BackgroundThe petitioners challenged an order passed by the SGST authority. Pursuant to an earlier order dated 24.02.2026, the department filed an affidavit dated 02.03.2026 setting out the relevant details and seeking to explain the issue of non-cross-examination of witnesses. Two procedural grievances were at the core of the matter: the non-supply of relied-upon documents along with the show cause notice, and the refusal to permit cross-examination of witnesses whose statements were relied upon by the department.FactsOn instructions from the Assistant Commissioner (SGST) present in Court, it was submitted that the explanation in the department's affidavit relating to non-cross-examination of the witnesses did not appear to be in consonance with the settled position of law, and that an appropriate opportunity was required to be extended to the petitioners to cross-examine the relevant witnesses as demanded. As regards the documents mentioned in the affidavit-in-reply, it was conceded that the same were supplied during the course of inquiry and not along with the show cause notice. The Court thus had before it two short grounds: subsequent (rather than contemporaneous) supply of the relied-upon documents, and refusal of cross-examination.Court Observations (Verbatim)Para 3: "Under the circumstances, since we find that the documents on which reliance has been placed during the investigation / inquiry were supplied to the petitioners subsequently and not along with the show cause notice, the same would amount to violation of the principles of natural justice. The second aspect pertains to the refusal to extend the opportunity of cross-examination, as demanded by the petitioners, of those witnesses whose statements have been relied upon by the department. Such inaction also violates the fundamental principle of fair opportunity of hearing."Para 4: "Thus, only on these two short grounds, the impugned order deserves to be quashed and set aside. The matter is remanded to the respondent authority for a fresh inquiry / investigation from the stage of issuance of the show cause notice."Para 5: "We direct that all the documents on which reliance is placed by the respondents shall be supplied to the petitioner along with the list of Relied Upon Documents (RUDs). In the event, the petitioner requests cross-examination of any witnesses whose statements are relied upon by the department, such opportunity shall be extended and appropriate orders shall be passed in accordance with law. The inquiry shall be completed within a period of three months."Para 7: "It is clarified that we are not setting aside the show cause notice and the inquiry shall proceed thereafter, after the RUDs are supplied to the petitioners."VerdictThe impugned order was quashed and set aside on the two grounds of non-supply of relied-upon documents with the show cause notice and refusal of cross-examination, both being violations of natural justice. The matter was remanded for fresh inquiry from the stage of the show cause notice, with a direction to supply all RUDs and extend cross-examination if requested; the show cause notice itself was not set aside, and the inquiry is to be completed within three months.
Singhvi Trandelink LLP & Anr. v. State of Gujarat & Anr. 05-03-2026
BackgroundThe petitioners challenged an order passed by the SGST authority. Pursuant to an earlier order dated 24.02.2026, the department filed an affidavit dated 02.03.2026 setting out the relevant details and seeking to explain the issue of non-cross-examination of witnesses. Two procedural grievances were at the core of the matter: the non-supply of relied-upon documents along with the show cause notice, and the refusal to permit cross-examination of witnesses whose statements were relied upon by the department.FactsOn instructions from the Assistant Commissioner (SGST) present in Court, it was submitted that the explanation in the department's affidavit relating to non-cross-examination of the witnesses did not appear to be in consonance with the settled position of law, and that an appropriate opportunity was required to be extended to the petitioners to cross-examine the relevant witnesses as demanded. As regards the documents mentioned in the affidavit-in-reply, it was conceded that the same were supplied during the course of inquiry and not along with the show cause notice. The Court thus had before it two short grounds: subsequent (rather than contemporaneous) supply of the relied-upon documents, and refusal of cross-examination.Court Observations (Verbatim)Para 3: "Under the circumstances, since we find that the documents on which reliance has been placed during the investigation / inquiry were supplied to the petitioners subsequently and not along with the show cause notice, the same would amount to violation of the principles of natural justice. The second aspect pertains to the refusal to extend the opportunity of cross-examination, as demanded by the petitioners, of those witnesses whose statements have been relied upon by the department. Such inaction also violates the fundamental principle of fair opportunity of hearing."Para 4: "Thus, only on these two short grounds, the impugned order deserves to be quashed and set aside. The matter is remanded to the respondent authority for a fresh inquiry / investigation from the stage of issuance of the show cause notice."Para 5: "We direct that all the documents on which reliance is placed by the respondents shall be supplied to the petitioner along with the list of Relied Upon Documents (RUDs). In the event, the petitioner requests cross-examination of any witnesses whose statements are relied upon by the department, such opportunity shall be extended and appropriate orders shall be passed in accordance with law. The inquiry shall be completed within a period of three months."Para 7: "It is clarified that we are not setting aside the show cause notice and the inquiry shall proceed thereafter, after the RUDs are supplied to the petitioners."VerdictThe impugned order was quashed and set aside on the two grounds of non-supply of relied-upon documents with the show cause notice and refusal of cross-examination, both being violations of natural justice. The matter was remanded for fresh inquiry from the stage of the show cause notice, with a direction to supply all RUDs and extend cross-examination if requested; the show cause notice itself was not set aside, and the inquiry is to be completed within three months.
