Background of the Case

The present writ petition before the Bombay High Court (Aurangabad Bench) arose from a GST demand challenged by Pagariya Auto Private Limited. The petitioner approached the High Court contending that the issue involved in the matter was squarely covered by the earlier judgment of the Bombay High Court in Star Engineers (I) Pvt. Ltd. v. Union of India, wherein relief had been granted in cases involving bona fide and inadvertent errors under the GST regime.

During the course of hearing, the Revenue argued that although the GST Appellate Tribunal had not yet been constituted, the Government had already issued notifications and circulars providing that taxpayers intending to challenge appellate orders must deposit an additional 10% of the disputed tax amount over and above the earlier statutory pre-deposit made before the First Appellate Authority. The department further submitted that upon such deposit, coercive recovery proceedings would remain stayed.

Arguments by the Appellant (Taxpayer)

The petitioner submitted that the issue involved in the present matter was fully covered by the decision of the Coordinate Bench in Star Engineers (I) Pvt. Ltd., which had consistently been followed by various Benches of the Bombay High Court. It was argued that the alleged discrepancy arose due to a bona fide and inadvertent mistake and therefore the petitioner should not be compelled to deposit an additional 10% amount merely because the GST Appellate Tribunal had not yet become operational.

The petitioner further contended that insistence on further pre-deposit despite settled judicial precedents would impose an unjust financial burden upon taxpayers, particularly when the demand itself was disputed on substantial legal grounds.

Respondent’s Response (Revenue Department)

The Revenue opposed the grant of interim relief and relied upon various judicial precedents as well as Government notifications and circulars issued in view of the non-constitution of the GST Appellate Tribunal. The department submitted that in such circumstances taxpayers desirous of challenging appellate orders are required to deposit an additional 10% of the disputed tax amount in addition to the earlier statutory deposit already made before the Commissioner (Appeals).

The department argued that once such additional deposit is made, the taxpayer would become entitled to protection from coercive recovery proceedings during pendency of the dispute.

Court Findings and Decision

The Bombay High Court was not impressed with the submissions advanced by the Revenue and prima facie accepted the petitioner’s contention that the matter was covered by the judgment in Star Engineers (I) Pvt. Ltd. The Court observed that where the alleged discrepancy arises out of a bona fide and inadvertent mistake, the taxpayer should not be compelled to make an additional 10% pre-deposit merely because the GST Appellate Tribunal has not yet been constituted.

Accordingly, the High Court issued notice in the writ petition and granted ad-interim relief in favour of the petitioner by staying coercive action against the assessee without insisting upon the additional 10% deposit sought by the department. The ruling provides significant interim relief to taxpayers facing similar demands in absence of a functional GST Appellate Tribunal.

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Background of the Case

The present writ petition before the Allahabad High Court arose from criminal proceedings initiated against an Advocate practicing in indirect taxes and corporate laws. The petitioner, an Advocate enrolled with the Bar Council of Uttar Pradesh and also an Advocate-on-Record before the Allahabad High Court, had been engaged by his client to file statutory GST appeals under Section 107 of the CGST/SGST Act against assessment orders passed under Section 74 of the GST Act involving substantial tax demands for FY 2021-22, 2022-23 and 2023-24. While filing the appeals, the petitioner utilized the assessee’s Electronic Credit Ledger and Input Tax Credit for payment of the mandatory 10% pre-deposit requirement in accordance with CBIC Circular dated 06.07.2022 and relying upon the Gujarat High Court judgment in Yasho Industries Ltd., which had also been upheld by the Supreme Court.

However, the Appellate Authority rejected the appeals on the ground that payment of pre-deposit through Electronic Credit Ledger was not maintainable. Subsequently, instead of proceeding merely against the assessee, the GST Department lodged an FIR against both the assessee and the Advocate alleging criminal conspiracy, tax evasion and financial loss to the State Exchequer. During pendency of the writ petition, a charge-sheet and cognizance order were also passed against the Advocate, which were additionally challenged before the High Court.

