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  • Gauhati High Court Upholds Consolidated Show Cause Notices Under Sections 73 and 74 of the CGST Act: Tata Projects Limited v. Union of India

    Gauhati High Court Upholds Consolidated Show Cause Notices Under Sections 73 and 74 of the CGST Act: Tata Projects Limited v. Union of India

    Gauhati High Court Upholds Consolidated Show Cause Notices Under Sections 73 and 74 of the CGST Act: Tata Projects Limited v. Union of India

    Court: Gauhati High Court | Bench: Justice Devashis Baruah | Case No.: WP(C)/2922/2025 (with WP(C)/20/2026 and WP(C)/1113/2026) | Date: June 8, 2026 | Citation: 2026:GAU-AS:8028

    Key Takeaways

    • There is no statutory bar under the CGST Act, 2017 against issuing a consolidated show cause notice under Section 73(1) or Section 74(1) covering multiple financial years, provided limitation under Sections 73(2)/74(2) is independently satisfied for each year.
    • Proceedings under Sections 73 and 74 are adversarial and adjudicatory in character, falling under Chapter XV (“Demand and Recovery”) — they are structurally distinct from “Assessment” under Chapter XII, and the financial-year-specific architecture of Chapter XII does not control or restrict the demand machinery.
    • Where a consolidated notice covers some financial years that are within limitation and others that are time-barred, the doctrine of severability applies: the notice survives for the years within time and fails only for those that are not.
    • The Court expressly disagreed with the Kerala High Court (Tharayil Medicals, Dhanlaxmi Bank) and the Madras High Court (Oriental Lotus, Titan Company), and aligned with the Delhi High Court (Ambika Traders, Mathur Polymers), the Allahabad High Court (S.A. Aromatics), and the Karnataka High Court Division Bench (Chimney Hills Education Society).

    What the Case Was About

    Three unrelated writ petitions — filed by Tata Projects Limited (a works contract services provider), Quantum Infratech (a residential construction firm), and Bitchem Asphalt Technologies Limited (a road-building materials supplier) — were heard together because they raised a single, common jurisdictional challenge. Each petitioner had been served a show cause notice under Section 74 (or Section 73, in Tata Projects’ case for one year) of the CGST Act that clubbed together demands pertaining to multiple financial years — ranging from 2017-18 through 2022-23 in the most expansive case. Each petitioner contended that the entire proceeding was without jurisdiction because the CGST Act requires year-specific show cause notices and does not permit consolidation.

    The stakes were significant. Tata Projects had already exhausted its first appeal, with the Commissioner (Appeals) confirming the demand. Quantum Infratech’s case originated in DGGI search operations, involved allegations of fraud under Section 74 read with Section 122(1A), and had penalties imposed on individual partners. Bitchem faced a demand of over ₹12.34 crore. In each case, if the jurisdictional challenge succeeded, the entire demand edifice would collapse without any adjudication on merits.

    What the Court Decided — and Why

    Justice Devashis Baruah, in a reserved judgment, ruled squarely against the petitioners on the jurisdictional question: there is no bar, explicit or implicit, in the CGST Act against issuance of a consolidated show cause notice or a consolidated adjudication order covering multiple financial years (para 70).

    The reasoning proceeds through several distinct analytical steps.

    The text of Sections 73(1) and 74(1) imposes no financial-year restriction. The Court observed that Sub-Section (1) of both provisions confers jurisdiction on the Proper Officer upon satisfaction of certain material facts — tax not paid, short paid, erroneously refunded, or ITC wrongly availed. Nothing in the language limits the notice to a single financial year. The only temporal constraint appears in Sub-Section (2), which requires the notice to be issued a specified period before the limitation deadline — but that constraint is about timing, not about the scope of years that can be covered (paras 48–49).

    Limitation runs independently per financial year, but that does not mandate separate notices. This is the heart of the judgment. The Court acknowledged that Sections 73(10) and 74(10) compute limitation by reference to the due date for filing annual returns “for the financial year to which” the default relates. But the Court drew a critical distinction: limitation governs whether a particular year’s demand can validly be raised at all, not whether it must be raised in a standalone proceeding. If a consolidated notice is issued on a date when limitation is still open for all the covered years, there is no infirmity (paras 53–55). The Court illustrated this with detailed worked examples and tabular computations for both three-year (Section 73) and five-year (Section 74) timelines.

    The doctrine of severability rescues partially time-barred consolidated notices. In an important practical holding, the Court addressed the scenario where a consolidated notice covers some years within limitation and some that are time-barred. Drawing an analogy to civil suits involving recurring causes of action (such as arrears of rent, where each rental period generates an independent cause of action), the Court held that the time-barred years can simply be severed — the notice and order survive for the years that are within time (para 59).

