Jimit Devani, Sannidhi Shah & Anushree Damle – [2025] 180 taxmann.com 861 (Article)

NITI Ayog, the policy think tank of the government, recently released a working paper that seeks to address issues related to taxation of foreign enterprises, with a framework to project India as a simplified tax regime that has the ability to attract high quality foreign investment – a mainstay of the overall objective to become a developed economy by 2047.

The NITI Aayog’s Consultative Group on Tax Policy’s inaugural working paper ‘Enhancing Certainty, Transparency, and Uniformity in Permanent Establishment and Profit Attribution for Foreign Investors in India’ focuses on two of the most debated areas in international taxation — Permanent Establishment (PE) and profit attribution. NITI Aayog emphasizes the need to simplify and streamline India’s tax framework, especially in light of evolving legal interpretations. Recent Supreme Court rulings, such as Formula One World Championship Ltd. v. CIT and Hyatt International (Southwest Asia) Ltd. vs. ACIT, have expanded the scope of PE and clarified how profits should be attributed to Indian operations. These developments, along with the complexities of attribution and the lingering impact of retrospective taxation back the need for tax reforms. The key proposals in the report are discussed below:

The Game-Changer – Presumptive Taxation

The proposed presumptive taxation scheme is a standout reform. It allows foreign companies to opt for a simplified tax regime based on sector-specific deemed profit margins applied to gross receipts from India. This optional mechanism eliminates the need for PE determination and complex profit attribution, offering a safe harbour for compliant taxpayers.

To simplify compliance, the scheme suggests indicative margins such as:

• 10% for infrastructure, EPC, engineering, and oilfield services
• 5% for offshore supply
• 15% for marketing and distribution support
• 20% for consulting, management, and software services
• 30% for digital and e-commerce platforms

To support its objective of reducing litigation and enhancing certainty, the scheme offers:

• Optional participation with opt-out provisions (with documentation)
• Carve-out from other provisions of Indian Tax Legislations to avoid overlapping taxation
• Multi-year lock-in safeguards to prevent misuse
• Alignment with treaty obligations and potential negotiation with key treaty partners
• Administrative simplicity and reduced compliance burden, thereby promoting predictability.

Click Here To Read The Full Article

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Case Details: Anita Rani vs. Income-tax Officer - [2025] 180 taxmann.com 562 (Punjab & Haryana)

Judiciary and Counsel Details

• Jagmohan Bansal & Amarinder Singh Grewal, JJ.
• Alok Mittal & Ishwinderpal Singh, Advs. for the Petitioner.
• Saurabh Kapoor, Rana Gurtej Singh, Ms Muskaan Gupta, Ms Muskan Chauhan & Tanya Kumar, Advs. for the Respondent.

Facts of the Case

The revenue assessed tax liability against a firm. The liability could not be recovered from said firm. KK, husband of the petitioner, was one of the partners of said firm. Revenue served a notice upon the Bank, informing it that a sum was due from KK, as a legal heir of his father, one of the partners of the firm. There was a credit balance in the account. The attached account was a joint account of KK and the petitioner.

The petitioner filed a writ petition before the High Court, contending that the funds in the bank account constituted rental income. The said income was not related to the firm’s liabilities. There was nothing on record indicating that the petitioner had inherited property from the firm’s partners.

High Court Held

The High Court held that Section 159 imposes liability on legal representatives, and Section 189 deals with the dissolution of the firm. The liability of the legal representative is confined to the value of the estate of the deceased. The liability cannot exceed the assets inherited.

In the instant case, the AO mechanically attached the petitioner’s bank account. There was a meagre amount in the account. The AO could attach the assets of the petitioner, which she had inherited from the partners of the defaulter firm. In the absence of evidence that the petitioner had inherited the defaulter firm’s assets, there was no reason to attach her bank account. Thus, the attachment notice issued by the AO was to be set aside.

The post HC Sets Aside Attachment of Joint Bank Account for Firm’s Tax Dues appeared first on Taxmann Blog.

