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2024 Supreme(Online)(Bom) 8094
HIGH COURT OF BOMBAY
M. S. Sonak, Jitendra Jain, JJ
Schulke India Pvt. Ltd. – Appellant
Versus
Union of India – Respondent
WRIT PETITION NO.11583 OF 2023
For the Appellants/Petitioners: Bharat Raichandani, Priyanka Rathi, Prasad Avhad, Ashwini Chandrasekaren, Kuldeep Nikam
For the Respondents: Subir Kumar, Ram Ochani, Abhinav Palsikar, Ashita Aggarwal
The executive branch lacks the authority to issue administrative press releases that dictate the classification of goods under taxation laws. Such classification is an adjudicatory function that must be performed independently by judicial and quasi-judicial authorities without influence from executive directives.
Headnote:(A) Constitution of India - Articles 73 and 77 - Executive power of the Union - Doctrine of Separation of Powers - The executive branch cannot issue directives or press releases that dictate the fiscal classification of goods or influence the functioning of judicial and quasi-judicial authorities under a statute. (Paras 24, 27)
(B) Tax Classification - Judicial Determination - Classification of goods is an adjudicatory function within the exclusive province of authorities constituted under the law. Administrative instructions or press releases attempting to pre-determine such classifications interfere with independent adjudication and are not binding on quasi-judicial bodies. (Paras 18, 36)
Facts of the case:
The authorities issued an executive press release classifying a specific category of goods as disinfectants, thereby subjecting them to a higher tax rate. Based on this press release, demand notices were issued to an entity that had classified its products differently as medicaments. The entity challenged the validity of the press release, arguing that it lacked legal authority and encroached upon the functions of the adjudicating authorities.
Findings of Court:
The court held that the classification of goods for tax purposes involves an interpretation of statutory provisions which must be undertaken independently by the designated adjudicatory authorities. The executive branch cannot circumvent the legislative and judicial process by issuing directions through administrative press releases or circulars that govern the outcome of pending assessment proceedings.
Issues: Whether the executive power of the government extends to issuing instructions that mandatorily categorize goods for taxation purposes, and whether such instructions violate the doctrine of separation of powers by influencing the performance of judicial and quasi-judicial functions.
Ratio Decidendi: The executive wing of the government cannot perform the functions of judicial or quasi-judicial authorities. Tax classification requires an independent examination of facts and law, free from executive influence or directive. Since the executive power is co-extensive with legislative power, it cannot claim authority to interpret laws or dictate classification in a manner that binds the independent adjudicatory process.
Result: Petition allowed in part; the impugned press release is quashed and set aside; the matter is to be decided by the relevant authorities on its own merits without influence from the set aside instruction.
| Table of Content |
|---|
| 1. case background and procedural history. (Para 1 , 2 , 3 , 4 , 5 , 6) |
| 2. challenges to executive authority and classification of goods. (Para 7 , 8 , 9 , 10 , 11) |
| 3. executive power to issue advisory circulars under articles 73 and 77. (Para 12 , 13 , 14 , 15) |
| 4. judicial review of administrative circulars versus executive power limits. (Para 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23) |
| 5. separation of powers prohibits executive influence on quasi-judicial adjudicatory functions. (Para 24 , 25 , 26 , 27 , 34 , 35 , 36) |
| 6. precedents on the non-binding nature of administrative circulars on judicial interpretation. (Para 28 , 29 , 30 , 31 , 32 , 33) |
| 7. quashing of illegal executive interference and mandate for independent quasi-judicial adjudication. (Para 37 , 38 , 39 , 40) |
JUDGMENT (Per 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 11 (2023) 12 Centax 199 (Mad.), Association of Technical Textiles Manufacturers and Processors Vs Union of India ,22 (2023) 12 Centex 195 (Del.) and Phonographic Performance Limited Vs State of Goa and ors.33 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 cosm
