Case Facts:The petitioner challenged the Order-in-Original dated 04.12.2025 cancelling its GST registration ab-initio. The allegation was that the petitioner availed fraudulent ITC from suppliers whose registrations were cancelled. The petitioner contended that relevant documents were furnished and transactions were bona fide, and cancellation was based only on suppliers’ status.Court Decision:The impugned order lacked cogent findings on whether ITC was validly availed in the normal course of business.Mere cancellation of suppliers’ registration cannot by itself justify cancellation of petitioner’s registration.The authority failed to examine documents and record findings on the alleged illegality of ITC.The order was arbitrary due to non-application of mind.The impugned order cancelling GST registration was set aside.Matter remanded for fresh consideration after granting hearing to the petitioner.Authorities permitted to continue investigation and take action in accordance with law.All contentions kept open.
Florida Solvent Private Limited v. Superintendent, CGST & Central Excise & Ors. 01-04-2026
Case Facts:The petitioner challenged the Order-in-Original dated 04.12.2025 cancelling its GST registration ab-initio. The allegation was that the petitioner availed fraudulent ITC from suppliers whose registrations were cancelled. The petitioner contended that relevant documents were furnished and transactions were bona fide, and cancellation was based only on suppliers’ status.Court Decision:The impugned order lacked cogent findings on whether ITC was validly availed in the normal course of business.Mere cancellation of suppliers’ registration cannot by itself justify cancellation of petitioner’s registration.The authority failed to examine documents and record findings on the alleged illegality of ITC.The order was arbitrary due to non-application of mind.The impugned order cancelling GST registration was set aside.Matter remanded for fresh consideration after granting hearing to the petitioner.Authorities permitted to continue investigation and take action in accordance with law.All contentions kept open.
BackgroundThe petitioner-assessee challenged an order dated 24.09.2025 passed by the Deputy Commissioner of Sales Tax (Respondent No. 4) before the Appellate Authority. In the appeal, the petitioner had filed detailed written submissions raising specific grounds including violation of principles of natural justice, timely filing of replies to both RFT-08 notices, request for personal hearing not granted by the adjudicating authority, breach of Section 75(4) of the CGST Act, 2017, and that belated generation of RFT-01 was due to administrative lapse and system auto-generation which should not have prejudiced the petitioner. The Appellate Authority rejected the appeal solely on the ground that the petitioner did not personally appear before it despite being given an opportunity of hearing, without addressing any of the grounds raised in the appeal memo.Facts Relevant to Understanding the JudgmentThe petitioner had timely filed replies to both RFT-08 notices and had specifically requested personal hearing before the adjudicating authority, which was not granted. The adjudicating order was challenged before the Appellate Authority with specific written grounds. The Appellate Authority, instead of dealing with the merits of those grounds, dismissed the appeal only because the petitioner did not remain personally present on the date of hearing, despite the fact that detailed written submissions were already on record. The vires of Rule 96(5A) of the CGST Rules, 2017 were not challenged by the petitioner at this stage.Court Observations (Verbatim)"We have noticed that the petitioner-assessee as well as the respondent have committed irregularity before the Appellate Authority." (Para 3)"All these contentions raised by the petitioners have been ignored by the Appellate Authority by merely observing that since the petitioner / appellant was though afforded an opportunity of hearing to remain personally present, he did not remain present and hence the appeal was liable to be rejected and accordingly the appeal was disallowed." (Para 3.1)"We find that the Appellate Authority while rejecting the appeal has committed an illegality by not dealing with the submissions raised by the petitioner in his appeal memo for the reason that the petitioner did not remain present though he was granted the opportunity of hearing. It is always open for the Appellate Authority to pass a reasoned order by dealing with the grounds raised in the appeal memo even if the party does not remain present." (Para 3.2)Final VerdictThe Appellate Order dated 24.09.2025 was quashed and set aside. The matter was remanded back to the Appellate Authority to decide afresh by giving opportunity of hearing to the petitioner. It was further clarified that even if the petitioner does not remain present on personal hearing, the Appellate Authority shall consider the grounds of appeal raised in the appeal memo and decide in accordance with law within 12 weeks.
