Allahabad High Court Stays GST Order Against Gannon Dunkerley, Examines Whether UP Jal Nigam Is a ‘Local Authority’

In a significant development with far-reaching implications under the Goods and Services Tax (GST) regime, the Allahabad High Court has stayed the operation of an adjudication order passed against M/s Gannon Dunkerley & Co. Ltd.

The interim relief came while the Court began examining a larger and long-debated legal question — whether UP Jal Nigam can be treated as a “local authority” under Section 2(69) of the Central Goods and Services Tax (CGST) Act, 2017.

The matter was heard by a Division Bench comprising Justice Saumitra Dayal Singh and Justice Swarupama Chaturvedi.

The writ petition had been filed on behalf of the petitioner-company through Advocate Akshat Sinha and Advocate Sanyukta Singh, while Senior Advocate Tarun Agarwal led the arguments for the petitioner, assisted by Advocate Akshat Sinha.

At the centre of the dispute is the petitioner’s challenge to the order-in-original dated December 29, 2025.

The company argued before the High Court that the services under consideration were provided to UP Jal Nigam, which, according to the petitioner, qualified as a “local authority” during the relevant period.

On this basis, the petitioner contended that the impugned GST demand and adjudication order could not legally stand.

To strengthen its case, the petitioner relied heavily on an earlier judgment delivered by the Allahabad High Court in UP Jal Nigam v. CIT (2011).

In that ruling, a Division Bench had held that UP Jal Nigam fell within the definition of a “local authority” for Section 10(20) of the Income Tax Act, 1961, read together with the General Clauses Act, 1897.

That decision had gone in favour of the corporation and against the Revenue authorities.

However, the Revenue opposed the plea by pointing to another coordinate Bench judgment in CIT v. UP Jal Nigam, reported in [2011] 14 taxmann.com 178 (Allahabad).

In that case, differing opinions had emerged among the judges hearing the matter, eventually resulting in a conclusion that UP Jal Nigam could not be treated as a “local authority” under Section 10(20) of the Income Tax Act.

The Revenue also referred to the opinion rendered by the third judge on November 29, 2011, to support its stand.

While hearing the matter, the High Court took note of the apparent conflict between the earlier judicial pronouncements.

The Bench observed that there was presently “one clear order in favour of the petitioners” and also recorded the submission advanced on behalf of the petitioner that the later opinions may not have conclusively settled the issue against them.

The Court further noted that the controversy might ultimately require consideration by a larger Bench due to the divergence in legal interpretation.

Recognising the complexity and importance of the issue, the Bench granted four weeks to the Revenue for filing its counter affidavit, followed by two weeks for the petitioner to file a rejoinder.

In the meantime, the Court granted interim protection to the petitioner by directing that the “operation and effect” of the impugned order dated December 29, 2025, shall remain stayed until the next date of hearing.

The case assumes considerable significance because the question of whether UP Jal Nigam qualifies as a “local authority” has repeatedly surfaced across different branches of tax law over the years.

The answer carries major financial and legal consequences, particularly for statutory corporations, public utility bodies, and government-backed entities operating under the GST framework.

Legal experts believe that the outcome of the present proceedings could emerge as a landmark ruling on the interpretation of the term “local authority” under the CGST Act.

The judgment is expected to provide much-needed clarity on the tax status of statutory bodies like UP Jal Nigam and may potentially influence several similar disputes pending across courts and tax authorities in the country.