    Sections 73 and 74 are not “assessment” provisions — they are demand and adjudication provisions. The petitioners had argued that since the entire GST architecture (returns, annual returns, self-assessment) is financial-year-specific, Sections 73 and 74, being part of the “assessment” mechanism under Section 2(11), must also be year-specific. The Court rejected this by drawing a sharp structural distinction between Chapter XII (Assessment) and Chapter XV (Demand and Recovery). Assessment provisions — self-assessment under Section 59, scrutiny under Section 61, best judgment under Section 62 — are largely non-adversarial. Sections 73 and 74, by contrast, are adversarial and adjudicatory, requiring notice, reply, hearing, and a reasoned order. They also uniquely involve penalty and, in Section 74’s case, findings on fraud — matters that do not arise in assessment proceedings proper (paras 60–61).

    Sub-Sections (3) and (4) of both Sections 73 and 74 confirm the legislative design. The Court noted that these provisions allow the Proper Officer, after issuing a notice under Sub-Section (1) for “any period,” to serve a supplementary statement (Form DRC-02) covering “such periods other than those covered under Sub-Section (1).” The phrase “those covered under Sub-Section (1)” is deliberately pluralistic — it contemplates that the original notice itself may have covered multiple periods (paras 62–64).

    The insertion of Section 74A and Sub-Section (12) in Sections 73 and 74 does not help the petitioners. The petitioners pointed to the Finance Act, 2024 amendments (effective November 1, 2024) introducing Section 74A — which applies from FY 2024-25 onward and is expressly year-specific — as proof that the pre-amendment regime was also intended to be year-specific. The Court implicitly rejected this by treating the amendment as a prospective structural change, not a clarification of pre-existing law.

    How This Changes Practice

    This judgment is the most analytically detailed single-judge pronouncement on the consolidated-SCN question to date, and it lands on the side of a growing judicial consensus. With Delhi, Allahabad, Karnataka (Division Bench), and now Gauhati aligned on permissibility, and with the Bombay High Court’s contrary line (Milroc, Marfani Steel, Aasawa Brother) already referred to a larger bench in Rollmet LLP (2026 SCC OnLine Bom 2613), the practical balance has shifted decisively in the department’s favour.

    For practitioners, several operational implications follow. First, jurisdictional challenges to consolidated notices are now a diminishing-returns strategy in most High Courts. Counsel should assess whether the stronger defence lies on merits — limitation for specific years, factual defences on fraud or suppression, computation disputes — rather than on the consolidation point. Second, the severability holding at para 59 is a double-edged sword: it means that even if some years in a consolidated notice are demonstrably time-barred, the notice will not be quashed in its entirety. Counsel must raise limitation year-by-year during adjudication and cannot rely on a wholesale jurisdictional knock-out. Third, for assessees who have already received consolidated notices, the Court’s direction granting 30 days to file statutory appeals (with limitation condoned) provides a narrow but real window to get before the Tribunal or the Appellate Authority on merits.

    Relevant Provisions

    • Sections 73 and 74, CGST Act, 2017 — Determination of tax not paid or short paid (non-fraud and fraud cases respectively); Sub-Sections (1), (2), (3), (4), (9), (10) extensively analyzed
    • Section 74A, CGST Act — Determination of tax for FY 2024-25 onward (inserted by Finance Act, 2024 w.e.f. 01.11.2024)
    • Section 2(11), CGST Act — Definition of “assessment”
    • Sections 59–64, CGST Act — Chapter XII assessment provisions (self-assessment, provisional, scrutiny, best judgment, summary)
    • Section 75, CGST Act — General provisions relating to determination of tax
    • Rule 142(1)(a) and (b), CGST Rules, 2017 — Issuance of notice (DRC-01) and statement (DRC-02)
    • Sections 107, 108, 112, CGST Act — Appellate remedies
    • Article 14 and Article 141, Constitution of India

    What to Watch

    The consolidated-SCN question is now squarely headed for definitive resolution at two levels. The Bombay High Court’s larger bench reference in Rollmet LLP will be the most closely watched proceeding — if the larger bench disagrees with Delhi, Allahabad, Karnataka, and Gauhati, a genuine inter-High Court conflict crystallizes and a Supreme Court reference becomes almost inevitable. The SLP against Mathur Polymers was dismissed with the observation that the Supreme Court found “no good ground” to interfere, which the department treats as tantamount to approval under Kunhayammed principles — but whether that truly constitutes a declaration of law under Article 141, as the respondents argued here (para 31), remains contestable and will likely be tested. Practitioners should also monitor whether CBIC issues any clarificatory circular endorsing consolidated proceedings, which would give field formations explicit administrative cover. Finally, the interaction between this line of authority and the new Section 74A regime (which is expressly year-specific for FY 2024-25 onward) may itself generate fresh litigation on transitional cases straddling the old and new frameworks.