SFC Global Commodity Private Limited vs Union of India & Ors. 13-03-2026
BackgroundThe petitioner-assessee challenged an order dated 24.09.2025 passed by the Deputy Commissioner of Sales Tax (Respondent No. 4) before the Appellate Authority. In the appeal, the petitioner had filed detailed written submissions raising specific grounds including violation of principles of natural justice, timely filing of replies to both RFT-08 notices, request for personal hearing not granted by the adjudicating authority, breach of Section 75(4) of the CGST Act, 2017, and that belated generation of RFT-01 was due to administrative lapse and system auto-generation which should not have prejudiced the petitioner. The Appellate Authority rejected the appeal solely on the ground that the petitioner did not personally appear before it despite being given an opportunity of hearing, without addressing any of the grounds raised in the appeal memo.Facts Relevant to Understanding the JudgmentThe petitioner had timely filed replies to both RFT-08 notices and had specifically requested personal hearing before the adjudicating authority, which was not granted. The adjudicating order was challenged before the Appellate Authority with specific written grounds. The Appellate Authority, instead of dealing with the merits of those grounds, dismissed the appeal only because the petitioner did not remain personally present on the date of hearing, despite the fact that detailed written submissions were already on record. The vires of Rule 96(5A) of the CGST Rules, 2017 were not challenged by the petitioner at this stage.Court Observations (Verbatim)"We have noticed that the petitioner-assessee as well as the respondent have committed irregularity before the Appellate Authority." (Para 3)"All these contentions raised by the petitioners have been ignored by the Appellate Authority by merely observing that since the petitioner / appellant was though afforded an opportunity of hearing to remain personally present, he did not remain present and hence the appeal was liable to be rejected and accordingly the appeal was disallowed." (Para 3.1)"We find that the Appellate Authority while rejecting the appeal has committed an illegality by not dealing with the submissions raised by the petitioner in his appeal memo for the reason that the petitioner did not remain present though he was granted the opportunity of hearing. It is always open for the Appellate Authority to pass a reasoned order by dealing with the grounds raised in the appeal memo even if the party does not remain present." (Para 3.2)Final VerdictThe Appellate Order dated 24.09.2025 was quashed and set aside. The matter was remanded back to the Appellate Authority to decide afresh by giving opportunity of hearing to the petitioner. It was further clarified that even if the petitioner does not remain present on personal hearing, the Appellate Authority shall consider the grounds of appeal raised in the appeal memo and decide in accordance with law within 12 weeks.
Facts:The respondent purchasing dealers claimed Input Tax Credit (ITC) on purchases made from various sellers. The Assessing Officer disallowed ITC on the ground that several selling dealers were deregistered, had not filed returns, or denied transactions, raising doubts about genuineness. The first Appellate Authority upheld the disallowance. However, the Tribunal and High Court allowed ITC primarily on the basis of invoices and payments through cheques. Court Decision:The Supreme Court held that the burden under Section 70 lies on the purchasing dealer to prove the genuineness of transactions. Mere production of invoices or payment through banking channels is not sufficient. The dealer must establish actual physical movement of goods and provide supporting evidence such as transport details, delivery acknowledgment, and seller details. Since the purchasing dealers failed to discharge this burden, the Court set aside the High Court and Tribunal orders and restored the disallowance of ITC by the Assessing Officer. Cases Referred by Court:• Corporation Bank v. Saraswati Abharansala (2009) 19 VST 84 (SC) • Bhagadia Brothers v. Additional Commissioner of Commercial Taxes (Karnataka High Court) • Madhav Steel Corporation v. State of Gujarat (Gujarat High Court) • Shreeji Impex v. State of Gujarat (Gujarat High Court) • On Quest Merchandising India Pvt. Ltd. v. Government of NCT of Delhi
State of Karnataka v. Ecom Gill Coffee Trading Private Limited 13-03-2026
Facts:The respondent purchasing dealers claimed Input Tax Credit (ITC) on purchases made from various sellers. The Assessing Officer disallowed ITC on the ground that several selling dealers were deregistered, had not filed returns, or denied transactions, raising doubts about genuineness. The first Appellate Authority upheld the disallowance. However, the Tribunal and High Court allowed ITC primarily on the basis of invoices and payments through cheques. Court Decision:The Supreme Court held that the burden under Section 70 lies on the purchasing dealer to prove the genuineness of transactions. Mere production of invoices or payment through banking channels is not sufficient. The dealer must establish actual physical movement of goods and provide supporting evidence such as transport details, delivery acknowledgment, and seller details. Since the purchasing dealers failed to discharge this burden, the Court set aside the High Court and Tribunal orders and restored the disallowance of ITC by the Assessing Officer. Cases Referred by Court:• Corporation Bank v. Saraswati Abharansala (2009) 19 VST 84 (SC) • Bhagadia Brothers v. Additional Commissioner of Commercial Taxes (Karnataka High Court) • Madhav Steel Corporation v. State of Gujarat (Gujarat High Court) • Shreeji Impex v. State of Gujarat (Gujarat High Court) • On Quest Merchandising India Pvt. Ltd. v. Government of NCT of Delhi
BackgroundSurya Businees Private Limited, registered under CGST/AGST Act, 2017 (GSTIN: 18AADCS6480J1ZX), 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 (GSTIN: 18AADCS6480J1ZX), 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. 👍
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.
