Khusharav Builders Pvt. Ltd. Vs Additional Commissioner (A.E.) (Bombay High Court)
In a significant development for the real estate sector, the Bombay High Court has granted interim relief to Khusharav Builders Pvt. Ltd. by staying further action on a show cause notice issued under the Central Goods and Services Tax (CGST) Act. The order, passed on January 6, 2026, raises fundamental questions about the jurisdiction of tax authorities to issue notices based on a provision that has been deemed unconstitutional by other High Courts.
The case, Khusharav Builders Pvt. Ltd. v. Additional Commissioner (A.E.), CGST, WP(L) No. 34439 of 2025 revolves around the contentious issue of valuing land in composite construction contracts for the purpose of levying GST. The petitioner challenged a show cause notice dated September 29, 2025, which was based on Notification No. 11/2017-Central Tax (Rate).
Reliance on Previous Judgments
Mr. Naresh Jain for the petitioner successfully argued that the issue was no longer novel, drawing the Court’s attention to several key precedents. The primary reference was to the Gujarat High Court’s decision in Munjaal Manishbhai Bhatt vs. Union of India, [2022] 138 taxmann.com 117 (Gujarat) which had scrutinized the same notification.
In Munjaal Bhatt, the Gujarat High Court declared Paragraph 2 of the notification to be ultra vires the GST Acts. This paragraph mandates a fixed deduction of one-third of the total consideration towards the value of land for levying tax. The Court found this mandatory, uniform deduction to be “discriminatory, arbitrary and violative of Article 14 of the Constitution of India,” especially in cases where the actual value of the land is ascertainable. Consequently, the Gujarat High Court “read down” the provision, making the one-third deduction an option for the taxpayer rather than a mandatory imposition. The Bombay High Court noted that the Delhi High Court had taken a similar view in Sanjeev Sharma vs. Union of India & Ors.
Supreme Court’s Intervention
The High Court also took into account the ongoing proceedings before the Supreme Court. The Union of India has appealed the Munjaal Bhatt decision, but the Supreme Court, in an order dated October 1, 2024, directed that “there shall be no coercive steps nor any adjudication of any show-cause notice that may have been issued to the respondents-assessees on the basis of the impugned Notification until further orders.”
