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2026 (8) TMI 230 - Supreme CourtGST

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Final adjudication of exemption issues awaits resolution of residual grounds before the Single Judge, preserving later challenge rights.
Pending residual issues before a Single Judge mean that an exemption issue is not finally adjudicated. The notes state that dismissal of an earlier departmental Special Leave Petition does not merge the High Court decision into the Supreme Court order. A later assessee-favourable decision may be placed before the Single Judge and may govern the pending proceedings. The Special Leave Petitions were closed, with liberty reserved to challenge the reference order after the Single Judge disposes of the matter.

2026 (5) TMI 1822 - Supreme CourtGST

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Issues: (i) Whether online gaming, fantasy sports and casino transactions involving stakes on uncertain outcomes constitute betting and gambling for GST purposes; (ii) whether actionable claims arising from betting and gambling are includible within "goods" and taxable as supplies under the GST framework; (iii) whether the amount staked forms consideration and whether Rule 31A, Rule 31B and Rule 31C are valid valuation provisions; (iv) whether the 2023 amendments are clarificatory and retrospective; and (v) how the pending notices, writ petitions and connected appeals are to be disposed of.

Issue (i): Whether online gaming, fantasy sports and casino transactions involving stakes on uncertain outcomes constitute betting and gambling for GST purposes?

Analysis: The statutory and constitutional meaning of betting and gambling was held to turn on the staking of money or money's worth on an uncertain outcome. The medium of play, including digital platforms, was treated as immaterial. The distinction between skill and chance was held to lose significance once stakes were placed on uncertain outcomes, unless a statute expressly protected skill-based play from the consequences of staking. Fantasy sports and online gaming contests with pooled stakes were held to fall within this concept, and casino transactions were treated as plainly within it.

Conclusion: Yes. Online gaming, fantasy sports and casino transactions involving stakes on uncertain outcomes constitute betting and gambling for GST purposes.

Issue (ii): Whether actionable claims arising from betting and gambling are includible within "goods" and taxable as supplies under the GST framework?

Analysis: The Court held that Article 246A provides the constitutional source for GST and that the levy is on supply, not on betting and gambling as a freestanding activity. Section 2(52) was held to validly include actionable claims within goods, relying on the inclusive constitutional conception of goods and the earlier recognition that actionable claims are movable property in the wider sense. Entry 6 of Schedule III was construed as preserving taxability for actionable claims arising from lottery, betting and gambling. The challenge based on Articles 14, 19(1)(g), 21 and 265 was rejected.

Conclusion: Actionable claims arising from betting and gambling are validly included within goods and are taxable as supplies under the GST framework.

Issue (iii): Whether the amount staked forms consideration and whether Rule 31A, Rule 31B and Rule 31C are valid valuation provisions?

Analysis: The Court held that the stake amount bears a direct and inseparable nexus with the supply and constitutes consideration under Section 2(31). It further held that valuation under Section 15 is not confined to net revenue or commission and that the legislature has wide latitude in adopting a reasonable measure for tax. Rule 31A was upheld as a valid machinery provision traceable to Sections 15 and 164, and Rule 31B and Rule 31C were also upheld as valid special valuation mechanisms. The Court rejected the contention that the rules were confined to horse racing or that they were manifestly arbitrary.

Conclusion: The stake amount is consideration, and Rule 31A, Rule 31B and Rule 31C are valid valuation provisions.

Issue (iv): Whether the 2023 amendments are clarificatory and retrospective?

Analysis: The Court held that the 2023 amendments did not create a fresh levy or a new taxable event. They were treated as clarificatory, explanatory and operational, introduced to remove doubts and provide greater specificity in the valuation and collection framework for online gaming and casino transactions. Their retrospective operation was upheld on that basis.

Conclusion: The 2023 amendments are clarificatory and operate retrospectively.

Issue (v): How are the pending notices, writ petitions and connected appeals to be disposed of?

Analysis: The writ petitions and transferred cases challenging the levy, valuation framework and notices were dismissed. The Revenue's civil appeals were allowed and the Karnataka High Court judgment quashing the notices was set aside, with the notices restored for adjudication. The criminal appeal was allowed to the extent indicated. The appeal concerning licence/permission was disposed of with a direction for consideration by the competent authority.

Conclusion: The levy was upheld, the writ petitions were dismissed, the Revenue's appeals succeeded, and the connected matters were disposed of in the manner stated.

Final Conclusion: The judgment upholds the GST levy on actionable claims arising from betting, gambling, online gaming, fantasy sports and casinos, validates the charging and valuation machinery, and directs the pending proceedings to continue in accordance with the declared principles, while granting limited relief only in the licence-related appeal.

Ratio Decidendi: Where money or money's worth is staked on an uncertain outcome, the transaction constitutes betting and gambling for GST purposes, and the resulting actionable-claim supply is taxable as goods under the GST framework with valuation governed by the statutory rules framed under the Act.

Betting and gambling under GST includes staked online gaming and fantasy sports, with taxable actionable claims and valid valuation rules.
Money or money's worth staked on an uncertain outcome was held to constitute betting and gambling for GST purposes, regardless of whether the activity occurs through online platforms, fantasy sports contests or casinos. Actionable claims arising from such transactions were held to be validly included within "goods" and taxable as supplies under the GST framework. The stake amount was held to be consideration, and Rules 31A, 31B and 31C were upheld as valid valuation provisions. The 2023 amendments were treated as clarificatory and retrospective, and the pending writ petitions, notices and connected appeals were disposed of accordingly.

