The Delhi High Court has recently expressed disapproval of the GST Department for issuing a tax demand calculated based on the company’s overall turnover. This decision has raised concerns, particularly because the authorities already had access to precise sales data that should have been used for determining the tax obligations.
A division bench of Justices Prathiba M. Singh and Shail Jain cited that,
“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 noted during the examination of a petition that contested an order issued by the Additional Commissioner. This order denied the Petitioner’s application for rectification under Section 161 of the Central Goods and Services Tax Act, 2017.
The applicant is in the business of wholesale and retail of Lithium-Ion and other batteries. The GST Department, upon collecting specific intelligence, alleged GST evasion through the misdeclaration of the duty slab.
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The applicant claimed that the subject product merely comprises 3% of its turnover, but the differential tax was charged on the total turnover. Against the same, the rectification application was rejected, validating the demand and charging the penalties.
The total demand raised against the applicant was to the tune of exceeding Rs 250 crores.
The method of taxing the total turnover has been disapproved by the Delhi High Court, and allowed the applicant to take the appellate remedy by computing the pre-deposit on the grounds of actual sales.
| Case Title | M/S IMS Mercantiles LTD vs. Union Of India & ANR |
| Case No. | W.P.(C) 15527/2025 & CM APPL. 63490/2025 |
| For Petitioner | Mr Bimal Jain, Mr Anurag Jain, Ms Ishika Agarwal |
| For Respondent | Mr Aditya Singla, Mr Ritwik Saha, Ms Arya Sruesh & Mr Sahil Parashar, Ms Anushree Narain, Mr Naman Choula |
| Delhi High Court | Read Order |