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Case Details: Bird Delhi General Aviation Services (P.) Ltd. vs. Sales Tax Officer II Avato - [2025] 180 taxmann.com 691 (Delhi)

Judiciary and Counsel Details

• Prathiba M. Singh & Shail Jain, JJ.
• Sparsh Bhargava, Ms Vanshika Taneja & Ms Ishita Farsaiyan, Advs. for the Petitioner.
• Urvi Mohan, Adv. & Kushal Kumar, SPC for the Respondent.

Facts of the Case

The petitioner, filed a writ challenging a show cause notice and the impugned order passed under Section 73 of the CGST Act and Delhi GST Act. It was contended that the impugned order was passed without providing an opportunity to be heard on merits. The petitioner challenged the validity of CBIC Notifications, extending the time limit for issuing orders under Section 73. It was submitted that such notifications were invalid. The matter was placed before the High Court.

High Court Held

The High Court set aside the impugned order on the grounds of lack of proper hearing and remanded the matter for fresh adjudication. The Court directed that the petitioner be given a full and fair opportunity to file a detailed reply to the show cause notice. This fresh hearing is to be conducted with due regard to principles of natural justice, and the petitioner is required to pay Rs. 50,000 as costs in connection with the remand. The Court emphasised the requirement of natural justice under Section 73 of the CGST Act and declined to decide on the validity of the impugned notifications.

List of Cases Reviewed

• Sugandha Enterprises v. Commissioner of DGST [2025] 179 taxmann.com 399 (Delhi) (Para 10) followed
• DJST Traders (P.) Ltd. v. Union of India [2025] 174 taxmann.com 191 (Delhi)
• HCC-SEW-Meil-AAG JV v. Asstt. Commissioner of State Tax [2025] 174 taxmann.com 1080 (SC) (para 14) followed

List of Cases Referred to

• DJST Traders (P.) Ltd. v. Union of India [2025] 174 taxmann.com 191 (Delhi) (para 4)
• HCC-SEW-Meil-AAG JV v. Asstt. Commissioner of State Tax [2025] 174 taxmann.com 1080 (SC) (para 5)
• Engineers India Ltd. v. Union of India [W.P. (C) No. 9214 of 2024, dated 23-4-2025] (para 6)
• Sugandha Enterprises v. Commissioner of DGST [2025] 179 taxmann.com 399 (Delhi) (para 9).

The post HC Sets Aside GST Order for Lack of Hearing | Matter Remanded with Rs. 50,000 Cost appeared first on Taxmann Blog.

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Case Details: Sanjeev Tyagi vs. Deputy Director Directorate of Enforcement, Delhi - [2025] 180 taxmann.com 393 (SAFEMA-New Delhi)

Judiciary and Counsel Details

• V. Anandarajan, Member
• Manav Gupta, Sahil, Abhinav Jain & Mithil Malhotra, Advs. for the Appellant.
• Aditya Singla, Adv. for the Respondent.

Facts of the Case

In the instant case, the Adjudicating Authority confirmed the attachment of various properties of the appellant made by the Directorate of Enforcement (ED) vide Provisional Attachment Order. The said order of the Adjudicating Authority confirming the attachment of properties had been contested by the appellant in appeals pending before the Appellate Tribunal.

The appellant filed an instant application praying that, without prejudice to the outcome of the main appeal, properties in respect of which the instant application had been filed might be allowed to be substituted with an equivalent security in the form of a bank guarantee or Fixed Deposit Receipts (FDRs).

It was noted that property was jointly owned by two appellants, who were both defendants before the Adjudicating Authority and were appellants before the Appellate Tribunal, pending outcome of main appeal, it would have to be presumed that entire property was prima-facie involved in money laundering and, therefore, question of accepting equivalent fixed deposits for a part of value of property would not arise.

It was further noted that in none of the cases cited by the appellant, it had been categorically held that the Appellate Tribunal had the requisite power to allow substitution of property.

Appellate Tribunal Held

The Appellate Tribunal held that, in the absence of any specific power vested in the Appellate Tribunal to allow substitution of attached property, the instant application was to be dismissed.

