Tax Vista Your weekly tax recap Edn. 292 - 5th October 2026 Dr. G. Gokul Kishore

 

 

GST recovery - SCN can be issued after demise but conduct during lifetime relevant

A few provisions in GST law cry for amendment and Section 93 of CGST Act is one. The provision deals with determination of liability and recovery from legal representative after the demise of the taxpayer. Reasonable amount of jurisprudence is now available where different High Courts have expressed divergent views on whether the provision can be set in motion by commencement of proceedings after the death of the taxpayer or such proceedings ought to have begun before death so that it can be concluded (determined / order passed) after death. The controversy can be laid to rest only by an amendment either way so that the uncertainty over tax or other dues does not haunt legal heirs / representatives.

 

In a recent case, SCN was issued after three years of the demise of petitioner's husband who was carrying on the business and adjudication order was also passed. The petitioner was proceeded against to impose penalty under Section 122 of CGST Act by invoking Section 93. She argued that such provision does not empower the department to initiate proceedings afresh long after the death of the taxpayer as Section 93 permits completion of proceedings which were commenced during the lifetime of the taxpayer. The department pointed to the initiation of investigation during the lifetime of the taxpayer.

 

The High Court analysed Section 93 and interpreted to mean that notice during lifetime of the deceased is not a condition precedent for determination after death. However, the liability should have arisen from the conduct attributable to the taxpayer and if yes, then legal representative will be answerable subject to conditions. It negated department's argument on investigation during lifetime and held that this cannot be treated as commencement of penalty proceedings as investigation and adjudication are distinct stages. The Court recognized the conditions required to fasten legal representative with liability in situations like continuation of business after death and cessation of business. Though constitutional validity was challenged, the Court rejected it without an elaborate discussion.

 

Conduct or acts of commission / omission during lifetime is relevant and SCN can be issued after death - this is the takeaway for all stakeholders within the jurisdiction of Delhi High Court [2026-VIL-1104-DEL].

 

Assignment of leasehold rights is not a supply - ITC bar under Section 17(5) inapplicable 

Input tax credit (ITC) is like West Asia which is eternally on the boil. Law may change, regimes may change, judgments may come, retro amendments may be made but the battle over ITC is like thousand years war. The mindset of tax administration is so fixed that ITC is a largesse granted if the officer as the sovereign vis-à-vis his taxpayers feels it should be given, otherwise, taxpayer should curse his decision to realise entrepreneurial ambitions.

 

Leasehold rights were acquired in industrial plot by the petitioner and GST was charged by supplier and paid by petitioner. Input tax credit of such GST paid was availed by the petitioner. During investigation, the petitioner reversed the ITC with interest as the department doubted eligibility citing bar under Section 17(5)(d) of CGST Act. The department promptly initiated proceedings and order was ceremoniously passed under Section 74 which was more ceremoniously upheld by the Appellate Authority. The Gujarat High Court noted its own judgment in Gujarat Chamber [2025-VIL-21-GUJ] holding assignment of leasehold rights by sale or transfer shall be benefit arising out of immovable property and such transaction would be outside the ambit of supply insulating it from any GST liability. It held that charging GST by the supplier itself was in contravention of the provisions and the department cannot retain such amount.

 

On ITC bar under Section 17(5)(d), it held that the provision is not applicable at all when taxable supply itself is absent. The Court also took note of the Gujarat Chamber judgment [2025-VIL-21-GUJ] wherein it was held that Section17(5)(d) was applicable only when the expenditure is related to construction and thus, approved the contention of the petitioner that in cases where construction is not involved, credit cannot be blocked. Refund of the amounts paid was ordered but interest for retention of such amounts was not directed. [2026-VIL-1107-GUJ].

 

E-way bill expiry - GST suffocates business while making transportation seamless

This issue is not worth discussing in this or any other column. Section 129 of CGST Act itself is such a piece of legislation which could not have found a place in the GST law but somehow due to delusions on evasion, it has not only become law but also being used in 'n' number of cases. There cannot be a treatment when the provision itself is to be amputated. In the past two weeks, VIL has reported several judgments of Allahabad High Court most of them on vehicle breakdown, period of e-way bill getting expired, department pouncing on taxpayers with tax and penalty alleging intent to evade as if breakdown itself was self-engineered. The High Court has granted relief to the petitioners in such cases. GSTAT has also passed similar orders in a few cases providing relief to taxpayers though one such order is widely perceived as generated by AI.

 

When way bill was announced as abolished in GST regime with the promise of no more serpentine queues of lorries waiting at check-posts, one would not have dreamt of the queue of SCNs on its electronic counterpart in GST. One of the key areas for reform is abolition of targets for tax officers. This pushes them to draft draconian provisions to be backed by equally draconian recovery mechanism supported by mindless confirmation at appellate stage also. A lot needs to be done to arrest the drain of taxpayer's confidence in the GST regime [2026-VIL-1119-ALH].

 

Personal penalty - Provision covers non-taxable persons also but prospective

Good and Simple Tax has a lot of really "good" provisions and one such provision is Section 122(1A) of CGST Act. This was inserted from 1-1-2021 to provide for imposition of penalty on "any person who retains the benefit of a transaction" and "at whose instance such transaction is conducted" covered as offences under specified clauses in Section 122(1). Section 122 though uses "offences", the penalty imposed is fiscal only while Section 132 provides for punishment for specified offences which is related to criminal prosecution. The controversy as to whether the above provision is applicable to employees or other persons who are not themselves registered under GST law i.e., not taxable persons or it covers taxable persons only and not such individuals, has been witnessing litigation in various High Courts. Bombay High Court expressed divergent views on this issue. This was before the Delhi High Court again now as it had considered the same issue before.

