BACKGROUNDThe assessee filed a return of income for the assessment year 1968-69 but failed to pay self-assessment tax within the prescribed time under Section 140A(1) of the Income Tax Act. The Income Tax Officer imposed penalty under Section 140A(3) for non-payment of self-assessment tax. The Appellate Assistant Commissioner reduced the penalty on appeal. In second appeal, the Bombay Income Tax Tribunal took note of the Madras High Court decision in A.M. Sali Maricar which had struck down Section 140A(3) as unconstitutional being violative of Article 19(1)(f) of the Constitution, and cancelled the penalty order on that basis. The Revenue challenged this before the Bombay High Court by way of a reference question. CRUCIAL COURT OBSERVATIONS (Verbatim)"It is the settled position in law, in view of the decision of the Supreme Court in K.S. Venkataraman and Co. (P.) Ltd. v. State of Madras, that an authority created by a statute cannot question the vires of that statute or any of the provisions thereof whereunder it functions.""It should not be overlooked that the Income-tax Act is an All-India statute and if an Income-tax Tribunal in Madras, in view of the decision of the Madras High Court, has to proceed on the footing that section 140A(3) was non-existent, the order of penalty thereunder cannot be imposed by the authority under the Act. Until contrary decision is given by any other competent High Court, which is binding on a Tribunal in the State of Bombay, it has to proceed on the footing that the law declared by the High Court, though of another State, is the final law of the land.""What the Tribunal really did was that in view of the law pronounced by the Madras High Court it proceeded on the footing that section 140A(3) was non-existent and so the order of penalty passed thereunder cannot be sustained.""When the Tribunal set aside the order of penalty it did not go into the question of intra vires or ultra vires. It did not go into the question of constitutionality of section 140A(3). That section was already declared ultra vires by a competent High Court in the country and an authority like an Income-tax Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Court on that question." FINAL VERDICT The Bombay High Court answered the reference question in the negative and in favour of the assessee, holding that the Tribunal was correct in setting aside the penalty order and was not required to independently go into the constitutionality of Section 140A(3), since it was duty-bound to follow the Madras High Court's declaration that the section was non-existent, there being no contrary High Court decision at the relevant time. Costs awarded to the assessee. 👍

BackgroundThe proceedings arose from a GST investigation concerning allegations of issuance of invoices without actual supply of goods, wrongful availment or passing on of Input Tax Credit and allied contraventions under the CGST Act. The investigation involved search proceedings and reliance by the Department on statements, electronic material and handwritten records. The Petitioners disputed the allegations and contended that the material relied upon did not independently establish their involvement in the alleged transactions.SCNs were issued under Section 122 proposing penalties under various provisions of Section 122. The Petitioners challenged the consequential adjudication orders on several grounds, including lack of jurisdiction of the officer issuing the SCNs, non-supply of relied-upon documents, denial of effective personal hearing and cross-examination, reliance on untested statements/electronic material, multiplication of penalties under different clauses of Section 122(1), and alleged inconsistencies in findings arising from the same investigation.Court ObservationThe Court held that Section 122(1) predicates liability upon a person being a “taxable person”, whereas Section 122(1A) is differently worded and operates upon “any person” in the specified circumstances. However, whether a particular person satisfies the statutory description and the precise role attributed to that person are intertwined with the factual material. The Court therefore left the question of applicability of Section 122(1) to a person who is not a taxable person open, as the issue is pending before the Supreme Court.Regarding the competence of the officer issuing the SCN, the Court observed that the expression “proper officer” under Section 2(91) is function-specific and that merely being an officer of central tax does not automatically make an officer the proper officer for every statutory function. At the same time, the Court noted that Notification Nos. 02/2017 and 14/2017 had to be considered along with Sections 3 and 5 of the CGST Act.The Court was unable to hold that absence