GST on actionable claims arising from betting and gambling - Games of skill played with stakes as betting and gambling - Actionable claims as goods under the GST framework - Supply of actionable claims in online gaming and fantasy sports - Valuation of betting and gambling transactions - Validity of Rule 31A, Rule 31B and Rule 31C - Clarificatory and retrospective operation of the 2023 GST amendments - Constitutional limits of legislative and delegated fiscal powers, the scope and operation of the GST framework, and the manner in which traditional legal doctrines are to be applied to technology-driven commercial activities. Whether activities conducted on online gaming platforms, casinos, betting platforms and allied establishments constitute taxable supplies of actionable claims arising from betting and gambling arrangements ? - HELD THAT: - In Junglee Games [2026 (5) TMI 1821 - SUPREME COURT] this Court, after undertaking an exhaustive examination of the expressions "betting” and "gambling”, the constitutional framework governing Entry 34 of List II and the relevant judicial precedents including RMDC-I, RMDC-II, K.R. Lakshmanan [1996 (1) TMI 336 - SUPREME COURT] and Satyanarayana [1967 (11) TMI 109 - SUPREME COURT], held that "betting” and "gambling” constitute a composite and interchangeable expression referring to the act of staking money or money’s worth upon uncertain outcomes. This Court expressly rejected the interpretation that Entry 34 ought to be read as "betting on gambling”, holding that such construction would be contrary to the constitutional scheme as revealed by the substantive constitutional provisions as well as the legislative heads specified in the entries in the Seventh Schedule thereto. Most significantly, this Court clarified that the determinative factor in betting and gambling is the staking of money upon uncertain outcomes irrespective of whether the underlying activity involves skill, chance or a combination of both. The distinction between games of skill and games of chance becomes relevant only where a statute expressly protects games of skill irrespective of the involvement of stakes. In the absence of such statutory protection, staking upon uncertain outcomes retains the character of betting and gambling. The Court further clarified that the medium, through which the activity is conducted, whether online or offline, is immaterial, since the essential character of the transaction lies in the staking arrangement itself and not in the technological medium through which it is facilitated. Notably, the Court also distinguished between an ‘entry fee’ paid merely to secure participation in a genuine skill-based competition and a ‘stake’ placed upon an uncertain outcome. It was held that in a genuine skill-based competition, the entry fee merely confers a right to participate and is not linked to the uncertain outcome or prize pool. Conversely, in gambling adventures or chance-based competitions, the so-called entry fee itself constitutes the stake amount, since it is paid upon an uncertain outcome and the prize money is intrinsically linked to the pooled stake amounts. Applying the principles stated in the connected judgment on betting and gambling, the Court held that the determinative element is the staking of money or money's worth on an uncertain outcome, and not whether the underlying activity is one of skill or chance. Once participation in the game is conditioned on stakes and the participant stands to gain more depending on an uncertain result, the transaction acquires the character of betting and gambling. The same principle applies to online gaming and fantasy sports, notwithstanding the technological medium or the presence of elements of skill. [Paras 49, 84] Online gaming, including fantasy sports, when played for stakes, is betting and gambling under the GST framework. Actionable claims as goods under the GST framework - Legislative competence under Article 246A - Constitutional validity of levy on actionable claims - HELD THAT: - Before the advent of GST, the exclusive power to levy tax on betting and gambling vested with the States. Such activities were kept outside the ambit of service tax imposed by the Union under the Finance Act, 1994. Section 66D(i) of the Finance Act, 1994 expressly placed "betting, gambling or lottery” within the negative list of services, thereby excluding such activities from the levy of service tax under Section 66B. It is no doubt true that actionable claims were historically treated as distinct from conventional goods under legislations such as the Sale of Goods Act, 1930. However, such treatment arose within entirely different statutory and juristic contexts governing contracts of sale and transfer of property. The constitutional validity of the GST framework cannot be determined solely by importing rigid classifications evolved under pre-GST commercial legislations enacted for altogether different purposes. The decision of the Constitution Bench in Sunrise Associates [2006 (4) TMI 118 - SUPREME COURT], assumes significance. The Constitution Bench expressly recognised that actionable claims constitute movable property and "goods” in the wider sense of the term, though historically excluded from the ambit of sales tax legislations by specific statutory exclusion. The Court observed that were actionable claims not otherwise comprehended within the wider conception of goods, there would have been no necessity for their express exclusion under sales tax statutes. The Court held that Article 246A confers wide legislative power to enact GST laws and that the taxable event under GST is supply. Article 366(12) is inclusive and does not freeze the meaning of goods to pre-GST commercial classifications. In light of the statutory framework and the decisions recognising actionable claims as movable property capable of being treated as goods, Sections 2(52) and 9(1) validly include and tax actionable claims arising from betting and gambling. The levy is on supply of such actionable claims and not a direct tax on betting and gambling as an activity simpliciter. The challenge under Articles 14, 19(1)(g), 21 and 265 was rejected, the Court holding that mere commercial hardship or higher tax incidence does not invalidate fiscal legislation otherwise within competence. [Paras 50, 84] Once the legislative competence underlying the levy, taxable event and valuation framework is sustained, the Rules framed thereunder, including Rules 31A, 31B and 31C of the CGST Rules, cannot independently be invalidated merely by reiterating the same constitutional challenge directed against the parent levy itself. The validity of such delegated legislation thereafter falls to be examined within the settled parameters governing subordinate legislation, including manifest arbitrariness, inconsistency with the parent enactment, excessive delegation or lack of statutory authority. Those aspects shall be dealt with separately in the subsequent part of this judgment. No constitutional infirmity is otherwise made out so as to warrant interference in exercise of judicial review. The impugned Rules are therefore not liable to be struck down on the constitutional grounds urged against the parent levy and statutory framework. Sections 2(52) and 9(1), read with the GST scheme taxing actionable claims arising from betting and gambling, were upheld as constitutionally valid. Supply of actionable claims beyond transfer of pre-existing claims - Organised betting and gambling arrangements as taxable supply - HELD THAT: - The GST regime therefore taxes supplies and not merely traditional transfers of title or conventional sale transactions. Consequently, once actionable claims are expressly included within the definition of "goods”, the expression "supply” under Section 7 must necessarily receive a purposive and expansive interpretation consistent with the constitutional and statutory architecture of GST. Any other restrictive construction would defeat the very architecture of GST and render the levy incapable of addressing modern commercial transactions which do not conform to traditional forms of transfer. The Court held that GST is a supply-centric regime and Section 7 uses broad and inclusive language. Therefore, taxability is not limited to assignment or transfer of an already existing actionable claim. Once the organised gaming or betting structure gives rise to contingent beneficial interests in movable property upon participation, those interests fall within actionable claims and their supply is taxable under Section 7 read with Entry 6 of Schedule III. The procedural requirements governing transfer of actionable claims under the Transfer of Property Act are not bodily imported into the GST framework. [Paras 51, 52, 84] Supply of actionable claims under GST includes organised betting and gambling structures in which such claims arise, even without transfer of a pre-existing claim. Consideration for betting and gambling supplies - Stake amount as transaction value - Valuation of betting and gambling transactions - HELD THAT: - In betting and gambling transactions, the stake amount is paid for the very purpose of participation in the organised betting and gambling framework and for acquisition of the corresponding actionable-claim interest arising therein. Even if, at a particular stage prior to participation crystallising, the amount may retain certain attributes of a refundable deposit, the character of such payment fundamentally changes once the participant is admitted into the betting or gaming arrangement and the amount stands appropriated towards participation in the underlying supply. Upon such appropriation, the payment ceases to retain the character of a mere deposit and forms part of the consideration for the supply involving actionable claims. The Court held that the definition of consideration in Section 2(31) is of wide import and covers payment made in respect of, in response to, or for the inducement of supply. Participation in betting and gambling is impossible without payment of the stake amount; hence the stake is neither collateral nor incidental but integral to the supply. Once appropriated towards participation, the amount ceases to be a mere deposit and becomes consideration for the supply. There is no statutory basis for deducting winnings, prize pools or payouts from the taxable value, and the statutory measure may validly adopt the full amount entering the betting and gambling framework. [Paras 53, 84] The full stake amount appropriated towards participation constitutes consideration and enters the valuation mechanism under Section 15. Validity of Rule 31A - Delegated valuation machinery for betting and gambling - HELD THAT: - The Court held that Rule 31A does not create a new levy or enlarge the charging section but only operationalises the valuation framework inhering in Sections 9 and 15 read with Entry 6 of Schedule III. The rule is traceable to Sections 15(4), 15(5) and 164, and the materials on record showed that it was backed by GST Council recommendations. The prescription of 100% of the face value of the bet as the measure of valuation bears a direct nexus with the taxable supply and is not manifestly arbitrary merely because another valuation method may also be conceivable. Rule 31A is not confined to horse racing; the use of the disjunctive expression covers betting and gambling generally, and the expression "chance to win" refers to the actionable-claim interest supplied, not only to games of chance. [Paras 58, 59, 64, 65, 84] Rule 31A was upheld as a valid valuation and machinery provision applicable to actionable claims arising from betting and gambling. Clarificatory and retrospective operation of the 2023 GST amendments - Validity of Rule 31B and Rule 31C - HELD THAT: - The Court found that the pre-amendment regime already taxed actionable claims arising from betting and gambling and that the 2023 amendments did not create a fresh levy or a new taxable event. They were introduced to provide greater statutory specificity and operational clarity for online gaming, online money gaming and casino transactions, and to refine and standardise valuation in those ecosystems. Rules 31B and 31C were held to be valid machinery provisions with a rational nexus to the taxable supply and not violative of Article 14. Since the amendments merely clarify and systematise the existing law, they were held to be retrospective in operation in the manner indicated in the judgment. [Paras 66, 67, 84] The 2023 amendments and Rules 31B and 31C were upheld as clarificatory, valid and retrospectively applicable. Supply of actionable claims in online gaming and fantasy sports - Online gaming operators as suppliers - Rule 31B valuation - HELD THAT: - The Court held that when players place stakes, an identifiable pooled fund of movable property comes into existence and each participant acquires a contingent beneficial interest therein. The players do not retain actual or constructive possession over the staked amounts once those amounts are committed to gameplay, and the platform controls deposits, gameplay, outcome determination and disbursal. There is no independent inter se supply between players; the platform creates, structures and administers the entire ecosystem and therefore itself supplies the actionable-claim interest. Fantasy sports were placed on the same footing because the amounts paid are not mere access fees but pooled stakes appropriated towards contingent prize structures dependent on uncertain future outcomes. Consequently, valuation of such transactions is governed by Rule 31B, including in pending proceedings. [Paras 72, 73, 74, 79, 84] Online gaming and fantasy sports operators were held to be suppliers of actionable claims, and valuation is to be governed by Rule 31B. Casino transactions under the GST framework - Best judgment valuation - Rule 31C valuation - HELD THAT: - The Court rejected the contention that GST in casino operations is leviable only on gross gaming revenue or net retained earnings, holding that GST is a tax on taxable supply and not on profits. The amount paid for participation in casino gaming enters the taxable framework irrespective of the ultimate profitability or loss of the casino, and chips or tokens are merely the medium through which bets are placed. The Court upheld the Department's authority to resort to Rule 31 and reconstruction or best judgment methodologies where complete contemporaneous records were absent. At the same time, because Rule 31C was held to be clarificatory and retrospective, the actual determination and computation of taxable value in casino cases must be reconsidered by the adjudicating authority in accordance with Rule 31C, leaving factual and computational objections open. [Paras 82, 83, 84] The challenge to taxability and to the use of best judgment methods failed, but casino valuation and computation were directed to be redetermined in accordance with Rule 31C. Final Conclusion: The Court upheld the GST levy on actionable claims arising from betting and gambling transactions, including online gaming and fantasy sports played with stakes, and sustained the constitutional and statutory validity of the relevant provisions and rules. The 2023 amendments and Rules 31B and 31C were held clarificatory and retrospective; pending show cause notices and proceedings were directed to be decided accordingly, with casino valuation to be recomputed under Rule 31C. The Karnataka High Court judgment quashing the show cause notices was set aside, the writ petitions and transferred cases were dismissed, and the criminal appeal was allowed to the limited extent indicated.

2026 (6) TMI 105 - Supreme CourtGST

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Anticipatory bail in GST fraud allegations set aside where custodial interrogation was found necessary to secure records and ascertain truth.
Anticipatory bail in a prosecution arising from summons under Section 70 of the Chhattisgarh GST Act for an offence under Section 132 was found unjustified on the facts. The Court noted allegations of suspicious transactions, dealings with multiple high-risk suppliers, and fraudulent input tax credit without actual supply of goods, with books and related records being relevant to the inquiry. In view of the need to ascertain the truth and secure the necessary documents, custodial interrogation was held necessary. The respondent's custody in another case was also noted. The pre-arrest bail order was set aside, the respondent was directed to be taken into custody in the present case, and the remedy of regular bail was left open.

2026 (5) TMI 426 - Supreme CourtGST

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Statutory appellate remedy bars writ challenge to tax adjudication order; Supreme Court declines interference.
A writ challenge to a tax adjudication order was rejected because the High Court required the appellant to pursue the available statutory appellate remedy against Ext.P9. The dispute also raised the validity of the show cause notice, but the Supreme Court found no good ground to interfere with the High Court's order and dismissed the Special Leave Petition.

2026 (3) TMI 835 - Supreme CourtGST

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Writ against show cause notice challenging GST registration cancellation is not maintainable; statutory remedies must be used.
Writ petitions seeking pre-emptive quashing of a show cause notice proposing cancellation of GST registration are not maintainable; the article applies the settled principle that such challenges must be pursued within the statutory adjudicatory process rather than by anticipatory writ relief, and notes dismissal of the petition on that ground. The operative legal point is that where the statutory scheme provides an adjudicatory remedy, writ jurisdiction ordinarily should not be invoked to pre-empt or stay the statutory proceedings.

2025 (12) TMI 505 - Supreme CourtGST

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Issues: (i) Whether the subject property qualified as a residential dwelling; (ii) Whether exemption under Entry 13 of Notification No. 9/2017-Integrated Tax (Rate) dated 28.06.2017 was available when the residential dwelling was leased to an aggregator which further sub-let it for hostel accommodation.

Issue (i): Whether the subject property qualified as a residential dwelling.

Analysis: The expression "residential dwelling" was not defined in the GST regime, so its meaning had to be gathered from common parlance and the accepted understanding of residential accommodation. The property was shown in revenue records as residential in nature, and long-term accommodation for students and working women was treated as use for residence rather than as temporary lodging akin to a hotel or guest house.

Conclusion: The subject property was held to be a residential dwelling.

Issue (ii): Whether exemption under Entry 13 of Notification No. 9/2017-Integrated Tax (Rate) dated 28.06.2017 was available when the residential dwelling was leased to an aggregator which further sub-let it for hostel accommodation.

Analysis: Entry 13 granted exemption to services by way of renting of residential dwelling for use as residence. The provision was held to be activity-specific and not person-specific. The condition was satisfied where the property was taken for residential use, and the notification did not add a further requirement that the immediate lessee must itself occupy the premises as a residence. A narrow construction would defeat the object of the exemption, which was to keep residential use outside the GST burden.

Conclusion: The exemption under Entry 13 was held to be available, and GST was not payable on the rent for the relevant period.

Final Conclusion: The appeals were rejected, and the High Court's view granting exemption was sustained.

Ratio Decidendi: Where a notification exempts renting of a residential dwelling for use as residence, the exemption turns on the character and use of the property and is not lost merely because the immediate lessee is an intermediary that sub-lets the premises for residential occupation.

Residential dwelling exemption under GST applies where property is used for residence, even if leased through an intermediary.
A residential property used for long-term accommodation of students and working women was treated as a residential dwelling under GST, with the meaning drawn from common parlance because the term was not defined in the regime. Exemption under Entry 13 of Notification No. 9/2017-Integrated Tax (Rate) was held to apply to renting of a residential dwelling for use as residence, because the condition depends on the character and use of the property rather than on whether the immediate lessee personally occupies it. The notification was read as activity-specific, so leasing to an aggregator that sub-lets the premises for residential occupation did not defeat the exemption. The result was that GST was not payable on the rent for the relevant period.

