The appeals arose from a judgment of the Gujarat High Court which had set aside the “pre-import condition” imposed through Notification No. 79/2017-Customs and Notification No. 33/2015-2020, both dated 13 October 2017. These notifications made the exemption from Integrated Goods and Services Tax (IGST) and GST Compensation Cess on inputs imported under the Advance Authorisation (AA) Scheme conditional upon fulfilling a “pre-import” requirement—i.e., that inputs be imported before export of finished goods. The High Court held that this condition was unreasonable and contrary to the Foreign Trade Policy (FTP) 2015-2020.The Union of India contended that the AA Scheme inherently required import before export because inputs must be physically incorporated in the final goods, and that the DGFT was empowered under paragraph 4.13(i) of the FTP to impose such conditions. The exporters argued that the condition was impractical for continuous manufacturing cycles and violated Articles 14 and 19(1) (g) of the Constitution.The Supreme Court allowed the appeals filed by the Union of India and upheld the validity of the “pre-import condition.” It held that paragraph 4.13(i) of the FTP expressly empowered the DGFT to impose such a condition on any inputs and that the power was exercised lawfully through the impugned notifications. The Court observed that the Advance Authorisation Scheme was a statutory exemption, and no importer had a vested right to exemption without complying with its terms.The Court found that the High Court erred in assuming the “pre-import condition” applied only to specific goods listed in Appendix-4J. It clarified that the DGFT could extend the condition to all goods as a matter of policy. The introduction of GST represented a fundamental overhaul of the indirect tax system, and the transitional conditions for IGST exemption were legitimate fiscal measures. The deletion of the condition in 2019 did not render its earlier imposition invalid or retrospective.Accordingly, the Supreme Court upheld the notifications dated 13 October 2017 and set aside the Gujarat High Court’s judgment.
Union of India & Others v. Cosmo Films Ltd. & Others 28-04-2023
The appeals arose from a judgment of the Gujarat High Court which had set aside the “pre-import condition” imposed through Notification No. 79/2017-Customs and Notification No. 33/2015-2020, both dated 13 October 2017. These notifications made the exemption from Integrated Goods and Services Tax (IGST) and GST Compensation Cess on inputs imported under the Advance Authorisation (AA) Scheme conditional upon fulfilling a “pre-import” requirement—i.e., that inputs be imported before export of finished goods. The High Court held that this condition was unreasonable and contrary to the Foreign Trade Policy (FTP) 2015-2020.The Union of India contended that the AA Scheme inherently required import before export because inputs must be physically incorporated in the final goods, and that the DGFT was empowered under paragraph 4.13(i) of the FTP to impose such conditions. The exporters argued that the condition was impractical for continuous manufacturing cycles and violated Articles 14 and 19(1) (g) of the Constitution.The Supreme Court allowed the appeals filed by the Union of India and upheld the validity of the “pre-import condition.” It held that paragraph 4.13(i) of the FTP expressly empowered the DGFT to impose such a condition on any inputs and that the power was exercised lawfully through the impugned notifications. The Court observed that the Advance Authorisation Scheme was a statutory exemption, and no importer had a vested right to exemption without complying with its terms.The Court found that the High Court erred in assuming the “pre-import condition” applied only to specific goods listed in Appendix-4J. It clarified that the DGFT could extend the condition to all goods as a matter of policy. The introduction of GST represented a fundamental overhaul of the indirect tax system, and the transitional conditions for IGST exemption were legitimate fiscal measures. The deletion of the condition in 2019 did not render its earlier imposition invalid or retrospective.Accordingly, the Supreme Court upheld the notifications dated 13 October 2017 and set aside the Gujarat High Court’s judgment.
