Bombay High Court Grants Stay on GST Adjudication Order Citing Pending Classification Dispute in Similar Matters

Introduction

In a significant development concerning GST classification disputes, the Bombay High Court has granted interim relief by staying an adjudication order in the matter of Himesh Foods Pvt. Ltd. Vs Union of India. The Court's decision was influenced by the pendency of similar proceedings involving identical classification issues before a coordinate Bench, demonstrating the judiciary's approach towards maintaining consistency in matters involving common questions of law and fact.

Background of the Case

The petitioner, Himesh Foods Pvt. Ltd., had originally approached the Bombay High Court by way of a writ petition to challenge a show cause notice issued on 03.08.2024. This notice was issued invoking the provisions of Section 74 of the CGST Act, 2017, along with the corresponding provision under the State GST Act. The show cause notice pertained to classification-related issues affecting the tax liability of the assessee.

While the writ petition was under consideration before the Court, the tax authorities proceeded to pass an adjudication order on 04.01.2025, deciding upon the same show cause notice that was under challenge. Following this development, the petitioner was granted permission to amend the original petition to include the challenge against the adjudication order as well. This procedural aspect highlights the evolving nature of tax litigation where proceedings continue to develop even during judicial scrutiny.

Key Arguments Presented Before the Court

Petitioner's Submissions

The counsel representing the petitioner drew the Court's attention to a crucial earlier decision passed by a coordinate Bench of the same Court. This order dated 02.12.2025 was delivered in the case of Hindustan Coca Cola Beverages Pvt. Ltd. v. Union of India through the Ministry of Finance & Ors., along with two other related matters. In that decision, the coordinate Bench had examined issues substantially similar to those arising in the present petition and had granted interim relief by staying the show cause notices under challenge.

The petitioner's counsel emphasized that the controversy in the present case was virtually identical to the issues already pending consideration before the Court in the companion matters. A central contention raised was that the revenue authorities had erroneously adopted an approach of itemised sale of products for the purpose of classifying them under the 18% tax rate for the period under dispute. This approach was challenged as being contrary to the proper principles of classification under GST law.

The petitioner urged that since a coordinate Bench had already found merit in granting interim protection in similar circumstances, the same consideration should extend to the present case as well. This argument was based on the principle of judicial consistency and the doctrine that coordinate Benches of the same Court should adopt a uniform approach in matters involving similar legal and factual issues.

Revenue's Position

The counsel appearing for the respondent revenue authorities acknowledged that similar proceedings were indeed pending before the Court. There was no dispute raised regarding the similarity of issues between the present case and the matters already under consideration by the coordinate Bench. This candid admission strengthened the petitioner's case for seeking parity in treatment.

Nature of the Dispute

The controversy in this matter revolves around the classification of products for GST purposes, which directly impacts the applicable tax rate. The core issue concerns whether the revenue authorities were justified in adopting an itemised sale approach for classifying the petitioner's products at the 18% GST rate during the relevant period.

Classification disputes under GST law have emerged as one of the most contentious areas of litigation. The determination of the correct tariff heading under the GST schedules is critical because different products attract different rates of tax. The difference between various tax slabs—5%, 12%, 18%, and 28%—can have substantial financial implications for businesses, particularly those dealing in large volumes.

In the present case, the petitioner's challenge to the itemised sale approach suggests that the revenue authorities may have broken down composite products or bundled offerings into individual components for the purpose of classification, potentially resulting in a higher effective tax rate. This approach has been contested in various forums, with assessees arguing that such methodology disregards the essential character and intended use of products as they are marketed and sold.

Court's Analysis and Reasoning

The Bombay High Court took note of several critical factors while deciding upon the interim relief application:

Consideration of Precedent

The Court gave significant weight to the order dated 02.12.2025 passed by the coordinate Bench in Hindustan Coca Cola Beverages Pvt. Ltd. v. Union of India through the Ministry of Finance & Ors. The fact that interim relief had been granted in those matters, which involved similar issues, established a relevant precedent for the present case.