A practitioner’s digest of the GST rulings that mattered this month — Input Tax Credit disputes, Section 16(2)(c), pre-deposit rules, natural justice, e-way bill detentions, and bank account attachments.
Why This Month Matters
July 2026 delivered one of the most consequential GST rulings since the rollout of the tax itself — the Supreme Court’s final word on whether a genuine buyer can be denied Input Tax Credit when their supplier pockets the tax instead of depositing it. Alongside that, High Courts across the country continued to shape the day-to-day litigation landscape: pre-deposit rules, natural justice in adjudication, e-way bill detentions, and the validity of notices served through the GST portal.
This roundup is curated for practitioners handling GST litigation, assessments, and appellate work — with the holding, the bench, and a practical takeaway for each ruling.
Supreme Court Rulings HEADLINE
Bhandari Scrap Traders v. Union of India & Ors. — ITC Denied Where Supplier Doesn’t Pay Tax
A Bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva dismissed a batch of petitions challenging Section 16(2)(c) of the CGST Act, which conditions a buyer’s ITC claim on the supplier actually having deposited the tax with the Government. The Court upheld the Gujarat High Court’s earlier ruling that the provision is constitutionally valid and does not need to be read down, holding that the GST framework is fundamentally different from the old VAT regime and that precedents protecting bona fide buyers under VAT law cannot simply be carried over. The Court noted the buyer isn’t without a remedy — Sections 41, 73 and 74 allow recovery from the defaulting supplier, after which the buyer can re-avail reversed credit under Rule 37A.
No GST on Assignment of Long-Term Industrial Plot Leasehold Rights
A Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe dismissed the Union’s Special Leave Petitions against the Gujarat High Court’s consolidated ruling (in nearly 50 connected petitions led by the Gujarat Chamber of Commerce and Industry) that GST cannot be levied on the assignment of 99-year leasehold rights in GIDC-allotted industrial plots. The Court followed its own earlier dismissal of a similar SLP on 22 May 2026 on grounds of consistency.
9Stacks & FanMade11 Directed to Pursue Statutory Appeal, Not Writ Jurisdiction
A Bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran disposed of writ petitions filed by two online gaming companies challenging GST proceedings, directing them to avail the statutory appellate remedy instead of invoking Article 32/226 writ jurisdiction.
Future Group GST Case — SC Questions Bombay HC’s Power to Grant Pre-Arrest Protection
The Court reserved its decision on whether the Bombay High Court could grant Future Group director Sunil Biyani one week’s protection from arrest after ruling his anticipatory bail plea premature, in an alleged ₹1,200 crore GST fraud probe.
High Court — ITC & Section 74 Disputes
Bona Fide Purchaser Not Denied ITC Merely Because Seller Failed to File Returns
Justice Devashis Baruah quashed an ITC demand where the selling dealer had admittedly collected GST from the purchaser but failed to file returns, applying the Division Bench precedent in National Plasto Moulding v. State of Assam. The Court held the department must proceed against the defaulting seller rather than the buyer.
Inverted Duty Structure Refund Cannot Be Denied Merely Because Principal Input and Output Share the Same GST Rate
Justice D. Bharatha Chakravarthy allowed Vindhya Spinning Mills’ refund claims, holding that ITC refunds under the inverted duty structure cannot be rejected just because the principal raw material and finished product attract the same tax rate, where other inputs at higher rates cause credit accumulation.
ITC Claim on Fabricated Agreement Invalid
Justice Senthilkumar Ramamoorthy upheld a Section 74 demand where the agreement and invoices did not establish a genuine business transaction, dismissing the taxpayer’s challenge.
High Court — Natural Justice & Procedure
Notices Uploaded Only in “Additional Notices” Tab Are Not Valid Service
Justice Hiranmay Bhattacharyya set aside an ex parte GST order after finding that the SCN, reminder, and adjudication order were uploaded only in the portal’s “Additional Notices and Orders” tab and not the “Normal” tab — holding this does not amount to valid communication.