The appellants, Hero Motocorp Ltd. and Sun Pharma Laboratories Ltd., had set up industrial units in Uttarakhand and Himachal Pradesh under the Office Memorandum (O.M.) dated 7 January 2003, which granted 100% excise duty exemption for ten years to new and substantially expanded industrial units in specified regions. These benefits were notified under Notification No. 50/2003-CE dated 10 June 2003. Following the introduction of the Goods and Services Tax (GST) regime through the Constitution (101st Amendment) Act, 2016 and enactment of the Central Goods and Services Tax Act, 2017 (CGST Act), the previous area-based exemptions were rescinded by Notification No. 21/2017-CE dated 18 July 2017. The Government introduced a Budgetary Support Scheme granting partial reimbursement (58% of CGST and 29% of IGST) to industrial units. The appellants challenged the reduction of benefits before the Delhi and Sikkim High Courts, contending that the Government was bound by the 2003 representation promising 100% exemption. Both High Courts dismissed the petitions.The Supreme Court dismissed the appeals and upheld the High Courts’ decisions. It held that the withdrawal of excise exemptions and introduction of partial reimbursement under the GST regime were valid and in accordance with the proviso to Section 174(2)(c) of the CGST Act, 2017, which specifically provides that any tax exemption granted as an investment incentive shall not continue if rescinded after the appointed day. The Court ruled that the doctrine of promissory estoppel cannot override statutory provisions or apply against legislative action. The change from the excise to GST regime constituted a major constitutional and statutory shift, and the earlier industrial incentives could not be enforced under the new law.The Court further held that no writ of mandamus could lie against the Union of India to compel payment of full refund since no statutory duty existed to grant 100% reimbursement. The Budgetary Support Scheme was a policy decision implemented in accordance with the recommendations of the GST Council and the Finance Commission.Accordingly, the Court upheld the validity of the 58% budgetary support and rejected the claim for continuation of full exemption under the earlier scheme.
M/s Hero Motocorp Ltd. v. Union of India & Others 17-10-2022
The appellants, Hero Motocorp Ltd. and Sun Pharma Laboratories Ltd., had set up industrial units in Uttarakhand and Himachal Pradesh under the Office Memorandum (O.M.) dated 7 January 2003, which granted 100% excise duty exemption for ten years to new and substantially expanded industrial units in specified regions. These benefits were notified under Notification No. 50/2003-CE dated 10 June 2003. Following the introduction of the Goods and Services Tax (GST) regime through the Constitution (101st Amendment) Act, 2016 and enactment of the Central Goods and Services Tax Act, 2017 (CGST Act), the previous area-based exemptions were rescinded by Notification No. 21/2017-CE dated 18 July 2017. The Government introduced a Budgetary Support Scheme granting partial reimbursement (58% of CGST and 29% of IGST) to industrial units. The appellants challenged the reduction of benefits before the Delhi and Sikkim High Courts, contending that the Government was bound by the 2003 representation promising 100% exemption. Both High Courts dismissed the petitions.The Supreme Court dismissed the appeals and upheld the High Courts’ decisions. It held that the withdrawal of excise exemptions and introduction of partial reimbursement under the GST regime were valid and in accordance with the proviso to Section 174(2)(c) of the CGST Act, 2017, which specifically provides that any tax exemption granted as an investment incentive shall not continue if rescinded after the appointed day. The Court ruled that the doctrine of promissory estoppel cannot override statutory provisions or apply against legislative action. The change from the excise to GST regime constituted a major constitutional and statutory shift, and the earlier industrial incentives could not be enforced under the new law.The Court further held that no writ of mandamus could lie against the Union of India to compel payment of full refund since no statutory duty existed to grant 100% reimbursement. The Budgetary Support Scheme was a policy decision implemented in accordance with the recommendations of the GST Council and the Finance Commission.Accordingly, the Court upheld the validity of the 58% budgetary support and rejected the claim for continuation of full exemption under the earlier scheme.
A global tender was floated by Diesel Locomotive Works, Varanasi, for procurement of turbo wheel impeller assemblies. Bharat Forge Ltd., one of the bidders, filed a writ petition before the Allahabad High Court alleging that competing bidders had quoted a lower GST rate (5%) instead of the correct rate (18%) applicable to the product under HSN Code 84148030. This resulted in significant variation in total bid prices, affecting fair competition. The High Court directed the tendering authority to clarify the applicable HSN Code and GST rate in tender documents to ensure uniform bidding and a level playing field.The Union of India challenged this direction, contending that determining the applicable GST rate and classification under HSN Code is the statutory responsibility of tax authorities and suppliers, not the purchaser. It was argued that the tender terms already required bidders to indicate applicable taxes and bear responsibility for misclassification.The Supreme Court allowed the appeal and set aside the High Court’s directions. The Court held that no statutory or public duty was cast on the tendering authority to specify the HSN Code or GST rate in tender documents. The liability to determine and pay the correct GST rested solely with the supplier under the Central Goods and Services Tax Act, 2017 and corresponding State laws. The Court found that the tender clauses clearly placed responsibility on bidders to be GST-compliant, indicate applicable tax rates, and bear the consequences of misclassification. The High Court’s direction compelling authorities to seek clarification from GST officers and mention HSN Codes in tender documents was found to be beyond jurisdiction and impractical.Accordingly, the Supreme Court held that the tender conditions were valid and that the High Court had erred in judicially intervening in contractual matters where no arbitrariness or mala fides were shown.
