusion of the pendency period while computing the limitation for filing an appeal. Consequently, the appellate order was set aside, and the appeal was restored for expeditious adjudication on merits.

Once SVLDRS Discharge Certificate Issued, No further Interest Payable on Belated Service Tax: Bombay HC rules against Revenue

Astute Valuers and Consultants Pvt. Ltd vs Union of India CITATION : 2026 TAXSCAN (HC) 124

The Bombay High Court ruled that no interest is payable on belated service tax once a discharge certificate is issued under the Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS), thereby protecting Astute Valuers and Consultants Pvt. Ltd. from further departmental demands. The petitioner challenged notices demanding ₹25,294 and ₹24,738 for FY 2014–15 to 2015–16, issued on 16 March 2021, despite settlement under the SVLDRS. The petitioner had filed Form SVLDRS-1 on 14 December 2019, declaring audit dues of ₹21,03,943 and paying ₹8,41,577, pursuant to which a discharge certificate was issued.

Justices Advait M. Sethna and M. S. Sonak, following Bhawna Malhotra v. Union of India, held that audit-quantified dues prior to the 30 June 2019 cut-off date qualified under the scheme, even if filed under an incorrect category of “arrears.” The Court observed that Section 128 of the Finance Act, 2019 permits the designated committee to rectify clerical or procedural errors. The show cause notices, being contrary to the SVLDRS settlement and issued without authority, were quashed, holding that the discharge certificate attains finality and bars any further demand.

Madras HC Quashes Service Tax Demand on Chennai Police for Bundobast Services, Holds Sovereign Functions Not Taxable before 1 June 2012

The Greater Chennai Police Commissionerate vs Union of India CITATION : 2026 TAXSCAN (HC) 125

The Madras High Court quashed the service tax demand raised against the Greater Chennai Police Commissionerate for providing Bundobast security services, holding that such services constituted sovereign functions and were not taxable prior to 1 June 2012. The petitioner challenged the confirmation of demand by the Principal Commissioner for charges collected pursuant to Government Orders for deployment of police personnel. The Revenue had classified the activity as “security agency services,” treating the collections as consideration for taxable services.

Justices Anita Sumanth and Mummaneni Sudheer Kumar held that Bundobast duty is an integral police function, identical in nature whether performed for the general public or for specific entities, and continues to retain its sovereign character. The Court observed that the definition of “person” under the Finance Act, 1994 excluded the Government until 1 June 2012, thereby barring jurisdiction to levy service tax for the relevant period. Accordingly, the Order-in-Original dated 14 October 2015 was quashed, the writ petitions were allowed, and it was held that no tax liability arose for the disputed period. The issue relating to the post-2012 period was left undecided. No costs were awarded.

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