  • Gauhati High Court Reaffirms: GST Registration Cancelled for Non-Filing Can Be Restored If Assessee Clears All Dues

    Gauhati High Court Reaffirms: GST Registration Cancelled for Non-Filing Can Be Restored If Assessee Clears All Dues

    Gauhati High Court Reaffirms: GST Registration Cancelled for Non-Filing Can Be Restored If Assessee Clears All Dues

    Court: Gauhati High Court | Bench: Justice Kardak Ete | Case No.: WP(C)/3000/2026 | Date: June 10, 2026

    Key Takeaways

    • Where GST registration is cancelled under Section 29(2)(c) of the CGST Act for non-filing of returns for six continuous months, the assessee can seek restoration by filing all pending returns and paying full tax dues with interest and late fee, as contemplated by the proviso to Rule 22(4) of the CGST Rules, 2017.
    • The Court permitted the petitioner to approach the jurisdictional officer within 60 days for restoration, even though the statutory time limit for filing a revocation application had lapsed.
    • The limitation period under Section 73(10) for issuing demand notices was directed to run from the date of this order (except for FY 2024-25, governed by Section 44), giving the department a fresh window to raise demands.
    • The decision follows and applies the coordinate bench ruling in Dhirghat Hardware Stores v. Union of India, WP(C) No. 5944/2025 (decided 17.10.2025), reinforcing a consistent line of authority from the Gauhati High Court on this issue.

    The Facts: A Familiar Story of Missed Returns and a Lapsed Remedy

    The petitioner, Sri Chongtham Manabandra Singh, is a proprietor operating a light motor vehicle hiring business in Duliajan, Dibrugarh, registered under both the CGST Act and the Assam GST Act. His trouble began when he failed to file GST returns for a continuous stretch of six months — a default he attributed to a breakdown in communication with his tax consultant.

    The department followed the prescribed procedure. A show-cause notice dated August 13, 2024 was issued in Form GST REG-17, calling upon the petitioner to explain within 30 days why his registration should not be cancelled. His registration was simultaneously suspended. When no satisfactory response came, the Superintendent, CGST, Duliajan Range cancelled the registration by order dated July 28, 2025 — notably, without recording any reasons in the cancellation order itself (para 5).

    By the time the petitioner attempted to apply for revocation of cancellation, the statutory window had already closed. He was, in effect, locked out of the GST system with no administrative remedy available. He had, however, filed all pending returns up to June 2025 and expressed willingness to pay all outstanding dues. Left with no other option, he moved the High Court under Article 226.

    What the Court Decided — and Why

    Justice Kardak Ete disposed of the petition at the motion stage itself, with the consent of both sides, on the strength of an earlier coordinate bench decision in Dhirghat Hardware Stores & Anr. v. Union of India & 3 Ors., WP(C) No. 5944/2025 (order dated October 17, 2025). The Standing Counsel for CGST fairly conceded that the earlier ruling covered the present facts (para 9).

    The legal reasoning, drawn from the Dhirghat Hardware Stores order and adopted in full by this bench, rests on two pillars.

    First, the proviso to Rule 22(4) of the CGST Rules expressly contemplates a situation where an assessee served with a show-cause notice for non-filing under Section 29(2)(b) or (c) furnishes all pending returns and clears all tax dues along with interest and late fee. In such a case, the proper officer is empowered — indeed, directed — to drop the proceedings and pass an order in Form GST REG-20 (paras 10 and 12 of the Dhirghat Hardware Stores extract). The proviso, in other words, builds a statutory escape hatch for assessees willing to come into compliance.

    Second, the Court underscored that cancellation of GST registration entails “serious civil consequences” (para 12 of Dhirghat Hardware Stores). This framing matters. It signals that the High Court views cancellation not as a routine administrative act but as a measure that effectively shuts a person out of legitimate commerce — an outcome disproportionate to the default where the assessee demonstrates willingness to regularize.

    The operative directions are precise. The petitioner must approach the jurisdictional authority within 60 days seeking restoration. If he files the application and complies with every requirement under the proviso to Rule 22(4) — meaning all returns filed, all tax paid with interest and late fee — the authority is bound to consider restoration “in accordance with law” and act “as expeditiously as possible” (para 13). There is no discretion to refuse on the ground that the statutory revocation period has lapsed; the Court’s writ jurisdiction effectively overrides that procedural bar.

    An important ancillary direction concerns limitation for departmental demands. The Court ordered that the period under Section 73(10) of the CGST Act (and the corresponding State Act provision) shall be computed from the date of this order, except for FY 2024-25, which remains governed by Section 44. This protects the revenue’s interest by ensuring that the time spent in litigation does not erode the department’s ability to raise demands for the period during which registration was cancelled.

    How This Shapes Practice

    This judgment does not break new ground in doctrinal terms — it follows Dhirghat Hardware Stores, which in turn followed Sanjoy Nath v. Union of India, WP(C) No. 6366/2023 (order dated October 11, 2023). What it does is consolidate a now-settled line of authority from the Gauhati High Court. Three coordinate bench orders over three years, all reaching the same result on materially identical facts, create a body of precedent that the department will find difficult to resist in future cases.