Union of India & Others v. Bharat Forge Ltd. & Another 16-08-2022
A global tender was floated by Diesel Locomotive Works, Varanasi, for procurement of turbo wheel impeller assemblies. Bharat Forge Ltd., one of the bidders, filed a writ petition before the Allahabad High Court alleging that competing bidders had quoted a lower GST rate (5%) instead of the correct rate (18%) applicable to the product under HSN Code 84148030. This resulted in significant variation in total bid prices, affecting fair competition. The High Court directed the tendering authority to clarify the applicable HSN Code and GST rate in tender documents to ensure uniform bidding and a level playing field.The Union of India challenged this direction, contending that determining the applicable GST rate and classification under HSN Code is the statutory responsibility of tax authorities and suppliers, not the purchaser. It was argued that the tender terms already required bidders to indicate applicable taxes and bear responsibility for misclassification.The Supreme Court allowed the appeal and set aside the High Court’s directions. The Court held that no statutory or public duty was cast on the tendering authority to specify the HSN Code or GST rate in tender documents. The liability to determine and pay the correct GST rested solely with the supplier under the Central Goods and Services Tax Act, 2017 and corresponding State laws. The Court found that the tender clauses clearly placed responsibility on bidders to be GST-compliant, indicate applicable tax rates, and bear the consequences of misclassification. The High Court’s direction compelling authorities to seek clarification from GST officers and mention HSN Codes in tender documents was found to be beyond jurisdiction and impractical.Accordingly, the Supreme Court held that the tender conditions were valid and that the High Court had erred in judicially intervening in contractual matters where no arbitrariness or mala fides were shown.
Multiple writ petitions were filed by associations and individuals representing Haj Group Organizers (HGOs) and Private Tour Operators (PTOs) challenging the levy of service tax and Goods and Services Tax (GST) on services provided to Haj pilgrims. The petitioners contended that their services — involving travel, accommodation, food, and logistics — formed part of the conduct of a religious ceremony (Haj/Umrah) and were thus exempt under paragraph 5(b) of the Mega Exemption Notification No. 25/2012–ST and corresponding GST exemption notifications. They further argued that while Haj Committees were granted tax exemption under paragraph 5A as “specified organisations,” denial of a similar exemption to HGOs/PTOs violated Article 14 of the Constitution.The Union of India contended that HGOs/PTOs merely arranged logistics and did not conduct any religious ceremony; hence, their services were taxable. It was also submitted that the classification distinguishing Haj Committees from HGOs was reasonable since the former are statutory bodies functioning under the Haj Committee Act, 2002, while the latter are private profit-oriented entities.The Supreme Court dismissed the petitions, upholding the tax liability of HGOs and PTOs. The Court held that under the Finance Act, 1994 and the Integrated GST Act, 2017, the place of provision of services was the location of the recipient—Indian residents—making the services taxable within India. The Court found that paragraph 5(b) of the Mega Exemption Notification applied only to persons who conduct religious ceremonies, not to those merely facilitating travel and accommodation. Clause 5A applied exclusively to “specified organisations” such as the Haj Committee, not to private operators.On the issue of Article 14, the Court held that the classification between the Haj Committee and HGOs was valid, as the former is a statutory body under government control performing welfare functions, while HGOs are commercial entities. The plea based on Article 25 was also rejected. Consequently, all writ petitions were dismissed, and the levy of service tax/GST on HGOs/PTOs was upheld.
