Sendoz Commercials Private Limited Vs Union of India (Supreme Court of India)
SC Issues Notice on Plea Seeking Transition of Accumulated GST Compensation Cess ITC On Stock As on Date of Compensation Cess Abolition
The Supreme Court of India was pleased to issue notice to the Union of India in Sendoz Commercials Private Limited v. Union of India [Writ Petition (Civil) No. 1219 of 2025], wherein the Petitioner had filed a writ petition under Article 32 praying for allowing the transition and adjustment of the accumulated Input Tax Credit of Goods and Services Tax Compensation Cess in respect of stock held as on the date of abolition of the Compensation Cess, towards the Goods and Services Tax payable thereon.
The factual matrix which led to filing of the Writ Petition was as follows:
GST Compensation Cess on coal stood abolished effective 22.09.2025 vide Notification No. 2/2025-Compensation Cess Rate dated 17.09.2025, consequent to the 56th GST Council decision merging Cess rates into GST (as clarified in Ministry of Finance FAQs dated 09.09.2025). This abolition, coupled with simultaneous rate in increase of GST to 18% under Notification No. 9/2025-Central Tax Rate, rendered accumulated Cess ITC inutilizable, since the proviso to Section 11(1) of the Goods and Services Tax Compensation to States Act, 2017 restricts such credit solely to
output Cess liability, which ceased to exist.
The petitioner has urged the following grounds before the Hon’ble Supreme Court :-
1. That the GST Compensation Cess is in the nature of an incremental levy to the Goods and Services Tax, and therefore, the accumulated credit thereof ought to be permitted to transition against the stock held as on the date of abolition of the Compensation Cess. Both the Goods and Services Tax and the Compensation Cess draw their legislative competence from Article 246A of the Constitution of India.
2. The sole distinction between the two levies lies in the destination of the revenue collected, inasmuch as while GST is credited to the Consolidated Fund of India, the Compensation Cess is levied and utilized for the limited purpose of compensating the States for the loss of revenue arising from the subsuming of various State indirect taxes into the GST regime.
3. That while the legislature may prescribe conditions for availing input tax credit as a legislative concession, once such credit is validly availed upon fulfilment of all statutory requirements at the relevant time, it acquires the character of the taxpayer’s property within the meaning of Article 300A. In the context of transition of erstwhile CENVAT credit to GST regime, it was held by several High Courts that Cenvat credit which stood accrued and vested is the property of the assessee, and is a constitutional right under Article 300A of the Constitution.
4. That property in the form of input tax credit cannot be arbitrarily extinguished without satisfying the twin requirements of public purpose and compensation.
5. That although the rate of Compensation Cess has effectively been subsumed into the Goods and Services Tax, inasmuch as the GST rate has been correspondingly enhanced to offset the revenue implications arising from the elimination of the Compensation Cess, the accumulated input tax credit of Compensation Cess lying on the stock has not been merged or permitted to be utilized, thereby resulting in arbitrary double taxation on the very same stock.
6. That the change in taxation structure results in hostile discrimination between coal manufacturers/miners and traders in the same supply chain, violating Article 14, as manufacturers benefit from released blocked GST credits on input services (previously ineligible due to inverted duty structure and non-refundability, especially royalty service tax), enhancing their liquidity, whereas traders suffer adverse consequences from blocked Compensation Cess ITC post-abolition despite GST rate merger, creating arbitrary classification without rational nexus to any legitimate
objective.
7. That once input tax credit has validly accrued, it constitutes a vested right in the nature of advance tax already paid and, as such, cannot be arbitrarily, unreasonably, or retrospectively taken away.
8. That the denial of transition of accumulated Input Tax Credit on GST Compensation Cess directly affects the working capital and financial liquidity of the business, thereby impairing its ability to operate viably. Such a restriction imposes an unreasonable burden on the taxpayer’s freedom to carry on trade or business guaranteed under Article 19(1)(g) of the Constitution of India.
The matter was argued by Mr. Vinay Shraff, Advocate, assisted by Mr. Dev Agarwal, Advocate, Mr. Divyanshu Rai, Advocate on Record, Mr. Shubh Gautam, Ms. Taruna, Mr. Vishal Sharma, Mr. Vansh Bhatnagar Advocates.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Issue notice.
2. Tag alongwith W.P. (C) (D) No.60671/2025.