List of Cases Reviewed

• Gagan Infraenergy Ltd. v. Deputy Director Directorate of Enforcement [2024] 164 taxmann.com 415 (Delhi)/[2024 SCC OnLine Del 4019]
• Revati Cements (P.) Ltd. v. Union of India [2024] 164 taxmann.com 13 (Delhi)/[2024 SCC OnLine Del 4020] (para 13)
• Agribiotech Industries Ltd. v. Deputy Director, ED FPA-PMLA-3025/JP/2019, order dated 29.05.2023 (para 19) followed
• Directorate of Enforcement v. Mahender Kumar Khandelwal LPA No. 148/2024, dated 6-6-2024 (para 6)
• Esskay Properties and Investment (P.) Ltd. v. Union of India Special Leave to Appeal (c) No. 9335 of 2022, dated 16-9-2022 (para 7) distinguished

List of Cases Referred to

• Gagan Infraenergy Ltd. v. Deputy Director Directorate of Enforcement [2024] 164 taxmann.com 415 (Delhi) (para 4)
• VGN Property Developers (P.) Ltd. v. Deputy Director, Directorate of Enforcement, Chennai [2020] 116 taxmann.com 148 ((PMLA-AT), NEW DELHI) (para 4)
• Revati Cements (P.) Ltd. v. Union of India [2024] 164 taxmann.com 13 (Delhi) (para 4)
• Directorate of Enforcement v. Mahender Kumar Khandelwal [LPA No. 148/2024, dated 6-6-2024] (para 4)
• India Cements Ltd. v. Adjudicating Authority [WP (C) No. 9361 of 2015, dated 5-11-2015] (para 4)
• Enforcement Directorate v. Smt. Y.S. Bharathi Reddy [C. M. S. A. No. 15 of 2019, dated 28-11-2022] (para 4)
• Enforcement Directorate v. Smt. Y.S. Bharathi Reddy [SLP (crl.) Diary No. (s) 22285 of 2023, dated 14-7-2023] (para 4)
• Esskay Properties and Investment (P.) Ltd. v. Union of India [Special Leave to Appeal (c) No. 9335 of 2022, dated 16-9-2022] (para 4)
• Joint Director, Directorate of Enforcement v. A. Raja [CRL. L.P. No. 184 of 2018, dated 20-9-2023] (para 4)
• Hetero Drugs Ltd. v. Dy. Director, Directorate of Enforcement, Delhi 2017 (354) E.L.T. 369 (ATPMLA) (para 5)
• Ara Properties v. Deputy Director, Directorate of Enforcement, Mumbai [2024] 165 taxmann.com 203 (SAFEMA – New Delhi) (para 5)
• Sanghavi Bullion Pvt. Ltd. v. Deputy Director Directorate of Enforcement [FPA-PMLA-5895/MUM/2023, dated 29-5-2024] (para 11)
• Agribiotech Industries Ltd. v. Deputy Director, ED [FPA-PMLA-3025/JP/2019, order dated 29.05.2023] (para 19).

The post Appellate Tribunal Cannot Substitute Attached Property with FDRs or Guarantees | SAFEMA appeared first on Taxmann Blog.

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Case Details: Concept Eateries (P.) Ltd. vs. Union of India - [2025] 180 taxmann.com 692 (Delhi)

Judiciary and Counsel Details

• Prathiba M. Singh & Shail Jain, JJ.
• Puneet Rai, Adv. for the Petitioner.
• Vaishali Gupta, Panel Counsel for the Respondent.

Facts of the Case

The petitioner filed a challenge against a show cause notice and the consequential order issued under the CGST Act and the Delhi GST Act for the financial year 2019-20. It was contended that the firm’s GST consultant, who was responsible for managing all GST-related filings and communications, had failed to examine the notice within the prescribed time, which prevented the petitioner from submitting a response or participating in the proceedings. The petitioner also challenged the validity of notifications under the CGST Act extending the limitation period. In view of these contentions, the matter was brought before the High Court.

High Court Held

The High Court held that the impugned order was liable to be set aside due to lack of proper hearing and remanded the matter for fresh adjudication, directing that the petitioner be given an opportunity to respond to the show cause notice. The Court emphasised the principles of natural justice under Section 73 of the CGST Act and Delhi GST Act. On the challenge to the notifications, the Court observed that the issue was pending before the Supreme Court in HCC‑SEW‑Meil‑AAG JV v. Asstt. Commissioner of State Tax and deferred any decision, leaving it contingent on the Supreme Court’s outcome.

