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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
J.B. Pardiwala, Nisha M. Thakore, JJ.
J K Snacks Industries – Petitioner
Versus
Union of India – Respondent
R/Special Civil Application No. 7107 of 2022
Decided On : 13-04-2022
GST Acts - Classification of Papad - Section 103(1)(b) - Entry No.96 of the exemption notification no. 2/2017 - Central Tax (Rate) dated 28.06.2017 - Common parlance test for classification of goods under taxation statutes - Judicial interpretation of the term 'Papad' - Influence of Appellate Authority's observations on the litigation
Fact of the Case:
The writ applicants, a Partnership Firm engaged in the business of manufacturing unfried fryums, received a show cause notice from the Directorate General of GST Intelligence, challenging the classification of their product as 'Papad' and demanding taxes, interest, and penalty under the GST Acts.
Finding of the Court:
The Court issued Notice and called upon the respondents to respond, considering the influence of the Appellate Authority's observations on the classification of 'Papad' and the challenge to the constitutional validity of Section 103(1)(b) of the GST Act.
Issues: Challenge to the show cause notice, influence of Appellate Authority's observations on the litigation, and constitutional validity of Section 103(1)(b) of the GST Act.
Ratio Decidendi: The Court's decision to issue Notice was influenced by the Appellate Authority's observations on the common parlance test for the classification of goods under taxation statutes and the challenge to the constitutional validity of Section 103(1)(b) of the GST Act.
Final Decision: Notice issued to the respondents, returnable on 15.06.2022, with an ad-interim order in terms of paragraph 25(F), and to be heard along with Special Civil Application No.16172 of 2021. Notice also issued to the learned Attorney General of India due to the challenge to a provision of the GST Act.
Certainly. Based on the provided legal document, here are the key points:
The case involves a challenge to the constitutional validity of Section 103(1)(b) of the GST Act, alleging that it is arbitrary and violates Articles 14 and 19(1)(g) of the Constitution of India (!) (!) .
The petitioner, engaged in manufacturing unfried fryums, claims that their product qualifies as "Papad" and seeks exemption under Entry No. 96 of the exemption notification no. 2/2017 – Central Tax (Rate) dated 28.06.2017 (!) .
The dispute arises from a show cause notice issued by the GST authorities, demanding payment of taxes, interest, and penalties for the period from July 2017 to March 2020, based on the classification of their product (!) (!) .
The Appellate Authority for Advance Ruling has observed that the product known as "Papad" in trade parlance is classified under a specific tariff entry that covers all types of "Papad" known in the market, emphasizing the importance of common trade understanding in classification (!) (!) .
The court's decision to issue a notice was influenced by the observations of the Appellate Authority regarding the classification of "Papad" and the challenge to the validity of Section 103(1)(b) of the GST Act (!) (!) .
The petitioner seeks various reliefs, including declaring the challenged section unconstitutional, binding the appellate orders on authorities, quashing the show cause notice, and confirming the classification of their products as exempt "Papad" (!) .
The case is linked to ongoing proceedings and challenges in other related cases, with notices issued to respondents and the Attorney General of India, indicating the broader constitutional and legal significance of the issues involved (!) (!) (!) (!) .
The court has also noted that the constitutional challenge is already under consideration in a separate but related case, with a scheduled hearing date, and has granted interim reliefs to stay further proceedings pending final judgment (!) (!) .
These points summarize the core issues, legal challenges, and procedural posture of the case as reflected in the document.
ORDER :
J.B.Pardiwala, J.
1. By this writ application under Article 226 of the Constitution of India, the writ applicants have prayed for the following reliefs:
B. This Hon’ble Court may be pleased to declare that the advance ruling appellate orders passed in the case of other taxable persons having identical facts and circumstances are binding on all authorities who are subordinate to the Chief Commissioners of CGST and SGST which constitute the advance ruling appellate authority;
C. This Hon’ble Court may be pleased to issue a writ of mandamus or writ in the nature of mandamus or any other appropriate writ or order quashing and setting aside impugned show cause notice dated 28.02.2022 along with Form GST DRC – 01 dated 07.03.2022 (annexed at Annexure A) as being wholly without jurisdiction, arbitrary and illegal;
D. This Hon’ble Court may be pleased to declare that products of the Petitioners being papad of different shapes and sizes are classifiable under Entry No.96 of the exemption notification no. 2/2017 – Central Tax (Rate) dated 28.06.2017 and hence exempt from tax under the GST Acts;
E. In any case this Hon’ble Court may be pleased to hold and declare that initiation of proceedings against the Petitioners under Section 74 of the GST Acts is wholly without jurisdiction, arbitrary and illegal;
F. Pending notice, admission and final hearing of this petition, this Hon’ble Court may be pleased to stay further proceedings pursuant to impugned show cause notice dated 28.02.2022 along with Form GST DRC – 01 dated 07.03.2022 (annexed at Annexure A);
G. Ex parte interim relief in terms of prayer F may kindly be granted;
H. Such further relief(s) as deemed fit in the facts and circumstances of the case may kindly be granted in the interest of justice for which act of kindness your petitioners shall forever pray.”
2. It appears from the materials on record that the writ applicant No.1 is a Partnership Firm engaged in the business of manufacture of unfried fryums of different shapes and sizes. It is the case of the writ applicants that bona fide, they believed that the product they are manufacturing is nothing but “Papad” in its literal sense and in such circumstances, they claimed exemption by classifying the products under the HSN 1905. The Office of the Directorate General of Goods and Services Tax Intelligence, Surat Zonal Unit, is of the view that the product manufactured by the writ applicants, cannot be compared and put at par with Papad.
3. In such circumstances referred to above, a show cause notice came to be issued by the Deputy Director, Directorate General of GST Intelligence, Surat Zonal Unit, dated 28.02.2022 calling upon the writ applicants to show cause as to why;
(ii) Interest at the applicable rate on the GST (IGST CGST+SGST) mentioned at (I) above should not be demanded and recovered from them under Section 50 read with section 74 of the CGST Act, 2017, read with Section 20 of IGST Act, 2017 and Section 50 read with Section 74 of the Gujarat GST Act, 2017.
(iii) Penalty, equivalent to total GST (IGST+CGST+SGST) amount, should not be imposed on them under Section 74 of the CGST Act, 2017 read with Section 20 of IGST Act, 2017 and read with
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