Exemption from GST - leasing of residential premises as hostel to students and working professionals - Entry 13 of the Notification No. 9/2017-Integrated Tax (Rate) dated 28.06.2017 - HELD THAT:- The High Court of Bombay in Bandu Ravji Nikam [2002 (9) TMI 897 - BOMBAY HIGH COURT] has explained “residential dwelling” in detail. In this case, a suit for eviction of a tenant was contested by the tenant saying that the landlord was attempting to evict him in order to lease out the premises to a hostel and that hostel accommodation amounted to ‘non residential accommodation’ which was impermissible under Section 25 of Bombay Rent Control Act. The High Court held that by the very nature of the use of students hostel, it is only a residential user as hostel, is a house of residence or lodging for students and that just because the hostel owners charge some amount from the students, such accommodation cannot be treated as commercial or non residential. In common parlance, ‘residential dwelling’ means any building, structure, or part of the building or structure other than offices or factories, that is used or intended to be used as a home, residence, or sleeping place by one person or by two or more persons maintaining a common household, to the exclusion of all others - Thus, any residential accommodation meant for long term stay can be referred to as “residential dwelling”. The materials on record further indicate that as per the Khatha Extract and layout plans and records available with the Bruhat Bangalore Mahanagara Palike, the plot and property is shown as residential in nature. In view of the aforesaid, we have no hesitation in reaching the conclusion that the subject property is a “residential dwelling”. In the case on hand, the ultimate use of the property as residence remains unchanged. However, if 18% GST is levied on this transaction between the respondent No. 1 and the lessee i.e. M/s DTwelve Spaces Private Limited, the same would ultimately be passed on to the students and working professionals which would lead to a situation where the legislative intent behind granting exemption for residential use is defeated - from 18.07.2022, there is no exemption available for respondent 1, as he has rented to a registered person. Through these appeals, the revenue is, in effect, trying to give retrospective application to the amendment made in 2022, which is impermissible - The Explanation clearly shows that even if the rent is paid by a registered person, the exemption will be available if it is used for the purpose of own residence and is rented in the personal capacity. Therefore, the intention from the beginning was to ensure that rental agreements for use of the property for residential purposes are granted exemption from GST. Application disposed off.

2025 (11) TMI 1928 - Supreme CourtGST

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Bail in GST prosecution allowed after charge sheet filing, limited further investigation, and low tampering risk.
Accused persons prosecuted under Section 132 of the CGST Act were entitled to bail where the charge sheet had already been filed, further investigation was limited to a supplementary charge sheet, and the prosecution case rested mainly on seized documentary and electronic material. The Court treated the risk of witness influence and tampering as remote because the proposed witnesses were departmental officers, noted that the matter was triable by a magistrate with a maximum punishment of five years, and considered nearly eleven months of custody excessive. Refusal of bail was therefore set aside and bail was granted.

Grant of bail in economic offences involving tax evasion - Pre-trial detention and necessity for continued custody - Documentary and electronic evidence seized - risk of tampering - Witnesses being officers of the tax department - risk of influence - Triable by magistrate and maximum sentence as bail factor - Conditional bail and power to cancel on breach - Offence under Section 132 of the Central Goods and Services Tax Act, 2017Grant of bail in economic offences involving tax evasion - Pre-trial detention and necessity for continued custody - Documentary and electronic evidence seized - risk of tampering - Witnesses being officers of the tax department - risk of influence - Triable by magistrate and maximum sentence as bail factor - Conditional bail and power to cancel on breach - Whether the appellants were entitled to be released on bail in the prosecution under Section 132 of the Central Goods and Services Tax Act, 2017. - HELD THAT: - The Court assessed factors relevant to bail in a tax-evasion prosecution and concluded that continued pre-trial detention was not required. The Court noted that the witnesses to be examined are officers of the tax department, making the risk of their being influenced if the appellants were enlarged on bail remote. The primary evidence relied upon by the prosecution is documentary and electronic, which, according to the chargesheet, have been seized; accordingly the risk of tampering with material evidence is low. The case is triable by a magistrate and carries a maximum sentence of five years, a factor weighing in favour of bail. The appellants had already been in custody for nearly eleven months. Balancing these considerations, the Court found that conditions for granting bail were satisfied and set aside the High Court's order refusing bail. The Court imposed that release be subject to such terms as the trial court may impose, and reiterated that the trial court retains power to cancel bail on breach of conditions, including failure to attend trial. The Court clarified that its observations and grant of bail are without prejudice to the merits of the prosecution. [Paras 9, 10, 11, 12, 13]Impugned order denying bail set aside; appellants released on bail subject to terms to be imposed by the trial court, with liberty to cancel bail on breach and obligation to attend trial; observations not to be treated as findings on merits.Final Conclusion: Appeals allowed; the High Court order refusing bail is set aside and the appellants are directed to be released on bail on such conditions as the trial court may impose, with cancellation permissible on breach and without prejudice to the merits of the case.

2025 (11) TMI 497 - Supreme CourtGST

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Refusal to intervene in challenge to GST Department seizure under Section 67 of CGST Act left undisturbed
SC dismissed the special leave petition, upholding the HC's refusal to intervene in proceedings challenging GST Department's seizure alleged to contravene Section 67 of the CGST Act, 2017. The HC found no grounds to disturb the impugned order, and SC agreed there was no reason to interfere, leaving the High Court's decision intact.

2025 (11) TMI 71 - Supreme CourtGST

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Notice returnable in four weeks in petitions challenging GST assessment orders under joint development agreements; assessments stayed pending return
SC issued notice returnable in four weeks in petitions challenging GST assessment orders under joint development agreements, noting the High Court observed petitioners alleged lack of alternative remedy without explaining bypass of ordinary remedy process and made a false claim of no effective remedy. Meanwhile SC stayed operation of the Assistant Commissioner, CGST & Central Excise, Nashik-I Division's assessment orders pending return of notice.

2025 (8) TMI 992 - Supreme CourtGST

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1. ISSUES PRESENTED AND CONSIDERED

1. Whether, after a provisional attachment order issued under Section 83(1) of the CGST Act ceases to have effect by operation of Section 83(2) upon expiry of one year, the revenue authority is empowered under the CGST Act, CGST Rules, or any other law/executive instruction to issue a second provisional attachment order in respect of the same property or bank account.

2. Whether issuance of a fresh provisional attachment order based on substantially the same satisfaction note or grounds as an earlier order that has lapsed amounts to an impermissible "renewal" that circumvents the statutory limitation in Section 83(2) and violates principles of statutory interpretation and due process.

3. Whether any doctrine (including inherent executive power or analogous provisions in other taxing statutes) permits the executive to supply an omission in the CGST Act by issuing or re-issuing attachment orders where the statute is silent on renewal or extension.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Power to issue a second provisional attachment after lapse of the one-year period under Section 83(2)

Legal framework:

1. Section 83(1) CGST Act: Commissioner may provisionally attach property, including bank accounts, where he forms an opinion it is necessary to protect revenue.

2. Section 83(2) CGST Act: "Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date of the order made under sub-section (1)."

3. Rule 159 CGST Rules prescribes manner/form of attachment and provides for release on Commissioner's written instruction; Rule 159(5) permits filing of objection and hearing; Rule 159(2) requires written instruction to remove encumbrance.

Precedent treatment:

1. Radha Krishan Industries v. State of Himachal Pradesh: this Court emphasised the draconian nature of Section 83(1), the need for strict compliance with statutory preconditions and formation of a proximate, live nexus to the protection of government revenue; endorsed as guiding principle for sub-section (1).

2. RHC Global Exports (interim order): this Court (single-order interim) de-frozen account after one year; court concurs respectfully with its view.

3. Kerala High Court in Ali K. (approved): held absence of enabling provision in Section 83 permitting re-issuance after lapse; refused to follow Gujarat High Court reasoning that no embargo exists.

Interpretation and reasoning:

1. Literal reading of Section 83(2) yields that any provisional attachment ceases after one year; no express provision for extension, renewal or re-issuance is contained in the section.

2. The draconian nature of Section 83(1) requires that statutory limitations (Section 83(2)) be given force; permitting re-issuance would render sub-section (2) otiose and undermine the legislative limitation (ut res magis valeat quam pereat).

3. Executive inherent powers cannot be used to supplant or contradict statutory provisions; while executive may fill lacunae where rules are silent, it may not act inconsistently with clear statutory text. Absence of any executive instruction authorising renewal consistent with legislative policy precludes justification on that basis.

4. Comparison with other statutes (Excise Act Section 11DDA and Customs Act Section 28BA) where express extension/renewal provisions exist demonstrates deliberate legislative choice not to allow extension under CGST; by negative implication, Parliament did not intend renewal.

Ratio vs. Obiter:

1. Ratio: A provisional attachment under Section 83 ceases by operation of law after one year and, in absence of statutory provision or valid executive instruction authorising renewal, the revenue has no power to re-issue or "renew" a provisional attachment in respect of the same property once the earlier order has lapsed.

2. Obiter: Discussion on the role of the GST Council agenda recommending amendments to Rule 159 and examples of systemic non-compliance by banks reflecting practical difficulties are illustrative but not essential to the holding on statutory power.

Conclusions:

1. It is not open to the authority to issue a second or renewed provisional attachment order after the earlier order has ceased by operation of Section 83(2); such issuance is ultra vires and impermissible.

2. The statutory bar cannot be circumvented by administrative practice or by invoking an inherent executive power inconsistent with the statute.

Issue 2: Legality of re-issuance based on substantially same grounds and failure to decide representation under Rule 159(5)

Legal framework:

1. Rule 159(5) CGST Rules: person whose property is attached may file objection in specified form and Commissioner may, after hearing, release the property by order in FORM GST DRC-23.

Precedent treatment:

1. Radha Krishan Industries: strict and punctilious observance of statutory preconditions; formation of opinion must have proximate nexus to revenue protection.

Interpretation and reasoning:

1. Issuing a fresh provisional attachment on substantially the same satisfaction note or grounds as an earlier lapsed order (without fresh formation of opinion based on new facts) would amount to indirect achievement of what Section 83(2) forbids-i.e., circumventing the statutory lapse.

2. The principle that an act which cannot be done directly cannot be done indirectly applies: re-issuance on same basis would be abuse of power and contrary to due process.

3. Failure to decide the representation filed under Rule 159(5) before issuing a subsequent attachment order aggravates infirmity because the statutory objection mechanism must be respected; non-disposal cannot validate re-attachment.

Ratio vs. Obiter:

1. Ratio: Re-attachment premised on substantially identical grounds as an earlier order that has lapsed is unlawful; the Commissioner must form a fresh, independent opinion with proximate nexus to revenue protection and must respect the objection/representation procedure under Rule 159(5).

Conclusions:

1. Re-issuance on substantially the same satisfaction note or without disposing the representation is impermissible and constitutes misuse/abuse of power; such orders are liable to be set aside.

Issue 3: Role of executive instructions and alignment between Rules and Act; remedial/amendatory steps

Legal framework and reasoning:

1. Where statute prescribes a clear provision, rules or executive instructions must be consistent and cannot contravene statutory mandate (Article 13 principle referenced).

2. Rule 159(2)'s requirement that removal of encumbrance is on written instruction from Commissioner created a procedural misalignment with Section 83(2) (automatic lapse after one year). The GST Council has recognised the misalignment and recommended amendments to Rule 159 and FORM GST DRC-22 to align rules with the Act.

Precedent treatment:

1. Courts have recognised systemic difficulties arising from procedural misalignment (cases cited by the Court illustrating continued debit-freeze beyond statutory lapse) and the need for compliance with statute pending amendment.

Ratio vs. Obiter:

1. Ratio: Until rules are aligned with the Act, authorities must implement provisional attachments in strict compliance with Section 83(2); absence of alignment does not empower continued encumbrance beyond one year.

Conclusions:

1. Executive or rule-making bodies may amend procedure to effectuate statutory intent, but pending such lawful amendments, the statutory one-year lapse must be respected and enforced by authorities and banks.

