Introduction: The applicability of subsequent Supreme Court judgments to earlier High Court decisions that have already attained finality has become an important question in GST litigation, particularly concerning denial of Input Tax Credit (ITC) where suppliers fail to deposit tax with the Government. The controversy has arisen following the Gujarat High Court’s judgment dated 1 May 2026 in a batch of 50 cases, including Bhandari Scrap Traders Vs Union of India, SCA No. 749/2025, and the subsequent Supreme Court decision affirming the Gujarat High Court’s interpretation of Section 16(2)(c) of the CGST Act, 2017. The Gujarat High Court, while considering the constitutional validity of Section 16(2)(c) of the CGST Act, declined to read down the statutory provision or declare it unconstitutional under Article 14 of the Constitution. However, the Court acknowledged the serious difficulties faced by genuine purchasing dealers who have fulfilled their obligations but suffer ITC denial because suppliers have failed to remit the corresponding tax. The Court emphasised the need for legislative intervention, technological mechanisms for invoice-wise verification of supplier payments and prompt recovery action against defaulting suppliers instead of imposing disproportionate burdens on bona fide purchasers. The article relies particularly on Commissioner of CGST and Central Excise Vs Saraswati Agro Chemicals Pvt. Ltd., decided on 4 July 2023. In that case, refunds of Education Cess and Secondary and Higher Education Cess had been granted on the basis of the Supreme Court’s earlier decision in SRD Nutrients. Although the legal position was subsequently altered by the Supreme Court’s decision in Unicorn Industries, the Supreme Court held that concluded refund proceedings could not be reopened merely because the earlier precedent had been overruled. The Court emphasised that permitting such recovery would undermine the finality of litigation.
Introduction
The Hon’ble High court of Gujarat given judgment to batch of 50 cases on 01/05/2026. One among them is BHANDARI SCRAP TRADERS Vs UNION OF INDIA, with SCA No. 749/2025 Dt 01/05/2026 (S NO 46)
But according to Gujarat High court judgment copy, it is in between MARUTI ENTERPRISE Vs UNION OF INDIA & ORS. In this Batch, the Hon’ble Gujarat High court given judgment that, there is a pressing need for legislative amendments or clarifications to be issued within the GST framework to alleviate the disproportionate financial and administrative burdens currently placed upon purchasers who have an honest claim of ITC. Beyond mere policy changes, the Government should implement a robust, technology-driven tracking mechanism enabling verification of payments made by suppliers against specific invoices in real time, thereby insulating bona fide recipients from the defaults of their vendors. Simultaneously, the Government has to take prompt and immediate steps for recovery of tax from the erring suppliers, instead of compelling the purchasers to avail themselves of alternate cumbersome remedies. In the absence of stringent oversight, unscrupulous sellers could potentially enrich themselves at the expense of both the public exchequer and honest buyers. Since we are not inclined to read down Section 16(2)(c) of the CGST Act, the question of declaring it ultra vires Part III of the Constitution of India, including Article 14 of the Constitution of India does not arise. However, we expect the Government to address the issue of genuine purchasers at the earliest.
Against the above judgment one Special Leave to Appeal (C) No. 23931/2026 filed by Bhandari Scrap Traders before the Hon’ble Supreme Court, with SCA No. 749/2025 (S No 46 before high court). The Hon’ble Supreme Court UPON hearing the counsel, the Court made the following judgment that. the distinction and differences between the provisions of the Delhi Value Added Tax Act, 2004, and the Central Goods and Services Tax Act, 2017, brought out by way of a detailed analysis from paragraph 42 onwards in the impugned judgment along with the scheme of availing Input Tax Credit (ITC) under the GST regime, as set out in paragraph 56 of the impugned judgment, clearly demonstrate that there is no possibility of drawing parity between the provisions of the two enactments, so as to treat a purchasing dealer under the CGST Act on par with a purported bonafide purchasing dealer under the Delhi VAT Act in relation to ITC, when the supplier-dealer fails to pay the requisite tax thereof. We find ourselves in complete and respectful agreement with the views expressed by the High Court of Gujarat and affirm and uphold the impugned judgment.
So after reading the above both judgments by Gujarat High court and Hon’ble Supreme Cout, it is evident that, one among appellants before Gujarat High court have file the SLP before supreme court, but not the remaining 49 appellants who filed case before High Court.
The second point is that the Hon’ble Gujarat High court has not given any adverse decision in the above case. The High court in fact supported the genuine purchasing dealer by expressing their views that Since we are not inclined to read down Section 16(2)(c) of the CGST Act, the question of declaring it ultra vires Part III of the Constitution of India, including Article 14 of the Constitution of India does not arise. However, we expect the Government to address the issue of genuine purchasers at the earliest. And the Hon’ble Supreme Court of India while giving answer to SLP given their opinion that We find ourselves in complete and respectful agreement with the views expressed by the High Court of Gujarat and affirm and uphold the impugned judgment.