of a specific assignment under Section 2(91), by itself, rendered the concerned central tax officer legally without authority. Notification No.14/2017 invested DGGI officers with powers corresponding to officers of the relevant rank, while Notification No.02/2017 assigned specified functions. Therefore, the question of competence could not be determined merely by relying upon the subsequent Circular dated 27.10.2025.The Court further observed that the objection regarding officer competence was not a patent or self-evident absence of jurisdiction warranting interference under Article 226. It involved interpretation of the statutory scheme, notifications, the subsequent Circular and the relationship between proceedings under Sections 73/74 and consequential penalties under Section 122. These issues could be examined by the statutory Appellate Authority under Section 107.The Court also found that the remaining challenges—relating to replies, relied-upon documents, personal hearing, cross-examination, evidentiary material, multiplication of penalties, clubbing of financial years and alleged inconsistent findings—required detailed examination of the underlying record and factual position of the respective noticees.Importantly, the Court held that the amended pre-deposit requirement under Section 107(6), effective from 01.10.2025, would not apply to appeals arising from SCNs issued before that date. Such appeals would be governed by Section 107(6) as it stood on the date on which the respective adjudicatory proceedings commenced.Final VerdictThe High Court disposed of the writ petitions on the ground that an efficacious statutory remedy was available under Section 107 of the CGST Act. The Court declined to exercise its extraordinary jurisdiction under Article 226 and permitted the Petitioners to pursue statutory appeals. The Appellate Authority was directed to examine all grounds, including the issues left open by the judgment, independently and uninfluenced by the observations made by the High Court.The Court specifically directed that appeals arising from SCNs issued before 01.10.2025 would be governed by the Section 107(6) pre-deposit provision applicable on the respective dates of issuance of the SCNs and could not be rejected merely because the Orders-in-Original were passed after 01.10.2025. The Petitioners were also permitted to seek exclusion of the period during which the writ petitions remained pending for limitation purposes.Cases Referred by CourtGaurav Jain & Anr. v. Joint Commissioner (Appeals-II), CGST Delhi Zone & Anr. — 2026:DHC:6124-DB.Considered on the applicability of the amended Section 107(6) pre-deposit requirement.Mukesh Kumar Garg v. Union of India & Ors. — SLP(C) No.18178/2025.The issue concerning applicability of Section 122(1) to a person who is not a “taxable person” was pending before the Supreme Court.Arun Kumar Jain v. Additional Commissioner, CGST, Delhi West & Ors. — 2026:DHC:6609-DB.Considered regarding applicability of Section 122(1) to a person who is not a taxable person.Devender Singh v. Additional Commissioner, CGST, Delhi West — 2025:DHC:9881-DB.Considered on the competence of the Additional Commissioner/officer to issue SCNs under Section 122.Sunil Chauhan, Proprietor of Shree Chem India v. Principal Commissioner of CGST, Delhi North & Ors. — 2026:DHC:5477-DB.Considered regarding the relationship between proceedings under Sections 73/74 and consequential penalties under Section 122.Alokadei Holdings Pvt. Ltd. v. Commissioner of Central Tax — W.P. No.4426/2026.Considered on the competence of the officer and the relationship between the statutory adjudication and Section 122 penalty proceedings.Patanjali Ayurved Ltd. v. Union of India & Ors. — [2025] 99 GSTL 7 (Allahabad).Considered on whether consequential Section 122 penalty forms part of the adjudicatory exercise under Sections 73/74; the Court noted that the decision was under challenge before the Supreme Court.Assistant Commissioner of State Tax & Ors. v. Commercial Steel Limited — (2022) 16 SCC 447.Referred to on the principles governing exercise of writ jurisdiction where an alternative statutory remedy exists.Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh & Ors. — 1953 SCC OnLine SC 33.Referred to in the context of the contention concerning the substantive/vested nature of the right of appeal and the applicable pre-deposit requirement.Amit Manilal Haria & Ors. v. Joint Commissioner, CGST & Central Excise & Ors. — W.P. No.5001/2025 (Bombay High Court).Referred to concerning the contention against retrospective application of Section 122(1A).Paramvir Singh Saini v. Baljit Singh & Ors. — SLP(Crl.) No.3543/2020.Referred to in relation to the safeguards concerning statements recorded under Section 70 of the CGST Act.  

