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Recent rulings by courts and authorities
High Courts
Suppression of value of supply established; invocation of extended period under Section 74 upheld
In the matter of KPR Enterprises vs. The State Tax Officer[1], the Hon’ble High Court of Madras (“Madras HC”) dismissed the writ petitions challenging Goods and Services Tax (“GST”) orders passed under Section 74 of the Central GST Act, 2017 (“CGST Act”) and Maharashtra GST Act, 2017 (“MGST Act”), holding that there were sufficient foundational facts for invocation of the extended period of limitation.
The petitioner, engaged in supply of boulders, had paid seigniorage fees indicating significantly higher quantities of minerals extracted than what was declared in GSTR-1 returns. The Madras HC observed that since the petitioner had paid a huge amount towards seigniorage fees but had under-declared the value of outward supply, a prima facie case was made out for invocation of the extended period under Section 74 of the CGST Act and MGST Act. The Madras HC held that the expression ‘where it appears’ used in Sections 73 and 74 indicates that the officer need only form a prima facie opinion based on available materials.
Accordingly, the Madras HC dismissed the writ petitions and granted liberty to the petitioner to file statutory appeals within 30 (thirty) days.
Assessment orders without signature are inherently defective and liable to be set aside
In the matter of Nominee Works Committee Kalavalla vs. Deputy Assistant Commissioner, ST-II, Kavali Circle & Ors.[2] and M/s GSN Granites vs. Assistant Commissioner, Ongole II Circle & Ors.[3], the Hon’ble High Court of Andhra Pradesh (“AP HC”) held that assessment orders suffering from the inherent defect of absence of a signature are liable to be set aside.
The petitioners challenged assessment orders that were issued without the signature of the assessing officer. The AP HC observed that assessment orders without signature suffer from a patent irregularity and must be set aside. However, balancing the difficulties faced by registered persons and the need for the State to maintain tax administration, the AP HC set aside the impugned orders and remanded the matters back to the assessing officer to pass appropriate orders after giving due opportunity of hearing, subject to the petitioners depositing 20% of the disputed tax within 6 (six) weeks.
Notifications under Sections 9 and 11 of the CGST Act cannot go beyond the recommendations of the GST Council
In the matter of M/s Guru and Co. & Ors. vs. Union of India & Ors.[4], the Hon’ble Madurai Bench of the Madras High Court (“Madras HC – Madurai Bench”) held that notifications issued by the Central Government under Sections 9 and 11 of the CGST Act cannot go beyond the recommendations made by the GST Council, and that the GST Council does not possess the power of ratification.
The petitioners, engaged in supply of branded food items, challenged amending notification no. 28/2017-Central Tax (Rate) dated September 22, 2017, which imposed GST on products bearing brand names on which an actionable claim or enforceable right in a court of law is available. The petitioners contended that the notification went beyond the recommendations of the GST Council made in its 21st meeting.
The Madras HC – Madurai Bench held, relying on the ratio of Union of India vs. Mohit Minerals Private Limited[5], that GST Council recommendations are binding when the Government issues statutory notifications under Sections 9 and 11 of the CGST Act, given their pan-India implications and bearing on cooperative federalism. It further held that neither the Constitution of India nor any statute has invested the GST Council with the power of ratification, and accordingly, the ratification made in the 22nd meeting was without jurisdiction.
Accordingly, the Madras HC – Madurai Bench allowed the writ petitions and set aside the impugned show cause notices, while granting liberty to the department to issue fresh show cause notices in terms of the notifications to the extent held valid.
Consolidated show cause notice for multiple financial years is not legally sustainable
In the matter of M/s Sri Sri Granites vs. Assistant Commissioner, Central Tax and Central Excise[6], the Hon’ble High Court of Kerala (“Kerala HC”) quashed a consolidated show cause notice issued for multiple financial years (2019-2020 to 2023-2024), holding that issuance of a composite notice for multiple assessment years is not legally sustainable.
The Kerala HC, following the Division Bench decisions in Joint Commissioner (Intelligence & Enforcement) vs. M/s Lakshmi Mobiles Accessories[7] and Tharayil Medicals v. Deputy Commissioner, Audit Division-IV[8], set aside the consolidated show cause notice and granted liberty to the respondent to issue separate notices for the relevant assessment years. It further clarified that the period from the date of issuance of the composite notice till the date of receipt of certified copy of the judgment shall be excluded while computing the period of limitation for initiating fresh proceedings.
JSA Comment: The issue regarding the issuance of consolidated show cause notices is deeply conflicted. While the Hon’ble Delhi High Court and Gauhati High Court has held that a consolidated show cause notice for multiple financial years is permissible under Section 74 of the CGST Act, however, contrary rulings have been pronounced by other High Courts[9] holding that it is impermissible to issue consolidated show cause notices under Section 74 of the CGST Act. Given that contrary views exist, the issue will only attain finality once decided by the Hon’ble Supreme Court of India[10].
