Bombay High Court Says Validity of GST Notification Must Be Tested Before Examining Notice Under It

The Bombay High Court has held that before examining facts or the tax liability of a taxpayer under a notification, it must first be decided whether the GST department had the power to issue the show cause notice at all. The court said this issue arises because the notice is founded on a central notification that has already been struck down/read down by two constitutional courts.

A division bench of Justice G. S. Kulkarni and Justice Aarti Sathe said the question goes to the root of jurisdiction.

The bench observed that “the primary question which would arise for consideration… whether at all there was jurisdiction to issue the impugned show cause notice, more particularly when paragraph 2 of the said notification has been held to be ultra vires or illegal.”

The petition has been filed by Khusharav Builders Pvt. Ltd., which has challenged a show cause notice issued under Section 74 of the Central GST and Maharashtra GST Acts. The notice is based on Paragraph 2 of Notification No. 11/2017 Central Tax (Rate), which mandates a uniform deduction of one-third of the total consideration towards land value in construction services, irrespective of actual land valuation.

For the petitioner, counsel pointed out that the part of the notification has already been examined by the Gujarat High Court and subsequently followed by the Delhi High Court. The Gujarat High Court has read down the provision, holding that " the impugned Paragraph 2 of the Notification No. 11/2017-Central Tax (Rate) dated 28-6-2017 and identical notification under the Gujarat Goods and Services Tax Act, 2017, which provide for a mandatory fixed rate of deduction of 1/3rd of total consideration towards the value of land is ultra-vires the provisions as well as the scheme of the GST Acts. Application of such mandatory uniform rate of deduction is discriminatory, arbitrary and violative of Article 14 of the Constitution of India"

The Bombay High Court also took note of the interim order passed by the Supreme Court of India, which has granted several taxpayers protection against any coercive measures. The apex court has directed that “there shall be no coercive steps nor any adjudication of any show-cause notice that may have been issued… on the basis of the impugned Notification until further orders.”

Against this backdrop, the bench observed that when a central notification issued under a central statute is struck down or read down by constitutional courts, such a declaration cannot be limited to the territorial jurisdiction of one High Court. The court noted that this assumes greater significance in the GST regime, which operates uniformly across the country.

On this basis, the court held that a serious preliminary issue arises as to whether the GST officer could have issued the impugned show cause notice at all. The bench directed the tax authorities to file a reply restricted to the question of jurisdiction within two weeks. Till that issue is decided, the court ordered that “no further action under the impugned show cause notice shall be taken.” The matter will be heard next on 20 January 2026.

Case Title: Khushrav Builders Pvt Ltd Vs Commissioner (A.E.), CGST and C. Ex

Citation: 2026 LLBiz HC(BOM) 14

Case Number: Writ Petition (L) No. 34439 of 2025

For Petitioner: Advocates Naresh Jain, Neha Anchlia, and Priyanshi Jain for the petitioner.

For Respondent: Advocates Satyaprakash Sharma and Abhishek Mishra