Cross-references

1. The considerations under Issue 1 (statutory bar on renewal) inform Issue 2 (impermissibility of re-issuance on same grounds) and Issue 3 (requirement that rules and executive action conform to statutory text).

Final Dispositive Conclusion (Ratio Summarised)

1. The Court holds that Section 83(2) of the CGST Act operates to terminate a provisional attachment after one year and, in absence of express statutory power or valid executive instruction authorising renewal, the revenue cannot lawfully re-issue or "renew" provisional attachment orders in respect of the same property or bank accounts once the earlier orders have lapsed; issuance of such subsequent orders based on the same grounds or without disposing representations is ultra vires and liable to be set aside.

Provisional CGST attachment cannot be reissued or renewed after one-year lapse under s.83(1)-s.83(2); orders invalid
SC held that once a provisional attachment under s.83(1) of the CGST Act lapses by operation of s.83(2) after one year, revenue cannot issue a fresh provisional attachment or renew the same; doing so would render s.83(2) otiose. The impugned provisional attachment orders issued after the initial orders had ceased were invalid. The bank accounts attached pursuant to those orders must be unfrozen and made operable forthwith upon production of this judgment. Appeal allowed.

Issuance of a second provisional attachment order under sub-section (1) of Section 83 of the CGST Act after the initial provisional attachment order issued - efflux of a year from the date of issuance of order - HELD THAT:- The law is clear that not all laws are provided by statutory enactments and law making could extend to orders passed by the executive in relation to matters where the Parliament/a State Legislature has the authority to enact laws, and the Parliament or a State Legislature, as the case may be, has even not enacted any such law; but, importantly, the inherent executive power cannot be exercised, in respect of any matter covered by statutory law/rules, in a manner inconsistent therewith. While so, law is also well-settled that the inherent executive power could be exercised to supplement the statutory law, but not supplant it. In Sant Ram Sharma v. State of Rajasthan [1967 (8) TMI 117 - SUPREME COURT (LB)], a Constitution Bench of this Court held that 'It is true that there is no specific provision in the Rules laying down the principle of promotion of junior or senior grade officers to selection grade posts. But that does not mean that till statutory rules are framed in this behalf the Government cannot issue administrative instructions regarding the principle to be followed in promotions of the officers concerned to selection grade posts. It is true that Government cannot amend or supersede statutory rules by administrative instructions, but if the rules are silent on any particular point Government can fill up the gaps and supplement the rules and issue instructions not inconsistent with the rules already framed.' Having regard to the draconian nature of power conferred on the revenue by sub-section (1) of Section 83 of the CGST Act to levy a provisional attachment, the terms of the entire section have to be construed in a manner so that sub-section (2) of Section 83 is not effectively reduced to a dead letter. We are reminded of the maxim ut res magis valeat quam pereat. It is an interpretive doctrine that a legal text, specially a statute, should be interpreted in a way that gives the document force rather than makes it fail. Conceding power to the revenue to issue a fresh provisional order of attachment after the initial order has lapsed by operation of law or to renew the same would render the text of sub-section (2) of Section 83 otiose and accepting the reason assigned by the Gujarat High Court would permit the revenue to exercise a power which is not the statutory intendment. There are no reason to read Section 83 in a manner to confer any additional power over and above the draconian power conferred by sub-section (1) and upon lapse as ordained by sub-section (2). The issue is answered in the negative. The respondent could not have issued the impugned provisional attachment orders dated 13th November, 2024 and 18th December, 2024 upon the previous ones having ceased to have any effect by operation of law after a year of its issuance. The bank accounts attached by the respondent shall stand de-freezed and be made operable forthwith upon production of a copy of this judgment before the banks where the appellant maintains its accounts. Appeal allowed.

2025 (8) TMI 991 - Supreme CourtGST

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1. ISSUES PRESENTED and CONSIDERED

Whether issuance of summons under Section 70 of the CGST Act constitutes "initiation of proceedings" within the meaning of Section 6(2)(b) of the CGST Act.
Whether the term "subject matter" in Section 6(2)(b) of the CGST Act includes all matters dealt with in summons issued under the Act.
What is the legal purport and scope of an "order" under Section 6(2)(a) of the CGST Act.
Interpretation and application of the cross-empowerment and single interface framework under Section 6 of the CGST Act.
Validity and effect of the Circular dated 05.10.2018 issued by the Central Board of Excise & Customs regarding cross-empowerment and intelligence-based enforcement actions.
Appropriate guidelines for coordination and avoidance of parallel proceedings between Central and State GST authorities.

2. ISSUE-WISE DETAILED ANALYSIS

I. Whether issuance of summons can be regarded as "initiation of proceedings" within the meaning of Section 6(2)(b) of the CGST Act?

Relevant legal framework and precedents:

Section 6(2)(b) of the CGST Act bars initiation of proceedings by one proper officer if proceedings on the same subject matter have already been initiated by another proper officer under the corresponding State or Union Territory GST Act. Section 70 empowers proper officers to summon persons in an inquiry. Various High Courts have interpreted the distinction between "proceedings" and "inquiry" or investigation differently.

Court's interpretation and reasoning:

The Court observed that summons issued under Section 70 are tools for gathering information and do not amount to initiation of adjudicatory proceedings. "Initiation of proceedings" under Section 6(2)(b) refers to formal commencement of adjudication, typically by issuance of a show cause notice. Summons are preliminary and investigatory in nature and do not establish the subject matter or intent to proceed.

Key evidence and findings:

High Courts of Allahabad, Madras, Kerala, and Rajasthan have held that summons or inquiries under Section 70 do not amount to "proceedings" under Section 6(2)(b).
High Courts have emphasized that "proceedings" include assessment, demand, penalty, or adjudication actions, such as those under Sections 73 and 74.
Summons are issued to collect evidence and do not define the subject matter conclusively.
Issuance of summons is not determinative of the course of action the Department may take.

Application of law to facts:

The petitioner challenged summons issued after a show cause notice was already issued by another authority on the same subject matter. The Court held that the summons themselves do not amount to initiation of proceedings and therefore do not trigger the bar under Section 6(2)(b). The High Court correctly distinguished summons from formal proceedings.

Treatment of competing arguments:

Petitioner argued that summons issuance is initiation of proceedings and barred under Section 6(2)(b).
Respondents and various High Courts contended summons are preliminary inquiries and do not amount to proceedings.
The Court favored the latter view, emphasizing the need for clear commencement of adjudicatory proceedings by issuance of show cause notice.

Conclusions:

Issuance of summons under Section 70 is not "initiation of proceedings" under Section 6(2)(b) of the CGST Act.
Summons are investigatory and evidence-gathering tools and do not bar parallel summons or inquiries.

II. Whether "subject matter" within the meaning of Section 6(2)(b) of the CGST Act includes all matters dealt with in summons under the Act?

Relevant legal framework and precedents:

Section 6(2)(b) bars initiation of proceedings on the "same subject matter." The term "subject matter" is not defined in the Act but has been judicially interpreted as the cause of action or the nature of proceedings concerning a particular dispute or liability.

Court's interpretation and reasoning:

The Court held that "subject matter" refers to the specific tax liability, deficiency, or contravention that the Department seeks to assess or recover, as delineated in a show cause notice. It is not every matter touched upon during summons or inquiry. The subject matter is crystallized only when formal proceedings are initiated by issuance of a show cause notice specifying the charges, grounds, and demand.

Key evidence and findings:

High Courts of Allahabad, Orissa, and Punjab & Haryana equate "subject matter" with cause of action or nature of proceedings.
Show cause notices must specify the charges and grounds in detail, defining the scope of proceedings.
Subsequent proceedings or inquiries overlapping in some aspects but differing in scope or period may not be barred.
Section 75(7) of the CGST Act restricts demand confirmation to grounds specified in the notice, underscoring the importance of clear subject matter definition.

Application of law to facts:

The petitioner's claim that summons relate to the same subject matter as the prior show cause notice was rejected because summons alone cannot define or fix the subject matter. Overlapping investigations do not ipso facto mean the subject matter is identical.

Treatment of competing arguments:

Petitioner argued broad interpretation of subject matter to include all matters in summons.
Court rejected this, emphasizing the need for precise and formal identification of subject matter through show cause notices.

Conclusions:

"Subject matter" under Section 6(2)(b) refers to the adjudicatory dispute or liability as formally initiated by a show cause notice.
Summons-related matters are preliminary and do not define the subject matter for the purpose of Section 6(2)(b).

III. What is the purport of an "Order" under Section 6(2)(a) of the CGST Act?

Relevant legal framework and precedents:

Section 6(2)(a) mandates that where a proper officer issues an order under the CGST Act, a corresponding order must be issued under the SGST or UTGST Act with intimation to the jurisdictional officer. The term "order" is broadly construed to include all forms of orders competent under the statute.

Court's interpretation and reasoning:

The provision aims to ensure a unified and comprehensive adjudication, avoiding multiplicity of proceedings and conflicting decisions. The obligation to issue corresponding orders fosters administrative coherence and respects comity between jurisdictions.

Key evidence and findings:

"Order" includes all adjudicatory decisions issued by proper officers under the statute.
Issuance of corresponding orders under both CGST and SGST/UTGST Acts prevents conflicting outcomes and multiplicity.
Mandatory intimation to jurisdictional officers safeguards against parallel or overlapping proceedings.

Application of law to facts:

The Court emphasized the importance of simultaneous issuance of orders under the parallel Acts to maintain the single interface and cross-empowerment framework.

Conclusions:

"Order" under Section 6(2)(a) is a broad term encompassing all adjudicatory decisions under the CGST Act.
Issuance of corresponding orders under SGST/UTGST Acts is mandatory to ensure administrative harmony.

IV. Framework of single interface and cross-empowerment under Section 6 of the CGST Act

Relevant legal framework and precedents:

Section 6 provides for cross-empowerment of officers between CGST and SGST/UTGST Acts, enabling officers appointed under one Act to act as proper officers under the other. The GST Council's decisions and Circulars dated 20.09.2017 and 05.10.2018 elaborate the administrative division of taxpayers and empower both Central and State authorities to undertake intelligence-based enforcement actions across the entire value chain.

Court's interpretation and reasoning:

The Court explained that the GST regime embodies two complementary concepts: "single interface" to avoid dual administrative control over taxpayers, and "cross-empowerment" to enable both Central and State authorities to act on intelligence-based enforcement actions. Section 6 balances these concepts by preventing parallel proceedings on the same subject matter but allowing intelligence-based actions by either authority.

Key evidence and findings:

GST Council meetings emphasized administrative division of taxpayers and cross-empowerment for enforcement.
Circular dated 05.10.2018 clarifies that the authority initiating intelligence-based enforcement action may complete the entire process irrespective of administrative assignment.
Section 6(1) authorizes officers appointed under SGST/UTGST Acts to be proper officers under CGST Act and vice versa.
Section 6(2)(b) bars initiation of proceedings on the same subject matter by different authorities to avoid duplication.
Section 6(2)(a) mandates issuance of corresponding orders under both Acts.

Application of law to facts:

The Court underscored that intelligence-based enforcement action can be initiated by either Central or State authorities regardless of administrative assignment, but formal proceedings on the same subject matter cannot be duplicated.