    For practitioners advising small businesses and proprietors in the Northeast — many of whom rely heavily on tax consultants and are vulnerable to precisely this kind of procedural default — the practical takeaway is clear. A lapsed revocation window is not the end of the road. The writ remedy remains available, provided the assessee demonstrates genuine willingness to comply: file all pending returns, pay all dues, and move promptly.

    Counsel should note, however, the conditions that made this petition succeed. The petitioner had already filed returns up to June 2025 before approaching the Court (para 6). He did not seek a waiver of dues or interest. He offered unconditional compliance. Petitions that seek restoration without having first cleared the backlog are unlikely to receive the same treatment.

    From the department’s perspective, the Court’s direction on Section 73(10) limitation is a meaningful safeguard. Officers processing restoration applications under these orders should note the recalibrated limitation timeline and initiate assessment proceedings accordingly.

    Relevant Provisions

    • Section 29(2)(c), CGST Act, 2017 — Power to cancel registration for non-filing of returns for six continuous months
    • Rule 22, CGST Rules, 2017 — Procedure for cancellation; proviso to sub-rule (4) permitting dropping of proceedings on compliance
    • Section 73(10), CGST Act / State GST Act — Time limit for issuance of demand orders
    • Section 44, CGST Act — Annual return provisions (applicable to FY 2024-25 limitation computation)
    • Article 226, Constitution of India — Writ jurisdiction of the High Court

    What to Watch

    An appeal to a Division Bench or the Supreme Court appears unlikely here — the Standing Counsel conceded the point and the department has not resisted this line of cases. The more interesting question is legislative. The GST Council and the CBIC have periodically introduced amnesty schemes and deadline extensions for revocation applications (most recently through various notifications relaxing the time limits under Section 30). If the pattern of writ petitions on this issue continues to grow, it may prompt a more permanent procedural fix — perhaps an expanded revocation window or a standardized late-compliance mechanism that removes the need for High Court intervention altogether. Practitioners should watch for any upcoming GST Council recommendations on this front.

  • Gauhati High Court Quashes ₹69.57 Lakh GST Demand Against Silchar Scrap Dealer; Rules Buyer Cannot Be Penalised for Supplier’s Tax Default

    Gauhati High Court Quashes ₹69.57 Lakh GST Demand Against Silchar Scrap Dealer; Rules Buyer Cannot Be Penalised for Supplier’s Tax Default

    Court reaffirms that a bona fide purchasing dealer who has duly paid GST to a registered seller cannot be denied input tax credit merely because the seller failed to remit the tax to the government.

    Gauhati High Court | GUWAHATI

    In a significant ruling for trading and manufacturing businesses, the Gauhati High Court has set aside a demand order of ₹69,56,794 raised against Sri Gurucharan Kangsa Banik, proprietor of M/s Sree Guru Metals, Silchar. The demand comprised IGST of ₹50.19 lakh, CGST of ₹9.69 lakh, and SGST of ₹9.69 lakh, along with an equivalent penalty.

    Hon’ble Mr. Justice Kardak Ete held that a purchasing dealer who acts in good faith and pays GST to a registered supplier cannot be penalised if the supplier subsequently fails to deposit the tax with the government.

    The Court followed the Division Bench judgment in National Plasto Moulding v. State of Assam & Ors. [2024] 129 GSTR 544 (Gauhati), which in turn relied upon the Delhi High Court’s decision in On Quest Merchandising India Pvt. Ltd. v. Government of NCT of Delhi [2018] 56 GSTR 177 (Delhi). Counsel appearing for both the petitioner and the Revenue accepted that the issue was covered by these decisions.

    Facts of the Case

    M/s Sree Guru Metals is engaged in the business of procurement and sale of scrap and waste batteries.

    During the financial years 2017-18 and 2018-19, the proprietorship purchased goods from suppliers located in Kolkata and paid the applicable GST along with the purchase consideration through banking channels. The transactions were supported by valid tax invoices.

    Following the introduction of the GST regime in July 2017, the business encountered certain compliance-related issues, including discrepancies between GSTR-1 and GSTR-3B arising from data-entry errors relating to reporting of output tax liability and input tax credit.

    Pursuant to a summons issued by the Directorate General of GST Intelligence (DGGI), Guwahati Zonal Unit, the petitioner appeared before the authorities on 5 April 2019 and furnished all relevant records, including GST returns and purchase invoices.

    A search conducted at the business premises on 9 July 2019 did not result in recovery of any incriminating material.

    The Demand and the Challenge

    Despite the petitioner’s cooperation, a Show Cause Notice dated 26 August 2022 was issued alleging wrongful availment of ITC amounting to ₹69.56 lakh under Section 16(2)(a) and Section 16(2)(b) of the CGST Act on the ground that the underlying goods had not actually been received.

    Thereafter, an Order-in-Original dated 28 March 2024 was passed confirming the demand together with interest under Section 50 and an equivalent penalty under Section 74(1) read with Section 122 of the CGST Act.

