Bombay High Court
Disha Construction vs Joint Commissioner Of Cgst Central ... on 18 March, 2026
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
22.DOC
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 917 OF 2025
Disha Construction. ... Petitioner
Versus
Joint Commissioner of CGST, Central Excise
Audit & Ors. ... Respondents
_________
Mr. Rafique Dada, Senior Advocate with Nikita Badheka, Parth Badheka and Lata
Nagal i/b. Disha Constructions, for Petitioner.
Mr. Krupa Hasurkar i/b. Ram Ochani and Mr. Harshad Shingnapurkar, for
Respondent Nos.1 to 3.
__________
Digitally
signed by
PRASHANT
PRASHANT VILAS RANE
VILAS
RANE Date:
2026.03.30
18:13:16
CORAM: G. S. KULKARNI &
+0530
AARTI SATHE, JJ.
DATE: 18 MARCH 2026
P.C.
1. We have heard Mr. Dada, learned Senior Counsel with Ms. Badheka,
appearing for the petitioner. The challenge in this petition is to the show cause
notice(s) issued under Section 74 of the Central Goods and Services Tax Act,
2017 (for short 'CGST Act'), on the ground that they are issued wholly without
jurisdiction, arbitrarily and in violation of the principles of natural justice. This
more importantly, as the show cause notice(s) intends to resurrect what was
completely a concluded issue in regard to the transfer of flats in the construction
and development, undertaken by the petitioner under the Development
agreement(s) entered with the Co-operative Housing Societies in the year 2008-
2011 whereunder the members of these societies were granted tenements free of
costs.
2. The petitioner had undertaken the redevelopment of the old buildings of
Page 1 of 4
18 March, 2026
P. V. Rane
::: Uploaded on - 30/03/2026 ::: Downloaded on - 03/04/2026 21:13:16 :::
22.DOC
the co-operative societies, under the terms of the development agreement, the
members of the housing societies in lieu of their tenements were allotted
reconstructed / new tenements under the scheme "free of cost". As pointed by
Mr. Dada, the audit proceedings were initiated against the petitioner, under the
regime of the CGST Act, 2017 which was brought into force (w.e.f 1 July 2017)
for the financial year 2017-2018, 2018-2019, 2019-2020, 2020-2021, 2021-
2022. The audit report under Section 65(6) of the CGST Act was served on the
petitioner under letter of the respondent dated 27 October 2023, a copy of which
is annexed to the petition at Exhibit B, which clearly indicates that insofar as the
demand in respect of the said period(s) is concerned, the same has already been
settled by the petitioner qua the taxable component. However, it appears that the
Chief Commissioner was not satisfied with the said action and accordingly,
further communication dated 10 July 2024 came to be issued to the petitioner
(although accepting the final report dated 26 October 2023) on the following
contents, as recorded in the said communication, for a show cause notice to be
issued to the petitioner:-
"Whereas submissions made by you under your reply dated 30.09.2023 &
04.06.2024 were considered and the Final Audit Report is prepared
accordingly. The findings are as under:-
Sr Para No. and description Amount Amoun Compliance by
No Detected t paid taxpayer
(Rs) (Rs.)
...... ... .. ... ..
5 Para No.5 :- Non-payment of Tax: 5,92,38,750/- -- The taxpayer has
GST on construction service Interest neither paid the
provided by giving free flat to Penalty tax nor paid
existing tenant in lieu of interest and
consideration received in the penalty. SCN to
forms of transfer of be issued if not
development rights. paid tax
alongwith interest
and penalty.
Page 2 of 4
18 March, 2026
P. V. Rane
::: Uploaded on - 30/03/2026 ::: Downloaded on - 03/04/2026 21:13:16 :::
22.DOC
3. It is in pursuance of such orders as passed by the Chief Commissioner, a
show cause cum demand notice(s) (Exhibit A-1 and Exhibit A-2 to the petition)
were issued to the petitioner.
4. Reply affidavit on behalf of the respondents is filed, in which in paragraph
5.5, the following statements are made, to contend that the impugned action has
been taken on the instructions received from the Chief Commissioner. The
relevant extract read thus:
"5.5 Thereafter, on the basis of instructions received from the Chief
Commissioner Office vide letter F. No.II/8-22/VIG/PCCO/CGST/MZ/2023
dated 21.11.2023 (Copy encl. As Exhibits-G), the taxpayer vide this office
letter 23.11.2023 was informed that the FAR No.550/2023-24 dated
26.10.2023 stand withdrawn as the decisions taken in the MMCM are under
review. Accordingly, review MCM was held on 12.12.2023 and it was decided
to invoke interest and penalty on ITC amount of Rs.1,89,92,652/- reversed
under Rule 42 of the CGST Rules, 2017."
5. Having perused the show cause cum demand notice(s) dated 2 January
2025, and more particularly from the contents of paragraph 9, on what is sought
to be taxed, is on a concluded issue in respect of the development in question,
namely the flats constructed by the petitioner have been handed over to the
tenants under the scheme 'free of cost'. The show cause cum demand notice(s)
clearly indicates that the development agreement in question was of 6 March
2011. The construction was undertaken by the petitioner for Dattaramanad CHS
Ltd. in respect of which Occupation Certificate was granted on 31 December
2021, and in respect of SAT Anupa CHS Ltd. the development agreement was
dated 22 November 2008. Under both these development agreements, the
obligations of the petitioner stood crystallized. The said development
Page 3 of 4
18 March, 2026
P. V. Rane
::: Uploaded on - 30/03/2026 ::: Downloaded on - 03/04/2026 21:13:16 :::
22.DOC
agreement(s), were executed between the petitioner and the society much prior to
the GST regime being brought into force, by the promulgation of the CGST and
MGST Act with effect from 1 July 2017.
6. Be that as it may, prima facie, we see substance in the petitioners
contentions that having regard to the nature of the development agreement and
the obligations of the petitioner thereunder, to provide free of cost flats/tenements
to the existing members of the society, the approach of the commissioner appears
to us to be in the teeth of the audit report dated 26 October 2023. Whether the
audit report as accepted by the assessing officer, had concluded the issue is also a
question more particularly when the petitioner had settled the taxes as set out in
the communication dated 27 October 2023 (Exhibit B, page 81 of the
paperbook).
7. We thus, prima facie, find substance in the contention as urged by Mr.
Dada that the impugned show cause notice(s) are issued without jurisdiction in
purported exercise of Section 74 of the CGST Act. Hence, the parties would be
required to be heard finally on this Writ Petition. We are accordingly inclined to
pass the following order:
ORDER
(I) Rule. (II) Respondents waive service. (III) Pending the final disposal of the Writ Petition, further proceeding of the
show cause notice stands stayed.
(AARTI SATHE, J.) (G. S. KULKARNI, J.) Page 4 of 4 18 March, 2026 P. V. Rane ::: Uploaded on - 30/03/2026 ::: Downloaded on - 03/04/2026 21:13:16 :::