Union Of INDIA Through Secretary And Others vs. Shirdi Country Inns Private Limited Through Its Director Laxman Kariya

Facts

The petitioner, Shirdi Country Inns Private Limited, filed a writ petition challenging an action by the revenue authorities. The revenue authorities, through a show cause notice dated September 29, 2025, issued under Section 74 of the CGST Act, proposed to recover GST amounting to Rs. 4,04,30,101/- along with interest and penalty for the period from FY 2019-20 to 2024-25. The High Court, on October 10, 2025, granted ad-interim relief, restraining coercive action against the petitioner upon furnishing a bank guarantee of Rs. 40,00,000/-. The respondents (Union of India and others) filed a civil application seeking vacation of this ad-interim relief or clarification that it would not prevent them from completing adjudication proceedings. The respondents argued that the adjudication proceedings had a statutory limitation period expiring on March 31, 2026, and failure to complete them would prejudice public revenue.

Held

The Court decided to grant a stay to the impugned show cause notice dated September 29, 2025, until further orders, pending the filing of a reply by the respondents and consideration of the writ petition for admission. The Court reasoned that this interim measure was appropriate given the stage of the proceedings. The respondents were directed to file their reply by May 8, 2026, and the petitioner was given time to file a rejoinder by June 10, 2026. The Civil Application filed by the respondents was disposed of in light of this order. The Court did not decide the ultimate merits of the writ petition or the validity of the show cause notice, deferring these to a later stage after the pleadings were complete. The principle derived is that in cases where a writ petition is pending and adjudication proceedings have a looming limitation period, the court may grant a stay on the show cause notice to allow for proper consideration of the writ petition after pleadings are filed.

Key Issues

1. Whether the ad-interim relief granted to the petitioner, restraining coercive action, prevents the revenue authorities from proceeding with and completing adjudication proceedings initiated by a show cause notice dated September 29, 2025, under Section 74 of the CGST Act, especially considering the statutory limitation period for adjudication expiring on March 31, 2026? Petitioner's contentions: The petitioner argued that a bank guarantee of Rs. 40,00,000/- had already been furnished as per the court's order. They also contended that the respondents had not yet filed a reply to the writ petition and that a stay on the show cause notice would stop the statutory limitation period from operating. Revenue's contentions: The respondents argued that the show cause notice formed the basis of statutory adjudication proceedings. They contended that the petitioner had filed the writ petition at a pre-adjudication stage instead of availing statutory remedies. They further argued that if the ad-interim relief was not vacated or modified, they would be prevented from completing the adjudication proceedings within the prescribed limitation period, causing prejudice to the statutory process and public revenue, rendering the proceedings infructuous. They sought vacation of the ad-interim relief or, in the alternative, permission to proceed with the adjudication.