Facts of the Case: In this case, the petitioner was engaged in the wholesale and retail trade of lithium-ion and other batteries, was subjected to a search by the GST Department, based on allegations of tax evasion. A Show Cause Notice was issued, alleging misclassification of goods under HSN 8507 (18%) instead of 8504 (28%) for combo packs of chargers with rechargeable batteries, resulting in short payment of GST. After considering the petitioner’s reply Order confirming the demand was passed.  The petitioner thereafter filed a rectification application under Section 161 of the CGST Act, which remained pending. As the limitation period for filing an appeal was expiring, the petitioner approached the High Court wherein the Court directed the authority to grant a personal hearing and pass a reasoned order, particularly considering the petitioner’s contention that the disputed combo products constituted only 3% of total turnover.

Pursuant to the direction, the Additional Commissioner passed a rectification order reaffirming the demand and imposing multiple penalties under Sections 74(1), 122(1)(x), 122(1)(xvi), 122(1)(xvii) and 125 of the CGST/DGST Acts. The total demand exceeded ₹250 crore, as GST was levied on the entire turnover, not merely on the turnover of the disputed combo packs. Aggrieved, the petitioner filed the present writ petition under Articles 226 and 227 of the Constitution.

Issue: Whether the Adjudicating Authority was justified in levying GST and penalties on the entire turnover of the petitioner when the alleged misclassification related only to the limited turnover of combo packs (chargers with batteries), and whether such an order warranted interference in writ jurisdiction.

Held that: The Court found a fundamental flaw in the approach of the Adjudicating Authority, noting that though details of B2B and B2C combo sales were available, GST had been demanded on the total turnover. The alleged tax evasion pertained only to the combo sales and not to the petitioner’s entire business activity.

The impugned order was appealable, and the Court declined to examine factual disputes in writ proceedings. However, considering the unique circumstances, the petitioner was relegated to the appellate remedy with a specific direction that the pre-deposit under Section 107(6) of the CGST Act be computed only on the B2B and B2C combo sales turnover, and not on the total turnover.

The petitioner was granted time till 30 November 2025 to file the appeal, which would not be treated as barred by limitation. The Commissioner (Appeals) was directed to grant a personal hearing and decide the appeal on merits by passing a reasoned order.

The Court clarified that its observations were confined to the facts of the case and would not prejudice the final adjudication by the appellate authority.

The Court held that GST cannot be demanded on total turnover where the alleged misclassification or short payment pertains to only a specific portion of turnover. The Court directed that pre-deposit should be restricted to the disputed portion, ensuring proportionate compliance pending appeal

Case name: M/s. IMS Mercantiles Ltd Versus Union Of India & Anr. dated   10.10.2025