BackgroundSurya Businees Private Limited, registered under CGST/AGST Act, 2017, had its returns for the period 2017-18 (July 2017 to March 2018) selected for audit under Section 65 of the AGST Act, 2017. A notice dated 27-09-2022 was issued requiring production of books of accounts. After audit, observations under Rule 101(4) of AGST Rules, 2017 were issued vide communication dated 29-05-2023, raising issues of short payment of tax, suppression of turnover and un-reconciled turnover. The petitioner replied on 07-06-2023 clarifying all observations. The audit report under Section 65(6) was thereafter issued. All objections on short payment of tax and suppression of turnover were dropped based on the petitioner's clarifications. Only interest of Rs. 1,34,580/- on account of late payment of tax was confirmed. The petitioner paid the said interest and intimated the authorities vide communication dated 19-06-2023, seeking closure of the matter. Despite this, the respondent No. 2 after approximately three months issued a fresh Show Cause Notice dated 28-09-2023 in Form GST DRC-01 under Section 73(1) of the CGST/AGST Act, 2017 for the same period 2017-18, alleging short payment of GST of Rs. 64,25,694/- and wrongful availment of ITC of Rs. 1,68,052/- under Section 17(5). The petitioner challenged this SCN before the Gauhati High Court.Court Observations (Verbatim)"The impugned show-cause notice pertains to the same subject matter and the period for which a detailed audit under Section 65 of the Act of 2017, was already carried out by the authorities and wherein no discrepancy was found concerning any short payment of tax or wrongful availment of ITC.""The said exercise having been carried out by the respondent authorities and there being no allegation that the petitioner for the purpose had not furnished all the requisite documents/records, the issuance of the impugned notice, without a circumstance as envisaged under Sub-Section (7) of Section 65 arising in the matter, in the considered view of this Court undermines the audit process carried out and renders the same redundant.""The petitioner having discharged his liabilities as ascertained during the audit proceeding, the impugned show-cause notice for the same very purpose would not be maintainable.""The said factors basing on which a notice under Section 73 of the Act of 2017, is permissible to be so issued, not being found to have arisen in the case of the petitioner, herein, in the audit report submitted by the respondent authorities, the petitioner having discharged its liability as determined, the proceeding initiated under Section 73 of the Act of 2017 in the facts and circumstances arising in the present matter would not be sustainable.""The comprehensive audit for the period having been carried out and no discrepancy having been found, therein, issuance of show-cause notice under Section 73 of the Act of 2017, without the situation envisaged under Sub-Section (7) of Section 65 arising in the matter, in the considered view of this Court renders the impugned show-cause liable to be interfered with.""In the present case this Court having found both the issues involved in the impugned show-cause notice to have been duly considered during the process of audit assessment carried out under the provision of Section 65 of the Act of 2017, the circumstances as envisaged under Sub-Section (7) of Section 65 of the Act of 2017, not arising in the matter, the show-cause notice dated 28-09-2023, was not permissible to be so issued to the petitioner, herein."Final VerdictThe Show Cause Notice dated 28-09-2023 issued under Section 73 of the CGST/AGST Act, 2017 was quashed and set aside. The Writ Petition was allowed in favour of the petitioner.Instructions / Circulars ReferredReferenceDetailsInstruction No. 13/2023-GST dated 26-12-2023Issued by Principal Commissioner of State Tax-cum-Commissioner of Taxes, Assam — stipulating that where audit proceedings have been completed, notices again issued using IIT Big Data Software need to be droppedNote: No judicial precedents / case laws were cited by the Court in this judgment. The above is an internal departmental instruction referred to by the petitioner's counsel and considered by the Court.Key Statutory Provisions InterpretedProvisionRelevanceSection 2(13) CGST/AGST Act, 2017Definition of 'Audit' — comprehensive verification of turnover, taxes, refunds and ITCSection 65(1) AGST Act, 2017Audit by tax authoritiesSection 65(6) AGST Act, 2017Issuance of final audit reportSection 65(7) AGST Act, 2017Trigger condition for initiating proceedings under Section 73/74 post-auditSection 73(1) CGST/AGST Act, 2017Determination of tax not paid / short paid — basis of impugned SCNRule 101(4) AGST Rules, 2017Audit observations issued to taxpayer
Surya Businees Private Limited vs. State of Assam & Ors. 05-03-2026
BackgroundSurya Businees Private Limited, registered under CGST/AGST Act, 2017, had its returns for the period 2017-18 (July 2017 to March 2018) selected for audit under Section 65 of the AGST Act, 2017. A notice dated 27-09-2022 was issued requiring production of books of accounts. After audit, observations under Rule 101(4) of AGST Rules, 2017 were issued vide communication dated 29-05-2023, raising issues of short payment of tax, suppression of turnover and un-reconciled turnover. The petitioner replied on 07-06-2023 clarifying all observations. The audit report under Section 65(6) was thereafter issued. All objections on short payment of tax and suppression of turnover were dropped based on the petitioner's clarifications. Only interest of Rs. 1,34,580/- on account of late payment of tax was confirmed. The petitioner paid the said interest and intimated the authorities vide communication dated 19-06-2023, seeking closure of the matter. Despite this, the respondent No. 2 after approximately three months issued a fresh Show Cause Notice dated 28-09-2023 in Form GST DRC-01 under Section 73(1) of the CGST/AGST Act, 2017 for the same period 2017-18, alleging short payment of GST of Rs. 64,25,694/- and wrongful availment of ITC of Rs. 1,68,052/- under Section 17(5). The petitioner challenged this SCN before the Gauhati High