The Delhi High Court has strongly criticised the GST Department for raising a tax demand based on the entire turnover of a company even when accurate data of its actual sales was available.

A division bench of Justices Prathiba M. Singh and Shail Jain noted:

“There is a fundamental flaw in the approach of the Adjudicating Authority… though the actual sales of the combo packs in both B2B and B2C segments were before it, GST is still being demanded on the total turnover. Any tax evasion pertains only to B2B and B2C sales. No reasoning has been provided for levying GST on the entire turnover.”

These remarks were made while hearing a challenge to an order of the Additional Commissioner, who dismissed the petitioner’s rectification plea under Section 161 of the Central Goods and Services Tax Act, 2017.

The petitioner, a wholesaler and retailer of lithium-ion and other batteries, was accused by the GST authorities of evading tax by misclassifying the applicable GST rate. According to the petitioner, the product in question formed only about 3% of its total business, yet the Department calculated the alleged differential tax liability on the full turnover. The rectification request was also rejected, resulting in a confirmed demand and penalties.

Crucially, the total demand raised exceeded ₹250 crore.

Disapproving the Department’s stance, the Court held that such taxation of the entire turnover was unsustainable and allowed the petitioner to pursue an appeal. It further clarified that the statutory pre-deposit for the appeal must be computed on the basis of actual sales, not total turnover.

Appearance:
For Petitioner – Mr. Bimal Jain, Mr. Anurag Jain, Ms. Ishika Agarwal
For Respondents – Mr. Aditya Singla, SSC CBIC with Mr. Ritwik Saha, Ms. Arya Sruesh & Mr. Sahil Parashar; Ms. Anushree Narain, SSC with Mr. Naman Choula

Case Title: M/s IMS Mercantiles Ltd v. Union of India & Anr.
Case No.: W.P.(C) 15527/2025