Arguments by the Appellant (Advocate)

The petitioner contended that he had acted purely in his professional capacity while advising and filing the statutory appeals on behalf of his client. It was argued that utilization of Input Tax Credit for payment of mandatory pre-deposit was based on a bona fide interpretation of law supported by the CBIC Circular and the judicial precedents of the Gujarat High Court and the Supreme Court in Yasho Industries Ltd.

The petitioner further submitted that even assuming the legal interpretation adopted by him was erroneous, the same could never constitute a criminal offence or conspiracy with the client. It was emphasized that the petitioner had no business connection with the assessee and merely discharged his professional obligations as an Advocate. The petitioner argued that criminal prosecution of an Advocate for legal advice or procedural actions taken during representation of a client would strike at the very independence of the legal profession and adversely affect the constitutional right of citizens to obtain legal assistance.

Respondent’s Response (GST Department/State)

The GST Department defended the FIR by alleging that the assessee had wrongfully utilized Input Tax Credit for payment of the statutory pre-deposit requirement and thereby attempted to evade tax liability. The department alleged that such actions caused financial loss to the State Exchequer and were undertaken in conspiracy between the assessee and the petitioner Advocate.

However, during the course of hearing, the learned Additional Advocate General and the Deputy Commissioner of GST were unable to satisfactorily explain the basis on which the petitioner Advocate had been implicated in the criminal proceedings merely for filing statutory appeals and adopting a particular legal interpretation regarding pre-deposit through Electronic Credit Ledger.

Court Findings and Decision

The Allahabad High Court strongly deprecated the action of the GST Department and held that the FIR, charge-sheet and cognizance proceedings against the Advocate were wholly unsustainable in law. The Court observed that an Advocate, by virtue of his profession, is entitled to represent and defend clients fearlessly and independently, irrespective of the allegations involved against such clients. Merely because an Advocate adopts a particular legal position or files proceedings on behalf of a client, he cannot be treated as a conspirator in the alleged acts of the client.

The Court further observed that criminal prosecution of Advocates for professional acts performed during legal representation would strike at the very foundation of the legal profession and undermine the constitutional protections available under Articles 14 and 21 of the Constitution. The High Court specifically held that even if the GST Department believed that pre-deposit through Electronic Credit Ledger was legally impermissible, the petitioner’s action was still a professional act based on a particular interpretation of law and could never amount to criminal conspiracy.

Accordingly, the Allahabad High Court quashed the FIR, charge-sheet and cognizance order against the petitioner Advocate and held that continuation of criminal proceedings in such circumstances would amount to gross abuse of the process of law.

To download official order, Click Here

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Background of the Case

A batch of writ appeals and connected matters came before the Karnataka High Court involving a common legal issue under Sections 73 and 74 of the CGST Act, 2017. The dispute arose because GST authorities had issued consolidated show cause notices covering multiple financial years and tax periods in a single proceeding for alleged short payment of tax, wrongful availment of input tax credit, and related discrepancies. Various assessees challenged such notices contending that the GST framework under the CGST Act is fundamentally financial year specific and therefore separate show cause notices were mandatory for each tax period.

Several Single Bench decisions had granted relief to taxpayers by holding that separate proceedings should be initiated for separate financial years. Aggrieved by those orders, the Revenue preferred writ appeals before the Division Bench of the Karnataka High Court seeking clarity on whether consolidated notices under Sections 73 and 74 are legally permissible.

Arguments by the Appellant (Revenue)

The Revenue contended that neither Section 73 nor Section 74 of the CGST Act expressly prohibits issuance of consolidated show cause notices covering multiple tax periods. It was argued that the statute merely requires proper determination of tax not paid, short paid, or wrongly availed input tax credit and does not mandate separate proceedings for each financial year. The Department submitted that procedural forms and return mechanisms cannot override substantive statutory provisions. According to the Revenue, consolidated proceedings promote administrative efficiency, avoid multiplicity of litigation, and prevent duplication of adjudication where common issues and transactions are involved across several years.

It was further argued that as long as the taxpayer receives adequate opportunity of hearing and the notice clearly specifies the allegations and tax demands period-wise, such notices remain legally valid.