Court.Court Observations (Verbatim)"The impugned show-cause notice pertains to the same subject matter and the period for which a detailed audit under Section 65 of the Act of 2017, was already carried out by the authorities and wherein no discrepancy was found concerning any short payment of tax or wrongful availment of ITC.""The said exercise having been carried out by the respondent authorities and there being no allegation that the petitioner for the purpose had not furnished all the requisite documents/records, the issuance of the impugned notice, without a circumstance as envisaged under Sub-Section (7) of Section 65 arising in the matter, in the considered view of this Court undermines the audit process carried out and renders the same redundant.""The petitioner having discharged his liabilities as ascertained during the audit proceeding, the impugned show-cause notice for the same very purpose would not be maintainable.""The said factors basing on which a notice under Section 73 of the Act of 2017, is permissible to be so issued, not being found to have arisen in the case of the petitioner, herein, in the audit report submitted by the respondent authorities, the petitioner having discharged its liability as determined, the proceeding initiated under Section 73 of the Act of 2017 in the facts and circumstances arising in the present matter would not be sustainable.""The comprehensive audit for the period having been carried out and no discrepancy having been found, therein, issuance of show-cause notice under Section 73 of the Act of 2017, without the situation envisaged under Sub-Section (7) of Section 65 arising in the matter, in the considered view of this Court renders the impugned show-cause liable to be interfered with.""In the present case this Court having found both the issues involved in the impugned show-cause notice to have been duly considered during the process of audit assessment carried out under the provision of Section 65 of the Act of 2017, the circumstances as envisaged under Sub-Section (7) of Section 65 of the Act of 2017, not arising in the matter, the show-cause notice dated 28-09-2023, was not permissible to be so issued to the petitioner, herein."Final VerdictThe Show Cause Notice dated 28-09-2023 issued under Section 73 of the CGST/AGST Act, 2017 was quashed and set aside. The Writ Petition was allowed in favour of the petitioner.Instructions / Circulars ReferredReferenceDetailsInstruction No. 13/2023-GST dated 26-12-2023Issued by Principal Commissioner of State Tax-cum-Commissioner of Taxes, Assam — stipulating that where audit proceedings have been completed, notices again issued using IIT Big Data Software need to be droppedNote: No judicial precedents / case laws were cited by the Court in this judgment. The above is an internal departmental instruction referred to by the petitioner's counsel and considered by the Court.Key Statutory Provisions InterpretedProvisionRelevanceSection 2(13) CGST/AGST Act, 2017Definition of 'Audit' — comprehensive verification of turnover, taxes, refunds and ITCSection 65(1) AGST Act, 2017Audit by tax authoritiesSection 65(6) AGST Act, 2017Issuance of final audit reportSection 65(7) AGST Act, 2017Trigger condition for initiating proceedings under Section 73/74 post-auditSection 73(1) CGST/AGST Act, 2017Determination of tax not paid / short paid — basis of impugned SCNRule 101(4) AGST Rules, 2017Audit observations issued to taxpayer
BACKGROUNDEmerson Process Management (India) Pvt. Ltd., registered under GST in multiple states including Gujarat and Maharashtra, amalgamated M/s Pentair Valves and Controls India Pvt. Ltd. into itself pursuant to an NCLT-approved scheme of amalgamation dated 14.11.2019. As part of the merger, all assets and liabilities of the transferor company — including its unutilized ITC balance — were transferred to the petitioner. The unutilized ITC pertained primarily to CGST, having been transitioned from the Central Excise regime through Form GST TRAN-1. When the petitioner attempted to transfer this ITC through Form GST ITC-02 on the online GST portal, the portal displayed an error message: "Transferee and Transferor should be of the same State - U.T." Despite multiple reminders dated 08.08.2022 and 26.03.2024, and several personal visits to the jurisdictional officer, no resolution was provided. The petitioner approached the Gujarat High Court under Article 226 of the Constitution challenging the portal restriction as illegal and contrary to the provisions of Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules. COURT OBSERVATIONS (Verbatim)On the illegal endorsement on statutory form:"We find that such incorporation has been made in the statutory form itself without referring to any provisions under which the same is passed. In our considered opinion, the reasons assigned in the statutory form should be separate, clearly demarcating the opinion of the department and shall not be embossed on the statutory form which has been done in the present case.""The statutory ITC form which is issued under Rule 41 of the CGST Rules does not contain any such column of specifying or recording of the opinion of the concerned officer assigning his/her reason for not accepting the statutory form."On absence of statutory prohibition:"We do not find any convincing reason to take a contrary view to that taken by the Bombay High Court. The transfer of the ITC on amalgamation of the company is permissible as per the provision of Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules. Neither of the provision prohibits or debars transfer of the ITC on the ground that the transferee and the transferor company are located in different states.""We are of the opinion that the respondent department cannot incorporate something in a statutory form ITC-02 on GST Portal which is absent in the statutory provisions. The remark which is mentioned on the Form GST ITC-02 does not find place in the statute. Neither the statute permits nor debars the transfer of ITC after the scheme of amalgamation has been approved by the NCLT. Such an action of restricting the transfer of ITC on the on-line GST portal is de hors the intention of the provision of Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules."On manual processing (interim direction):"We clarify that till proper amendment or mechanism is provided in uploading the Form ITC-02, the respondent department shall accept such forms manually and process the same. We direct that the petitioner should be allowed to fill up the Form ITC-02 manually. The same shall be processed within a period of six weeks from the date of receipt of order of this Court." FINAL VERDICTWrit petition allowed. Rule made absolute. The GST portal restriction of "same State/UT" in Form ITC-02 held to be without any statutory basis and illegal. Department directed to accept Form ITC-02 manually and process transfer of CGST ITC within six weeks. 👍