Now the debatable issue is whether this judgment in Bhandari Scrap Traders Vs Union of India, applicable to other high court decisions given prior to this judgment?
The Principle of Finality and Order XLVII, Rule 1 of the CPC. The Supreme Court of India has consistently held that a case that has reached its conclusion cannot be reopened simply because a higher court later overrules the legal precedent on which that decision was based.
The Hon’ble Supreme court upheld the principle of Finality in the case of (Commissioner Of CGST And Central Excise Vs M/S Saraswati Agro Chemicals Pvt. Ltd. on 4 July, 2023). In this case, the Hon’ble supreme court opinion that, since the assessee has been held entitled to the refund of the Educational cess and Secondary & Higher Educational cess on the basis of a judgment and order of the Supreme Court in case SRD Nutrients which was in vogue at the relevant time, the appellants are not entitled to make recovery of the said refunded amount on the basis of the subsequent decision of the Supreme Court rendered in the case of Unicorn Industries. If such an action is permitted, it will open a Pandora box and the lis between the parties which had attained finality will never come to an end
BINDING PRECEDENT OF SC JUDGMENT UNDER ARTICLE 141
Recently The Hon’ble Supreme Court clarified that not every judgment is meant to be a binding precedent under Article 141 of the Constitution.
The Hon’ble supreme court in the case of NBCC (INDIA) LTD. VERSUS THE STATE OF WEST BENGAL & ORS. Dt 10th January 2025. The hon’ble apex court held that. Every judgment or order made by this Court in disposing of these appeals is not intended to be a binding precedent under Article 141. We are aware of the difficulties that High Courts and the subordinate courts face in determining whether the judgment is in the process of decision-making or precedent-making, particularly when we have also declared that even an obiter of this Court must be treated as a binding precedent for the High Courts and the courts below. In the process of decision making, this Court takes care to indicate the instances where the decision of the Supreme Court is not to be treated as precedent. It is therefore necessary to be cautious in our dispensation and state whether a particular decision is to resolve the dispute between the parties and provide finality or whether the judgment is intended to and in fact declares the law under Article 141. However, it does not automatically reopen or set aside High court Judgments that had already attained finality.
OPINION
Many High Couts given judgments in favour of genuine purchases not to reverse the input tax credit for the fault of supplier with out considering Section 16 (2) (c). So when the Indian constitution is not permitted to reopen the High court judgments based on subsequent judgment by Hon’ble Supreme Court, how supreme court judgment in Bhandari Scrap Traders v. Union of India (being one of the appellant out of 50) can be enforceable on those high court cases already delivered their verdict. If so what about the future litigation on the same issue. Will the government with drawn Section 16 (2)(c) of GST or continue to open a Pandora box to continue litigation. We think NO.
Cases Discussed
- Maruti Enterprise Vs Union of India & Ors. — Gujarat High Court, judgment dated 01.05.2026. Batch decision concerning constitutional validity of Section 16(2)(c) and ITC denial on account of supplier defaults.
- Bhandari Scrap Traders Vs Union of India — SCA No. 749/2025 (Gujarat HC); SLP(C) No. 23931/2026 (SC). Supreme Court affirmed the Gujarat High Court’s interpretation of Section 16(2)(c) of the CGST Act.
- Commissioner of CGST and Central Excise Vs Saraswati Agro Chemicals Pvt. Ltd. — Supreme Court, 04.07.2023. Finality of concluded refund proceedings notwithstanding subsequent changes in judicial precedent.
- SRD Nutrients Pvt. Ltd. Vs Commissioner of Central Excise — Supreme Court. Earlier decision concerning refund of Education Cess and Secondary and Higher Education Cess.
- Unicorn Industries Vs Union of India — Supreme Court. Subsequent decision concerning the scope of excise duty exemptions and applicable cesses.
- NBCC (India) Ltd. Vs State of West Bengal & Ors. — Supreme Court, 10.01.2025. Distinction between dispute resolution and declaration of binding law under Article 141 of the Constitution.
Author Details: Raghavendra Rao SVS, GST Advocate (Email: [email protected]), and Sasidhar Rao SVSN, Chartered Accountant (Email: [email protected]), are based in Nellore, Andhra Pradesh.
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Authors:
S.V.S. Raghavendra Rao, Advocate & Tax Consultant, Nellore, Andhra Pradesh, Phone: 9440275175, Email: [email protected]
S.V.S.N. Sasidhar Rao, Chartered Accountant, Nellore, Andhra Pradesh, Phone: 9490087873, Email: [email protected].