All India Haj Umrah Tour Organizer Association, Mumbai v. Union of India & Others 26-07-2022
Multiple writ petitions were filed by associations and individuals representing Haj Group Organizers (HGOs) and Private Tour Operators (PTOs) challenging the levy of service tax and Goods and Services Tax (GST) on services provided to Haj pilgrims. The petitioners contended that their services — involving travel, accommodation, food, and logistics — formed part of the conduct of a religious ceremony (Haj/Umrah) and were thus exempt under paragraph 5(b) of the Mega Exemption Notification No. 25/2012–ST and corresponding GST exemption notifications. They further argued that while Haj Committees were granted tax exemption under paragraph 5A as “specified organisations,” denial of a similar exemption to HGOs/PTOs violated Article 14 of the Constitution.The Union of India contended that HGOs/PTOs merely arranged logistics and did not conduct any religious ceremony; hence, their services were taxable. It was also submitted that the classification distinguishing Haj Committees from HGOs was reasonable since the former are statutory bodies functioning under the Haj Committee Act, 2002, while the latter are private profit-oriented entities.The Supreme Court dismissed the petitions, upholding the tax liability of HGOs and PTOs. The Court held that under the Finance Act, 1994 and the Integrated GST Act, 2017, the place of provision of services was the location of the recipient—Indian residents—making the services taxable within India. The Court found that paragraph 5(b) of the Mega Exemption Notification applied only to persons who conduct religious ceremonies, not to those merely facilitating travel and accommodation. Clause 5A applied exclusively to “specified organisations” such as the Haj Committee, not to private operators.On the issue of Article 14, the Court held that the classification between the Haj Committee and HGOs was valid, as the former is a statutory body under government control performing welfare functions, while HGOs are commercial entities. The plea based on Article 25 was also rejected. Consequently, all writ petitions were dismissed, and the levy of service tax/GST on HGOs/PTOs was upheld.
The petitioner, a Chartered Accountant, filed a Public Interest Litigation under Article 32 of the Constitution seeking directions to the Union of India, the GST Council, and all States to implement a system for electronic (digital) generation of a Document Identification Number (DIN) for all communications issued by State Tax Officers to taxpayers and related persons. It was submitted that such a system would ensure transparency, accountability, and prevent misuse of authority by eliminating undated or unauthorised correspondence. The petitioner relied on the Central Government’s 2019 decision to introduce the DIN system for the Central Board of Direct Taxes (CBDT) and sought similar implementation in the indirect tax administration across all States.The Supreme Court acknowledged the importance of implementing a DIN system to promote transparency and accountability in tax administration. It observed that while the DIN system had been successfully implemented for direct taxes by the Central Government and adopted by the States of Karnataka and Kerala, other States had not yet introduced it. The Court held that, under Article 279A of the Constitution, the GST Council was empowered to issue advisories and recommendations to States on GST-related matters. Accordingly, the Court directed the Union of India and the GST Council to issue advisory instructions to all States for implementing the electronic DIN system in the indirect tax administration. The Court also directed that a copy of the order be sent to the Chief Secretaries of all States to take appropriate steps for compliance. The writ petition was disposed of with these directions.
Pradeep Goyal v. Union of India & Others 18-07-2022
The petitioner, a Chartered Accountant, filed a Public Interest Litigation under Article 32 of the Constitution seeking directions to the Union of India, the GST Council, and all States to implement a system for electronic (digital) generation of a Document Identification Number (DIN) for all communications issued by State Tax Officers to taxpayers and related persons. It was submitted that such a system would ensure transparency, accountability, and prevent misuse of authority by eliminating undated or unauthorised correspondence. The petitioner relied on the Central Government’s 2019 decision to introduce the DIN system for the Central Board of Direct Taxes (CBDT) and sought similar implementation in the indirect tax administration across all States.The Supreme Court acknowledged the importance of implementing a DIN system to promote transparency and accountability in tax administration. It observed that while the DIN system had been successfully implemented for direct taxes by the Central Government and adopted by the States of Karnataka and Kerala, other States had not yet introduced it. The Court held that, under Article 279A of the Constitution, the GST Council was empowered to issue advisories and recommendations to States on GST-related matters. Accordingly, the Court directed the Union of India and the GST Council to issue advisory instructions to all States for implementing the electronic DIN system in the indirect tax administration. The Court also directed that a copy of the order be sent to the Chief Secretaries of all States to take appropriate steps for compliance. The writ petition was disposed of with these directions.