Emerson Process Management (India) Pvt. Ltd. vs Union of India & Ors. 05-03-2026
BACKGROUNDEmerson Process Management (India) Pvt. Ltd., registered under GST in multiple states including Gujarat and Maharashtra, amalgamated M/s Pentair Valves and Controls India Pvt. Ltd. into itself pursuant to an NCLT-approved scheme of amalgamation dated 14.11.2019. As part of the merger, all assets and liabilities of the transferor company — including its unutilized ITC balance — were transferred to the petitioner. The unutilized ITC pertained primarily to CGST, having been transitioned from the Central Excise regime through Form GST TRAN-1. When the petitioner attempted to transfer this ITC through Form GST ITC-02 on the online GST portal, the portal displayed an error message: "Transferee and Transferor should be of the same State - U.T." Despite multiple reminders dated 08.08.2022 and 26.03.2024, and several personal visits to the jurisdictional officer, no resolution was provided. The petitioner approached the Gujarat High Court under Article 226 of the Constitution challenging the portal restriction as illegal and contrary to the provisions of Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules. COURT OBSERVATIONS (Verbatim)On the illegal endorsement on statutory form:"We find that such incorporation has been made in the statutory form itself without referring to any provisions under which the same is passed. In our considered opinion, the reasons assigned in the statutory form should be separate, clearly demarcating the opinion of the department and shall not be embossed on the statutory form which has been done in the present case.""The statutory ITC form which is issued under Rule 41 of the CGST Rules does not contain any such column of specifying or recording of the opinion of the concerned officer assigning his/her reason for not accepting the statutory form."On absence of statutory prohibition:"We do not find any convincing reason to take a contrary view to that taken by the Bombay High Court. The transfer of the ITC on amalgamation of the company is permissible as per the provision of Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules. Neither of the provision prohibits or debars transfer of the ITC on the ground that the transferee and the transferor company are located in different states.""We are of the opinion that the respondent department cannot incorporate something in a statutory form ITC-02 on GST Portal which is absent in the statutory provisions. The remark which is mentioned on the Form GST ITC-02 does not find place in the statute. Neither the statute permits nor debars the transfer of ITC after the scheme of amalgamation has been approved by the NCLT. Such an action of restricting the transfer of ITC on the on-line GST portal is de hors the intention of the provision of Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules."On manual processing (interim direction):"We clarify that till proper amendment or mechanism is provided in uploading the Form ITC-02, the respondent department shall accept such forms manually and process the same. We direct that the petitioner should be allowed to fill up the Form ITC-02 manually. The same shall be processed within a period of six weeks from the date of receipt of order of this Court." FINAL VERDICTWrit petition allowed. Rule made absolute. The GST portal restriction of "same State/UT" in Form ITC-02 held to be without any statutory basis and illegal. Department directed to accept Form ITC-02 manually and process transfer of CGST ITC within six weeks. 👍
Case Facts:The petitioner challenged an order dated 26.12.2025 confirming tax liability for FY 2018–19. The show cause notice proposed a demand of Rs.1.37 crore, whereas the final order confirmed Rs.2.41 crore. The petitioner contended that the order exceeded the scope of the show cause notice. The writ petition was filed seeking quashing of both the show cause notice and consequential order. Court Decision:The Court held that the impugned order was contrary to Section 75(7) as it confirmed demand beyond what was proposed in the show cause notice. The impugned order was set aside and the matter was remitted back to the authority for fresh consideration. The petitioner was directed to file a reply within 30 days and the authority was directed to pass a fresh order after granting opportunity. The authority was permitted to proceed in accordance with law in case of non-compliance by the petitioner.
Tirumala Milk Products Private Limited v. State Tax Officer 05-03-2026
Case Facts:The petitioner challenged an order dated 26.12.2025 confirming tax liability for FY 2018–19. The show cause notice proposed a demand of Rs.1.37 crore, whereas the final order confirmed Rs.2.41 crore. The petitioner contended that the order exceeded the scope of the show cause notice. The writ petition was filed seeking quashing of both the show cause notice and consequential order. Court Decision:The Court held that the impugned order was contrary to Section 75(7) as it confirmed demand beyond what was proposed in the show cause notice. The impugned order was set aside and the matter was remitted back to the authority for fresh consideration. The petitioner was directed to file a reply within 30 days and the authority was directed to pass a fresh order after granting opportunity. The authority was permitted to proceed in accordance with law in case of non-compliance by the petitioner.