Treatment of competing arguments:

Petitioner emphasized bar on parallel proceedings under Section 6(2)(b).
Respondents relied on cross-empowerment and Circulars to justify intelligence-based actions.
The Court harmonized these views, recognizing the bar on parallel proceedings but allowing intelligence-based enforcement by either authority.

Conclusions:

Section 6 enshrines single interface and cross-empowerment principles.
Intelligence-based enforcement action may be initiated by either Central or State authorities across the entire value chain.
Parallel proceedings on the same subject matter are barred to avoid duplication and harassment.

V. Interpretation and effect of Circular dated 05.10.2018

Relevant legal framework and precedents:

The Circular clarifies ambiguity regarding enforcement action by Central or State tax officers against taxpayers assigned to the other authority. It empowers officers of both Central and State tax to initiate and complete intelligence-based enforcement actions over the entire taxpayer base.

Court's interpretation and reasoning:

The Court held that the Circular is consistent with Section 6 and the GST Council's decisions. It clarifies that intelligence-based enforcement action is not restricted by administrative assignment and that the authority initiating such action may complete the process. However, the Circular does not cover all possible scenarios and is limited to intelligence-based enforcement actions.

Key evidence and findings:

Circular recognizes cross-empowerment and allows authorities to act beyond administrative assignment for intelligence-based actions.
It does not preclude the bar on parallel proceedings for the same subject matter once formal proceedings are initiated.
GSTN IT system changes are underway to support this framework.

Application of law to facts:

The Court found that the Circular supports the respondent's authority to issue summons and conduct investigations despite taxpayer assignment to another authority, provided no formal proceedings on the same subject matter have been initiated by the other authority.

Conclusions:

The Circular dated 05.10.2018 clarifies and operationalizes cross-empowerment for intelligence-based enforcement actions.
It does not override the statutory bar on parallel proceedings under Section 6(2)(b).

VI. Guidelines and directions to avoid parallel proceedings and ensure coordination

Court's reasoning and directions:

Where summons or show cause notices are issued by multiple authorities, the assessee must comply initially and notify the subsequent authority if proceedings are already pending.
Authorities must communicate to verify overlap and avoid duplication.
If subject matters differ, authorities must inform the assessee accordingly.
If an overlap exists, authorities must decide which will continue the proceedings, and the other shall forward all material to that authority.
If no agreement is reached, the authority which first initiated the inquiry or investigation shall continue.
Non-compliance with these guidelines may be challenged by the assessee via writ petition.
Taxpayers must cooperate fully, including responding to summons and notices.
Departments should enhance IT infrastructure for seamless data and intelligence sharing to support cooperative federalism and reduce taxpayer hardship.

Conclusions:

Effective coordination and communication between Central and State tax authorities are essential to avoid parallel proceedings and duplication.
Taxpayers have a duty to cooperate and notify authorities of overlapping proceedings.
Robust IT systems and data sharing mechanisms are recommended to facilitate transparency and coordination.

Summons not 'initiation' under Section 6(2)(b); show-cause notice crystallizes subject matter; Section 6(2)(a) mandates corresponding orders
SC held that issuance of summons does not constitute initiation of proceedings under Section 6(2)(b) of the CGST Act; proceedings are formally initiated by issuance of a show-cause notice which crystallizes the subject matter. The Court ruled that subject matter for s.6(2)(b) must be ascertained from the show-cause notice and overlapping inquiries or searches do not bar other authorities unless the same subject matter has been formally initiated. Section 6(2)(a) mandates issuing corresponding orders to counterpart State/UT authorities to avoid multiplicity. Petition disposed.

Issuance of summons - initiation of proceedings within the meaning of Section 6(2)(b) of the CGST Act or not - 'subject matter' within the meaning of Section 6(2)(b) of the CGST Act includes all matters dealt with in summons under the Act or otherwise - purport of an 'Order' under Section 6(2)(a) of the CGST Act. Whether issuance of summons can be regarded as “initiation of proceedings” within the meaning of Section 6(2)(b) of the CGST Act? - HELD THAT:- The High Court of Madras in Kuppan Gounder P.G. Natarajan v. Directorate General of GST Intelligence [2021 (9) TMI 713 - MADRAS HIGH COURT], dealt with a challenge to summons issued by the respondent on the ground that the appellant’s company fell within the state jurisdiction under the SGST Act, and the respondent is an authority with the central jurisdiction. The Court held that the scope of Sections 6(2)(b) and 70 respectively, are different and distinct, as the former deals with any proceedings on a same subject matter, whereas, the latter deals with power to summon in an inquiry and therefore, the words “proceedings” and “inquiry” cannot interchangeably be used to say that there is a bar to invoke the power under Section 70 of the CGST Act. The Court referred to the proceedings under Section 67, 68, 69, 71 and 72 respectively as “inquiry”. It was further observed that the prohibition under Section 6(2)(b) shall come into play when any proceedings on the same subject matter had already been initiated by a proper officer of another tax authority. The High Court of Rajasthan in Rais Khan v. Add. Commissioner, Enforcement Wing-II, [2024 (3) TMI 1086 - RAJASTHAN HIGH COURT], dealt with a challenge to the issuance of summons by the DGGI, on the ground that the proceedings had already been initiated by the State GST authority. The Court observed that the terms “proceedings” under Section 6(2)(b) of the CGST Act and “inquiry” under Section 70 cannot be conflated to imply a bar on the issuance of summons. It held that the mere issuance of summons does not amount to the initiation of proceedings under Section 6(2)(b). Section 6 of the CGST Act and the identical pari-materia provision in the respective State and Union Territories statutes, is a nuanced provision that enshrines both the concept as-well as the contours of “single interface” system and “cross-empowerment”. It delineates when and how the various officers appointed under different corresponding legislations shall act as “proper officer” for the purposes of the said legislation. Section 6 of the CGST Act has to be read with Circular No. 01/2017 dated 20.09.2017 and Circular dated 05.10.2018 read with Clarification F. No. CBEC-20/10/07/2019-GST dated 22.06.2020 by the Central Board of Indirect Taxes, GST Policy Wing - In conformity with the scheme of cross-empowering officers, clause (a) of sub-section (2) of Section 6 mandates that where a proper officer issues an order under the CGST Act, he has to pass an order under the SGST or UTGST Act respectively, under an intimation to the jurisdictional officer of the State and Union Territory tax authorities. Further, clause (b) of sub-section (2) bars a proper officer under the CGST Act to initiate proceedings on a subject matter where a proper officer under the SGST Act and UTGST Act has initiated proceedings on the same subject matter. In the present case, the petitioner was served with a show cause notice dated 18.11.2024 by the respondent no. 2 under Section 73 of the CGST Act, thereby initiating proceedings. The petitioner has impugned the summons dated 16.01.2025 and 23.01.2025 respectively issued by the respondent no. 1 for production of documents. At the summons stage, it cannot be predicated with certainty that the subject matter of the proceedings will be identical; the mere presence of an overlapping aspect under investigation does not ipso facto render the subject matter “same”. In the facts of the present case, the mere issuance of summons does not imply that the Department has decided to proceed against the taxpayer for recovery of liability. Therefore, issuance of summons, by no stretch, can be considered as the initiation of proceedings, since at that stage, the Department still retains the discretion not to initiate any proceedings. A mere contemplation or possibility of initiating action cannot be equated with “proceedings”, as doing so would undermine the framework of cross-empowerment under the Act. Even when a discovery is made during the search proceedings under Section 67 of the CGST Act, the Department is required to bring such proceedings to a definitive conclusion, either by issuing a show cause notice under Section 74 or by dropping the matter altogether. Whether “subject matter” within the meaning of Section 6(2)(b) of the CGST Act includes all matters dealt with in summons under the Act? - HELD THAT:- It is abundantly clear from the purport of Section 6(2)(b) that “subject matter” needs to be understood in perspective of initiation of proceedings. In other words, subject matter of the proceedings. In the preceding paragraphs of this judgment, we have stated that proceedings stand initiated when a show cause notice is issued with regard to a subject matter. We say so because an issuance of a show cause notice is the first stage whereby the Revenue for the very first time elaborately pens down various grounds and charges it is alleging against the assessee, who is invited to show cause as to why adverse action must not be taken against him on the basis of the apprehensions that the authority contemplates. A show cause notice delineates the scope of the proceedings in the expression of subject matter with which the authority would be dealing. It would be impermissible for an authority to invoke such rules, claims or grounds at a later stage which do not figure in the show cause notice. That is to say, any ground, reasoning or claim which does not figure out in the show cause notice cannot be permitted to adversely affect the noticee. In the present case, the learned Counsel for the petitioner contended that the subject matter of the proceedings pertained to the availability of input tax credit in respect of cancelled dealers. However, this contention fails for two reasons: first, the summons, on its own, cannot reveal the subject matter; and secondly, the subject matter can be ascertained only from the show cause notice. The apprehension of the petitioner cannot be countenanced merely because a facet of the ongoing inquiry overlaps with the subject matter of the show cause notice already issued - Upon crystallization of the subject matter through a show cause notice issued pursuant to an intelligence, no other tax authority may assume jurisdiction over it, provided it is ascertainable that the consequences of any further departmental action would be subsumed within the same subject matter. What is the purport of an “Order” under Section 6(2)(a) of the CGST Act? - HELD THAT:- Section 6(2)(a) is couched in terms that are both enabling and mandatory. It confers upon, and simultaneously obliges, the proper officer to issue a corresponding order under the SGST Act or the UTGST Act in cases where an order is being issued under the CGST Act. The expression ‘order’, qualified by the terms “under this Act”, occurring in the said provision admits of a broad construction, so as to include every form of order which a proper officer is competent to issue by virtue of the authority vested in them under the statute. Such an interpretation is necessary to ensure that the statutory mandate achieves its intended purpose of avoiding multiplicity of proceedings and securing uniformity of adjudication across the parallel enactments. Inasmuch as the CGST Act vests the proper officer with authority to issue “orders” under various provisions, it becomes imperative that such officer duly apprises the jurisdictional counterpart of any action initiated by the Department in relation to a taxable person who may otherwise fall within the administrative domain of that officer. Given that the statutory framework envisages a regime of cross-empowerment amongst officers, the obligation so cast operates as a safeguard against the prejudice which may arise from the initiation of parallel or overlapping proceedings against the same taxpayer by different wings of the Department. The expression “initiation of any proceedings” occurring in Section 6(2)(b) refers to the formal commencement of adjudicatory proceedings by way of issuance of a show cause notice, and does not encompass the issuance of summons, or the conduct of any search, or seizure etc - The expression “subject matter” refers to any tax liability, deficiency, or obligation arising from any particular contravention which the Department seeks to assess or recover - Where the proceedings concern distinct infractions, the same would not constitute a “same subject matter” even if the tax liability, deficiency, or obligation is same or similar, and the bar under Section 6(2)(b) would not be attracted. Petition disposed off.

2025 (8) TMI 635 - Supreme CourtGST

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Sale transaction disputes cannot become criminal prosecution absent entrustment; refusal to quash was set aside.
A dispute arising from a sale transaction and alleged non-payment of the balance price was held not to disclose criminal breach of trust, because mere failure to pay the remaining amount did not show entrustment. The Court also held that a civil recovery claim could not be converted into criminal prosecution on the facts pleaded, and that the High Court erred in treating the hardship of civil litigation as a reason to continue the criminal case. The order refusing quashing was set aside, and the matter was remanded to the High Court for fresh consideration.