List of Cases Reviewed

• Sugandha Enterprises v. Commissioner of DGST [2025] 179 taxmann.com 399 (Delhi) (Para 10) followed
• DJST Traders (P.) Ltd. v. Union of India [2025] 174 taxmann.com 191 (Delhi) (para 5)
• HCC-SEW-Meil-AAG JV v. Asstt. Commissioner of State Tax [2025] 174 taxmann.com 1080 (SC) (para 14) followed

List of Cases Referred to

• DJST Traders (P.) Ltd. v. Union of India [2025] 174 taxmann.com 191 (Delhi) (para 4)
• HCC-SEW-Meil-AAG JV v. Asstt. Commissioner of State Tax [2025] 174 taxmann.com 1080 (SC) (para 5)
• Engineers India Ltd. v. Union of India [W.P. (C) No. 9214 of 2024, dated 23-4-2025] (para 6)
• Sugandha Enterprises v. Commissioner of DGST [2025] 179 taxmann.com 399 (Delhi) (para 9).

The post Matter Remanded After Assessee Missed SCN Due to Consultant | HC Sets Aside GST Order appeared first on Taxmann Blog.

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1. Facts

A Limited, a public company (hereinafter referred to as ‘the company’) under the Ministry of Shipping, is engaged in dredging operations across major and minor ports and operates a fleet of various dredgers and ancillary crafts. Four dredgers have completed their estimated useful life of twenty-five years, but continue in active use. The Company depreciates its dredgers over twenty-five years with a residual value of two percent.

All dredgers must undergo periodic IRS inspections every three to five years to remain operational. These inspections require significant dry dock expenditure, including overhaul and repair costs, and the Company capitalises such expenditure as major inspection costs in accordance with paragraph 14 of Ind AS 16, derecognising the previous inspection component.

During the audit for 2021-22 to 2023-24, the CAG observed that dry dock expenditure on dredgers whose useful lives had expired was capitalised, which, in its view, was inconsistent with the Company’s accounting policy and an earlier EAC opinion issued under the IGAAP framework. The CAG held that such costs should have been expensed as repairs and maintenance.

The Company submitted that the earlier EAC opinion was under IGAAP and did not consider Ind AS requirements, including component accounting. It referred to industry guidance and a 2023 EAC opinion permitting capitalisation of subsequent expenditure where future economic benefits arise, even if the main asset has completed its useful life. Dry dock expenditure, in the Company’s view, restores operational utility and extends the dredgers’ usable life; accordingly, the useful lives of the concerned dredgers were reviewed and extended up to the next dry dock cycle in line with paragraph 51 of Ind AS 16.

State whether such treatment is appropriate and whether subsequent expenditure can be capitalised even after the expiry of a dredger’s original useful life.

2. Relevant Provisions

Ind AS 16 – Property, Plant and Equipment

Para 7

The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if:

(a) it is probable that future economic benefits associated with the item will flow to the entity; and

(b) the cost of the item can be measured reliably.

Para 13

Parts of some items of property, plant and equipment may require replacement at regular intervals. For example, a furnace may require relining after a specified number of hours of use, or aircraft interiors such as seats and galleys may require replacement several times during the life of the airframe. Items of property, plant and equipment may also be acquired to make a less frequently recurring replacement, such as replacing the interior walls of a building, or to make a non-recurring replacement. Under the recognition principle in paragraph 7, an entity recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if the recognition criteria are met. The carrying amount of those parts that are replaced is derecognised in accordance with the derecognition provisions of this Standard.

Para 14

A condition of continuing to operate an item of property, plant and equipment (for example, an aircraft) may be performing regular major inspections for faults regardless of whether parts of the item are replaced. When each major inspection is performed, its cost is recognised in the carrying amount of the item of property, plant and equipment as a replacement if the recognition criteria are satisfied. Any remaining carrying amount of the cost of the previous inspection (as distinct from physical parts) is derecognised. This occurs regardless of whether the cost of the previous inspection was identified in the transaction in which the item was acquired or constructed. If necessary, the estimated cost of a future similar inspection may be used as an indication of what the cost of the existing inspection component was when the item was acquired or constructed.