Facts :The petitioner, a telecom service provider with multiple GST registrations, operated as an Input Service Distributor (ISD) for distribution of common input tax credit across its units. It challenged Rule 39(1)(a) requiring distribution of ITC in the same month as the invoice, both prior to and after amendment to Section 20 w.e.f. 01.04.2025. The petitioner contended that prior to amendment, there was no statutory power to prescribe such time limit and that the requirement was arbitrary and impossible to comply with. Show cause notices were issued alleging improper distribution of ITC not done in the same month as receipt of invoices.Court Decision:The Court upheld the validity of Rule 39(1)(a) of the CGST Rules. It held that prescription of time limit for distribution of ITC is within rule-making power and is a procedural requirement governing distribution mechanism. The requirement of distribution in the same month was held not arbitrary and having nexus with proper administration of GST and prevention of misuse. The Court rejected the contention that such requirement is impossible to comply with and held that ITC is a statutory benefit subject to conditions. The challenge to show cause notices was declined, holding that the petitioner can raise all contentions in adjudication proceedings.Cases Referred:Sales Tax Officer, Ponkunnam vs K.I. AbrahamJayam & Co. vs Assistant CommissionerUnion of India vs VKC Footsteps India Pvt. Ltd.ALD Automotive Pvt. Ltd. vs Commercial Tax Officer
Reliance Jio Infocom Ltd. vs Union of India & Others 05-03-2026
Facts :The petitioner, a telecom service provider with multiple GST registrations, operated as an Input Service Distributor (ISD) for distribution of common input tax credit across its units. It challenged Rule 39(1)(a) requiring distribution of ITC in the same month as the invoice, both prior to and after amendment to Section 20 w.e.f. 01.04.2025. The petitioner contended that prior to amendment, there was no statutory power to prescribe such time limit and that the requirement was arbitrary and impossible to comply with. Show cause notices were issued alleging improper distribution of ITC not done in the same month as receipt of invoices.Court Decision:The Court upheld the validity of Rule 39(1)(a) of the CGST Rules. It held that prescription of time limit for distribution of ITC is within rule-making power and is a procedural requirement governing distribution mechanism. The requirement of distribution in the same month was held not arbitrary and having nexus with proper administration of GST and prevention of misuse. The Court rejected the contention that such requirement is impossible to comply with and held that ITC is a statutory benefit subject to conditions. The challenge to show cause notices was declined, holding that the petitioner can raise all contentions in adjudication proceedings.Cases Referred:Sales Tax Officer, Ponkunnam vs K.I. AbrahamJayam & Co. vs Assistant CommissionerUnion of India vs VKC Footsteps India Pvt. Ltd.ALD Automotive Pvt. Ltd. vs Commercial Tax Officer
Case Facts:The petitioner challenged a show-cause notice proposing blocking of ITC under Rule 86A and seeking restoration of ₹1.96 crore. The allegation was that the petitioner issued invoices without actual supply of goods, enabling M/s. Million Lights to avail wrongful ITC. The petitioner contended that Rule 86A applies only when ITC is wrongly availed by the assessee itself and not by its customer. The department asserted ongoing investigation and alleged admissions regarding issuance of invoices without supply.Court Decision:The Court held that Rule 86A empowers restriction on utilization of ITC only when the credit in the electronic credit ledger of the concerned assessee is fraudulently availed or is ineligible under specified circumstances such as absence of supply, non-existent supplier, non-payment of tax, or lack of valid documents. The Rule is limited to these conditions and cannot be invoked otherwise. In the present case, the allegation was that the petitioner issued invoices without actual supply, leading to wrongful ITC availment by the recipient. Such allegation does not pertain to ITC availed by the petitioner itself. Therefore, invocation of Rule 86A against the petitioner was improper as the statutory conditions were not satisfied.
Sri Padmavathi Marketing v. Assistant Commissioner of Commercial Taxes 04-03-2026
Case Facts:The petitioner challenged a show-cause notice proposing blocking of ITC under Rule 86A and seeking restoration of ₹1.96 crore. The allegation was that the petitioner issued invoices without actual supply of goods, enabling M/s. Million Lights to avail wrongful ITC. The petitioner contended that Rule 86A applies only when ITC is wrongly availed by the assessee itself and not by its customer. The department asserted ongoing investigation and alleged admissions regarding issuance of invoices without supply.Court Decision:The Court held that Rule 86A empowers restriction on utilization of ITC only when the credit in the electronic credit ledger of the concerned assessee is fraudulently availed or is ineligible under specified circumstances such as absence of supply, non-existent supplier, non-payment of tax, or lack of valid documents. The Rule is limited to these conditions and cannot be invoked otherwise. In the present case, the allegation was that the petitioner issued invoices without actual supply, leading to wrongful ITC availment by the recipient. Such allegation does not pertain to ITC availed by the petitioner itself. Therefore, invocation of Rule 86A against the petitioner was improper as the statutory conditions were not satisfied.
Facts:The petitioner was issued a show cause notice seeking recovery of alleged wrongful ITC availed by his deceased father. The father had passed away in September 2022, while the notice was issued in April 2024. The petitioner contended that recovery proceedings under Sections 74 and 93 could not be initiated against him for liabilities of the deceased. It was also argued that the adjudication order was passed without considering his reply, violating principles of natural justice. Court Decision:The Court held that considering the facts, the petitioner should be granted an opportunity of hearing before the adjudicating authority. It directed the petitioner to appear before the authority and allowed him to raise all contentions, including on applicability of Sections 74 and 93. The authority was directed to pass a fresh order after granting hearing and considering all submissions. All issues, including challenge to statutory provisions, were kept open.