BackgroundThe petitioners were proprietors of registered firms dealing in steel and scrap materials. They had purchased aluminium scrap from certain supplier firms. The authorities subsequently conducted raids at the premises of the suppliers and arrested their proprietors. Thereafter, summons were issued to the petitioners under Section 70 of the CGST Act, requiring them to appear and produce supporting documents concerning the purchases. The petitioners apprehended arrest and approached the Court after their applications for anticipatory bail before the Sessions Court were dismissed.The prosecution alleged that the suppliers had issued concocted invoices without actual supply of goods and that the petitioners had availed ITC on the basis of such invoices, with the tax amounts allegedly being encashed through hawala transactions. The petitioners, on the other hand, maintained that they had paid the invoice value and GST through banking transactions, had periodically filed their returns and were willing to produce documents such as e-way bills, transport records, weighbridge receipts and stock/sale records to establish actual receipt of goods.Court ObservationThe Court observed that ITC cannot ordinarily be denied to a purchaser merely because the supplier's registration is subsequently cancelled or the supplier ceases to exist after the transaction. Where the supplier was registered and active at the time of the transaction, the purchaser had paid the invoice value and GST through banking channels and had filed returns, recovery would ordinarily be against the defaulting supplier unless fraud and collusion are proved or exceptional circumstances exist.The Court further held that actual receipt of goods can be established through documentary evidence such as e-way bills, transport vehicle receipts, weighbridge receipts and stock and sale records. In a genuine transaction, where the purchaser has paid the invoice value and GST and regularly filed returns, custodial interrogation would normally not be necessary merely to verify receipt of goods, unless there is prima facie material showing collusion with the supplier.The Court emphasised that arrest under Section 69 read with Section 132 cannot be based merely on suspicion. The Commissioner must have a belief supported by material and evidence satisfying the statutory conditions. The Court also noted that, for the purpose of Section 132, the supplier is the principal offender in the circumstances considered in the case.The Court also considered the petitioners' cooperation, absence of similar antecedents, payment through banking channels and undertaking to produce documents. It relied upon the principle that where an accused has joined investigation, is cooperating and is not likely to abscond, custodial interrogation should be avoided.Final VerdictThe High Court allowed all three petitions and granted anticipatory bail. The respondents/authorities were directed to release the petitioners in the event of their arrest in connection with the proceedings under Section 132(1) of the CGST Act, subject to specified conditions.The petitioners were directed to appear before the authorities on 10.08.2026 and could be taken into custody for interrogation if necessary, but were to be released on the same day after interrogation, subject to execution of a ₹5 lakh personal bond with two sureties of the like amount. They were also required to cooperate with the investigation, avoid influencing witnesses, keep their mobile numbers operational, provide their location through Google Maps, surrender their passports and not leave India without permission.Cases Referred by the CourtCaseCourt Radhika Agarwal v. Union of IndiaSupreme Court of India Akram Pasha v. Senior Intelligence Officer, DGGIHigh Court of Karnataka Tarun Jain v. Directorate General of GST Intelligence (DGGI)High Court of Delhi Siddharam Satlingappa Mhetre v. State of Maharashtra & Ors.Supreme Court of India Shailesh Rajpal v. CommissionerHigh Court of Madhya Pradesh GST Intelligence Directorate v. Chaman GoelHigh Court of Delhi  The Court distinguished Shailesh Rajpal and Chaman Goel because those cases involved different factual circumstances concerning the suppliers and tax/ITC allegations, whereas the present case concerned purchasers who claimed payment of invoice value and GST through banking channels and were willing to establish actual receipt of goods.The Court particularly relied upon Radhika Agarwal, Akram Pasha, Tarun Jain and Siddharam Satlingappa Mhetre while assessing the legality and necessity of arrest/custodial interrogation.  