Para 43

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately.

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The post Accounting Treatment of Dry Dock Costs After Useful Life Under Ind AS 16 appeared first on Taxmann Blog.

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PR no. 2025-2026/1589; Dated: 28.11.2025

The Reserve Bank of India (RBI) has issued the final Digital Banking Channels Authorisation Directions, 2025, establishing a comprehensive regulatory framework for digital banking operations in India. These Directions apply to all banks authorised to operate in India, including both commercial banks and cooperative banks.

1. Scope and Applicability

The Directions govern the authorisation, governance, and conduct of digital banking channels offered by banks. They aim to ensure secure, reliable, and customer-centric digital banking services across the sector.

Applicability extends to:

• Scheduled commercial banks
• Small finance banks
• Payments banks (as applicable)
• Urban and state cooperative banks

2. Eligibility Criteria for View-Only Digital Banking

The Directions prescribe specific conditions for banks seeking to offer non-transactional or view-only digital facilities. These include:

• Demonstration of robust internal systems for data display
• Adequate cybersecurity safeguards
• Proper customer authentication mechanisms
• Compliance with IT governance standards prior to launch

These facilities enable customers to access account statements, balances, and other information without initiating transactions.

3. Eligibility Criteria for Transactional Digital Banking

Banks intending to provide full-fledged digital banking services—such as payments, transfers, and other online transactions—must meet enhanced eligibility norms, including:

• Strong operational resilience frameworks
• End-to-end encrypted digital infrastructure
• Tested and audited transaction and reconciliation systems
• Adequate fraud monitoring, alerting, and reporting mechanisms

The aim is to ensure smooth, secure, and reliable digital transactions for customers.

4. Technological Guidelines for Digital Banking

RBI has laid down detailed instructions on technology standards, including:

• IT governance, risk, and compliance frameworks
• Cybersecurity guidelines, including periodic audits and threat monitoring
• Requirements for high system availability and disaster recovery
• Data protection and privacy standards
• Use of secure APIs and third-party integration protocols

These guidelines ensure that digital channels remain resilient and function with minimal disruptions.

5. General Operational Guidelines

The Directions also provide common operational requirements applicable across all digital banking channels, such as:

• Mandatory board and senior management oversight
• Periodic reporting to RBI
• Transparent disclosure requirements
• Internal audit and compliance review obligations
• Policies on outsourcing technology or operational functions

These requirements help maintain consistency and governance across digital banking platforms.

6. Customer Conduct & Additional Instructions

The Directions emphasise customer protection and responsible conduct requirements, covering:

• Clear communication of terms, charges, and limits
• Robust grievance redressal mechanisms
• Standards to ensure fair treatment of customers
• Measures to prevent customer misuse or risky behaviour
• Liability allocation in cases of unauthorised transactions

Banks must ensure customer awareness, provide timely notifications, and maintain transparency across services.

7. Conclusion

The Digital Banking Channels Authorisation Directions, 2025 strengthen India’s digital banking landscape by setting unified standards for authorisation, security, and customer protection. With these Directions, the RBI aims to improve the resilience, reliability, and consumer-centric nature of digital banking across all authorised banks.

Click Here To Read The Full Press Release

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PR No.77/2025; Dated: 28.11.2025

The Securities and Exchange Board of India (SEBI) has approved the substitution of the existing SEBI (Informal Guidance) Scheme, 2003 with a new and more comprehensive framework titled the SEBI (Informal Guidance) Scheme, 2025. The updated scheme aims to modernise, expand, and streamline the process of seeking regulatory clarity from SEBI.

1. Broader Scope Under the New Scheme

The 2025 Scheme significantly broadens the categories of entities eligible to approach SEBI for interpretative guidance. Under the revised framework, the following regulated entities may now seek informal guidance:

• Stock Exchanges
• Clearing Corporations
• Depositories
• Other intermediaries and market infrastructure institutions

This expansion ensures that a wider range of market participants can obtain regulatory clarity, thereby enhancing compliance standards and reducing interpretational uncertainties.