Vinay Hiroo Thadani v. Deputy Commissioner of CGST & Central Excise & Ors. 04-03-2026
Facts:The petitioner was issued a show cause notice seeking recovery of alleged wrongful ITC availed by his deceased father. The father had passed away in September 2022, while the notice was issued in April 2024. The petitioner contended that recovery proceedings under Sections 74 and 93 could not be initiated against him for liabilities of the deceased. It was also argued that the adjudication order was passed without considering his reply, violating principles of natural justice. Court Decision:The Court held that considering the facts, the petitioner should be granted an opportunity of hearing before the adjudicating authority. It directed the petitioner to appear before the authority and allowed him to raise all contentions, including on applicability of Sections 74 and 93. The authority was directed to pass a fresh order after granting hearing and considering all submissions. All issues, including challenge to statutory provisions, were kept open.
Background. Under a scheme of arrangement approved by the NCLT, Mumbai Bench on 24.11.2023, with an appointed date of 01.04.2023, the entire business of the transferor was vested in the petitioner and the transferor was dissolved without winding up. Although the petitioner informed the authorities by reply dated 29.03.2024 that the company no longer existed, notices and hearings continued in the dissolved company’s name and culminated in an assessment order dated 06.12.2024. The petitioner had participated in those proceedings.Observations of the Court. The Court set out Clause 7 of the sanctioned scheme, under which all legal, taxation and other proceedings by or against the transferor pending on the appointed date are to be continued and enforced by or against the transferee as if instituted by or against it. It followed Spice Enfotainment Ltd., Maruti Suzuki India Ltd. and Kamala Muthiah, holding that proceedings pursued against a dissolved company are wholly without jurisdiction.On Section 87, the Court held that the provision only ensures that the authorities’ right to recover tax is protected and that the liability continues to be discharged. It does not deal at all with the question whether pending proceedings against a dissolved company may be continued; that question stands already decided by the Supreme Court, and Section 87 is not relevant to it. Participation by the petitioner did not cure the defect. The merits of the demand were expressly left open.Final verdict. The writ petition was allowed and the order dated 06.12.2024 was set aside, leaving it open to the respondent authorities to undertake such action as may be permissible under law.
Background. Under a scheme of arrangement approved by the NCLT, Mumbai Bench on 24.11.2023, with an appointed date of 01.04.2023, the entire business of the transferor was vested in the petitioner and the transferor was dissolved without winding up. Although the petitioner informed the authorities by reply dated 29.03.2024 that the company no longer existed, notices and hearings continued in the dissolved company’s name and culminated in an assessment order dated 06.12.2024. The petitioner had participated in those proceedings.Observations of the Court. The Court set out Clause 7 of the sanctioned scheme, under which all legal, taxation and other proceedings by or against the transferor pending on the appointed date are to be continued and enforced by or against the transferee as if instituted by or against it. It followed Spice Enfotainment Ltd., Maruti Suzuki India Ltd. and Kamala Muthiah, holding that proceedings pursued against a dissolved company are wholly without jurisdiction.On Section 87, the Court held that the provision only ensures that the authorities’ right to recover tax is protected and that the liability continues to be discharged. It does not deal at all with the question whether pending proceedings against a dissolved company may be continued; that question stands already decided by the Supreme Court, and Section 87 is not relevant to it. Participation by the petitioner did not cure the defect. The merits of the demand were expressly left open.Final verdict. The writ petition was allowed and the order dated 06.12.2024 was set aside, leaving it open to the respondent authorities to undertake such action as may be permissible under law.
BACKGROUND The petitioner-assessee held a 95-year lease of an industrial plot allotted by MIDC. In exercise of the transferable rights under the lease deed, the petitioner assigned the entire leasehold rights in favour of a third party with prior consent of MIDC, receiving consideration for the said assignment. The Department issued a Show Cause Notice under Section 73(5) of the Maharashtra GST Act, 2017 alleging that the petitioner had concealed this transaction and had not paid GST on it. The Department's case was that this assignment amounted to supply of services classifiable under other miscellaneous services taxable at 18% under Entry No. 35 of Notification No. 11/2017-CT (Rate). It was also admitted in the notice itself that the transaction did not amount to a sub-lease, as the petitioner's rights stood extinguished upon assignment. An adjudication order was passed on 30.12.2025 confirming the demand, which was challenged before the High Court.CRUCIAL COURT OBSERVATIONS (Verbatim)"In the case before us, the transaction under question is assignment of leasehold rights by the petitioner in favour of assignee, which, admittedly, is not a lease nor does it amount to sub-lease. In fact, in the show cause notice issued by respondent no.1, he has categorically mentioned that the transaction under question does not amount to sub-lease, as the petitioner's right stands extinguished by the said transaction.""Such petty services, in our view, cannot be extended to assignment of leasehold rights in an immovable property, to term it to be other miscellaneous services, as classified under Clause at Sr. No. 35 of the Notification. In that view of the matter, the notice could be said to be bad in law on this count