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TMI Blog2024 (11) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... T regime as well as the GST regime. The Petitioner claims that the products they deal with have been consistently classified under HSN 3004. 4. The first Respondent has, however, issued a Press Release dated 15.07.2020 purporting to classify alcohol-based hand sanitisers, which would include hand sanitisers that the Petitioner deals in as "disinfectants", thereby attracting a GST rate of 18%. This press release issued by the Ministry of Finance, Union of India, is in Exhibit B (page 124) of this petition. 5. Based upon the above Press Release, the second Respondent issued a show cause notice cum demand notice dated 17.04.2023 requiring the Petitioner to show cause why the differential tax/duties along with interest and penalties be not recovered from the Petitioner alleging alcohol-based hand rubs/sanitisers and antiseptics were not "medicaments" but were "disinfectants" exigible to tax at the rate of 18% per annum. 6. The Petitioner has paid the differential duty under the protest and, after that, instituted this petition to challenge the impugned Press Release dated 15.07.2020 and the impugned show cause notice cum demand notice dated 17.04.2023. PETITIOENR'S CONTENTIONS 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd since the Petitioner's products were not different, this precedent was binding on the Respondents. He submitted that the impugned Press Release takes a position contrary to the binding precedent of the Hon'ble Supreme Court and, therefore, is manifestly arbitrary and liable to be struck down. 11. Based on the above contentions, Mr Raichandani submitted that the impugned Press Release and the impugned show cause notice cum demand notice may therefore be quashed and set aside. RESPONDENTS' CONTENTIONS 12. Respondents Nos. 1 and 2 filed an affidavit on 19.01.2024, and Respondent No.3 filed an affidavit on 10.10.2023. They opposed the filing of this petition because the adjudication has yet to be completed. They submit that should the adjudication confirm the show cause notice and the tax demand, the Petitioner has the remedy of appeal. The affidavit cited dictionary definitions, statutory provisions, and precedents to support its contention that the Petitioner's products are not "medicaments" but only "disinfectants," which attract a GST rate of 18% per annum. Mr Subir Kumar, learned counsel echoed the arguments in this affidavit in reply dated 10.10.2023 and submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the adjudicatory judicial and quasi-judicial authority to classify all alcohol-based hand sanitisers as "disinfectants" attracting a GST rate of 18%. The Judicial and quasi-judicial authorities under the Act may not be able to decide on the validity or otherwise of such a press release. The argument about alternate remedies will, therefore, not apply regarding the challenge to the impugned press release. 19. The impugned Press Release at Exhibit-B (page 124) to this petition reads as follows:- "Ministry of Finance Clarification on issue of GST rate on alcohol based hand sanitizers Posted On: 15 JUL 2020 4:46PM by PIB Delhi The issue of GST rate on alcohol based hand sanitizers has been reported in few sections of media. It is stated that hand sanitizers attract GST at the rate of 18%. Sanitizers are disinfectants like soaps, anti-bacterial liquids, dettol etc which all attract duty standard rate of 18% under the GST regime. The GST rates on various items are decided by the GST Council where the Central Government and all the state governments together deliberate and take decisions. It is further clarified that inputs for manufacture of hand sanitizers are chemicals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, still, in the absence of any such indication or compliance with the provisions of Article 77 of the Constitution, we cannot simply accept that the impugned Press Release is indeed an instance of the exercise of executive power by the Union. In the absence of any compliance with the requirements of Article 77, the burden was on the Respondents to establish this aspect. The Respondents have failed to discharge this burden. 24. However, even though it is assumed that the impugned Press Release is an instance of the exercise of executive power by the Union still, the question is whether, in the purported exercise of such executive power, the Union is competent to direct judicial and quasi-judicial authorities to decide the issue of classification of products in a particular manner. We cannot lightly accept that the Union, in the exercise of executive power, has such authority because the issue of classification, which is essentially an issue of interpretation, must be undertaken by the various judicial and quasi-judicial adjudicatory authorities under the Statute. Though there may not be a very distinct line separating legislative and executive functions, still the line separatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar manner would interfere with their judicial or quasi-judicial functions. This cannot be allowed. The executive powers of the Union do not extend to this. 28. In the case of Parle Agro Pvt. Ltd. (supra), the challenge was to the decision of the GST Council classifying "flavoured milk" under HS Code No.2202 instead of HS Code No. 0402. The argument was that such classification by the GST Council was contrary to the decision of the Hon'ble Supreme Court in CCE Vs Amrit Food (2015) 63 taxmann.com 153. The learned single Judge of the Madras High Court held that though the Goods and Services Tax Council may be a Constitutional body still, it is a recommendatory body. By referring to Union of India Vs Mohit Minerals (P) Ltd. (2022) 138 taxmann.com 331, the Court held that the recommendations of the GST Council are not binding on the Union and States. Besides, the Court held that while a GST Council may recommend "rates of taxation", it does not have the power to determine the classification of goods and services. Similarly, in Association of Technical Textiles Manufactures and Processors (supra), the Division Bench of Delhi High Court quashed the Circular issued by the Tax Research Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Justice and Company Affairs cannot be said to have been issued under any provision of the I.T. Act or the Rules. It cannot override or qualify the statutory provisions without being issued under a statutory authority. The Circular is accordingly liable to be ignored. A Circular issued by the Ministry of Law, Justice and Company Affairs does not stand on the same footing as a Circular of the CBDT issued under Section 119 of the Act, which section empowers the Board to issue appropriate orders, instructions and directions as it may deem fit for the proper administration of the Act. Indeed, this Circular has not even been issued by the Ministry of Finance, which can be said to be directly concerned with implementing the I.T. Act. 32. The Division Bench of the Andhra Pradesh High Court took note of the decision of the Calcutta High Court in Tarak Nath Paul Vs CWT (1983) 142 ITR 468 in which it was held that such press notes or circulars issued by the Ministry of Finance, not having been issued under any authority of the Act (in that case, Wealth Tax Act), could not be taken into account by the Wealth Tax authorities either for imposing or for deciding the question of imposition of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above principles, it is apparent that where the Legislature, after enacting a law, is functus officio in matters of interpretation of such law, the executive cannot claim such power when, admittedly, the executive power of the Union is only coextensive with its legislative powers. The interpretation of a law is within the province of the judiciary, and to that extent, the doctrine of separation of powers would apply. This is also not a case where the Union of India has claimed to be empowered to exercise judicial function in a limited way. Therefore, based on Rai Sahib Ram Jawaya Kapur (supra), the impugned Press Release cannot be saved. 36. In Bengal Iron Corporation (supra), again relied upon by Mr Subir Kumar, it was held that even the interpretation contained in the administrative instructions is not binding on Courts. The Court observed that so far as clarifications or Circulars issued by the Central Government and/or State Government are concerned, they represent merely their understanding of the statutory provisions. They are not binding upon the Courts. The understanding of the Government, whether in favour or against the assessee is nothing more than its understanding an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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