Bombay High Court Quashes Centre’s Press Release on GST Classification of Hand Sanitisers
Key Highlights:
The Bombay High Court recently quashed a 2020 press release from the Union Ministry of Finance, which classified alcohol-based hand sanitisers as disinfectants, subject to an 18% GST rate. The Court ruled that the press release wrongly influenced judicial and quasi-judicial authorities responsible for product classification under the Central Goods and Services Tax (CGST) Act. According to the Court, such decisions should be made by adjudicating authorities, not through executive orders or press releases.
Case Background:
Schulke India Pvt. Ltd, a manufacturer of hand sanitizers, challenged the 2020 press release. It classified alcohol-based hand sanitisers as disinfectants, imposing an 18% GST rate. The company argued that sanitizers and antiseptics are often sold as medicaments, which should be taxed at a lower GST rate.
In response to the press release, the Directorate General of GST Intelligence issued a show-cause notice in April 2023. This notice demanded taxes, interest, and penalties based on the disputed classification. Schulke India sought to quash both the press release and the show-cause notice, asserting that only judicial or quasi-judicial authorities should decide on classifications.
Court’s Ruling:
The Court emphasized that product classification, whether as disinfectants or medicaments, falls under the jurisdiction of judicial and quasi-judicial authorities. It clarified that the press release improperly influenced these authorities, thereby compromising their independence.
The bench stated,
“The executive cannot interfere with judicial or quasi-judicial functions.” Moreover, the Court affirmed that the Union government does not have the authority to dictate how adjudicating bodies should interpret the law.
Outcome and Implications:
- Press Release Quashed: The Court quashed the 2020 press release, ruling it improperly influenced the classification process, which must remain independent.
- Show Cause Notice: While the Court did not quash the show-cause notice, it confirmed that Schulke India could challenge it through the appropriate judicial or quasi-judicial channels.
- Impact on GST Classification: The ruling reinforces the independence of adjudicating bodies. It ensures that decisions on GST classification are not influenced by executive actions.
Legal Insight:
This judgment marks an important precedent in GST law. It asserts that executive actions, such as issuing press releases, should not infringe upon judicial authority. As a result, the ruling guarantees that product classification under GST remains independent and is decided by proper authorities.
Our Take:
The Bombay High Court’s decision reinforces judicial independence in GST classification. By quashing the executive’s influence over adjudicating authorities, the Court has emphasized the need for fair, unbiased decision-making. This judgment could have significant implications for future tax disputes involving product classification.
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