Judicial Roundup: GST SCN Validity, Refund Restoration, and Constitutional Challenges (September 29, 2025)
Calcutta HC Scrutinizes Section 74 Notice for Exempt Supplies
The Calcutta High Court agreed to examine the validity of invoking Section 74 (which pertains to fraud/suppression/willful misstatement) of the GST Act for disputes related to alleged excess claims of exemption on certain supplies. While the court allowed proceedings under Section 74 to continue for issues related to ‘tyre sales’, it restrained enforcement of proceedings related to exempt supplies without prior court permission, noting the prior acceptance of the exempt status under initial scrutiny notices.
Bombay HC Issues Notice on Constitutional Challenge to Section 16(2)(c)
The Bombay High Court issued notice to the Attorney General of India regarding a writ petition challenging the constitutional validity of Section 16(2)(c) of the CGST Act (which disallows Input Tax Credit if the supplier has not paid tax). The court refused to grant an unconditional stay of tax recovery, holding that the taxpayer must still deposit ₹20 lakhs within six weeks, arguing that disputes with the supplier do not extinguish the primary liability to the state.
Retrospective Cancellation Quashed if Not Proposed in SCN
The Delhi High Court held that the GST registration of a business cannot be cancelled with retrospective effect if the initial Show Cause Notice (SCN) did not explicitly propose such retrospective cancellation. The court ruled that the cancellation must take effect only from the date the SCN was issued, although the department retained the right to initiate separate proceedings for other violations.
Gujarat HC Restores Export Refund, Rebukes Appellate Authority
The Gujarat High Court quashed an Appellate Authority’s order that had reversed a sanctioned refund claim for Export of Goods/Services without payment of Tax. The High Court found that the Appellate Authority failed to properly consider material evidence, specifically the Bank Realization Certificates (BRCs) and supporting documents that the Adjudicating Authority had originally verified and relied upon when sanctioning the refund.
Retrospective Cancellation Upheld for Unchallenged Fake Invoicing
The Bombay High Court upheld the retrospective cancellation of a business’s GST registration after the assessee failed to file any reply to an SCN that alleged fake invoicing (issuing invoices without actual supply of goods). The court ruled that the failure to contest the clear allegations negated any claim of breach of natural justice, thus sustaining the retrospective effect of the cancellation.
Bombay HC – M.N. Trading Co. v. Union of India [WRIT PETITION NO. 1757 OF 2024]