 

In this case, the High Court analysed use of terms like taxable person, registered person, any person in various provisions in CGST Act and interpreted such use as deliberate and conscious by the legislature and therefore, "any person" cannot read as referring to only taxable persons. Factual backdrop weighed much in the mind of the Court as it noted - " "Fraudulent ITC transactions are often structured through fictitious or shell entities created in the names of persons having little or no connection with the underlying business, a peon, driver, domestic help, or even a person whose identity documents have been misused, while the actual orchestration of the transactions and retention of the financial benefit rests with persons operating behind such entities." The mastermind will escape if it is interpreted differently and this would defeat the objective of the provision.

 

Comparing Section 122 with Section 132, the Court said that Section 122 is penal in nature and its applicability should have nexus with date of the underlying act or transaction and subsequent issue of SCN cannot alter the date of commission of contravention thus effectively holding it as prospective in application. It rejected that the provision is applicable with respect to date of SCN by holding -"A SCN may be issued either promptly or after a considerable lapse of time. To make the applicability of a penal provision dependent upon the date of such notice would mean that identical transactions could attract different legal consequences solely by reason of the time at which the Department initiates proceedings. Such an interpretation would impermissibly make the operation of a penal provision contingent upon a subsequent administrative act."

 

GST Council in its meeting on 7th October is expected to take up a proposal on amending prosecution and arrest provisions in GST law. If decriminalisation of certain acts / provisions is the objective, then it should not be confined to those providing for criminal prosecution. It should also encompass penal provisions which are tied to similar offences and which are indeed severe even though monetary in nature [2026-VIL-1128-DEL].

 

Cum-tax benefit even if not claimed in appeal, to be extended

GSTAT orders have started flowing in good numbers now. While a few of them are perceived as not of good quality, some of them are fair and good considering the clarity with which issues are dealt with and the reasoning adopted for arriving at the conclusion. A recent order of GSTAT, Hyderabad belongs to the latter category laying down an important ratio which will be useful to taxpayers.

 

Rule 35 of CGST Rules provides for computation of GST payable when the value is cum-tax value i.e., inclusive of GST. In an appeal before it, GSTAT, Hyderabad has judiciously held that even when the appellant had not claimed that the value should be taken as cum-tax while determining tax demand, the same should be extended when such tax has not been separately collected from the recipients. It held that omission to claim such benefit cannot disentitle the appellant from the one available under the rule when facts are clear. It went further to note that authorities cannot collect tax in excess merely because the taxpayer did not claim the same specifically. The order is welcome on another ground also. Exercising the power under Section 75(2) of CGST Act, it held that Section 74 (on suppression etc) of CGST At was not invocable in the case before it and directed the proper officer to treat the same as proceedings under Section 73 and recompute penalty in particular.

 

The case related to payment of GST on food supplied to in-patients in hospital by caterer on contract with the hospital. Relying on CBIC Circular No. 32, tax was not paid considering the same as composite supply. The Tribunal reasoned that in so far as the contractor is concerned, supply is made to the hospital and there is only one supply and therefore, composite supply requiring more than one supply was not applicable. Applicable tax was held as payable while allowing department's appeal [2026-VIL-105-GSTAT-HYD].

 

ITC on inward supplies used for own construction - GSTAT explains non-availability

Whether a resort can claim input tax credit on goods and services used for construction of its own building' This was the question involved in an appeal before GSTAT, Bengaluru. Both the adjudicating and appellate authorities held the view that credit is blocked under Section 17(5)(d) of CGST Act. The appellant argued that resort is the "plant" and a building used for taxable activity is not "on own account" and Supreme Court judgment in Safari Retreats [2024-VIL-45-SC] was ignored. The Tribunal considered the provision, Safari judgment and the amendment made with retrospective effect in respect of plant and machinery. It noted that the explanation expressly excludes land, building and civil structure and held -"A resort building is a building. However central it may be to the business carried on within it, it cannot be "plant and machinery" as defined, because the definition expressly leaves buildings and civil structures out. The same is true of the resort's other civil structures: its halls, lawns, pathways, compound walls and the like." It pointed out that the Apex Court in Safari case excluded hotels and cinema theatres while deciding whether they are covered under plant and machinery as per Section 17(5)(d) and in the case before it, the resort building was a hotel building wherein accommodation and restaurant services were supplied.

 

In respect of "own account" the Tribunal framed the question as - Was the resort built as the setting of the appellant's own business, or for sale, lease or licence to others' It held that the resort was constructed for use in own business and it was not leased out to others and therefore, the bar under Section 17(5)(d) is attracted.

This is also a provision reportedly under consideration for some relaxation by the GST Council in the meeting to be held on 7th October. The provision requires a revisit and loosening the string on ITC bar on business expenditure is something which is overdue now. Entire Section 17(5) needs a overhaul and the exercise this time is expected to be confined to some of the items only. May be, based on the relaxations made (to be made) now, another round of changes can be thought of [2026-VIL-147-GSTAT-BLR].

 

[The author is an Advocate. The views expressed are strictly personal.]