Indirect Tax Quarterly Milestones (October-December 2025)

In a landmark decision in Union of India v M/s Adani Power Ltd.,¹ the Supreme Court has settled a long-standing tax dispute, affirming that export duty cannot be levied on goods supplied from the Domestic Tariff Area (DTA) to a unit or developer in a Special Economic Zone (SEZ). This ruling brings certainty to an issue that has been the subject of extensive litigation across various High Courts.

The dispute originated from the interpretation of the term ‘export’ under two different statutes. The tax authorities contended that since the Special Economic Zones Act, 2005 (SEZ Act) defines the supply of goods from the DTA to an SEZ as an ‘export’, such transactions should be subject to export duty under the Customs Act, 1962. This interpretation was consistently challenged by the industry, leading to conflicting positions and uncertainty.

The Supreme Court, upholding the consistent view taken by the High Courts of Gujarat, Andhra Pradesh, and Madras, provided crucial clarifications on the matter and reasoned that:

This judgment provides significant relief and much-needed certainty for businesses. It will directly lower procurement costs for SEZ units and developers, enhancing their global competitiveness. By reinforcing the tax-free operational framework envisaged for SEZs, this decision strengthens the ‘Make in India’ initiative by encouraging domestic sourcing by SEZ units.

In a significant judgment, the Supreme Court held that a provisional attachment order issued under Section 83 of the Central Goods and Services Tax Act, 2017 (CGST Act) cannot be renewed or re-issued on substantially similar grounds after it ceases to have effect upon the expiry of one year.² The Court held that Section 83(2) of the CGST Act explicitly provides that a provisional attachment shall lapse after one year from the date of the order, and there is no provision in the statute that permits an extension or renewal of such an order. 

The Court observed that the power to order a provisional attachment under Section 83(1) is draconian in nature and must be exercised strictly in accordance with the statutory preconditions. Further, allowing the revenue authorities to issue a fresh attachment order on substantially the same grounds after the original order has lapsed would render the one-year limitation under Section 83(2) infructuous. The Court also noted that, unlike other taxing statutes such as the Customs Act, the CGST Act does not contain any provision for extending the period of attachment, which indicates a clear legislative intent against it. 

The Court noted that a provisional attachment is a pre-emptive measure to protect revenue during the pendency of proceedings and cannot be used as a recovery tool. It further clarified that a statutory authority can only perform acts that are permissible under the statute, and the absence of a prohibition cannot be interpreted as a conferment of power. This judgment reinforces the principle that what cannot be done directly cannot be done indirectly, by holding that issuing repeated attachment orders under the guise of ‘renewal’ would be an abuse of the due process of law.  

By settling the law on this issue, the Supreme Court has provided significant relief to taxpayers, preventing the indefinite freezing of assets through successive attachment orders. In quashing the impugned renewal orders and directing the de-freezing of the appellant’s bank accounts, the Court upheld the statutory safeguards available to taxpayers under the CGST Act and clarified the limits of provisional attachment. This should reduce repetitive litigation and facilitate faster disposal of disputes. 

The Karnataka High Court held that the time limit for filing a refund claim under Section 54(3) of the CGST Act must be calculated by considering the date of filing of the initial application.³ The Court clarified that a subsequent revised application, filed by a taxpayer after a deficiency memo is issued by the tax authorities, does not reset the clock for the purpose of computing the limitation period. 

The petitioner in this case filed an initial refund application on 4 July 2024, which was well within the prescribed two-year limitation period. Following the issuance of a deficiency memo by the tax authorities, the petitioner submitted a fresh refund application on 14 August 2024. The authorities rejected the refund claim, erroneously treating the date of the second application as the filing date and concluding that the claim was barred by limitation. This stance was subsequently upheld by the appellate authority, prompting the petitioner to approach the High Court.

Relying on its earlier judgment in M/s. Amidc Automation Technologies,⁴ the High Court held that the authorities’ position was incorrect and contrary to law. It observed that the date on which the petitioner first filed the refund application has to be considered for computing the period of limitation, not the date of the subsequent filing. Accordingly, the High Court quashed the rejection orders and remitted the matter back to the authorities for reconsideration on merits, with the issue of limitation being conclusively settled in favour of the taxpayer.

This decision provides crucial relief to taxpayers whose legitimate initial refund claims are often rejected on procedural grounds. It reinforces the principle that procedural errors should not jeopardise a taxpayer’s substantive right to a refund.

In a significant judgment, the Gauhati High Court held that issuing a show cause notice (SCN) under Section 73 of the CGST Act for discrepancies found during the scrutiny of returns, without first adhering to the procedure under Section 61 of the CGST Act, is unauthorised and contrary to law.⁵ The High Court held that the issuance of a notice in Form GST ASMT-10, as prescribed under Section 61 read with Rule 99 of the CGST Rules, is a mandatory precondition before initiating recovery proceedings under Section 73 for such discrepancies.

The Court analysed the legislative scheme, noting that Section 61 provides a specific mechanism for the scrutiny of returns. If a proper officer finds discrepancies, they are statutorily obligated to first inform the taxpayer through Form GST ASMT-10 and seek an explanation. Proceedings under Section 73 can only be initiated if the taxpayer fails to provide a satisfactory explanation within the stipulated time or does not take corrective measures after accepting the discrepancy. The Court emphasised that this procedure provides an opportunity for the taxpayer to rectify defects or explain their position, and if the explanation is found acceptable, no further action is to be taken. Bypassing this step vitiates the entire proceedings initiated under Section 73. 

In this case, the SCN was issued for alleged wrongful availment of ITC based on the petitioner’s failure to furnish details in Table 14 of Form GSTR-9C. The petitioner argued that furnishing these details was optional for the relevant financial year, and the revenue authority had failed to issue a notice in Form GST ASMT-10 before issuing the SCN under Section 73. The High Court concurred, holding that even if the non-furnishing of information constituted a discrepancy, the revenue was duty-bound to follow the Section 61 procedure. 

This ruling reinforces the principles of procedural fairness and the importance of following the statutory mandate. By quashing the SCN, the Court affirmed that the revenue cannot bypass the scrutiny mechanism prescribed under Section 61 to directly invoke the recovery provisions of Section 73 when the issue originates from discrepancies in tax returns. The Court also took note of a similar decision by the Rajasthan High Court,⁶ which was subsequently upheld by the Supreme Court, thereby lending significant weight to this legal position.