Respondent’s Response (Assessee)

The assessees argued that the entire GST scheme including filing of returns, reconciliation, annual returns, rectifications, maintenance of accounts, and assessment proceedings is structured around individual financial years and tax periods. It was contended that Form GST DRC-01 itself refers to a “tax period” and “financial year,” thereby indicating that proceedings under Sections 73 and 74 must also remain confined to a single financial year. The taxpayers further submitted that issuance of common notices for multiple years would create anomalies relating to limitation, adjudication, pecuniary jurisdiction, and applicability of Sections 73 and 74, particularly because Section 74 deals with fraud and suppression cases carrying different limitation periods.

Reliance was placed on several decisions of the Bombay, Kerala, Madras, Andhra Pradesh, and Karnataka High Courts where separate notices for different years were emphasized. It was also argued that consolidated notices could prejudice taxpayers by combining independent causes of action and extending limitation indirectly.

Court Findings and Decision

The Hon’ble Karnataka High Court answered the core issue in favour of the Revenue and held that consolidated or common show cause notices under Sections 73 and 74 of the CGST Act covering multiple financial years or tax periods are legally permissible. The Court observed that although various compliances under the GST regime may be linked to financial years or tax periods, the statute nowhere expressly restricts the issuance of a combined show cause notice. The Court held that procedural formats such as DRC-01 cannot control or curtail the substantive powers granted under the Act. It further observed that the object of Sections 73 and 74 is determination of tax liability and such determination can validly be undertaken through a consolidated proceeding when issues are interconnected.

The Division Bench accordingly held that common show cause notices do not become invalid merely because they cover multiple years, provided principles of natural justice are complied with and the demands are properly identifiable. Consequently, the Court upheld the validity of consolidated GST show cause notices and ruled in favour of the Revenue.

To download official order, Click Here

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Background of the Case

The dispute arose from a refund claim filed by the Respondent which is engaged in providing intermediary services to foreign entities and earning commission income. The Respondent initially treated certain services as “export of services” and accordingly paid Integrated GST (IGST) while filing the GSTR-3B return for October 2017. Subsequently, the Respondent reconsidered the nature of the transaction and treated the supply as an intra-State transaction, leading to the payment of Central GST (CGST) and State GST (SGST). As a result, the Respondent effectively paid tax twice on the same transaction. Seeking rectification, the Respondent filed an application under Section 54 of the CGST Act for refund of the IGST amount. However, the refund application dated 30.03.2024 was rejected by the authorities on the ground that it was filed beyond the statutory limitation period of two years.

The learned Single Judge of the Karnataka High Court allowed the writ petition and held that the limitation under Section 54 was directory in nature, directing the authorities to process the refund claim.

Arguments by the Appellant (Revenue)

The Revenue authorities contended that Section 54 of the CGST Act clearly prescribes a limitation period of two years from the relevant date for filing refund claims, and the provision must be interpreted strictly as a mandatory requirement. It was argued that the learned Single Judge erred in treating the limitation period as directory, as doing so would effectively rewrite the statutory provision and undermine the scheme of the GST law. The Revenue further submitted that Rule 89(1A), introduced in 2021, provided a specific window allowing taxpayers to file refund claims within two years from the date of its introduction. Since the Respondent’s application was filed on 30.03.2024, it was beyond even the extended timeline and therefore rightly rejected.

The Revenue emphasized that GST legislation is a time-bound statutory framework where strict adherence to prescribed timelines ensures certainty and finality in tax administration.

Respondent’s Response (Assessee)

The Respondent contended that the refund claim arose due to the inadvertent payment of tax twice on the same transaction. It was submitted that the initial payment of IGST was made treating the services as exports, whereas the subsequent payment of CGST and SGST was made after realizing that the transaction constituted an intra-State supply. The Respondent further argued that the procedural framework for claiming refund under Rule 89(1A) of the CGST Rules was introduced only through Notification No. 35/2021 dated 24.09.2021, long after the original tax payments were made in 2017. Therefore, the strict application of the two-year limitation period would cause undue hardship and unjust enrichment of the Revenue.

