Raghuvir Developers And Builders Vs Assistant Commissioner (Gujarat High Court)
Summary: The Gujarat High Court considered a writ petition filed by Raghivir Developers and Builders, a partnership firm engaged in construction services, challenging an Order-in-Original dated 30.03.2026/31.03.2026 passed under Section 74 of the Central Goods and Services Tax Act, 2017. The proceedings concerned an alleged barter supply involving excavated soil valued at Rs.1,70,97,395/-. The petitioner had been called upon to pay GST of Rs.8,54,870/- with interest and penalty, and the eventual total demand was stated to be Rs.47,87,271/- along with interest. The Show Cause Notice dated 27.06.2025 had invoked Rule 28 of the CGST Rules, 2017 for determining the value of the excavated soil. The petitioner contended that the authority was uncertain whether Rule 27 or Rule 28 applied and that the Show Cause Notice specifically proceeded under Rule 28(1)(a).
The adjudicating authority subsequently admitted that Rule 28(a) had been incorrectly invoked, but simultaneously relied upon Rule 27(c) and adopted a different valuation methodology for determining the value of services. The petitioner argued that no opportunity had been given to meet the new valuation basis under Rule 27(c). The Revenue could not controvert the factual position concerning invocation of different provisions, although it submitted that the excavated soil had been utilised in the project itself. The Court held that the change in the applicable valuation provision between the Show Cause Notice and adjudication order was undisputed.
The Court noted that the Show Cause Notice did not allege or indicate that the supply of soil was to any “related persons”, while the adjudicating authority rejected Rule 28(a) as incorrectly invoked and proceeded under Rule 27(c). The Court further found that the petitioner had never been afforded an opportunity to meet the determination of value under Rule 27(c). Holding that the petitioner had suffered grave prejudice, the Court quashed and set aside the impugned order as well as the Show Cause Notice dated 27.06.2025. The Court nevertheless left it open to the Revenue to initiate fresh proceedings by issuing a fresh Show Cause Notice to the petitioner.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Since a short issue is involved, the matter is taken up for final hearing.
2. By way of present writ petition, the petitioner being a partnership firm engaged in the business of providing construction services has assailed the impugned order dated 30.03.2026 passed by the respondent under the provision of Section 74(9) of the Central Goods and Services Tax Act, 2017 (for short ‘CGST Act’), raising the demand of tax and penalty of Rs.47,87,271/- [Rs.8,54,870/- + Rs.39,32,401/-] along with interest.
FACTS OF THE CASE
3. Pursuant to the intelligence gathered by the Surat Commissionerate, CGST, the petitioner was called upon the pay the tax amounting to Rs.8,54,870/- along with interest and penalty in FORM GST DRC-01A under Section 74(5) of the CGST Act, alleging that the petitioner had supplied the excavated soil worth Rs. 1,70,97,395/- in exchange of service from the service provider, without issuing tax invoices and chargeable to GST on such barter supply. Subsequently, the Show Cause Notice dated 27.06.2025 was issued by the Assistant Commissioner (Anti Evasion), under Section 74(1) of the CGST Act, seeking to recover the aforesaid amount. The petitioner submitted the detailed written submissions on 26.12.2025 denying the allegations referred in the Show Cause Notice and submitted that the petitioner had already paid the GST at the rate of 5% on value of the excavated soil. The respondent thereafter passed the impugned Order-in-Original under Section 74 of the CGST Act confirming the demand of tax of Rs.8,54,870/- along with applicable interest and penalty, amounting to total sum of Rs.47,87,271/- along with interest. Hence, the present writ petition.
SUBMISSIONS ON BEHALF OF THE PETITIONER
4. At the outset, learned advocate Mr. Desai appearing for the petitioner has submitted that the impugned Show Cause Notice as well as subsequent order are required to be quashed and set aside, since the respondent authority is not sure whether the provision of Rule 27 or Rule 28 of the Central Goods and Services Tax Rules, 2017 (for short ‘the CGST Rules’) are required to be invoked. In this regard, it is submitted that the Show Cause Notice dated 27.06.2025 was issued by invoking the provision of 28(1)(a) of the CGST Rules, for determining the value of excavated soil and accordingly, the demand of tax along with interest and penalty was raised. It is submitted that the adjudicating authority in the impugned order has admitted that Rule 28(a) of the CGST Rules was incorrectly invoked in the case of the petitioner. However, the respondent authority, simultaneously, invoked Rule 27(c) of the CGST Rules and confirmed the demand by resorting to a completely new and different valuation for determining the valuation of the services. It is submitted that the adjudicating authority has not offered any opportunity of hearing to the petitioner as to how Rule 27(c) of the CGST Rules, would get attracted in the case of the petitioner. Thus, it is urged that the impugned Show Cause Notice as well as the order are required to be quashed and set aside as both runs contrary to each other.
SUBMISSIONS ON BEHALF OF THE RESPONDENT
5. Learned Senior Standing Counsel Ms. Hardika Vyas is unable to controvert the above factual aspect with regard to invocation of different provisions in the Show Cause Notice as well as in the adjudication order. However, she has submitted that the entire excavated soil was utilised in the project itself as admitted by the petitioner in the reply dated 13.03.2026.
ANALYSIS & OPINION
6. We have heard the rival submissions of the respective parties. The fact about invocation of different provision in the CGST Rules in the Show Cause Notice as well as in the impugned order passed by the adjudicating authority is not in dispute. The petitioner was issued the impugned Show Cause Notice dated 27.06.2025 by invoking the provision of Rule 28(a) of the CGST Rules, for determination of value of the excavated soil and which had resulted into demand of tax of Rs.47,87,271/- along with interest and penalty. The petitioner filed its reply to the Show Cause Notice pointing out that the said provisions of Rule 28(a) of the CGST Rules would not apply in the case of the petitioner and the valuation prescribed under the said Rule on the basis of open market value was without any legal basis. As the Show Cause Notice failed to allege or even indicate that the alleged supply of soil to any “related persons”.
7. The respondent adjudicating authority in paragraph no.4.3 of the impugned order dated 30.03.2026/31.03.2026 has admitted that Rule 28(a) of CGST Rules as mentioned in the Show Cause Notice is incorrectly invoked. However, simultaneously the adjudicating authority invoked Rule 27(c) of the CGST Rules and confirmed the demand by resorting to a different valuation for determination of value of services. Thus, the impugned order passed by the adjudicating authority does not approve the Rule 28(a) of the CGST Rules, which was invoked in the Show Cause Notice. Moreover, the petitioner was never offered any opportunity to meet with the determination of value under Rule 27(c) of the CGST Rules, which was invoked and relied upon by the adjudicating authority. Hence, on this count alone the impugned Show Cause Notice is required to be quashed and set aside since the petitioner has suffered a grave prejudice. We also quash and set aside the initial show cause notice dated 27.06.2025, since, the adjudicating authority has opined that the provision of Rule 28(a) of the CGST Rules was incorrectly invoked.
8. Accordingly, the present writ petition succeeds. The impugned order as well as Show Cause Notice are hereby quashed and set aside. It will be open for the Revenue to initiate fresh proceedings by issuing a fresh Show Cause Notice to the petitioner.
