'Fundamentally Flawed': Delhi High Court Criticises GST Dept For Demanding Tax On Total Turnover & Not Actual Sales Of Company
The Delhi High Court recently criticised the GST Department for demanding tax on the total turnover of a company, despite figures of the actual sales being available with it.A division bench of Justices Prathiba M. Singh and Shail Jain observed,“The Court finds a fundamental flaw in the approach of the Adjudicating Authority that, though the actual sales of the entire combo packs, on both...
The Delhi High Court recently criticised the GST Department for demanding tax on the total turnover of a company, despite figures of the actual sales being available with it.
A division bench of Justices Prathiba M. Singh and Shail Jain observed,
“The Court finds a fundamental flaw in the approach of the Adjudicating Authority that, though the actual sales of the entire combo packs, on both B2B and B2C sales was available with the Adjudicating Authority, the GST is being demanded on the total turnover…The tax evasion, if any, is in respect of B2B and B2C sales. There is no reasoning given by the Adjudicating Authority, as to why GST is being sought to be levied on the total turnover.”
The observation was made while dealing with a plea challenging an order passed by the Additional Commissioner, rejecting the Petitioner's application for rectification under Section 161 of the Central Goods and Services Tax Act, 2017.
Petitioner is engaged in the wholesale and retail business of Lithium Ion and other batteries. The GST Department, upon gathering certain intelligence, alleged evasion of GST by way of misdeclaration of duty slab.
The Petitioner argued that the subject product only constituted 3 % of its turnover, however, the differential tax was imposed on the total turnover. Rectification application against the same was also rejected, confirming the demand and imposing penalties.
Significant to note that the total demand raised against the Petitioner was to the tune of more than Rs.250/- crores.
The Court disapproved of such an approach of taxing the total turnover and permitted the Petitioner to avail appellate remedy, by calculating the pre-deposit on the basis of actual sales.
Appearance: Mr. Bimal Jain, Mr. Anurag Jain and Ms. Ishika Agarwal, Advs. for Petitioner; Mr. Aditya Singla, SSC CBIC with Mr. Ritwik Saha, Ms. Arya Sruesh & Mr. Sahil Parashar, Advs. Ms. Anushree Narain, SSC with Mr. Naman Choula, Adv. for Respondents
Case title: M/S IMS Mercantiles Ltd v. Union Of India & Anr.
Citation: 2025 LiveLaw (Del) 1510
Case no.: W.P.(C) 15527/2025