    The petitioner challenged the order on several grounds.

    It was contended that no effective opportunity of hearing had been granted, as notices were manually served after the dates fixed for hearing and were not uploaded on the GST portal. It was also argued that Form GST DRC-07 had not been issued prior to passing the order.

    On merits, the petitioner submitted that all statutory conditions prescribed under Section 16(2) had been fulfilled. The goods had been received, genuine tax invoices had been issued, and payment including GST had been made through banking channels.

    According to the petitioner, the sole basis for denial of ITC was the alleged failure of the suppliers to deposit the tax collected from the petitioner, a circumstance entirely beyond the purchaser’s control.

    The petitioner further raised a limitation challenge, contending that a part of the disputed period was governed by Section 73 of the CGST Act and that the statutory limitation for proceedings under that provision had already expired. Consequently, invocation of Section 74 was stated to be impermissible.

    An additional objection was raised against the clubbing of multiple assessment years into a single adjudication order.

    Court’s Reasoning

    The Court held that the controversy stood squarely covered by the Division Bench judgment in National Plasto Moulding, which had adopted the reasoning of the Delhi High Court in On Quest Merchandising.

    The Division Bench had held that where a purchasing dealer bona fide enters into transactions with a validly registered supplier, pays the tax component, and otherwise complies with the statutory requirements, denial of ITC merely because the selling dealer fails to deposit the tax with the government is impermissible.

    The Court referred to the following observation in National Plasto Moulding:

    “A purchasing dealer cannot be punished for the act of a selling dealer who has failed to deposit the tax collected by it.”

    The Court also noted that the Delhi High Court in On Quest Merchandising had read down Section 9(2)(g) of the Delhi VAT Act—the provision analogous to Sections 16(2)(c) and 16(2)(d) of the CGST Act—to exclude bona fide purchasing dealers from its scope.

    The Delhi High Court had reasoned that a literal interpretation would impose an impossible burden on a purchaser and could render the provision vulnerable to challenge under Article 14 of the Constitution.

    The Court further noted that the Special Leave Petition filed against the Delhi High Court’s judgment had been dismissed by the Supreme Court, while preserving liberty for the authorities to proceed in cases where the transactions were not bona fide.

    Accepting that the legal position stood settled, the Gauhati High Court set aside the impugned Order-in-Original.

    At the same time, the Court preserved the department’s right to proceed against the petitioner if material subsequently emerges showing that the transactions were not genuine or were entered into in collusion with the suppliers.

    Significance

    The decision adds to the growing body of judicial authority protecting bona fide purchasers from adverse consequences arising solely from a supplier’s failure to discharge tax liability.

    The ruling reiterates that where a purchaser has acted in good faith, obtained valid tax invoices, received the goods, and paid the consideration including GST, denial of ITC cannot be justified merely because the supplier defaults in remitting tax to the government.

    The Court, however, recognised the distinction between genuine transactions and collusive arrangements. Where the department is able to establish that transactions were not bona fide or lacked commercial substance, it remains open to the authorities to invoke the statutory provisions and deny the benefit of ITC.

    Citation: Sri Gurucharan Kangsa Banik v. Union of India & Ors. — Gauhati High Court, Writ Petition (arising from Order-in-Original No. 37/GST/AC/SIL/2023-24 dated 28.03.2024).

  • GSTAT Dismisses Dow Chemical’s ₹13.41 Cr GST Refund Bid, Rules Procurement Hub Services Are Not Intermediary

    GSTAT Dismisses Dow Chemical’s ₹13.41 Cr GST Refund Bid, Rules Procurement Hub Services Are Not Intermediary

    Tribunal holds that services rendered by Swiss entity Dow Europe GmbH to its Indian affiliate constitute an import of services liable to GST, rejecting the reclassification as exempt intermediary services.

    GST Appellate Tribunal, Principal Bench | NEW DELHI

    The GST Appellate Tribunal (GSTAT), Principal Bench, has dismissed a batch of six appeals filed by M/s Dow Chemical International Private Limited, declining to grant refunds aggregating approximately ₹13.41 crore in Integrated GST paid under the Reverse Charge Mechanism (RCM) for the period January to June 2022.

    The Bench comprising Hon’ble Justice (Retd.) Dr. Sanjaya Kumar Mishra, President, and Hon’ble Shri Anil Kumar Gupta, Member (Technical), upheld the orders passed by the Joint Commissioner of State Tax (Appeals), Raigad Division, and held that the procurement services provided by Dow Europe GmbH, the Switzerland-based group entity, constitute an import of services taxable in India and do not qualify as “intermediary services” under Section 2(13) of the IGST Act.

    Background

    Dow Chemical India entered into a Procurement Agreement dated 1 July 2021 with Dow Europe GmbH, which functions as the centralised procurement hub for the global Dow Group.

    Under the agreement, Dow Europe undertook a wide range of procurement-related activities, including identification and approval of foreign suppliers, negotiation of procurement terms, development of sourcing strategies, and execution of contracts and purchase orders on behalf of the group.