2. Modernised Framework for Regulatory Clarifications

The new Scheme seeks to:

• Ensure uniformity and transparency in SEBI’s guidance process
• Address evolving market structures and regulatory needs
• Provide timely and reliable interpretational support
• Replace the outdated 2003 framework with a more relevant and robust mechanism

3. Applicability and Transition

SEBI has clarified that from 01 December 2025 onwards, the processing of all informal guidance applications—whether newly submitted or pending—shall be governed under the SEBI (Informal Guidance) Scheme, 2025.

This ensures a seamless transition and consistent application of the updated regulatory framework.

4. Conclusion

The introduction of the SEBI (Informal Guidance) Scheme, 2025 marks a significant step toward strengthening regulatory clarity and stakeholder engagement. By widening the scope and modernising the process, SEBI aims to facilitate better compliance and foster a more transparent, informed, and efficient securities market ecosystem.

Click Here To Read The Full Press Release

The post SEBI Notifies SEBI (Informal Guidance) Scheme, 2025 | Expands Eligibility for Regulatory Clarifications appeared first on Taxmann Blog.

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Case Details: Devender Singh vs. Additional Commissioner, Central Goods and Services Tax [2025] 180 taxmann.com 490 (Delhi)

Judiciary and Counsel Details

• Prathiba M. Singh & Madhu Jain, JJ.
• Akhil Krishan Maggu, Vikas Sareen, Ms Oshin Maggu, Aryan Nagpal & Ms Mehak Sharma, Advs. for the Petitioner.
• Ms Anushree Narain, SSC, Naman Choula & Yamit Jetley, Advs. for the Respondent.

Facts of the Case

A show-cause notice was issued to the petitioner alleging that he was involved in creating fake firms to indulge in fraudulent circular trading and had been involved in operating various bank accounts, mobile phones under different names, and also GST Nos., which were generated in the names of these firms. A detailed order-in-original was passed against the petitioner after granting an opportunity to be heard, raising demands. The petitioner contended that he was only a director or a partner of the firms, and hence no penalty could be imposed upon him under section 122 of the CGST Act.

High Court Held

The Delhi High Court held that the allegations against the petitioner were extremely serious. In the case of fake, nonexistent, and fraudulent firms, who do not have any real persons as partners or proprietors or even any incorporation, the ‘taxable person’ would be the person who has got such firms created and used the same for availment of ITC. If the petitioner’s submission was accepted, then in the case of fake firms or non-existent firms, there would be no liability cast upon anybody despite fraudulently cheating the Exchequer of crores of rupees as in the instant case. The petitioner was clearly alleged to be the mastermind of the entire maze of transactions resulting in the fraudulent availment of crores of rupees of ITC. The associates of the petitioner were involved, and their services were utilized by the petitioner and his son for the creation of fake firms. Thus, the director or partner of the firm would be considered a ‘taxable person’ and liable for penalty under section 122(1).

List of Cases Referred to

• Devender Singh v. Additional Commissioner, Central GST, Delhi West Commissionerate [W.P.(C) No. 1958 of 2025, dated 31-1-2025] (para 8)
• Vallabh Textiles v. Additional Commissioner Central Tax GST [2025] 173 taxmann.com 801 (Delhi) (para 23)
• Asstt. Commissioner of State Tax v. Commercial Steel Ltd. [2021] 130 taxmann.com 180/52 GSTL 385/88 GST 799 (SC) (para 25)
• Mukesh Kumar Garg v. Union of India [2025] 174 taxmann.com 638/98 GSTL 419 (Delhi) (para 26)
• Sheetal and Sons v. Union of India [2025] 175 taxmann.com 597 (Delhi) (para 27)
• MHJ Metaltechs (P.) Ltd. v. Central GST Delhi South [2025] 174 taxmann.com 1277/110 GST 288/99 GSTL 446 (Delhi) (para 28)
• Metal Techs v. Central GST Delhi South [2025] 179 taxmann.com 254 (SC) (para 29).

The post Director of Fake Firm Treated as Taxable Person – Liable for Penalty | HC appeared first on Taxmann Blog.

