The Bombay High Court addressed a dispute concerning the classification of alcohol-based hand sanitizers under the GST regime. The petition by Schulke India Pvt. Ltd. challenged a Press Release issued by the Union of India classifying sanitizers as "disinfectants" subject to an 18% GST rate. The Court ruled that executive directives cannot influence judicial or quasi-judicial functions. It quashed the Press Release, reaffirming the autonomy of adjudicatory authorities to decide classification disputes based on the law.

1. Background Facts

   • Schulke India Pvt. Ltd., a trader in hand sanitizers, classified its products under HSN 3004 as "medicaments" (attracting 8%-12% GST).
   • A Press Release (dated 15.07.2020) from the Ministry of Finance classified sanitizers as "disinfectants" (attracting 18% GST).
   • Based on this, authorities issued a show-cause notice demanding differential tax, interest, and penalties.

2. Petitioner's Arguments

   • The Press Release was arbitrary and beyond the executive's authority.
   • Previous rulings and clarifications recognized sanitizers as "drugs" under the Drugs and Cosmetics Act, 1940, and thus as "medicaments."
   • Binding precedents, including Reckitt Benckiser India Ltd. v. CCT, support classification as "medicaments."

3. Respondents' Arguments

   • The Press Release, issued under Article 73, was merely a clarification for guidance.
   • The executive power extends to classifying goods for taxation purposes.
   • The matter is yet to be adjudicated, and the petitioner has recourse to appeal.

4. Key Issues

   • Can the executive dictate the classification of goods through a Press Release?
   • Does the Press Release undermine judicial and quasi-judicial independence?

5. Court's Analysis

   • The Press Release, lacking statutory authority, intruded on the jurisdiction of adjudicatory bodies.
   • Classification disputes are judicial or quasi-judicial functions.
   • The executive cannot influence such determinations through directives or notifications.

6. Conclusion and Reliefs

   • The Press Release dated 15.07.2020 was quashed.
   • Adjudicatory bodies were directed to independently decide the classification of sanitizers without being influenced by the Press Release.

I. Case Background

• Para 3-6: The dispute arose over the GST classification of hand sanitizers. Schulke India Pvt. Ltd. argued its products are "medicaments" under HSN 3004, not "disinfectants." The government classified them as "disinfectants" attracting higher GST.

II. Petitioner's Contentions

• Para 7-11: The Press Release violated separation of powers, lacked statutory basis, and contradicted judicial precedents (e.g., Reckitt Benckiser).

III. Respondents' Contentions

• Para 12-15: The Press Release was an executive action under Article 73 to guide tax authorities. Adjudication could independently address classification disputes.

IV. Judicial Analysis

• Para 16-37: The Court emphasized judicial independence in classification matters. Executive actions must not dictate outcomes in adjudicatory processes.

V. Reliefs and Conclusions

• Para 38-40: The Press Release was quashed. Adjudicatory authorities were instructed to proceed independently.

Acts and Sections Discussed:

1. Central Goods and Services Tax (CGST) Act, 2017 – Governs classification and tax rate disputes.
2. Articles 73 and 77 of the Constitution of India – Define executive powers and procedures.
3. Drugs and Cosmetics Act, 1940 – Recognizes sanitizers as "drugs."

Ratio Decidendi:

The classification of goods under GST is a judicial or quasi-judicial function that must remain uninfluenced by executive directives. The Press Release lacked statutory authority and unlawfully interfered with judicial independence.

Subjects:

#GSTDispute #JudicialIndependence #TaxClassification #ExecutiveAuthority