Bombay High Court Stays ₹2,500 Crore GST Demand on Hindustan Coca-Cola, Finds Revenue’s Interpretation ‘Prima Facie Incorrect’

Mumbai: The Bombay High Court has granted interim relief to Hindustan Coca-Cola Beverages Pvt. Ltd. by staying a GST demand of approximately ₹2,500 crore. The court observed that the revenue department’s interpretation of GST provisions appeared prima facie flawed.

The demand was raised based on allegations that the company had undervalued goods over seven assessment years by offering retrospective discounts to distributors. The authorities claimed that Coca-Cola structured these discounts in a manner that reduced the taxable value of supplies, thus evading tax.

According to the revenue department, distributors initially extended discounts to retailers, after which Coca-Cola adjusted its own discounts to the distributors based on these past transactions. This, they argued, was a deliberate strategy to evade taxes.

However, a bench of Justices BP Colabawalla and Firdosh Pooniwalla disagreed with the tax authorities’ stance. The judges ruled that the reasoning adopted by the revenue was “prima facie incorrect” and stayed the demand, restraining any coercive action against the company.

The case revolves around 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 contended that its pricing mechanism was fully compliant with Section 15(1), which states that the transaction value forms the basis of the taxable value. The company asserted that all discounts were transparently recorded in its Distributor Management System and were not intended for tax evasion.

Earlier this year, on August 4, 2024, a show cause notice was issued to Coca-Cola, which was subsequently confirmed by an order dated January 23, 2025, and amended by a corrigendum on January 30. The company challenged these notices, citing that they were time-barred and issued beyond the scope of Section 74 of the GST Act. After withdrawing an earlier writ petition, Coca-Cola filed a fresh petition.

The High Court acknowledged the company’s strong prima facie case and granted interim protection. It directed the revenue department to file a response by April 15 and allowed Coca-Cola to submit a rejoinder by April 22. The next hearing is scheduled for April 29.