    During the period in dispute, Dow India treated these services as an “import of services” under Section 2(11) of the IGST Act and discharged IGST under the Reverse Charge Mechanism on payments made to Dow Europe. The tax paid ranged from ₹38.56 lakh for June 2022 to ₹7.81 crore for January 2022, aggregating approximately ₹13.41 crore.

    Subsequently, the company revised its position and contended that the services were in the nature of “intermediary services” as defined under Section 2(13) of the IGST Act. According to the company, the place of supply would therefore be outside India, namely Switzerland, by virtue of Section 13(8)(b) of the IGST Act.

    Based on this position, Dow India reversed the input tax credit and filed refund claims for the IGST paid under RCM. The refund applications were rejected by both the Adjudicating Authority and the First Appellate Authority, leading to the present appeals before the Tribunal.

    Appellant’s Arguments

    Appearing for the appellant, counsel submitted that Dow Europe squarely satisfied the statutory definition of an “intermediary” as it arranged and facilitated the supply of goods between Dow India and independent foreign suppliers without supplying the goods on its own account.

    It was argued that the service fee, fixed at 3.5% of the procurement value, was commission-based and dependent upon actual procurement transactions, which is a characteristic feature of intermediary arrangements. It was further submitted that no consideration was payable in periods when no procurement activity took place.

    Reliance was placed on the Advance Ruling decisions in Airbus Group India Pvt. Ltd. and Global Reach Education Services Pvt. Ltd., where similar facilitation activities were held to qualify as intermediary services.

    The appellant also relied upon CBIC Circular No. 159/15/2021-GST dated 20 September 2021 and argued that all three conditions prescribed therein for intermediary classification were fulfilled, namely:

    • Existence of three parties;
    • Presence of two distinct supplies; and
    • Performance of a facilitative role rather than acting as a principal supplier.

    The appellant submitted:

    “The role of Dow Europe is not limited to a single transaction but extends to the entire procurement lifecycle—from strategy to contract negotiation to final sign-off.”

    Revenue’s Contentions

    The Revenue, represented by Ms. Shwetal Shepal, contended that Dow Europe was independently providing substantive procurement services, including procurement strategy, supplier relationship management, supplier risk management, quality audits, and spend analytics.

    According to the Revenue, the arrangement amounted to procurement outsourcing on a principal-to-principal basis and therefore fell within the exclusionary portion of the intermediary definition contained in Section 2(13) of the IGST Act.

    Reliance was placed on the Karnataka High Court’s decision in Columbia Sportswear India Sourcing Pvt. Ltd. (26 April 2025), where buying support services rendered as an independent contractor were held not to constitute intermediary services.

    The Revenue further pointed out that Clause 6 of the Procurement Agreement expressly provided that Dow Europe was not authorised to bind Dow India, thereby reinforcing its status as an independent service provider.

    Tribunal’s Findings

    The Tribunal noted that there exist divergent judicial authorities on the scope of intermediary services.

    Reference was made to the decisions of the Delhi High Court in Blackberry India Private Limited and the Punjab and Haryana High Court in Genpact India Pvt. Ltd., both of which held that services rendered by Indian entities to foreign affiliates constituted exports rather than intermediary services.

    However, the Tribunal observed that the present matter involved the reverse factual situation, namely a foreign entity rendering services to an Indian company.

    Applying the three-part test contained in CBIC Circular No. 159/15/2021-GST, the Tribunal accepted that three parties were involved in the broader transaction. However, it held that the requirement of two distinct supplies was not satisfied.

    The Tribunal observed that Dow Europe and Dow India are both subsidiaries of Dow Inc. and that the services rendered by Dow Europe as the group’s centralised procurement hub constituted a substantive group-level procurement function rather than a mere facilitation of supplies between independent principals.

    The Tribunal observed:

    “Dow Europe renders services on its own account to service receivers located in India, and its acts are those of an independent contractor that does not represent or bind the Indian client.”

    The Tribunal also disagreed with the First Appellate Authority’s observation that the refund claims were liable to be rejected merely because the tax had initially been paid voluntarily.

    It observed that Section 54 of the CGST Act permits refund claims even where tax has been paid under a mistaken understanding of law, and such claims cannot be rejected solely on that ground.

    Nevertheless, on the substantive issues relating to classification of services, intermediary status, place of supply, and entitlement to refund, the Tribunal decided all issues against the appellant.

    Accordingly, all six appeals were dismissed and the orders of the First Appellate Authority were affirmed.

    Key Takeaway

    The ruling highlights the importance of the exclusionary limb of Section 2(13) of the IGST Act. Where a foreign group entity independently performs substantive services on a principal-to-principal basis, the transaction may be treated as an import of services liable to GST in India even if multiple parties are involved in the broader commercial arrangement.

    Businesses relying upon intermediary classification for inbound group services may need to closely examine whether the overseas entity is merely facilitating supplies between independent parties or is itself providing substantive services on its own account.