It was also argued that when tax is collected without authority of law, the same must be refunded as mandated under Article 265 of the Constitution of India. According to the Respondent, the limitation prescribed under Section 54 should be treated as directory rather than mandatory in cases where tax has been paid mistakenly or twice.

Court Findings and Decision

The High Court of Karnataka examined the statutory scheme of the CGST Act and held that the two-year limitation prescribed under Section 54 for filing refund claims is mandatory and cannot be treated as merely directory. The Court observed that the GST law operates through a structured timeline framework, and relaxing such timelines without statutory backing could disrupt related provisions, particularly proceedings under Sections 73 and 74 relating to tax recovery and adjudication. However, the Court also recognized that the CGST Act does not provide any mechanism for condonation of delay in refund applications. In such circumstances, the Court held that taxpayers may invoke the writ jurisdiction of the High Court under Article 226 of the Constitution in cases of genuine hardship.

Considering that the entitlement to refund was undisputed and the delay was only about six months, the Court condoned the delay and directed the authorities to process the refund claim in accordance with law. The writ appeals were thus partly allowed, clarifying that while statutory limitation under Section 54 remains mandatory, the High Court retains constitutional power to grant relief in appropriate cases.

To download official order, Click Here

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M/s Jyoti Tar Products Private Limited vs. Revenue [ MAT / 2100 / 2024 ]

Background of the Case

The appellant, M/S Jyoti Tar Products Private Limited received an adjudication order dated 10^th July, 2024, passed under Section 74(9) of the WBGST/CGST Act. The core issue stemmed from a pre-show cause notice issued on 16th August, 2023, under Section 73(5) of the Act. The notice alleged that the appellant had wrongly claimed ITC against supplies received from certain non-existent suppliers whose GST registrations had been cancelled. This order was subsequently challenged by the appellant in a writ petition, which was dismissed by an order dated 11th November, 2024, leading to the current intra-court appeal.

Arguments by the Appellant

The appellant explained that all purchases were legitimately accounted for in their books. They asserted that ITC was claimed correctly as reflected in their GSTR-2A, and all payments for these purchases were duly made through banking channels, with supporting bank statements and ledger copies provided. Furthermore, the appellant furnished copies of all relevant tax invoices, e-way bills, and kata slips to establish the genuineness of the transactions and movement of goods. Crucially, they contended that these purchases were made at a time when the suppliers’ GST registrations were active and valid.

The appellant strongly relied on the conditions stipulated under Section 16(2) of the Act for ITC availment. They also emphasized that all necessary details were furnished in their periodical returns on the GST Portal. They vigorously argued that the retrospective cancellation of a supplier’s registration should not adversely impact a purchaser’s right to claim ITC, provided the purchaser can prove compliance with Section 16(2).

Respondent’s Response

The respondent, the Revenue, did not find the submissions satisfactory. Consequently, they proceeded with the issuance of a formal show cause notice and subsequently passed their adjudication order. In this order, a new finding was introduced, expressing doubt about the nature of business carried on by the suppliers, stating that their registration details did not align with the goods purportedly purchased by the appellant. The Respondent stated that retrospective cancellation of a supplier’s registration impacts the ITC claim by purchasing dealer’s.

Court Findings and Decision

The Calcutta High Court, in its findings, emphatically stated that the respondent had failed to address two fundamental issues that were central to the case. Firstly, the authority did not examine the legal implications of a retrospective cancellation of a supplier’s registration on the purchasing dealer’s ITC claim. Secondly, it did not properly evaluate whether the appellants had successfully proven the actual movement and receipt of goods through the substantial documentary evidence provided. Given these significant omissions, the High Court concluded that the matter required a fresh adjudication.

Consequently, the appeal filed was allowed and the order passed in the writ petition, as well as the initial adjudication order dated 10th July, 2024, passed under Section 74(9) of the Act, were set aside. The case has been remanded back for a fresh decision on merits, strictly in accordance with the law.

Calcutta High Court Quashes GST Order

To download official order, Click Here.

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