Cross-Examination Cannot Be Denied Merely Because Witness Statements Are Unretracted
Justice A.A. Ziyad Rahman allowed a taxpayer’s request to cross-examine witnesses relied upon in a DGGI investigation, holding that the mere fact that statements weren’t retracted doesn’t justify refusing cross-examination.
Appellate Authority Under Section 107 Can Permit Cross-Examination
The Division Bench held the appellate authority can conduct further inquiry, including permitting cross-examination of witnesses, despite the statutory bar on remanding matters to the adjudicating authority.
Adjudicating Authority Not Bound to Elaborately Address Every Submission, or Call for Further Documents
Two rulings this month (Sunil Chauhan and Sodexo India) held that an adjudicating authority isn’t obliged to deal with every point in a taxpayer’s reply in detail, nor to seek additional documents if it finds the record insufficient — such adequacy questions belong to the appellate authority.
Penalty Order Passed Beyond 7 Days of SCN Held Invalid
A Division Bench held the seven-day timeline under Section 129(3) for passing a penalty order is mandatory, and an order passed even a day late cannot be sustained — fiscal statutes using “shall” for coercive powers must be strictly complied with.
High Court — Appeals & Pre-Deposit
Mandatory Pre-Deposit Cannot Be Waived or Reduced
Two Delhi HC rulings (Amar Singh And Sons and DS Farbication) reaffirmed that neither the CESTAT pre-deposit under Section 129E of the Customs Act nor the CGST appeal pre-deposit can be waived, reduced, or exempted — the statutes contain no such provision.
New 10% Penalty-Appeal Pre-Deposit Not Applicable Where SCN Preceded 1 October 2025
The Court held that the right to appeal vests on the date the SCN is issued — so the amended 10% pre-deposit requirement for penalty-only appeals, effective 1 October 2025, cannot be applied retrospectively to proceedings initiated before that date.
High Court — Detention, Attachment & Recovery
No Detention for Expired E-Way Bill Where Delay Was Due to Vehicle Breakdown
A Division Bench directed authorities to drop Section 129 detention proceedings where the e-way bill had expired only because of a vehicle breakdown, with no evidence of intent to evade tax.
Bank Account Attachment Quashed for Lack of Tangible Material
Justice Senthilkumar Ramamoorthy held that a provisional attachment under Section 83 cannot rest on a mechanical recitation of the statutory language — the order must disclose the actual tangible material and reasons justifying the drastic step.
Capacity-Based National Security Cess on Pan Masala Struck Down as Arbitrary
The Court held Parliament competent to levy the cess, but struck down its machine-capacity-based computation (rather than actual quantity manufactured) as violative of Article 14.
GST Cannot Be Deducted From Land Acquisition Compensation
Justice R. Nataraj quashed a GST deduction from compensation paid for compulsory land acquisition, holding that expropriation under eminent domain is not a “supply of goods or services” under GST law.
Practical Takeaways for Practitioners
Re-check ITC due diligence clauses
With Section 16(2)(c) now settled by the Supreme Court, supplier vetting and GSTR-2B monitoring move from best practice to essential risk management — consider standard indemnity/withholding clauses for larger clients.
Audit the notice trail before conceding
Before accepting that a client “missed” a deadline, check which tab the notice appeared in on the GST portal, and whether the SCN-to-order timelines under Sections 129 and 74 were respected.
Challenge boilerplate attachment orders
Section 83 bank attachment orders that merely restate the statutory language, without case-specific tangible material, remain vulnerable — this is often the fastest relief available to a client.
Budget pre-deposit into appeal strategy
Courts continue to hold pre-deposit provisions as non-waivable — factor the cash-flow impact into the client’s decision to appeal, rather than the merits of challenging the deposit itself.
A quick note on conflicting High Court views
A few rulings this month sit close to each other on similar facts without being identical — for instance, the Gauhati High Court’s protection of a bona fide buyer where the seller admittedly collected tax but didn’t file returns, alongside the Supreme Court’s stricter reading of Section 16(2)(c) where the supplier never paid the tax at all. When advising clients, pin down precisely which factual scenario applies before choosing a precedent.