Unpaid seller - institution of criminal proceedings for recovery of amount unpaid - the complainant in the first instance tried to lodge a FIR but the police declined to register the FIR saying that it was purely a civil dispute - criminal breach of trust - HELD THAT:- It was expected of the Additional CJM to know that in a case of sale transaction where is the question of any entrustment of goods so as to bring the case within the ambit of criminal breach of trust punishable under Section 406 of the IPC. This position of law came to be explained by this Court almost six decades back in the landmark decision titled State of Gujarat vs. Jaswantlal Nathalal [1967 (11) TMI 110 - SUPREME COURT], wherein this Court stated that a mere transaction of sale cannot amount to an entrustment. This very Bench in a very recent pronouncement in the case of Delhi Race Club (1940) Ltd. and Others v. State of U.P. and Another [2024 (8) TMI 1200 - SUPREME COURT] has exhaustively explained what constitutes criminal breach of trust. However, it appears that the judgment was not looked into so as to understand what constitutes criminal breach of trust punishable under Section 406 of the IPC. Is it the understanding of the High Court that ultimately if the accused is convicted, the trial court would award him the balance amount? The observations recorded in para 12 are shocking. It is an extremely sad day for one and all to read the observations contained in para 12 of the impugned order. It was expected of the High Court to know the well-settled position of law that in cases of civil dispute a complainant cannot be permitted to resort to criminal proceedings as the same would amount to abuse of process of law. It was expected of the High Court to understand the nature of the allegations levelled in the complaint. In substance the High Court has said in so many words that the criminal proceedings instituted by the complainant in a case of pure civil dispute is justified because it may take considerable time for the complainant to recover the balance amount by preferring a civil suit. The impugned order passed by the High Court is set aside - matter remanded to the High Court for fresh consideration of the Criminal Miscellaneous Application - appeal allowed in part.

2025 (7) TMI 1962 - Supreme CourtGST

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Initiation of proceedings under the UPGST Act was not interfered with, as a similar challenge had already been dismissed.
Initiation of proceedings under section 130 of the UPGST Act, read with section 122, was challenged on the basis that alleged excess stock found during a survey should instead attract proceedings under sections 73 and 74. The Supreme Court noted that a similar matter had already been dismissed in an earlier order and, in view of that dismissal, declined to interfere. The special leave petitions were dismissed.

2025 (7) TMI 1525 - Supreme CourtGST

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ISSUES:

Whether the proper officer is mandatorily required to pass a final, reasoned order under Section 129(3) of the CGST Act, 2017 after issuing a notice specifying tax and penalty payable, even if the tax and penalty are paid by the person charged within the stipulated time.Whether the deeming provision under Section 129(5) of the CGST Act, 2017, which states that proceedings shall be deemed concluded upon payment of the amounts, dispenses with the requirement of passing a formal adjudicatory order under Section 129(3).Whether payment of tax and penalty via Form GST DRC-03 can be treated as voluntary payment, thereby waiving the right to contest the demand and obviating the need for passing a reasoned order.Whether failure to pass a reasoned order under Section 129(3) after issuance of notice and receipt of objections violates principles of natural justice and the constitutional mandate under Article 265 of the Constitution of India.Whether the appellant's right to appeal under Section 107 of the CGST Act, 2017 is preserved in the absence of a formal order under Section 129(3).

RULINGS / HOLDINGS:

On the requirement of passing a final order under Section 129(3): The Court held that the proper officer is "duty-bound to pass a formal order in Form GST MOV-09" after issuing a notice specifying tax and penalty payable, regardless of payment, especially where objections have been filed, to enable the taxpayer to exercise the statutory right of appeal.On the effect of Section 129(5): The Court ruled that the deeming fiction in Section 129(5) that proceedings are concluded upon payment "does not absolve the responsibility of the proper officer to pass an order concluding the proceedings," and cannot be interpreted as waiver or abandonment of the right to challenge the levy.On the nature of payment via Form GST DRC-03: The Court found that payment made under business exigencies or protest cannot be treated as voluntary payment; the absence of a mechanism to record protest in Form GST DRC-03 should not prejudice the taxpayer, especially when objections are on record.On violation of natural justice and Article 265: The Court held that failure to pass a reasoned order in response to a show cause notice violates principles of natural justice and Article 265, which mandates that no tax or penalty shall be levied or collected except by authority of law.On the right to appeal under Section 107: The Court emphasized that the right to appeal is predicated on the existence of a formal adjudicatory order; absence of such order renders the right of appeal illusory and deprives the taxpayer of statutory remedies.

RATIONALE:

The Court applied the statutory framework of Section 129 of the CGST Act, 2017, which mandates that after issuing a notice specifying tax and penalty payable under subsection (3), the proper officer shall "thereafter, pass an order," and subsection (4) which requires an opportunity of hearing before determination.Rule 142 of the CGST Rules, 2017, particularly sub-rules (3) and (5), reinforce the procedural requirement that upon payment of tax and penalty, the proper officer shall issue an order in Form GST DRC-05 concluding the proceedings and upload a summary in Form GST DRC-07.The Court relied on Circular No.41/15/2018-GST dated 13.04.2018 issued by the CBIC, which provides binding departmental instructions that a speaking order in Form GST MOV-09 must be passed after objections are filed, even if payment is made, to ensure uniformity and safeguard taxpayer rights.The Court distinguished the deeming provision under Section 129(5) as signifying conclusion of prosecution proceedings but not waiver of adjudication or appeal rights; it held that "there can be no acquiescence in tax" and that payment under protest or compulsion does not constitute waiver or abandonment of rights.Judicial precedents on waiver, acquiescence, and abandonment were examined, emphasizing that waiver or abandonment must be clear, voluntary, and with full knowledge; mere payment or oral withdrawal of objections without written evidence does not satisfy this standard.The Court emphasized the constitutional mandate under Article 265 that tax or penalty can only be levied or collected by authority of law, which requires passing of a reasoned order to justify the demand.Principles of natural justice and fairness require that quasi-judicial authorities record cogent, clear, and succinct reasons for decisions affecting rights, as supported by Supreme Court jurisprudence emphasizing transparency, accountability, and judicial review.The Court rejected the respondents' reliance on strict literal interpretation of Section 129(5) to avoid adjudication, holding that procedural safeguards and taxpayer rights cannot be circumvented by mechanical application of deeming provisions.

GST goods detention tax-and-penalty payment under protest: final speaking order still required; MOV-09 directed, appeal allowed.
Whether payment of tax and penalty pursuant to a notice under s.129(3) CGST Act, 2017, coupled with release of goods under Form GST MOV-05, dispenses with the requirement of a final order by virtue of the deeming conclusion under s.129(5), was answered in the negative. SC held that every show cause notice must culminate in a reasoned, speaking order; s.129(5) only deems cessation of further proceedings and does not amount to waiver or abandonment of the taxpayer's right to contest the levy or appeal under s.107, particularly where objections are filed and payment is under protest. Non-passing of an order undermines natural justice and may offend Art.265. HC order was set aside and the proper officer was directed to issue a final order in Form GST MOV-09 with summary in Form GST DRC-07 after hearing; appeal allowed.

Requirement of proper officer to pass a final order under section 129(3) of CGST Act or deeming fiction under section 129(5) dispenses with such requirement - Though detained goods were released under Form GST MOV-05, final order was not passed - payment of tax and penalty done by the appellant within the time stipulated in the notice u/s 129(3) - HELD THAT:- Evidently, the discharge order merely records that the detained goods and vehicle were released upon payment of the proposed tax and penalty. It makes no mention of any withdrawal of objections or of the conclusion of proceedings initiated under Section 129(3) of the CGST Act, 2017 - It is a well settled principle that every show cause notice must culminate in a final, reasoned order. While Section 129(5) of the CGST Act, 2017 provides that proceedings shall be deemed to be concluded upon payment of tax and penalty, this deeming fiction cannot be interpreted to imply that the assessee has agreed to waive or abandon the right to challenge the levy – a right that is protected by the very enactment itself. The term “conclusion” as used in Section 129(5) merely signifies that no further proceedings for prosecution will be initiated. It does not absolve the responsibility of the proper officer to pass an order concluding the proceedings. Therefore, the proper officer is duty-bound to pass a formal order in Form GST MOV-09 and upload a summary thereof in Form GST DRT 07 as mandated under Rule 142(5) and the Circular dated 13.04.2018, so as to enable the taxpayer to avail the appeal remedy as per law. In the present case, payment was made under protest, and objections had already been filed by the appellant. Once objections are filed, adjudication is not optional, it becomes imperative to pass a speaking order to justify the demand of tax and penalty, to safeguard the right of appeal under Section 107 of the CGST Act, 2017. The language of section 129(3) is categorical in stating that the officer “shall issue a notice… and thereafter, pass an order”. The use of the words “and thereafter” reinforces the mandatory nature of passing a reasoned order, regardless of payment, particularly where protest or dispute is raised. A waiver, as settled, is an abandonment of a right by express terms or by implication. It is an act by which a party elects to abandon his right to pursue a particular remedy with full knowledge of its existence, making the other party to alter his position or legal status. Acquiescence, on the other hand, will imply the conduct of a party, who refrains from taking any action for a long period of time, despite the knowledge of the violation of his right, thereby precluding his future right to agitate the issue, as it would be hit by laches. The principles of natural justice mandate that when a taxpayer submits a response to a show cause notice, the adjudicating authority is required to consider such response and render a reasoned, speaking order. This is not a mere procedural formality, but a substantive safeguard ensuring fairness in quasi- judicial proceedings. The right to appeal under Section 107 of the CGST Act, 2017, is predicated upon the existence of a formal adjudication. An appeal can lie only against an ‘order’, and in the absence of a reasoned order passed under Section 129(3) of the Act, the taxpayer is effectively deprived of the statutory remedy of appeal - Any consequential action including imposition of tax or penalty, would then be unsupported by authority of law, thereby potentially violating Article 265 of the Constitution of India, which prohibits the levy or collection of tax except by authority of law. Thus, taking into account that objections were filed, payment was stated to have been made under protest due to business exigencies, and the appellant seeks to challenge the levy, the proper officer was under a clear statutory obligation to pass a final order under section 129(3) in Form GST MOV-09 and DRC-07. The refusal by the High Court to direct the passing of such an order, has the effect of frustrating the appellant’s statutory right to appeal and is contrary to well established legal principles governing tax adjudication and procedural fairness. The impugned order passed by the High Court is set aside. Respondent No.3 is directed to pass a reasoned final order under section 129(3) of the CGST Act, 2017, in Form GST MOV-09, after granting an opportunity of being heard as mandated under Section 129(4), and upload the summary thereof in Form GST DRC-07 within a period of one month from the date of receipt of a copy of this judgment - Appeal allowed.

2025 (7) TMI 1524 - Supreme CourtGST

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SC upholds 5% tax on flavoured milk under Item 04030000, dismissing petition challenging classification
The SC upheld the Writ Court's decision classifying flavoured milk under Item 04030000, subject to a 5% tax rate. The petition challenging this classification was dismissed.

