The Bombay High Court has granted an interim stay on a ₹2,500 crore Goods and Services Tax (GST) demand raised against Hindustan Coca-Cola Beverages Pvt. Ltd., observing that the revenue department’s interpretation of the law appeared “prima facie incorrect.”
A division bench comprising Justices B.P. Colabawalla and Firdosh Pooniwalla passed the order on April 1, while hearing the beverage company’s challenge to the show cause notice issued in January. The court also restrained the authorities from taking any coercive action against the company until the next hearing, scheduled for April 29.
The GST demand stemmed from allegations that Coca-Cola undervalued its supplies over seven assessment years by offering retrospective discounts to its distributors. According to the revenue department, the discount structure—where distributors first extended discounts to retailers and Coca-Cola later adjusted its discounts based on those transactions—resulted in a reduced taxable value and potential tax evasion.
However, Coca-Cola has argued that its pricing mechanism complies with Section 15(1) of the CGST Act, which allows the transaction value to determine the taxable amount. The company also stated that all discount-related data is transparently maintained in its Distributor Management System and not used as a tax evasion tool.
The court noted:
“We find that a strong prima facie case is made out for staying the effect and implementation of the impugned order. We do not find, at least prima facie, that the reasoning employed by the third respondent (CGST Commissioner) is correct.”
The dispute hinges on the interpretation of Section 15(3)(a) of the CGST Act, which the revenue department relied on to challenge the retrospective discounts. The case will now be taken up for further hearing on April 29.