The respondent, Cadila Healthcare Ltd., manufactured a product called “KADIPROL” containing Amprolium Hydrochloride and Vitamin K3, used in poultry to prevent coccidiosis. The company sought clarification from the Deputy Commissioner of Sales Tax under Section 62 of the Gujarat Sales Tax Act, 1969 to determine the tax rate applicable to the product. The Deputy Commissioner classified “KADIPROL” as a “Drug and Medicine” under Entry 26(1) of Schedule II, Part A, which attracted tax. The Gujarat Sales Tax Tribunal upheld this finding. However, on reference, the Gujarat High Court held that “KADIPROL” fell under Entry 25 of Schedule I as “Poultry Feed,” making it tax-exempt. The State of Gujarat appealed this decision before the Supreme Court.The Supreme Court observed that “KADIPROL” was not meant to be fed directly to poultry but to be mixed with feed and that it contained medicinal properties used for preventing infection. The Court found that the High Court had not adequately addressed the reasoning of the Sales Tax Tribunal and had relied only on earlier High Court decisions in Glaxo Laboratories (India) Ltd. v. State of Gujarat and State of Gujarat v. Pfizer Ltd. without an in-depth factual analysis. The Court noted that the issue had become academic, as there were no pending tax demands or revenue implications. Accordingly, the appeal was closed, leaving the broader question regarding the “common parlance test” open for consideration in an appropriate future case.
State of Gujarat v. Cadila Healthcare Ltd. 11-07-2022
The respondent, Cadila Healthcare Ltd., manufactured a product called “KADIPROL” containing Amprolium Hydrochloride and Vitamin K3, used in poultry to prevent coccidiosis. The company sought clarification from the Deputy Commissioner of Sales Tax under Section 62 of the Gujarat Sales Tax Act, 1969 to determine the tax rate applicable to the product. The Deputy Commissioner classified “KADIPROL” as a “Drug and Medicine” under Entry 26(1) of Schedule II, Part A, which attracted tax. The Gujarat Sales Tax Tribunal upheld this finding. However, on reference, the Gujarat High Court held that “KADIPROL” fell under Entry 25 of Schedule I as “Poultry Feed,” making it tax-exempt. The State of Gujarat appealed this decision before the Supreme Court.The Supreme Court observed that “KADIPROL” was not meant to be fed directly to poultry but to be mixed with feed and that it contained medicinal properties used for preventing infection. The Court found that the High Court had not adequately addressed the reasoning of the Sales Tax Tribunal and had relied only on earlier High Court decisions in Glaxo Laboratories (India) Ltd. v. State of Gujarat and State of Gujarat v. Pfizer Ltd. without an in-depth factual analysis. The Court noted that the issue had become academic, as there were no pending tax demands or revenue implications. Accordingly, the appeal was closed, leaving the broader question regarding the “common parlance test” open for consideration in an appropriate future case.
The Union of India filed appeals challenging the judgment of the Gujarat High Court dated 23 January 2020, which had struck down Notifications No. 8/2017-Integrated Tax (Rate) and 10/2017-Integrated Tax (Rate), both dated 28 June 2017, as unconstitutional. These notifications levied Integrated Goods and Services Tax (IGST) on ocean freight paid by a foreign seller to a foreign shipping line in cases where goods were imported into India on a Cost-Insurance-Freight (CIF) basis, making the Indian importer liable to pay tax on a reverse charge basis.The respondent, M/s Mohit Minerals Pvt. Ltd., imported coal under CIF contracts, where the freight was paid abroad by the exporter. It contended that it was not the “recipient” of the shipping service, that IGST on ocean freight amounted to double taxation since the value of freight was already included in the assessable value of imported goods for customs duty, and that the notifications exceeded the powers conferred by the IGST Act.The Supreme Court upheld the Gujarat High Court’s decision, declaring the levy of IGST on ocean freight as unconstitutional. It held that under a CIF contract, the importer is not the recipient of transportation service—the contractual relationship exists between the foreign exporter and the foreign shipping line. The impugned notifications were ultra vires Section 5(3) of the IGST Act, 2017 since they imposed tax liability on a third party who was not the recipient of service.The Court further held that the levy resulted in double taxation because the value of ocean freight was already included in the assessable value of imported goods under Section 3(7) of the Customs Tariff Act, 1975 and subjected to IGST at the time of import. The Court ruled that the GST Council’s recommendations are not binding on the Union and States but have persuasive value under Article 279A of the Constitution. Accordingly, all appeals filed by the Union of India were dismissed.