2025 (4) TMI 61 - Supreme CourtGST

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Bail cancellation set aside as the Supreme Court restored the original bail order subject to existing conditions.
The Supreme Court found, on the facts before it, that bail was warranted and that the order cancelling bail could not stand. It interfered with the cancellation order, restored the trial court's bail order, and directed that the original bail conditions continue to apply. The operative effect was that the appellant remained on bail subject to the conditions previously imposed by the trial court.

Right to bail - cancellation of bail - bail under Section 439 of the Code of Criminal Procedure - cooperation with investigation as a condition of bail - non-tampering with prosecution witnesses as a bail condition - leave of the court for foreign travel as a bail condition - offence under Section 132(1)(c) of the CGST ActRight to bail - cancellation of bail - bail under Section 439 of the Code of Criminal Procedure - cooperation with investigation as a condition of bail - Whether the High Court rightly cancelled the bail granted by the trial court and whether the bail granted by the trial court should be restored - HELD THAT: - The Supreme Court examined the factual matrix, including that the appellant had been on bail since 25.10.2023 and that the appellant was alleged to be a manager in the company in proceedings under Section 132(1)(c) of the CGST Act. Having afforded reasonable opportunity to both parties and heard counsel, the Court concluded that the case for grant of bail was made out. The Court therefore allowed the appeal, set aside the High Court's order of cancellation, and restored the trial court's order dated 03.11.2023 granting bail. The restoration was subject to the operative conditions imposed by the trial court, notably that the appellant shall cooperate with the investigation, shall not tamper with prosecution witnesses, and shall not leave India without the permission of the Court. The Court also noted the respondent's submission that, if bail were to be granted, the appellant should be directed to cooperate with the investigation and accordingly made such cooperation a condition.Allowed the appeal; High Court's bail cancellation order set aside; trial court order dated 03.11.2023 restored with conditions including cooperation in investigation, non-tampering with witnesses, and prior permission for foreign travel.Final Conclusion: The appeal is allowed. The order cancelling bail passed by the High Court is set aside and the trial court's bail order of 03.11.2023 is restored, subject to the stated conditions including cooperation in investigation, non-tampering with witnesses, and obtaining court permission before leaving India.

2025 (2) TMI 1162 - Supreme Court (LB)GST

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Issues: (i) Whether the power of arrest under the Customs Act, 1962 is valid and subject to constitutionally and statutorily prescribed safeguards, including the requirement of reasons to believe, disclosure of grounds of arrest, and compliance with the Code of Criminal Procedure, 1973; (ii) Whether Sections 69 and 70 of the Central Goods and Services Tax Act, 2017 are constitutionally valid and whether the power of arrest under the GST regime is similarly controlled by mandatory safeguards.

Issue (i): Whether the power of arrest under the Customs Act, 1962 is valid and subject to constitutionally and statutorily prescribed safeguards, including the requirement of reasons to believe, disclosure of grounds of arrest, and compliance with the Code of Criminal Procedure, 1973.

Analysis: The amended Customs Act, 1962 classifies specified offences as cognizable and others as non-cognizable, and separately classifies certain offences as non-bailable while the rest remain bailable. The power of arrest under Section 104(1) is not unbridled: it must rest on reasons to believe, must relate to offences within the statutory categories, and must be exercised with due regard to the monetary thresholds and classifications created by the statute. The provisions of the Code of Criminal Procedure, 1973 apply where they are not excluded, and the arresting officer must comply with safeguards flowing from Article 22(1) of the Constitution of India, including communication of grounds of arrest and maintenance of proper records. Customs officers are not police officers, but the arrest framework under the Customs Act operates with statutory discipline and constitutional safeguards.

Conclusion: The power of arrest under the Customs Act, 1962 is valid, but it must be exercised only in accordance with the statutory preconditions and constitutional safeguards.

Issue (ii): Whether Sections 69 and 70 of the Central Goods and Services Tax Act, 2017 are constitutionally valid and whether the power of arrest under the GST regime is similarly controlled by mandatory safeguards.

Analysis: The GST enactment is not a complete code on arrest and allied procedural matters. The relevant provisions are to be read with the Code of Criminal Procedure, 1973 unless expressly or impliedly excluded. The power to arrest under Section 69 is conditioned by the Commissioner's reasons to believe, the classification of offences in Section 132, the cognizable and non-cognizable distinction, and the bailable and non-bailable distinction. The Court treated arrest as an extreme measure requiring credible material, objective reasons, and observance of safeguards such as communication of grounds of arrest, maintenance of records, and compliance with constitutional protections. The challenge to legislative competence was rejected because GST law, in pith and substance, includes ancillary and incidental powers necessary to prevent evasion and enforce the levy, including summons, arrest, and prosecution.

Conclusion: Sections 69 and 70 of the Central Goods and Services Tax Act, 2017 are constitutionally valid, and the power of arrest under the GST regime is upheld subject to mandatory statutory and constitutional safeguards.

Final Conclusion: The challenge to the arrest powers and constitutional validity of the impugned Customs and GST provisions was rejected, while the Court clarified the strict preconditions, procedural safeguards, and limits governing exercise of those powers and left the matters to be taken up for further hearing.

Ratio Decidendi: A statutory power of arrest in fiscal enactments is valid when the legislature has created a structured regime of cognizable and bailable classifications and has required recorded reasons to believe, disclosure of grounds, and observance of constitutional safeguards; such power is lawful only when exercised on objective material and in strict compliance with the statute and Article 22(1) of the Constitution of India.

Fiscal arrest powers are valid only with recorded reasons, offence classification, and constitutional safeguards under Customs and GST law.
Statutory arrest powers under the Customs Act, 1962 and the GST regime are valid only when exercised within a structured framework of objective reasons, offence classifications, and constitutional safeguards. The Customs Act requires reasons to believe, proper linkage to the statutory categories of cognizable, non-cognizable, bailable, and non-bailable offences, and compliance with Article 22(1), including communication of grounds of arrest and proper recordkeeping; the Code of Criminal Procedure, 1973 applies where not excluded. Sections 69 and 70 of the CGST Act, 2017 are likewise upheld as constitutionally valid, with arrest treated as an exceptional measure dependent on recorded reasons, credible material, and observance of procedural safeguards.

Constitutional Validity of Power to arrest under the Customs Act, 1962 and the Central Goods and Services Tax Act, 2017 - Constitutionally and statutorily prescribed safeguards, including the requirement of reasons to believe, disclosure of grounds of arrest, and compliance with the Code of Criminal Procedure, 1973 - Reasons to believe - Pith and substance - Proportionality - Personal liberty - non-cognizable offences - Jurisdictionary Powers of judicial review under Article 32 and Article 226 of the Constitution of India - Effects of amendments made to the Customs Act in 2012, 2013 and 2019, effectively modify the application of Om Prakash [2011 (9) TMI 65 - SUPREME COURT]. As per Sanjiv Khanna, CJI HELD THAT:- Section 41-D of the Code is applicable for offences under the Customs Act. Accordingly, a person arrested by a customs officer has the right to meet an advocate of his choice during interrogation, but not throughout interrogation - In Senior Intelligence Officer, Directorate of Revenue Intelligence v. Jugal Kishore Samra, [2011 (7) TMI 910 - SUPREME COURT]. This Court held that an advocate/authorised person may be present within visual distance during interrogation, but he cannot be within hearing distance of the proceedings nor can there be any consultations with such advocate/authorised person during the course of the interrogation. Reference can also be made to Section 50A of the Code, which states that every police officer or other person making an arrest under the Code shall forthwith give information regarding such arrest and place where the arrested person is being held to any of his friends, relatives, or other person as may be disclosed or nominated by the arrested person for the purpose of giving such information. The arrested person must be informed of this right - the details of compliance with this mandate must be entered into the diary maintained by customs officer. It is the duty of the Magistrate, when an arrested person is produced, to satisfy himself that the requirements of Section 50A(2) and (3) have been complied with. Thus, these stipulations will apply in cases of arrests made by the customs officers. Arvind Kejriwal v. Directorate of Enforcement, [2024 (7) TMI 760 - SUPREME COURT] a recent judgment authored by one of us (Sanjiv Khanna, J.), is a dictum relating to the Prevention of Money Laundering Act, 2002. This Court held that the power of arrest granted to the Directorate of Enforcement under Section 19 of the PML Act is fenced with certain pre-conditions. These pre-conditions act as stringent safeguards to protect the life and liberty of individuals. In Arvind Kejriwal, a combined reading of Pankaj Bansal v. Union of India and Others, [2024 (7) TMI 760 - SUPREME COURT] Prabir Purkayastha v. State of NCT of Delhi, [2024 (5) TMI 1104 - SUPREME COURT] and Vijay Madanlal Choudhary and Others v. Union of India and Others [2022 (7) TMI 1316 - SUPREME COURT (LB)] was adopted by this Court. It was held that the power to arrest a person without a warrant and without instituting a criminal case is a drastic and extreme power. Therefore, the legislature had prescribed safeguards in the language of Section 19 itself which act as exacting conditions as to how and when the power is exercisable. These safeguards include the requirement to have “material” in the possession of DoE, and on the basis of such “material”, the authorised officer must form an opinion and record in writing their “reasons to believe” that the person arrested was “guilty” of an offence punishable under the PML Act. The “grounds of arrest” are also required to be informed forthwith to the person arrested. Arvind Kejriwal also holds that the courts can judicially review the legality of arrest. This power of judicial review is inherent in Section 19 as the legislature has prescribed safeguards to prevent misuse. After all, arrests cannot be made arbitrarily on the whims and fancies of the authorities. This judicial review is permissible both before and after criminal proceedings or prosecution complaints are filed. The investigating officer is also required to look at the whole material and cannot ignore material that exonerates the arrestee. A wrong application of law or arbitrary exercise of duty by the designated officer can lead to illegality in the process. The court can exercise judicial review to strike down such a decision. There is substantively no difference between a person being guilty of an offence and a person committing an offence. In a catena of judgments of this Court, it has been held that words of a statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning, unless such construction leads to some absurdity or unless there is something in the context or in the object of the statute to suggest to the contrary - given the framework of the Customs Act, which explicitly classifies offences into bailable and non-bailable, as well as cognizable and noncognizable, the “reasons to believe” must reflect these classifications when justifying an arrest. The reasoning must weigh in why an arrest is being made in a specific case, particularly given the specific severity assigned to the offence by the legislature. The reasoning must also state how the monetary thresholds outlined in the Act are met. There are no inconsistency between Section 19(1) of the PML Act and Section 104(1) of the Customs Act. We are of the opinion that principles and ratio developed in the case of Arvind Kejriwal, and the principles specifically discussed and delineated in paragraphs 30 to 45 of this judgment, are equally applicable to the power of arrest under Section 104 of the Customs Act. The respondent authorities are, therefore, directed to comply with the mandate of this judgment and that of Arvind Kejriwal. The amendments made to the Customs Act in 2012, 2013 and 2019 are substantive and were introduced to effectively modify the application of Om Prakash [2011 (9) TMI 65 - SUPREME COURT], which required a customs officer to obtain prior approval from a Magistrate before making an arrest. These amendments designated specified offences as cognizable and non-bailable, while also imposing certain preconditions and stipulations for making arrest. Consequently, the petitioners’ reliance on Om Prakash (supra) is no longer valid and must be rejected. However, it remains important to examine the pre-conditions and safeguards established by the legislature to protect the life and liberty of arrestees. The challenge to the amendments as well as provisions of the Customs Act is rejected. Reliance placed by the petitioners on the decision of this Court in Om Prakash (supra) is misconceived as the statutory provisions have undergone amendments to bring them in consonance with the law of the land. Moreover, the provisions themselves provide enough safeguards against arbitrary and wrongful arrests. Section 162(1) of the GST Acts permits compounding of offences and therefore, the ratio in Makemytrip [2016 (9) TMI 52 - DELHI HIGH COURT] should be applied to the GST Acts. The decision in Makemytrip, itself carves out an exception when an assessment order under the Finance Act may not be required, namely cases where a person who is shown to be a habitual evader as one who has not filed service tax returns for a continuous period of time, who has a history of repeated defaults for which there have been fines, penalties imposed, and prosecutions launched, etc. - there are sufficient safeguards to ensure that no arrests are made till the Commissioner is able to show and establish, on the basis of material and evidence, that the conditions of clauses (a) to (d) as well as clause (i) of sub-section 1 to Section 132 of the GST Acts are satisfied and therefore the offences are non-bailable. Constitutional validity of Sections 69 and 70 of the GST Acts - HELD THAT:- The Parliament, under Article 246-A of the Constitution, has the power to make laws regarding GST and, as a necessary corollary, enact provisions against tax evasion. Article 246-A of the Constitution is a comprehensive provision and the doctrine of pith and substance applies. The impugned provisions lay down the power to summon and arrest, powers necessary for the effective levy and collection of GST. Time and again this Court has held that while deciding the issue of legislative competence, entries should not be read in a narrow or pedantic sense but given their broadest meaning and the widest amplitude because they are intrinsic to a machinery of government. A penalty or prosecution mechanism for the levy and collection of GST, and for checking its evasion, is a permissible exercise of legislative power. The GST Acts, in pith and substance, pertain to Article 246-A of the Constitution and the powers to summon, arrest and prosecute are ancillary and incidental to the power to levy and collect goods and services tax. In view of the aforesaid, the vires challenge to Sections 69 and 70 of the GST Acts must fail and is accordingly rejected. The challenge to the constitutional validity as also the right of the authorised officers under the Customs Act and the GST Acts to arrest are rejected and dismissed with elucidation and clarification on the pre-conditions and when and how the power of arrest is to be exercised. The matters are directed to be listed before an appropriate Bench in the week commencing 17.03.2025 for final hearing and disposal. As per Bela M. Trivedi, J HELD THAT:- Whenever the jurisdiction of the High Court or the Supreme Court is invoked under Article 226 or Article 32 as the case may be, challenging the punitive or preventive detention, the Court is expected to take into consideration the nature of right infringed, the scope and object of the legislation under which such arrest or detention is made, the need to balance the rights and interests of the individual as against those of the society, the circumstances under which and the persons by whom the jurisdiction is invoked etc. In exercise of their discretionary jurisdiction, the High Courts and the Supreme Court do not, as courts of appeal or revision, correct errors of law or of facts. The judicial intervention is warranted only in exceptional circumstances when the arrest is prima facie found to be malafide; or is prompted by extraneous circumstances, or is made in contravention of or in breach of provisions of the concerned statute; or when the authority acting under the concerned statute does not have the requisite authority etc. The power of judicial review keeps a check and balance on the functioning of the public authorities and is exercised for better and more efficient and informed exercise of their powers, such power has to be exercised very cautiously keeping in mind that such exercise of power of judicial review may not lead to judicial overreach, undermining the powers of the statutory authorities. To sum up, the powers of judicial review may not be exercised unless there is manifest arbitrariness or gross violation or non-compliance of the statutory safeguards provided under the special Acts, required to be followed by the authorized officers when an arrest is made of a person prima facie guilty of or having committed offence under the special Act. Conclusion - i) The amendments to the Customs Act and GST Act are valid. ii) The procedural safeguards under the CrPC apply to arrests under the Customs Act and GST Act, ensuring protection of individual rights. iii) Customs officers must exercise their arrest powers with caution, ensuring compliance with statutory and constitutional safeguards. iv) The power of arrest under these Acts is subject to judicial review to prevent arbitrary or unlawful arrests. v) The constitutional validity of Sections 69 and 70 of the GST Acts is upheld, affirming the legislative competence to enact such provisions.