BackgroundIn W.P. Nos. 21432 and 21433 of 2026, assessment orders were challenged whereby the petitioner's claim for ITC relating to construction-cum-leasing services was rejected. The petitioner had relied upon the Supreme Court judgment in Chief Commissioner of CGST and Others v. Safari Retreats Pvt. Ltd. and Others, particularly its interpretation of construction undertaken for leasing or licensing purposes vis-à-vis construction on the taxable person's own account. The petitioner contended that this judgment had not been properly considered while passing the assessment orders.In W.P. No. 22392 of 2026, the petitioner sought re-credit/refund of amounts debited from its electronic cash and credit ledgers pursuant to the assessment orders. It was contended that recovery was made without the prior intimation contemplated under Rule 142B(1) and without allowing the prescribed seven-day period.Court ObservationThe Court noted that the Supreme Court in Safari Retreats had held that construction cannot be regarded as being on the taxable person's own account where it is intended for sale, lease or licence. The Court observed that, in the factual context where the inputs were procured for construction and leasing, the proper officer ought to have considered the Supreme Court's judgment before recording findings.The Court found that the impugned assessment orders instead recorded that leasing could not convert otherwise blocked ITC into eligible credit, but these findings were entered without considering the ratio of the Supreme Court judgment in Safari Retreats. Consequently, the Court held that reconsideration of the assessment orders was warranted.With regard to recovery, the Court examined Rule 142B and observed that the proper officer is required to intimate the person in default regarding the recoverable amount and provide seven days from the date of intimation for payment. Recovery proceedings under the specified rules can be initiated only if the amount remains unpaid after expiry of that period. The Court found that this requirement had not been complied with in the present cases.Final VerdictThe assessment orders challenged in W.P. Nos. 21432 and 21433 of 2026 were set aside and the matters were remanded for reconsideration. The respondents were directed to provide a reasonable opportunity to the petitioner and issue fresh orders within five months from the date of receipt of the Court's order.In W.P. No. 22392 of 2026, considering the non-compliance with Rule 142B and the fact that the underlying assessment orders had been set aside, the Court directed the respondents to re-credit/refund the amounts debited from the electronic cash or credit ledgers to the corresponding ledger within two weeks from receipt of the order. The writ petitions were accordingly disposed of, with no order as to costs.Case Referred by CourtChief Commissioner of CGST and Others v. Safari Retreats Pvt. Ltd. and Others — Supreme Court, reported in (2024) 121 GSTR 184 (SC). 

BACKGROUNDThe appellant was engaged in trading dialysis equipment and providing maintenance and leasing services. Service tax was paid on AMC and CMC services, while leasing of equipment was treated as deemed sale and subjected to VAT. During audit, the Department took the view that the leasing transactions were taxable services because ownership, possession and effective control remained with the appellant.The Department alleged that the taxable leasing services had not been declared in ST-3 returns and that the appellant had suppressed the relevant facts with intent to evade service tax. A show cause notice was issued invoking the extended limitation and the proposed demand, interest and penalties were subsequently confirmed by the Order-in-Original.COURT OBSERVATIONSThe Tribunal examined the distinction between a deemed sale and a taxable service. It noted that Article 366(29A)(d) covers transfer of the right to use goods, whereas Section 66E covers transfer of goods by hiring, leasing or licensing without transfer of the right to use those goods.The Tribunal relied upon the principles laid down in BSNL v. Union of India, under which a transfer of the right to use goods requires, among other things, a legal right in the transferee to use the goods and exclusion of the transferor during the relevant period.On examining the actual agreement, the Tribunal found that the equipment could be used only in accordance with the appellant's specifications and instructions, the appellant retained maintenance and insurance responsibilities, and it retained rights of inspection. The Tribunal held that the relevant conditions for transfer of the right to use were not satisfied.The Tribunal concluded that mere permission to inspect and maintain the equipment was insufficient to establish a deemed sale. The usage of the equipment remained subject to the appellant's approval and maintenance and insurance expenses remained with the appellant. Payment of VAT was also held insufficient to change the character of the transaction.FINAL VERDICTThe Tribunal found no infirmity in the Order-in-Original and held that the activity constituted a taxable service. The appeal filed by the appellant was therefore dismissed.CASE REFERRED BY COURTBharat Sanchar Nigam Ltd. v. Union of India (BSNL) — Supreme Court of India — 2006; exact order date not stated in the PDF. The Tribunal applied the principles concerning transfer of the right to use goods.Indian Compressors v. Union of India — Delhi High Court — 2025; exact order date not stated in the PDF. The Tribunal expressly stated that it drew support from this decision.