    Citation: M/s Dow Chemical International Private Ltd. v. Commissioner of State Tax, Mazgaon, Mumbai — GSTAT, Principal Bench, APL/2–7/PB/2026.

  • Punjab and Haryana High Court Grants Bail to Ludhiana Steel Trader in ₹9.67 Cr GST Fraud Case; Cites Documentary Nature of Evidence and Supreme Court Precedents on Liberty

    Punjab and Haryana High Court Grants Bail to Ludhiana Steel Trader in ₹9.67 Cr GST Fraud Case; Cites Documentary Nature of Evidence and Supreme Court Precedents on Liberty

    Court holds that a three-and-a-half month custody period, combined with the wholly documentary character of the evidence and the absence of any flight or tampering risk, tilts the scales firmly in favour of bail, irrespective of the gravity of the alleged offence.

    Punjab and Haryana High Court, Chandigarh | CHANDIGARH, June 2, 2026

    The Punjab and Haryana High Court has granted bail to Rohit Kumar Gupta, proprietor of M/s Maa Steel, Ludhiana, who was arrested on 12 February 2026 in connection with alleged irregularities in Input Tax Credit (ITC) claims totalling approximately ₹9.67 crore under the Central Goods and Services Tax Act, 2017.

    Hon’ble Mr. Justice Surya Partap Singh allowed the first bail petition, CRM-M-19525-2026, filed under Section 483 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023, holding that the cumulative effect of settled legal principles and the facts of the case overwhelmingly favoured the petitioner’s release on bail.

    Background and Allegations

    The petitioner is engaged in the business of trading iron and steel goods through his proprietorship concern, M/s Maa Steel, based in Ludhiana.

    According to the State Tax Department, scrutiny of E-Way Bill data for the period from 1 April 2024 to 27 January 2026 revealed systematic issuance and utilisation of invoices without actual movement or supply of goods. The authorities alleged that through these transactions, the petitioner fraudulently availed ineligible Input Tax Credit, causing a loss of approximately ₹9,66,64,194 to the State exchequer.

    Based on these allegations, the petitioner was arrested on 12 February 2026 and remained in judicial custody thereafter.

    The prosecution invoked Section 132 of the Punjab Goods and Services Tax Act/CGST Act, 2017, read with Section 69 of the CGST Act and Section 187 of the BNSS, 2023. The offences alleged against the petitioner carry a maximum punishment of seven years’ imprisonment.

    Petitioner’s Case

    Appearing for the petitioner, Mr. Gurkiran Singh contended that the allegations were baseless and unsupported by credible evidence.

    It was argued that M/s Maa Steel is a duly registered and functioning business concern and that all relevant documents, including GST invoices, E-Way Bills and purchase records, had already been supplied to the investigating authorities.

    The petitioner further pointed out that the department itself had previously sanctioned and processed refund claims after conducting due verification of records. According to the petitioner, this prior departmental verification contradicted the subsequent allegation that the transactions were fictitious.

    Counsel emphasised that the petitioner had fully cooperated with the investigation from the very beginning and that all material evidence was documentary in nature and already in the possession of the authorities.

    It was submitted that continued incarceration would serve no investigative purpose because:

    • All documents had been seized or examined;
    • No custodial interrogation was required;
    • The petitioner had cooperated throughout the investigation;
    • The trial was unlikely to conclude in the near future; and
    • The petitioner had already undergone more than three-and-a-half months of incarceration.

    The petitioner accordingly sought regular bail.

    State’s Opposition

    The State, represented by Deputy Advocate General Mr. I.P.S. Sabharwal, opposed the bail application.

    The prosecution argued that the allegations involved a serious economic offence resulting in substantial loss to the public exchequer and were supported by substantial documentary material.

    It was further submitted that although the petitioner had spent more than three-and-a-half months in custody, the investigation remained ongoing as a large volume of records still required scanning and processing.

    The State relied upon the Supreme Court’s decision in CBI v. V. Vijay Sai Reddy (2013) 7 SCC 452, which lays down the factors relevant to the grant of bail, including:

    • Nature and gravity of the accusation;
    • Severity of punishment upon conviction;
    • Likelihood of tampering with evidence;
    • Possibility of influencing witnesses; and
    • Larger public interest.

    Court’s Analysis

    Justice Surya Partap Singh undertook a detailed review of Supreme Court jurisprudence governing bail in economic offences before applying those principles to the facts of the present case.

    The Court identified seven factors favouring grant of bail.

    1. Length of Custody

    The petitioner had already undergone more than three-and-a-half months of incarceration.

    2. Maximum Punishment

    Even if the prosecution case were accepted in its entirety, the offences carry a maximum punishment of seven years.

    The Court observed that the Supreme Court has repeatedly granted bail in comparable GST-related prosecutions at relatively early stages of custody.

    3. Documentary Nature of Evidence

    The Court considered this to be the most significant factor.