Union of India & Another v. M/s Mohit Minerals Pvt. Ltd. 19-05-2022
The Union of India filed appeals challenging the judgment of the Gujarat High Court dated 23 January 2020, which had struck down Notifications No. 8/2017-Integrated Tax (Rate) and 10/2017-Integrated Tax (Rate), both dated 28 June 2017, as unconstitutional. These notifications levied Integrated Goods and Services Tax (IGST) on ocean freight paid by a foreign seller to a foreign shipping line in cases where goods were imported into India on a Cost-Insurance-Freight (CIF) basis, making the Indian importer liable to pay tax on a reverse charge basis.The respondent, M/s Mohit Minerals Pvt. Ltd., imported coal under CIF contracts, where the freight was paid abroad by the exporter. It contended that it was not the “recipient” of the shipping service, that IGST on ocean freight amounted to double taxation since the value of freight was already included in the assessable value of imported goods for customs duty, and that the notifications exceeded the powers conferred by the IGST Act.The Supreme Court upheld the Gujarat High Court’s decision, declaring the levy of IGST on ocean freight as unconstitutional. It held that under a CIF contract, the importer is not the recipient of transportation service—the contractual relationship exists between the foreign exporter and the foreign shipping line. The impugned notifications were ultra vires Section 5(3) of the IGST Act, 2017 since they imposed tax liability on a third party who was not the recipient of service.The Court further held that the levy resulted in double taxation because the value of ocean freight was already included in the assessable value of imported goods under Section 3(7) of the Customs Tariff Act, 1975 and subjected to IGST at the time of import. The Court ruled that the GST Council’s recommendations are not binding on the Union and States but have persuasive value under Article 279A of the Constitution. Accordingly, all appeals filed by the Union of India were dismissed.
The petitioner challenged detention of goods and levy of tax and penalty under Section 129 despite goods being accompanied by valid invoices, e-way bills and transport documents. The factual background showed that proceedings were initiated solely on suspicion without recording any finding of evasion.The Court held that detention of goods is permissible only when documents are absent or defective. Where all statutory documents are available, initiation of proceedings under Section 129 is illegal. The impugned orders were quashed and refund of amounts directed.
M/s Samira Enterprises vs State of Uttar Pradesh & Ors. 09-12-2021
The petitioner challenged detention of goods and levy of tax and penalty under Section 129 despite goods being accompanied by valid invoices, e-way bills and transport documents. The factual background showed that proceedings were initiated solely on suspicion without recording any finding of evasion.The Court held that detention of goods is permissible only when documents are absent or defective. Where all statutory documents are available, initiation of proceedings under Section 129 is illegal. The impugned orders were quashed and refund of amounts directed.
The appeals arose from conflicting judgments of the Gujarat High Court and the Madras High Court on the validity of Rule 89(5) of the Central Goods and Services Tax Rules, 2017 (CGST Rules). The Gujarat High Court, in VKC Footsteps India Pvt. Ltd. v. Union of India, held that the restriction of refund of unutilised input tax credit (ITC) only to input goods under Section 54(3) of the CGST Act, 2017 was unconstitutional, whereas the Madras High Court, in Tvl. Transtonnelstroy Afcons Joint Venture v. Union of India upheld the validity of the rule. The dispute centered on whether ITC accumulated due to an inverted duty structure could include tax paid on both input goods and input services.The Supreme Court upheld the decision of the Madras High Court and set aside the Gujarat High Court’s ruling. It held that the proviso to Section 54(3) of the CGST Act expressly restricts refunds to unutilised ITC accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies, thereby excluding input services. The Court ruled that refund is a statutory right, not a constitutional entitlement, and must be governed strictly by the provisions of the statute. Consequently, Rule 89(5) of the CGST Rules, which limits refund to credit accumulated on input goods, was held to be valid and not ultra vires Section 54(3). The appeals filed by the Union of India were allowed, and the writ petitions were dismissed.
