Case Note & Summary
The petitioner, M/s Schulke India Pvt. Ltd., is engaged in trading of hand rubs/sanitisers and antiseptics, which it claims are used as pharmaceutical aid or antibacterial/antisepsis solutions in hospitals and have been consistently classified under HSN 3004 as 'medicaments' under the erstwhile excise/VAT regime and GST regime. On 15.07.2020, the Ministry of Finance issued a Press Release purporting to classify alcohol-based hand sanitisers as 'disinfectants', attracting a GST rate of 18%. Based on this Press Release, the Directorate General of GST Intelligence issued a show cause notice cum demand notice dated 17.04.2023 to the petitioner demanding differential tax/duties along with interest and penalties. The petitioner paid the differential duty under protest and filed the present writ petition challenging the Press Release and the show cause notice. The petitioner contended that the Press Release was without authority of law, manifestly arbitrary, and transgressed the limits imposed by the doctrine of separation of powers by foreclosing fair adjudication by quasi-judicial authorities. The petitioner also relied on the Supreme Court's decision in Reckitt Benckiser India Ltd. Vs CCT, which classified 'Dettol antiseptic liquid' as a 'medicament' under HSN 3004. The respondents argued that the Press Release was an executive instruction under Article 73 read with Article 77 of the Constitution and did not conflict with any statutory provisions. The High Court held that the Press Release was not issued under Article 73 and did not indicate any statutory backing. The Court observed that the Press Release virtually issued a fiat to adjudicatory authorities to classify all alcohol-based hand sanitisers as 'disinfectants', which encroached upon the quasi-judicial function of those authorities. The Court quashed the Press Release as ultra vires and manifestly arbitrary, and also quashed the show cause notice cum demand notice dated 17.04.2023, as it was based on the invalid Press Release. The Court clarified that it was not deciding the classification of the petitioner's products, which would be determined by the adjudicatory authorities in accordance with law.
Headnote
A) Constitutional Law - Executive Power - Article 73 of the Constitution of India - Separation of Powers - The impugned Press Release issued by the Ministry of Finance purporting to classify alcohol-based hand sanitisers as 'disinfectants' under GST was held to be without authority of law and manifestly arbitrary. The Court held that the executive cannot issue a fiat that pre-empts or forecloses fair adjudication by quasi-judicial authorities, as it transgresses the limits imposed by the doctrine of separation of powers. (Paras 18-25) B) Goods and Services Tax - Classification - Medicaments vs Disinfectants - HSN 3004 - The Court did not decide the classification of the petitioner's products but held that the issue must be adjudicated by the appropriate quasi-judicial authorities based on facts and law, uninfluenced by the impugned Press Release. (Paras 17, 26) C) Constitutional Law - Executive Instructions - Article 73 read with Article 77 of the Constitution of India - The impugned Press Release was not issued under Article 73 and does not indicate any statutory backing. Executive instructions that conflict with statutory provisions or binding precedents are not enforceable. The Court held that the Press Release cannot override the quasi-judicial function of adjudicating authorities. (Paras 20-25) D) Precedent - Binding Nature - Supreme Court decision in Reckitt Benckiser India Ltd. Vs CCT (2023) 384 E.L.T. 616 (S.C.) - The Court noted that the Supreme Court had classified 'Dettol antiseptic liquid' as a 'medicament' under HSN 3004. The impugned Press Release taking a contrary position was held to be manifestly arbitrary and liable to be struck down. (Paras 10, 26)
Issue of Consideration
Whether the impugned Press Release dated 15.07.2020 issued by the Ministry of Finance classifying alcohol-based hand sanitisers as 'disinfectants' under GST is valid and binding on quasi-judicial authorities, and whether the show cause notice cum demand notice based thereon is sustainable.
Final Decision
The impugned Press Release dated 15.07.2020 is quashed and set aside as ultra vires and manifestly arbitrary. The impugned show cause notice cum demand notice dated 17.04.2023 is also quashed and set aside. Rule is made absolute in those terms. No order as to costs.
Law Points
- Executive power cannot override quasi-judicial adjudication
- Press Release without statutory backing is ultra vires
- Doctrine of separation of powers limits executive instructions
- Binding precedent of Supreme Court must be followed by executive