    All evidence relied upon by the prosecution consisted of documentary and electronic records already collected and available with the department.

    Consequently, continued detention was unnecessary for the purposes of investigation.

    4. Delay in Trial

    The Court found no realistic possibility of the trial concluding in the immediate future.

    5. No Investigative Purpose Served

    Since the evidence had already been secured, continued incarceration would not advance the investigation.

    6. No Risk of Tampering

    Nothing on record suggested that the petitioner would tamper with evidence or influence witnesses if released on bail.

    7. No Flight Risk

    The Court also found no material indicating any possibility that the petitioner would abscond or evade trial.

    Reliance on Supreme Court Precedents

    The Court extensively relied upon recent Supreme Court decisions emphasising the primacy of personal liberty and the limited role of pre-trial detention.

    Referring to Dataram Singh v. State of Uttar Pradesh (2018), the Court reiterated:

    “The grant of bail is the general rule and putting a person in jail is an exception. A fundamental postulate of criminal jurisprudence is the presumption of innocence.”

    The Court also relied on Vineet Jain v. Union of India (2025 SCC OnLine SC 2331), where the Supreme Court expressed surprise that bail had been denied in a GST prosecution carrying a maximum sentence of five years despite the evidence being entirely documentary. Bail was ultimately granted after seven months of custody.

    Similarly, in Ratnambar Kaushik v. Union of India (2023) 2 SCC 621, the Supreme Court granted bail in a CGST evasion case after approximately four months of custody, observing that documentary and electronic evidence generally minimises the possibility of tampering.

    The Court further referred to Radhika Aggarwal v. Union of India (2025) 6 SCC 545, where the Supreme Court emphasised that arrest powers under the CGST Act must be exercised strictly in accordance with statutory safeguards and cannot be employed as a coercive mechanism for tax recovery.

    Particular reliance was also placed on Ashutosh Garg v. Union of India (SLP (Crl.) No. 8740 of 2024, decided on 26 July 2024), wherein the Supreme Court granted bail in a case involving alleged fake ITC transactions exceeding ₹1,032 crore through 294 firms after approximately nine months of custody.

    The High Court observed that if bail could be granted in a case involving allegations of such magnitude, the quantum involved in the present case could not, by itself, justify prolonged pre-trial detention.

    The Court also cited the landmark decision in Sanjay Chandra v. CBI (2012), observing:

    “Even if the offence is serious in terms of huge loss to the State exchequer, that, by itself, should not deter the Court from enlarging the appellant on bail, when there is no serious contention that the accused will interfere with the trial or tamper with evidence.”

    Reliance on Coordinate Bench Decisions

    Justice Surya Partap Singh also noted that several coordinate benches of the Punjab and Haryana High Court had recently granted bail in similar prosecutions under Section 132 of the GST laws.

    Among the decisions referred to were:

    • Atul Aggarwal v. State of Punjab (CRM-M-21915-2026);
    • Bhanuj Jindal v. DGGI (CRM-M-881-2026); and
    • Arvind Kumar v. DGGI (2025 NC PHHC 65125).

    In each of these cases, bail had been granted despite allegations of GST evasion after custody periods of approximately three months or less.

    Order

    Allowing the petition, the Court directed that the petitioner be released on regular bail upon furnishing appropriate personal bonds and surety bonds to the satisfaction of the Trial Court or Duty Magistrate concerned.

    The release was made subject to the following conditions:

    1. The petitioner shall not directly or indirectly induce, threaten or promise any person acquainted with the facts of the case to withhold information from the Court or investigating authorities;
    2. The petitioner shall furnish his residential address to the Court and promptly notify any subsequent change of address; and
    3. The petitioner shall not leave India without obtaining prior permission from the Trial Court.

    The Court clarified that the observations contained in the order were confined solely to adjudication of the bail application and would not influence the merits of the trial.

    Significance

    The judgment reinforces the increasingly consistent judicial approach that pre-trial incarceration in GST fraud prosecutions should remain an exception rather than the norm, particularly where the evidence is entirely documentary and already secured by the investigating authorities.

    The decision is especially noteworthy for its detailed reliance on the Supreme Court’s recent rulings in Vineet Jain and Radhika Aggarwal, which have significantly strengthened the protection of personal liberty in GST prosecutions and emphasised that the financial magnitude of an alleged tax fraud cannot, by itself, justify denial of bail.

    For taxpayers, professionals and enforcement agencies alike, the ruling serves as a reminder that economic offences, however serious, remain subject to the constitutional principles of presumption of innocence and personal liberty, and that continued custody must be justified by genuine investigative necessity rather than the mere size of the alleged tax demand.

    Case: Rohit Kumar Gupta v. State of Punjab through State Tax Officer
    Court: Punjab and Haryana High Court
    Case No.: CRM-M-19525-2026 (O&M)
    Decision Date: 2 June 2026
    Judge: Hon’ble Mr. Justice Surya Partap Singh