No more improper invocation of section 16 (2) (c) of the CGST Act please.

In general, the decisions on tax laws of Supreme Court are binding all over India and the decisions of jurisdictional high courts are also binding on tax officials all over India, in respect of orders passed by other high court so long as there is no contrary decision from the respective jurisdictional high court. I am of the view that so far as decisions on GST law is concerned, as it is One Nation, One Tax, the decisions of GSTAT, HC as well as SC are all binding on all adjudication level as well as first level appeal officials. As of now, 287 decisions of GSTAT are already posted in respective sites and the number is bound to increase in geometric progression in future.

As I was updating on recent case laws, I came across one interesting decision by the Punjab and Haryana High Court on 01/10/2026 covering 424 writ petitions in one go. The order is a lengthy one and I attempt here to give the synopsis. It appears that the tax officials through out the states of Punjab as well as Haryana have improperly invoked section 16 (2) (c). It is not my case that 16 (2) (c) must not be invoked at all, but the Punjab and Haryana High Court on 01/10/2026 has prescribed several norms for invoking 16 (2) (c). These guidelines are binding on tax officials in respect of all show cause notices which are yet to be adjudicated as well as on all show cause notices proposed to be issued in future.

Many of such guidelines are general in nature and applicable to all GST cases. Let us see some important guidelines for the benefit of all the readers/ stakeholders.

1. This section should not be invoked in a routine or mechanical manner. Circumstances must warrant.
2. Proceedings against the selling dealer is desired.
3. Link of purchaser on violation of 16 (2) (c)
4. In case of invocation of 74 for applicable periods, the SCN must be clear as per CBIC guidelines dated 13/12/2023.
5. Proof such as tax invoice, e way bill, receipt of goods, sale or use in manufacture, payment to supplier etc. must be taken in to account before imposing.
6. Retrospective GST registration of cancellation does not automatically warrant 16 (2) (c)
7. Existence of statutory remedy against seller.
8. No need to cancel the registration of the purchaser unless such action is warranted.
9. The principles of natural justice must be adhered.
10. The requirements of Section 75 (6) on bringing the facts and legal position in the order is required.

It appears to be a decision which shall have far reaching consequences. The Court has ruled that in cases where orders have been passed by the adjudicating authority, the proper officer shall re-visit the matter in the light of the guidelines set out in this judgment, after affording an opportunity of personal hearing, and shall pass a fresh reasoned order in accordance with law. While undertaking such an exercise, the proper officer may issue a supplementary notice or corrigendum along with the particulars or the material contemplated by the aforementioned guidelines and shall provide a proper opportunity to the petitioner(s) to file their Reply.

Thus, this decision is binding on all the 424 matters referred in that case, even in the cases where adjudication order has been passed. A taxpayer can- not expect a better order than this as this order not only saves the taxpayer who have filed writs, but also makes the guidelines applicable to all future cases.

Conclusion: It is simply and undoubtedly possible for tax administrators to simplify the law and improve the collections by increasing the threshold exemption as we are in the tenth year of GST era. This simple exercise, if done with effect from 01/04/2027, it shall pave way for reduction in litigation. Whenever any taxpayer approaches any appellate authority or a higher court, it is not the taxpayer only who is affected. The department must protect the revenue interest by proper representation as well. The precious time of the tax officials are simply spent in an unproductive manner in litigation before first, second appeal levels as well as HC and SC. Imagine a situation where 1000 crores demand raised in SCN, 700 Crores confirmed in OIO, 450 crores confirmed at First appeal level and demand is finally reduced to 10 Crores in GSTAT. What is the department gaining by way of raising improper demand which may not be sustained at GSTAT level.

I am coming across cases of demand of GST @18% on trade payables as on the 31/03 of the respective financial year, demand of GST under RCM on director remuneration which is not covered under RCM by CBIC circular itself.

Before parting: During the last 100 days, we have seen around 500 decisions on GST from GSTAT, HC as well as SC. Many issues are getting resolved. I appeal to all adjudication officers all over India to update all recent developments taking place in GST so as to keep themselves always updated. The adjudication order fulfills its purpose only when the taxpayer accepts the same and pays the demand amount or the entire demand as per OIO is confirmed at GSTAT level. Otherwise, the officer whose order is later set aside or quashed by a higher authority, the exercise of that official becomes futile.