In a major relief to PepsiCo India Holdings Pvt. Ltd., the Gauhati High Court on Friday, September 19, 2025, quashed a ₹19.51 crore GST demand raised by the tax department, calling the show-cause notice "illegal" and "without jurisdiction." The judgment, delivered by Justice Soumitra Saikia, has significant implications for how GST authorities initiate proceedings under Sections 61 and 73 of the Central Goods and Services Tax (CGST) Act, 2017.
The court held that the GST authorities failed to follow the mandatory precondition of issuing a notice in Form GST ASMT-10 before proceeding under Section 73 - a procedural lapse that invalidated the entire action.
Background
The dispute began after the GST Commissionerate, Guwahati, issued a show-cause notice to PepsiCo India on September 5, 2023, alleging that the company had wrongly availed Input Tax Credit (ITC) worth ₹19.51 crore for the financial year 2017–18. The department claimed discrepancies between PepsiCo's annual return (GSTR-9) and its reconciliation statement (GSTR-9C), particularly in Table 14, which lists ITC details linked to expenses.
PepsiCo's counsel, Senior Advocate R. Shah, assisted by R. and D. Borah, argued that Table 14 was optional for the said year, citing a string of government notifications from 2019 to 2023 that made this section non-mandatory.
"When the law itself made Table 14 optional, there could be no question of a ‘discrepancy’ or mismatch," Shah submitted.
The company further contended that under Section 61 of the CGST Act, officers must first scrutinize returns and issue Form GST ASMT-10 before invoking Section 73, which allows for recovery of unpaid or wrongly availed tax. Since no such preliminary notice was issued, the jurisdictional foundation of the case was missing.
Court's Observations
Justice Saikia meticulously examined the statutory scheme of Sections 61 and 73, emphasizing that tax scrutiny cannot skip procedural safeguards.
"The proper officer must first notify discrepancies and seek the taxpayer’s explanation within 30 days," the judge noted, quoting Rule 99 of the CGST Rules.
The bench observed,
"When a statute provides a specific manner for exercising jurisdiction, it must be followed strictly. The tax authorities cannot act contrary to the scheme of the Act."
Referring to the Rajasthan High Court's 2025 judgment in Goverdhandham Estate Pvt. Ltd. - later upheld by the Supreme Court - the court said the same principle applied: a show-cause notice based solely on return discrepancies is invalid if Section 61 procedure isn’t followed first.
Justice Saikia further highlighted that the notifications issued by the Central Board of Indirect Taxes and Customs (CBIC) between 2019 and 2023 expressly made Table 14 optional, reaffirming PepsiCo's compliance.
"The department’s own circulars bind it," the court said, citing the Supreme Court ruling in Commissioner of Customs vs. Indian Oil Corporation Ltd. (2004) which held that circulars are binding on tax authorities.
On the government’s argument that PepsiCo could have appealed through departmental channels, the bench remarked,
"When jurisdiction itself is wrongly assumed, the availability of an alternate remedy cannot oust writ jurisdiction."
Decision
After a detailed analysis, the Gauhati High Court concluded that:
- The show-cause notice dated 05.09.2023 was issued without following Section 61 of the CGST Act.
- The revenue acted in excess of jurisdiction by invoking Section 73 directly.
- The information under Table 14 of GSTR-9C was optional for 2017–18 and subsequent years.
- The failure to issue GST ASMT-10 rendered the proceedings null and void.
Consequently, the court quashed the ₹19.51 crore demand and set aside the impugned show-cause notice, holding it to be "unauthorized and contrary to law." The interim protection earlier granted to PepsiCo was merged with the final order.
The matter ended there - with Justice Saikia's ruling restoring procedural discipline within the GST framework and reminding tax officers that jurisdiction cannot be stretched beyond the statute’s four corners.
Case Title: M/s PepsiCo India Holdings Pvt. Ltd. vs. Union of India & Others
Case Number: WP(C)/6960/2023
Date of Judgment: 19 September 2025
Counsel for Petitioner: Mrs. R. Borah and Mr. D. Borah, assisted by Mr. R. Shah (Senior Counsel)
Counsel for Respondents: Mr. S.C. Keyal, Standing Counsel, GST