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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
M.S. SONAK, JITENDRA JAIN, JJ.
M/s Schulke India Pvt. Ltd. – Petitioner
Versus
Union of India through the Revenue Secretary, New Delhi – Respondent
Writ Petition No. 11583 of 2023
Decided On : 11-11-2024
Advocate Appeared:
For the Petitioners: Bharat Raichandani, Priyanka Rathi, Prasad Avhad, Ashwini Chandrasekaren, Kuldeep Nikam
For the Respondents: Subir Kumar, Ram Ochani, Abhinav Palsikar, Ashita Aggarwal
The executive cannot dictate product classification to judicial authorities, which must independently interpret laws, ensuring separation of powers.
Headnote:(A) Constitution of India - Articles 73 and 77 - Goods and Services Tax - Classification of hand sanitizers - The Petitioner challenged a Press Release classifying hand sanitizers as disinfectants attracting 18% GST, arguing it undermined judicial authority and was arbitrary - The Court found the Press Release exceeded executive powers, infringing on judicial functions, and quashed it - The Respondents must decide the show cause notice independently. (Paras 4, 18, 38)
(B) Separation of Powers - The executive cannot dictate the classification of products to judicial authorities, which must interpret laws independently. (Paras 24, 35)
Facts of the case:
The Petitioner, engaged in trading hand sanitizers, contested a Press Release classifying their products as disinfectants, leading to a tax demand. The Petitioner argued this classification was arbitrary and outside the authority of the Respondents.
Findings of Court:
The Court quashed the Press Release, asserting that classification issues must be determined by judicial authorities without executive influence.
Issues: The main issues were whether the classification of hand sanitizers as disinfectants was valid and whether the executive could influence judicial determinations.
Ratio Decidendi: The Court ruled that the executive cannot interfere with judicial functions, emphasizing the need for independent adjudication on product classification.
Result: The petition was partly allowed, quashing the Press Release and directing independent adjudication on the show cause notice.
JUDGMENT :
M.S. SONAK, J.
1. Heard the learned counsel for the parties.
2. Rule. The rule is made returnable immediately at the request and with the consent of the learned counsel for the parties.
3. The Petitioner is engaged in trading of hand rubs/sanitisers and antiseptics. The Petitioner claims that such hand rubs/sanitisers and antiseptics are used as pharmaceutical aid (solvent) or as antibacterial/antisepsis solutions in the hospitals and have been sold as a “medicament” under the erstwhile excise/VAT 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. Mr. Raichandani, learned counsel for the Petitioner, submitted that the impugned Press Release was without authority of law and, in any event, was manifestly arbitrary. He submitted that the issue of whether the products the Petitioner was dealing with constituted “medicaments” or “disinfectants” was an issue to be adjudicated by judicial and quasi-judicial authorities and not by the first Respondent purporting to exercise its executive powers. The impugned Press Release, assuming it is indeed relatable to Article 73 of the Constitution as was alleged, transgresses the limits imposed by the doctrine of separation of powers. He submitted that the impugned Press Release has the tendency to foreclose fair adjudication by adjudicating authority in the discharge of their judicial and quasi-judicial functions. Mr. Raichandani, learned counsel, relied on Parle Agro Pvt. Ltd. Vs. Union of India, (2023) 12 Centax 199 (Mad.), Association of Technical Textiles Manufacturers and Processors Vs. Union of India, (2023) 12 Centex 195 (Del.) and Phonographic Performance Limited Vs. State of Goa and Ors. 2024 SCC Online Bom 2713 in support of his above contentions.
8. Mr. Raichandani referred to the clarification issued by the Directorate General of Health Services, Government of India, on 21.09.2020 regarding hand sanitisers for external use being covered under the definition of “Drug” as per Drugs and Cosmetics Act, 1940 and that such products cannot be classified as disinfectant or cosmetic. He submitted that two departments of the Union of India should not be allowed to take up contradictory pleas, and the impugned Press Release and the impugned show cause notice cum demand notice issued based thereon are, therefore liable to be set aside.
9. Mr. Raichandani also referred to the Notification dated 27.07.2020 issued by the Ministry of Health and Family Welfare accepting that hand sanitisers are drugs under the Drugs and Cosmetics Act and therefore exempted from the requirement of a license for the sale of such hand sanitisers. He submitted that this was on the premise that the hand sanitisers are “medicaments” and, therefore, classifiable under HSN 3004.
10. Mr. Raichandani relied on Reckitt Benckiser India Ltd. Vs. CCT, 2023 (384) E.L.T. 616 (SC) to submit that the Hon’ble Supre