Service tax demand founded solely on Form 26AS without independent examination is unsustainable
In the matter of M/s Debojit Deb and Anr. vs. Union of India and Ors.[11], the Hon’ble High Court of Gauhati (“Gauhati HC”) held that a service tax demand founded solely on Form 26AS, without any independent examination of the nature of services rendered, is unsustainable in law.
The petitioner, a proprietorship firm engaged in execution of construction works for Government departments including the Public Works Department, was registered under the Finance Act, 1994. The respondent authorities obtained information from the Income Tax Department in the form of Form 26AS and initiated proceedings for recovery of service tax amounting to INR 60,52,413 (Indian Rupees sixty lakh fifty-two thousand four hundred and thirteen) for the period 2016-17 under the proviso to Section 73(1) of the Finance Act, 1994 (“Finance Act”) read with Sections 142(8)(a) and 174 of the CGST Act.
The petitioner contended that the works contract services rendered during the financial year 2016-17 were exempted from levy of service tax under Entries 12 and 13 of Notification No. 25/2012-ST dated June 20, 2012. The petitioner further contended that the alleged show cause notice dated April 21, 2022 was never served upon the petitioner and that the extended period of limitation under the proviso to Section 73(1) of the Finance Act was invoked without any allegation or finding of fraud, collusion, wilful misstatement or suppression of facts with intent to evade payment of tax.
The Gauhati HC, following its earlier decision in Technocom vs. Union of India and Anr. (2026)[12], held that Form 26AS merely reflects payments received from Government departments after deduction of tax at source and cannot, by itself, form the basis for determination of service tax liability. The Court further held that for invocation of the extended period under Section 73(1) of the Finance Act, there must be a conclusive finding that the assessee had resorted to fraud, collusion, wilful misstatement, suppression of facts or contravention with intent to evade payment of service tax. No such finding was discernible in the impugned Order-in-Original.
Accordingly, the Gauhati HC set aside and quashed the order-in-original dated March 31, 2023 and the consequential order-in-appeal dated February 29, 2024, along with the demand of service tax, interest and penalties imposed upon the petitioner.
Maintenance of Minimum Average Balance by bank customers does not constitute ‘consideration’ for levy of service tax
In the matter of Canara Bank and Ors. vs. Union of India and Ors.[13], the Hon’ble High Court of Karnataka (“Karnataka HC”) held that the maintenance of Minimum Average Balance (“MAB”) by bank customers does not constitute “consideration” for services rendered and consequently, such services are not exigible to service tax.
The dispute arose when the respondents issued show cause notices to several public sector banks demanding service tax on the facilities provided by the banks to customers who maintained MAB, contending that such maintenance constituted non-monetary consideration for the services provided. The banks challenged these show cause notices, contending that no consideration was charged for services provided to MAB-maintaining customers and that MAB was merely a contractual condition.
The Karnataka HC observed that for a ‘declared service’ under Section 66E(e) of the Finance Act to be taxable, there must exist a necessary and sufficient nexus between the supply and the consideration. It further held that MAB is merely a condition of the contract and not ‘consideration’ within the meaning of the Finance Act. The Karnataka HC further noted that Central Board of Indirect Taxes and Customs Circular No. 178/10/2022-GST dated August 3, 2022 itself clarifies that an agreement to do an act should not be presumed to exist merely because there is a flow of money from one party to another. The Karnataka HC also relied upon the fact that the respondents had dropped identical proceedings against South Indian Bank vide order dated December 30, 2023 by accepting the same contentions.
Accordingly, the Karnataka HC quashed all the impugned show cause notices together with all proceedings emanating therefrom, holding the same to be manifestly unsustainable in law, arbitrary, without jurisdiction and contrary to the circulars issued by the Board.
Anti-dumping duty demand on Export Oriented Unit upheld; Section 9A(2A) exemption not available where goods diverted to Domestic Tariff Area without manufacturing
In the matter of Tonira Pharma Limited vs. The Union of India and Ors.[14], the Hon’ble High Court of Gujarat (“Gujarat HC”) upheld the demand of anti-dumping duty on a 100% Export Oriented Unit (“EOU”) that imported ascorbic acid duty-free but cleared it into the Domestic Tariff Area (“DTA”) without undertaking any manufacturing process.
