Facts of the Case:In this case, the appeal arose from a common judgment of the Single Judge allowing a batch of writ petitions filed by contractors and sub-contractors executing government works contracts that had commenced under the pre-GST regime and continued after the introduction of GST on 1 July 2017. The writ petitioner, a registered GST dealer and sub-contractor engaged in the Basaveshwar Lift Irrigation Scheme, contended that the contract rates had been determined under the erstwhile VAT regime and did not factor in GST, resulting in an increased tax burden after GST was introduced.
The petitioner had also filed GST returns belatedly for the financial years 2017-18, 2018-19 and 2019-20, prompting the GST authorities to issue notices demanding interest under Section 50 of the CGST Act and initiate recovery proceedings through a garnishee notice under Section 79. The Single Judge disposed of the writ petition by issuing comprehensive directions requiring government departments to recalculate the contract value, reimburse the differential GST, permit filing or revision of GST returns without limitation, interest or penalty, and restrain the GST authorities from taking coercive action. Aggrieved by the directions issued against the tax authorities, the State preferred the present writ appeal.
Issue:
Whether the High Court, while resolving disputes arising from transition of works contracts from the VAT regime to the GST regime, could direct the GST authorities to permit filing or revision of GST returns beyond the statutory framework, waive interest, penalty and limitation prescribed under the GST enactments, and restrain the authorities from initiating recovery proceedings.
Held That:
The Court observed that disputes regarding reimbursement of additional GST liability arising from contracts executed before the implementation of GST are essentially contractual disputes between the contractor and the employer and cannot alter the statutory obligations imposed under the CGST Act. Liability to pay GST, interest, assessment and recovery is governed exclusively by the GST statutes and cannot be modified through judicial directions contrary to legislative provisions.
The Court reiterated that interest under Section 50 of the CGST Act is a statutory consequence of delayed payment of tax and arises automatically by operation of law, leaving no discretion with either the tax authorities or the Court to waive or reduce such liability in the absence of statutory authority.
Similarly, there is no provision under the GST law permitting filing or revision of returns in the manner directed by the Single Judge or extending statutory limitation through judicial orders. Consequently, the directions permitting filing or amendment of returns beyond the statutory framework, waiving interest, penalty and limitation, and restraining the GST authorities from taking coercive action were set aside. However, the Court clarified that the directions relating to reimbursement of the differential tax burden would operate only against the contracting employer and not against the GST authorities.
The Division Bench partly allowed the appeal and held that the directions issued by the Single Judge against the GST authorities were contrary to the statutory scheme of the GST enactments.
Case Name: THE COMMISSIONER OF CENTRAL TAX & ORS. v. M/s SADGURU INFRATECH PVT LTD dated 10.06.2026
To read the complete judgement 2026 Taxo.online 1703