2025 (2) TMI 1013 - Supreme CourtGST

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GST show cause proceedings stayed pending final disposal of the tagged main matter and connected matters
Proceedings under show cause notices alleging short-payment of goods and services tax for 2017-18 were stayed pending final disposal of the tagged main matter and connected tagged matters. The operative effect is that further action on the notices will remain in abeyance until the main dispute is finally decided.

2024 (10) TMI 286 - Supreme CourtGST

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ITC exclusions for works contracts and "plant or machinery" interpretation upheld; explanation not applied; buildings may be plant
Whether clauses (c) and (d) of Section 17(5) CGST Act are constitutionally valid: Court held ITC is a legislative creation and clauses may exclude categories (works contract) by plain language; no judicial addition or subtraction is permissible - outcome: clauses upheld. Whether the explanation to Section 17 (defining "plant and machinery") applies to the phrase "plant or machinery" in s.17(5)(d): Court reasoned the legislature deliberately used different wording; the defined phrase and the disjunctive phrase cannot be equated - outcome: the explanation does not automatically apply to "plant or machinery". Proper meaning of "plant or machinery" and buildings as plant: Court held the term is context-specific; a building may be a plant if construction is essential to the taxable person's supplying activity - outcome: factual determination required; writs dismissed subject to this interpretation.

Input Tax Credit - blocked credits - plant or machinery v. plant and machinery - functionality test - non-obstante clause - works contract - scope of supply under Schedule II - reasonable classification under Article 14Plant or machinery v. plant and machinery - non-obstante clause - Meaning of the expression "plant or machinery" in Section 17(5)(d) and applicability of the explanation defining "plant and machinery" - HELD THAT: - The Court held that the expression "plant or machinery" in Section 17(5)(d) cannot be read as identical to the defined expression "plant and machinery" in the explanation to Section 17. The legislature's deliberate use of the disjunctive "or" in clause (d) must be respected; the explanatory definition, which expressly excludes land, building or civil structures, applies to the compound expression "plant and machinery" used elsewhere in Chapters V and VI but not to the singular/disjunctive expression in clause (d). The Court therefore declined the revenue's invitation to read "or" as "and" or to import the explanatory definition into clause (d), emphasising the principle that courts should not supply deficiencies in taxing enactments or rewrite plain statutory language. [Paras 42, 43, 44, 45, 65]The expression "plant or machinery" in Section 17(5)(d) is distinct from the defined expression "plant and machinery" and the explanation to Section 17 does not apply to the former.Functionality test - scope of supply under Schedule II - Input Tax Credit - Whether an immovable property (such as a shopping mall, warehouse or other building) can be treated as a "plant" under Section 17(5)(d) - HELD THAT: - The Court applied the established functionality/essentiality test: whether on facts the building has been planned and constructed to serve special technical requirements such that it functions as an essential tool of the business. If so, the building may qualify as a "plant" for the purposes of clause (d) and would not fall within the blocked-credit exception. The Court observed that this is a question of fact to be determined case-by-case in light of the business of the registered person and the role of the building in that business. The Court refused to decide the factual question of whether the particular mall before the High Court satisfied the functionality test and directed that such factual determination be made by the High Court. [Paras 52, 53, 55, 66, 67]Whether a building is a "plant" under Section 17(5)(d) is a factual question to be decided by applying the functionality test; the matter is remanded for limited factual determination.Blocked credits - reasonable classification under Article 14 - Input Tax Credit - Constitutional challenge to clauses (c) and (d) of Section 17(5) and to Section 16(4) of the CGST Act - HELD THAT: - Applying the settled principles governing review of taxation statutes, the Court held that the classification effected by clauses (c) and (d) is based on intelligible differentia (immovable property/creation of immovable property and the break in tax chain) and bears a rational nexus to the legislative objective, including respect for State competence over land and buildings. The Court rejected arguments of arbitrariness, under inclusiveness and violation of Articles 14, 19(1)(g) and 300A. Similarly, the temporal bar in Section 16(4) (as amended) was not found to be arbitrary. Given that ITC is a statutory entitlement, the Court emphasised the legislature's wide latitude in fiscal classification and declined to read down or strike down the provisions. [Paras 59, 60, 63, 64, 65]Clauses (c) and (d) of Section 17(5) and Section 16(4) are constitutionally valid; reading down is not warranted.Final Conclusion: The appeals are partly allowed: the High Court's order is set aside insofar as it read down Section 17(5)(d); the Court construed "plant or machinery" as distinct from the defined phrase "plant and machinery", held clauses (c) and (d) of Section 17(5) and Section 16(4) constitutionally valid, and remanded the writ petitions to the High Court of Orissa for limited factual determination whether the mall (or other impugned immovable property) qualifies as a "plant" under the functionality test, failing which the blocked credit rule will apply.

2024 (4) TMI 528 - Supreme CourtGST

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Good-faith protection under GST cannot be prejudged before proceedings begin; premature observation was expunged.
An interim observation on the availability of good-faith protection under section 157 of the GST Act was held to be inappropriate because no suit, prosecution, or other proceeding against the officers had yet begun. A good-faith clause is a defence to be examined on the facts of the individual case when the statutory functionary's conduct is directly in issue, so any pre-emptive view on that protection could prejudice later adjudication. The impugned observation was expunged, and the matter was disposed of in favour of the appellant.

Good faith clause - immunity of statutory functionaries - protection of action taken under this Act - judicial scrutiny of good faith defence - prohibition on advance ruling on anticipated defence Good faith clause - protection of action taken under this Act - prohibition on advance ruling on anticipated defence - Whether the High Court could record an observation that protection under Section 157 of the GST Act "may not" be available to officers in the absence of any suit, prosecution or legal proceeding against them, and whether that portion of the interim order should be expunged. - HELD THAT: - The Court held that a statutory "good faith" clause is an immunity provision available as a defence to statutory functionaries for acts done honestly in furtherance of statutory purpose; its scope is limited and is to be adjudicated in the course of any suit, prosecution or legal proceeding initiated against the officer. The High Court's expression that protection under Section 157 "may not" be available constituted an advance ruling on a defence which could only be examined in proceedings against the officers. Such tentative observations, made in the absence of any proceeding against the officers, risk prejudicing future adjudication and compromise the integrity of any subsequent prosecution or defence. Accordingly, the observation in paragraph 28 of the High Court's interim order, which cast doubt on availability of Section 157 protection, was erroneous and was expunged. The broader writ petition remains pending in the High Court and the Court did not decide the merits of the underlying factual or constitutional complaints. [Paras 3, 7, 10, 11, 12] Paragraph 28 of the High Court's interim order is expunged; the expression that protection under Section 157 "may not" be available to officers is set aside and the appeal is disposed of. Final Conclusion: The Supreme Court expunged the High Court's tentative observation that the statutory protection under Section 157 of the GST Act "may not" be available to officers, holding that good faith is a defence to be adjudicated only in proceedings against the officer; the interim order is modified by deleting paragraph 28 and the appeal is disposed of.

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