The appellant, a 100% EOU and private bonded warehouse licensee, imported ascorbic acid and 3,4,5 TMBA duty-free under Notification No. 53/97-Cus dated [June 3, 1997]. The department alleged that the imported goods were cleared to DTA without any manufacturing process, and the Commissioner confirmed the demand of customs duty of Rs. 8,84,16,660 (Indian Rupees eight crore eighty-four lakh sixteen thousand six hundred and sixty)along with penalty of equal amount under Section 114A of the Customs Act, 1962 (“Customs Act”).
The Gujarat HC held that: (a) no manufacturing or processing had taken place on the imported goods based on the Government laboratory test report confirming that both raw material and finished goods were one and the same; (b) Section 9A(2A) of the Customs Tariff Act, 1975 exempting EOUs from anti-dumping duty is not applicable where the EOU diverted all goods to the domestic market without fulfilling export obligations and manufacturing conditions; (c) the mandatory penalty under Section 114A of the Customs Act is leviable in full where willful misstatement or suppression of facts resulting in non-levy of duty is proved, and the Tribunal erred in reducing the penalty to 10%.
Accordingly, the Gujarat HC dismissed the appeal filed by the Company and allowed the appeal filed by the Customs Department, confirming the entire demand of Rs. 8,84,16,660 (Indian Rupees eight crore eighty-four lakh sixteen thousand six hundred and sixty) and restoring the mandatory penalty under Section 114A of the Customs Act, while providing the appellant an option to avail the benefit of reduced penalty under the provisos to Section 114A of the Customs Act.
Circulars/GST Appellate Tribunal advisories
Extension for filing of appeals before GSTAT
The Government has extended the due date to July 31, 2026 (earlier date for filing was June 30, 2026), for filing of appeals before the GST Appellate Tribunal (“GSTAT”) under Section 112(1) read with Section 112(3) of the CGST Act, highlighting technical difficulties due to rush to file appeals on the GSTAT portal.
Advisory on higher court exemption or correction of pre-deposit amount
The GSTAT has issued an advisory explaining the procedure for reviewing and processing pre-deposit amounts when auto-populated from the GST Network (“GSTN”) portal. The advisory explains how to upload documents when an exemption has been granted by a higher court or when the user identifies a variance in the auto-fetched amount.
Key features of the advisory include as follows:
- when an appeal is filed using the available application reference number / case reference number option and the pre-deposit data is fetched automatically from GSTN, the same cannot be changed by the user;
- if a higher court has exempted the pre-deposit amount or the auto-fetched amount differs from the user’s calculation, the exemption/correction option may be used;
- if the application reference number/case reference number is not available, the required data must be entered manually in the relevant forms under the demand details tab; and
- voluntary payments can be linked with outstanding demands through the prescribed procedure.
Advisory regarding online payment of court fees on GSTAT portal
The GSTAT has issued an advisory informing taxpayers that in cases where online payment of court fees has been made but the payment status is not reflected as ‘Success’, the taxpayer is advised to wait for up to 72 (seventy-two) hours from the time of making the payment for status updates due to processing delays. If the payment status does not update to ‘Success’ even after 72 (seventy-two) hours, the system will not restrict or prevent the filing of the appeal. The taxpayer will be allowed to proceed with the appeal filing process on the GSTAT portal without any interruption, and the payment status will be appropriately reconciled at the backend.
This Newsletter has been prepared by:
|
Manish Mishra |
Shareen Gupta |
Shashank Shekhar |
Joybrata Misra |
Shubh Dixit |
For more details, please contact km@jsalaw.com
[1] W.P. Nos. 35453, 35458 and 35463 of 2024 (decided on June 12, 2026)
[2] WP No. 7693/2026 (decided on June 15, 2026)
[3] WP No. 14368/2026 (decided on June 15, 2026)
[4] W.P.(MD) Nos. 14115, 14116, 14117, 14118, 14119, 14120, 14208, 18602 and 26403 of 2022 (decided on June 15, 2026)
[5] (2022) 10 SCC 700
[6] WP(C) No. 42520 of 2025 (decided on June 19, 2026)
[7] 2025 KHC OnLine 149
[8] 2025 VIL 356 KER
[9] Hon’ble Calcutta High Court, Hon’ble Kerala HC and Hon’ble Karnataka High Court
[10] The issue is already pending before the Hon’ble Supreme Court in SLP (C) No. 17214 – 17215 of 2026 arising out of the orders of the AP HC and Hon’ble Bombay High Court.
[11] WP(C)/1653/2026 (decided on June 12, 2026)
[12] 156 GSTR 602 (Gauhati)
[13] WP No. 10234 of 2020 c/w WP Nos. 10363/2020, 11574/2020 and 2173/2021 (decided on June 1, 2026)
[14] R/Tax Appeal No. 1102 of 2007 with R/Tax Appeal No. 762 of 2007 with R/Special Civil Application No. 1908 of 2009 (decided on June 18, 2026)