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Case Details: Shah Paperplast Industries Ltd. vs. Union of India [2025] 180 taxmann.com 582 (Gujarat)

Judiciary and Counsel Details

• Bhargav D. Karia & Pranav Trivedi, JJ.
• Uchit N Sheth for the Petitioner.
• Ms Hetvi H Sancheti for the Respondent.

Facts of the Case

The petitioner was a 100% Export Oriented Undertaking (EOU), engaged in the manufacture and export of Tissue Paper, Wrapping Paper, Disposable Plastic Products, etc. It purchased raw materials from the registered suppliers under the GST Act, which was used to manufacture the finished products for export. Petitioner filed refund application under Section 54 of the GST Act read with Rule 89(4) of the GST Rules. The supplier of the goods to the petitioner did not avail the input tax credit, and the refund was sanctioned by the authorised officer. The order was passed under section 107(2) of the Act, and the refund sanction order was reviewed on the ground that the petitioner is 100% EOU and eligible to file a refund claim under Rule 89(1) or Rule 89(4A) of the GST Rules. Aggrieved by the order, the petitioner filed a writ petition to the Gujarat High Court.

High Court Held

The High Court held that the petitioner had not claimed any refund of the input tax credit on the deemed export supply. The petitioners were exporters of the finished goods, and the refund claim was filed by the petitioners being 100% EOU of zero-rated supply without payment of tax. The petitioners were not deemed exporters but were exporters of the goods, resulting in zero-rated supply as per section 16(1) of the IGST Act. Since the petitioners had exported the goods, they were entitled to a refund of the unutilised input tax credit as per the provisions of section 54(3) of the GST Act read with Rule 89(4) of the GST Rules. The petitioners were not governed by para no. 2.2 of the Circular dated 06.07.2022. When the petitioners were not the deemed export suppliers, Rule 89(4A) would also not be applicable to the petitioners as Rule 89(4A) has been omitted by the Central Goods and Services Tax (Second Amendment) Rules, 2024 with effect from 08.10.2024. Therefore, the reasonings assigned by the appellate authority for the applicability of Rule 89(4A) of the GST Rules were also contrary to the provisions of the GST Act. The petitions were to be allowed, and the respondents were not justified in disallowing the refund claims of the petitioners.

List of Cases Referred to

• Patanjali Foods Ltd. v. Union of India [2025] 172 taxmann.com 133/109 GST 203/97 GSTL 24 (Gujarat) (para 26)
• Triupra Ispat v. Union of India 2021 SCC OnLine Tri 659 (para 26)
• CCE v. Jellalpore Tea Estate 2011 SCC OnLine Gau 18 (para 26)
• CCE, Kanpur v. Flock (India) (P.) Ltd. 2000 taxmann.com 701/[2000] 120 ELT 285 (SC) (para 26)
• Priya Blue Industries Ltd. v. Commissioner of Customs (Preventive) 2004 taxmann.com 347/[2004] 172 ELT 145 (SC) (para 26)
• ITC Ltd. v. CCE (2019) 17 SCC 46 (para 26)
• Commissioner of Central GST and Central Excise v. Krishi Rasayan Exports (P.) Ltd. 2023 SCC Online J&K 333 (para 26)
• Union of India v. VKC Footsteps India (P.) Ltd. [2021] 130 taxmann.com 193/52 GSTL 513 (SC) (para 27)
• Jayam & Company v. Asst. Commissioner (2016) 15 SCC 125 (para 27)
• Eicher Motors Ltd. v. Union of India 1999 taxmann.com 1769/[1999] 106 ELT 3 (SC) (para 27)
• Premier Cotton Textiles v. CCE 2019 (368) E.L.T. 465 (Madras) (para 31)
• Grasim Industries Ltd. v. CCE (2011) 14 SCC 685 (para 32)
• Asian Paints (India) Ltd. v. CCE 2002 taxmann.com 1519 (SC)/2002 142 ELT 522 (SC) (para 33)
• W.P.I.L. Ltd. v. CCE, Meerut 2005 taxmann.com 751/[2005] 181 ELT 359 (SC) (para 44).

The post ITC Refund Allowed to 100% EOU for Zero-Rated Exports | HC appeared first on Taxmann Blog.

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