The Bombay High Court has granted ad-interim protection to a hotel developer facing a substantial Goods and Services Tax (GST) demand arising from the Supreme Court’s ruling in Safari Retreats and the subsequent retrospective amendment to Section 17(5)(d) of the Central Goods and Services Tax (CGST) Act.
The bench of Justice Suman Shyam and Justice Advait M. Sethna directed the tax authorities not to initiate any coercive recovery proceedings against the petitioner after noting that nearly 70% of the disputed tax demand had already been deposited.
The petitioner/assessee had constructed a hotel and availed Input Tax Credit (ITC) on works contract services as well as other goods and services used during the construction of the hotel. At the time the credit was availed, the issue regarding eligibility of ITC on immovable property used for business purposes was the subject matter of extensive litigation.
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Following the Supreme Court’s landmark judgment in Chief Commissioner of CGST v. Safari Retreats Pvt. Ltd. and the subsequent retrospective amendment made to Section 17(5)(d) of the CGST Act, the GST Department issued a show cause notice proposing reversal of the ITC claimed by the petitioner.
The Department invoked the extended period of limitation, demanded reversal of the entire ITC along with interest and penalty, and ultimately confirmed the demand through an adjudication order.
Aggrieved by the order, the petitioner approached the Bombay High Court challenging the demand on several legal grounds.
The principal challenge was based on the alleged violation of the principles of natural justice, contending that the adjudication proceedings suffered from procedural infirmities.
Secondly, the petitioner argued that the extended period of limitation could not be invoked in the peculiar facts of the case. According to the petitioner, the issue regarding availability of ITC on hotel construction was already pending adjudication before the Supreme Court, and therefore there could not have been any allegation of suppression, fraud or wilful misstatement warranting invocation of the extended limitation period. Further, the liability itself had arisen only because of a retrospective legislative amendment, making the invocation of the extended period legally unsustainable.
The petitioner also challenged the levy of interest and penalty, arguing that where the tax liability itself is created retrospectively by legislative amendment, taxpayers cannot be subjected to penal consequences or interest for periods during which no such liability existed.
During the hearing on interim relief, counsel appearing for the petitioner informed the Court that approximately 70% of the disputed demand had already been deposited.
The submission regarding the substantial deposit was not seriously disputed by the counsel appearing for the GST Department.
Taking note of this significant payment, the Division Bench considered it appropriate to grant limited interim protection.
The Court accordingly directed that no coercive steps shall be initiated against the petitioner in connection with the impugned GST demand until the next date of hearing, thereby protecting the assessee from recovery proceedings while the writ petition remains pending.
The Court granted the Department three weeks’ time to file its affidavit-in-reply. It also permitted the petitioner to file a rejoinder within one week thereafter and directed that the matter be listed again on 4 August 2026. Pending further consideration, the ad-interim protection against coercive recovery will continue.
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