GST: Impugned Press Release dated 15.07.2020 quashed, ensuring that the classification will be determined independently by judicial and quasi-judicial

In the case of?M/s. Schulke India Pvt. Ltd. versus Union of India & Others (W.P. No. 11583 of 2023)?reported at?2024 (11) TMI 522 - Bombay High Court, it was held that,

GST:

The Ministry of Finance issued a Press Release dated 15.07.2020, categorizing alcohol-based hand sanitizers as "disinfectants" attracting an 18% GST rate. The petitioner argued that their hand sanitizers, used primarily as antiseptics and pharmaceutical aids, should be classified as "medicaments" under HSN 3004, subject to a lower GST rate.

The petitioner contended that the Press Release was arbitrary, lacked constitutional backing under Articles 73 or 77, and unlawfully interfered with the functions of judicial and quasi-judicial authorities tasked with product classification under GST.

Held:

The impugned Press Release, does not indicate that the same is relatable to either Article 73 or Article 77 of the Constitution. Though that, by itself, may not be a ground to strike down the impugned Press Release, 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.

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 - Though there may not be a very distinct line separating legislative and executive functions, still the line separating the judicial functions from the executive and legislative functions is fairly clear. The executive cannot transgress on the functions within the exclusive province of the judicial or even quasi-judicial authorities.

The Petitioner has made out a?case?for quashing the impugned Press Release so that the judicial and quasi-judicial authorities under the Act can decide on the issue of classification and, consequently, the rate of tax independently without even remotely being influenced by the impugned Press Release - this petition partly allowed by setting aside the impugned Press Release dated 15.07.2020.

Our Comments:

The Court emphasized maintaining the separation of powers and ensuring that executive instructions do not interfere with judicial functions. Any SCN merely based on Government Press Release ?or Letter/Instructions can be challenged if it does not give its own independent view.