alone.""This transaction, on the face of record, constitute transfer of immovable property by the petitioner to M/s. Kothari Belting Company. The transaction pertains exclusively to transfer of benefits arising out of an immovable property and has no nexus whatsoever with the business of the petitioner Company. Consequently, the essential element of supply of service, in the course of business or in furtherance of business, is completely absent.""We subscribe to this view for the reasons quoted in earlier part of our judgment so also because the view, in our considered opinion, is in consonance with the provisions of law on supply of services." (referring to Gujarat HC conclusion)"Further, the law laid down by the Gujarat High Court is binding on the authorities, i.e. the respondents in terms of the judgment of this Court in the case of Commissioner of Income-tax, Vidarbha and Marathwada, Nagpur Vs. Smt. Godavaridevi Saraf Tumsar [1978 (2) ELTJ 624 Bombay], wherein, the Court held that until a contrary decision is given by any other competent High Court, which is binding on 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 land.""We subscribe to the finding of the Gujarat High Court that the assignment by sale and transfer of leasehold rights of the plot of land allotted by the Corporation, like GIDC or MIDC to the lessee in favour of third party-assignee for a consideration, shall be assignment/sale/transfer of benefits arising out of immovable property by the lessee-assignor in favour of third party, and in such circumstances, the transaction would not be subject to levy of GST in terms of the GST Act."FINAL VERDICT The Writ Petition was allowed, the adjudication order dated 30.12.2025 was quashed and set aside, holding that assignment of leasehold rights in an MIDC plot constitutes transfer of benefits arising out of immovable property and is not liable to GST as it lacks the essential element of supply in the course or furtherance of business. 👍
Hindustan Equipment Craft vs. Assistant Commissioner of State Tax & Ors. 27-02-2026
BACKGROUND The petitioner-assessee held a 95-year lease of an industrial plot allotted by MIDC. In exercise of the transferable rights under the lease deed, the petitioner assigned the entire leasehold rights in favour of a third party with prior consent of MIDC, receiving consideration for the said assignment. The Department issued a Show Cause Notice under Section 73(5) of the Maharashtra GST Act, 2017 alleging that the petitioner had concealed this transaction and had not paid GST on it. The Department's case was that this assignment amounted to supply of services classifiable under other miscellaneous services taxable at 18% under Entry No. 35 of Notification No. 11/2017-CT (Rate). It was also admitted in the notice itself that the transaction did not amount to a sub-lease, as the petitioner's rights stood extinguished upon assignment. An adjudication order was passed on 30.12.2025 confirming the demand, which was challenged before the High Court.CRUCIAL COURT OBSERVATIONS (Verbatim)"In the case before us, the transaction under question is assignment of leasehold rights by the petitioner in favour of assignee, which, admittedly, is not a lease nor does it amount to sub-lease. In fact, in the show cause notice issued by respondent no.1, he has categorically mentioned that the transaction under question does not amount to sub-lease, as the petitioner's right stands extinguished by the said transaction.""Such petty services, in our view, cannot be extended to assignment of leasehold rights in an immovable property, to term it to be other miscellaneous services, as classified under Clause at Sr. No. 35 of the Notification. In that view of the matter, the notice could be said to be bad in law on this count alone.""This transaction, on the face of record, constitute transfer of immovable property by the petitioner to M/s. Kothari Belting Company. The transaction pertains exclusively to transfer of benefits arising out of an immovable property and has no nexus whatsoever with the business of the petitioner Company. Consequently, the essential element of supply of service, in the course of business or in furtherance of business, is completely absent.""We subscribe to this view for the reasons quoted in earlier part of our judgment so also because the view, in our considered opinion, is in consonance with the provisions of law on supply of services." (referring to Gujarat HC conclusion)"Further, the law laid down by the Gujarat High Court is binding on the authorities, i.e. the respondents in terms of the judgment of this Court in the case of Commissioner of Income-tax, Vidarbha and Marathwada, Nagpur Vs. Smt. Godavaridevi Saraf Tumsar [1978 (2) ELTJ 624 Bombay], wherein, the Court held that until a contrary decision is given by any other competent High Court, which is binding on 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 land.""We subscribe to the finding of the Gujarat High Court that the assignment by sale and transfer of leasehold rights of the plot of land allotted by the Corporation, like GIDC or MIDC to the lessee in favour of third party-assignee for a consideration, shall be assignment/sale/transfer of benefits arising out of immovable property by the lessee-assignor in favour of third party, and in such circumstances, the transaction would not be subject to levy of GST in terms of the GST Act."FINAL VERDICT The Writ Petition was allowed, the adjudication order dated 30.12.2025 was quashed and set aside, holding that assignment of leasehold rights in an MIDC plot constitutes transfer of benefits arising out of immovable property and is not liable to GST as it lacks the essential element of supply in the course or furtherance of business. 👍