Facts:An FIR was registered alleging an organised racket involving forged LL.B. degrees and fake academic certificates used to impersonate advocates. Respondent No. 2 allegedly procured and used a forged law degree to practice as an advocate and facilitate similar fraud for others. The Sessions Court rejected bail, but the High Court granted bail relying on disputed documents and claims of innocence. The appellant challenged the bail order citing suppression of multiple FIRs, serious criminal antecedents, and reliance on forged material. Court Decision:The Supreme Court set aside the High Court’s order granting bail, holding it to be perverse and legally unsustainable. It held that the High Court relied on disputed and prima facie forged documents, ignored material evidence, and failed to consider criminal antecedents and gravity of offences. The Court emphasized that suppression of material facts, including multiple FIRs, vitiates the exercise of judicial discretion in granting bail. It clarified that appellate courts can annul bail where the order suffers from illegality, perversity, or non-consideration of relevant factors, irrespective of post-bail conduct. The prayer for transfer of investigation to a special agency was rejected as investigation was complete and no exceptional circumstances were shown. Cases Referred by Court:• State of Karnataka v. Sri Darshan • Yogendra Pal Singh v. Raghvendra Singh • Manik Madhukar Sarve v. Vitthal Damuji Meher • Ajwar v. Waseem • Mahipal v. Rajesh Kumar • P v. State of Madhya Pradesh • Dolat Ram v. State of Haryana • Prasanta Kumar Sarkar v. Ashis Chatterjee • Ash Mohammad v. Shiv Raj Singh • Neeru Yadav v. State of Uttar Pradesh • Brijmani Devi v. Pappu Kumar • Disha v. State of Gujarat • K.V. Rajendran v. Superintendent of Police • Kusha Duruka v. State of Odisha
Zeba Khan v. State of Uttar Pradesh & Ors. 28-02-2026
Facts:An FIR was registered alleging an organised racket involving forged LL.B. degrees and fake academic certificates used to impersonate advocates. Respondent No. 2 allegedly procured and used a forged law degree to practice as an advocate and facilitate similar fraud for others. The Sessions Court rejected bail, but the High Court granted bail relying on disputed documents and claims of innocence. The appellant challenged the bail order citing suppression of multiple FIRs, serious criminal antecedents, and reliance on forged material. Court Decision:The Supreme Court set aside the High Court’s order granting bail, holding it to be perverse and legally unsustainable. It held that the High Court relied on disputed and prima facie forged documents, ignored material evidence, and failed to consider criminal antecedents and gravity of offences. The Court emphasized that suppression of material facts, including multiple FIRs, vitiates the exercise of judicial discretion in granting bail. It clarified that appellate courts can annul bail where the order suffers from illegality, perversity, or non-consideration of relevant factors, irrespective of post-bail conduct. The prayer for transfer of investigation to a special agency was rejected as investigation was complete and no exceptional circumstances were shown. Cases Referred by Court:• State of Karnataka v. Sri Darshan • Yogendra Pal Singh v. Raghvendra Singh • Manik Madhukar Sarve v. Vitthal Damuji Meher • Ajwar v. Waseem • Mahipal v. Rajesh Kumar • P v. State of Madhya Pradesh • Dolat Ram v. State of Haryana • Prasanta Kumar Sarkar v. Ashis Chatterjee • Ash Mohammad v. Shiv Raj Singh • Neeru Yadav v. State of Uttar Pradesh • Brijmani Devi v. Pappu Kumar • Disha v. State of Gujarat • K.V. Rajendran v. Superintendent of Police • Kusha Duruka v. State of Odisha
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.
