Mumbai: The Bombay High Court has stayed a GST demand of approximately Rs 2,500 crore against Hindustan Coca-Cola Beverages Pvt. Ltd., observing that the revenue department’s interpretation of GST provisions appeared prima facie flawed.
The GST demand was based on allegations that the company undervalued goods over seven assessment years by offering retrospective discounts to distributors. Authorities claimed that the company structured discounts in a way that reduced the taxable value of supplies.
According to the revenue, distributors first extended discounts to retailers, and Coca-Cola later adjusted its own discounts to the distributors based on these past transactions — a practice they said was intended to evade tax.
A bench of Justices BP Colabawalla and Firdosh Pooniwalla, however, disagreed with this view. The bench held that the reasoning adopted by the tax department was “prima facie incorrect” and granted interim relief by staying the demand and restraining coercive action.
The dispute lies in the interpretation of Section 15(3)(a) of the Central GST Act. While the revenue relied on this section to disallow the discounts, Coca-Cola argued that its pricing mechanism was fully compliant with Section 15(1), which says the transaction value forms the basis of taxable value. The company claimed that all discounts were transparently recorded in its Distributor Management System and were not tools of evasion.
Earlier, on August 4, 2024, a show cause notice was issued to the company, which was later confirmed by an order dated January 23, 2025, and amended by a corrigendum on January 30. Coca-Cola challenged these on the grounds that the notice was time-barred and issued beyond the scope of Section 74 of the Act.
After withdrawing an earlier writ, the company filed a fresh petition. The HC, acknowledging the strong prima facie case, granted interim protection. It directed the revenue to respond by April 15, and allowed Coca-Cola to file a rejoinder by April 22. The next hearing is scheduled for April 29.