BackgroundThe petitioner, Kalaimahal Cements Private Limited (GSTIN: 33AAGCK4135K1ZK), had its ITC blocked vide Reference No. BL3312250000204 dated 05.12.2025 for the tax period 01.10.2025 to 31.12.2025 under Rule 86A of the GST Rules by the Commercial Tax Officer, Virudhachalam Assessment Circle, Cuddalore.Crucially, on the previous day i.e., 04.12.2025, an inspection was conducted by the authorities, wherein statements were recorded from the petitioner's Managing Director, Ms. R. Kavitha Ramesh, from which it was apparent that the petitioner had been availing ITC on the basis of bogus/block invoices. It was in this background that the ITC was blocked on 05.12.2025.The petitioner raised two grounds before the Court: (i) that there was no valid basis for blocking ITC under Rule 86A; and (ii) that only an Assistant Commissioner or a Senior Officer is competent to block ITC under Rule 86A, and therefore the blocking by the Commercial Tax Officer was without jurisdiction.Court Observations (Verbatim)On the first ground of challenge to blocking:"It is in this background, the Input Tax Credit was blocked on 05.12.2025 vide impugned proceedings. Therefore, the challenge to the blocking of the Input Tax Credit under Rule 86A of the respective GST Rules on this count cannot be countenanced."On the second ground regarding competency/jurisdiction, the Court relied upon the Madurai Bench decision in W.P.(MD).No.21670 of 2025 and quoted the following observations therefrom:"18. Rules 86A(2) contemplates that the Commissioner or the Officer authorised by him under Sub Rule 1, may, upon being satisfied that the condition disallowing the debit of electronic credit no longer existed and allow such credit.19. However, considering the fact that notice has been issued in Form GST DRC 01, it is unlikely that the power will be exercised under Rule 86A(2) of the respective GST Rules. The question as to whether the proceedings were within the power of the State Tax Officer and contrary to the requirements of the circular dated 02.11.2021 bearing reference CBEC-20/16/05/2021-GST is concerned, it has to be construed that the senior official would have authorised the blocking of the credit.20. There is a clear embargo under Rule 86A, officer below the rank of Assistant Commissioner not to block where credit has been availed fraudulently or the credit is ineligible. However, the blocking would have been made with the permission of the senior in the hierarchy. That apart, it is the internal matter and particularly in the light of the fact that the notice has been issued in Form GST DRC 01 dated 07.07.2025 by State Tax Officer. The State Tax Officer is a proper officer for issuance of show cause notice also proper officer under Rule 74. Therefore, the objection on the jurisdiction cannot be countenanced."Final VerdictThe Writ Petition was dismissed. The Court upheld the blocking of ITC in view of the Managing Director's own admission during inspection. Liberty was granted to the petitioner to file a representation before the concerned officer, who shall pass appropriate orders within 30 days of receipt of a copy of this order. The petitioner shall be heard before final orders are passed.
Kalaimahal Cements Private Limited vs. The Commercial Tax Officer 26-02-2026
BackgroundThe petitioner, Kalaimahal Cements Private Limited (GSTIN: 33AAGCK4135K1ZK), had its ITC blocked vide Reference No. BL3312250000204 dated 05.12.2025 for the tax period 01.10.2025 to 31.12.2025 under Rule 86A of the GST Rules by the Commercial Tax Officer, Virudhachalam Assessment Circle, Cuddalore.Crucially, on the previous day i.e., 04.12.2025, an inspection was conducted by the authorities, wherein statements were recorded from the petitioner's Managing Director, Ms. R. Kavitha Ramesh, from which it was apparent that the petitioner had been availing ITC on the basis of bogus/block invoices. It was in this background that the ITC was blocked on 05.12.2025.The petitioner raised two grounds before the Court: (i) that there was no valid basis for blocking ITC under Rule 86A; and (ii) that only an Assistant Commissioner or a Senior Officer is competent to block ITC under Rule 86A, and therefore the blocking by the Commercial Tax Officer was without jurisdiction.Court Observations (Verbatim)On the first ground of challenge to blocking:"It is in this background, the Input Tax Credit was blocked on 05.12.2025 vide impugned proceedings. Therefore, the challenge to the blocking of the Input Tax Credit under Rule 86A of the respective GST Rules on this count cannot be countenanced."On the second ground regarding competency/jurisdiction, the Court relied upon the Madurai Bench decision in W.P.(MD).No.21670 of 2025 and quoted the following observations therefrom:"18. Rules 86A(2) contemplates that the Commissioner or the Officer authorised by him under Sub Rule 1, may, upon being satisfied that the condition disallowing the debit of electronic credit no longer existed and allow such credit.19. However, considering the fact that notice has been issued in Form GST DRC 01, it is unlikely that the power will be exercised under Rule 86A(2) of the respective GST Rules. The question as to whether the proceedings were within the power of the State Tax Officer and contrary to the requirements of the circular dated 02.11.2021 bearing reference CBEC-20/16/05/2021-GST is concerned, it has to be construed that the senior official would have authorised the blocking of the credit.20. There is a clear embargo under Rule 86A, officer below the rank of Assistant Commissioner not to block where credit has been availed fraudulently or the credit is ineligible. However, the blocking would have been made with the permission of the senior in the hierarchy. That apart, it is the internal matter and particularly in the light of the fact that the notice has been issued in Form GST DRC 01 dated 07.07.2025 by State Tax Officer. The State Tax Officer is a proper officer for issuance of show cause notice also proper officer under Rule 74. Therefore, the objection on the jurisdiction cannot be countenanced."Final VerdictThe Writ Petition was dismissed. The Court upheld the blocking of ITC in view of the Managing Director's own admission during inspection. Liberty was granted to the petitioner to file a representation before the concerned officer, who shall pass appropriate orders within 30 days of receipt of a copy of this order. The petitioner shall be heard before final orders are passed.