Union of India & Others v. VKC Footsteps India Pvt. Ltd. 13-09-2021
The appeals arose from conflicting judgments of the Gujarat High Court and the Madras High Court on the validity of Rule 89(5) of the Central Goods and Services Tax Rules, 2017 (CGST Rules). The Gujarat High Court, in VKC Footsteps India Pvt. Ltd. v. Union of India, held that the restriction of refund of unutilised input tax credit (ITC) only to input goods under Section 54(3) of the CGST Act, 2017 was unconstitutional, whereas the Madras High Court, in Tvl. Transtonnelstroy Afcons Joint Venture v. Union of India upheld the validity of the rule. The dispute centered on whether ITC accumulated due to an inverted duty structure could include tax paid on both input goods and input services.The Supreme Court upheld the decision of the Madras High Court and set aside the Gujarat High Court’s ruling. It held that the proviso to Section 54(3) of the CGST Act expressly restricts refunds to unutilised ITC accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies, thereby excluding input services. The Court ruled that refund is a statutory right, not a constitutional entitlement, and must be governed strictly by the provisions of the statute. Consequently, Rule 89(5) of the CGST Rules, which limits refund to credit accumulated on input goods, was held to be valid and not ultra vires Section 54(3). The appeals filed by the Union of India were allowed, and the writ petitions were dismissed.
The appellant, engaged in the manufacture of lead, was registered under the Himachal Pradesh Goods and Services Tax Act, 2017 (HPGST Act). A provisional attachment order was issued against the appellant’s receivables under Section 83 of the HPGST Act, on the allegation of availing fraudulent Input Tax Credit (ITC) based on invoices from its supplier, GM Powertech. The appellant challenged the attachment order before the Himachal Pradesh High Court, contending that it was issued without jurisdiction, in violation of the prescribed procedure, and without any pending proceedings under Section 74 of the HPGST Act at the time of attachment. The High Court dismissed the petition on the ground that the appellant had an alternative remedy under Section 107 of the Act.The Supreme Court held that the High Court erred in dismissing the writ petition solely on the ground of alternative remedy. It ruled that the “rule of alternate remedy” is a rule of discretion, not compulsion, and exceptions apply where the action challenged is wholly without jurisdiction or in violation of natural justice. On merits, the Court held that the power of provisional attachment under Section 83 is a drastic and extraordinary power and must be exercised only during the pendency of proceedings under Sections 62, 63, 64, 67, 73, or 74 of the Act. Since no proceedings under Section 74 were pending against the appellant at the time of the attachment, the order was held to be without jurisdiction. The Court further held that such attachment requires tangible material and must satisfy the condition of necessity to protect government revenue. The appeals were allowed, and the orders of provisional attachment were set aside.
M/s Radha Krishan Industries v. State of Himachal Pradesh & Others 20-04-2021
The appellant, engaged in the manufacture of lead, was registered under the Himachal Pradesh Goods and Services Tax Act, 2017 (HPGST Act). A provisional attachment order was issued against the appellant’s receivables under Section 83 of the HPGST Act, on the allegation of availing fraudulent Input Tax Credit (ITC) based on invoices from its supplier, GM Powertech. The appellant challenged the attachment order before the Himachal Pradesh High Court, contending that it was issued without jurisdiction, in violation of the prescribed procedure, and without any pending proceedings under Section 74 of the HPGST Act at the time of attachment. The High Court dismissed the petition on the ground that the appellant had an alternative remedy under Section 107 of the Act.The Supreme Court held that the High Court erred in dismissing the writ petition solely on the ground of alternative remedy. It ruled that the “rule of alternate remedy” is a rule of discretion, not compulsion, and exceptions apply where the action challenged is wholly without jurisdiction or in violation of natural justice. On merits, the Court held that the power of provisional attachment under Section 83 is a drastic and extraordinary power and must be exercised only during the pendency of proceedings under Sections 62, 63, 64, 67, 73, or 74 of the Act. Since no proceedings under Section 74 were pending against the appellant at the time of the attachment, the order was held to be without jurisdiction. The Court further held that such attachment requires tangible material and must satisfy the condition of necessity to protect government revenue. The appeals were allowed, and the orders of provisional attachment were set aside.
