Circulars Issued by GST Council Binding on Department: Allahabad HC quashes Demand Order ignoring Council’s Circular [Read Order]

The Allahabad High Court, while ruling that the circulars issued by the  Goods and Services Tax ( GST ) council are binding on the department, it quashed the GST demand orders issued under Section 74 of GST Act and IGST without considering the circulars.

The writ petition challenged the orders dated 21.11.2024 passed by the adjudicating authority under Section 74 of the GST Act. The impugned orders had confirmed GST demands, including Integrated GST ( IGST ), against the petitioners along with penalties, pertaining to goods falling under heading HSN 9021 primarily orthopaedic appliances.

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The petitioners argued that the department failed to consider two important  clarificatory circulars issued by the GST Council, dated 01.08.2023 (Circular No. 200/12/2023-GST) and 11.10.2024 (Circular No. 236/30/2024-GST), both of which were applicable at the time of the impugned orders. These circulars clarified the tax treatment of goods under HSN 9021 (Orthopaedic Appliances) , and the omission to consider them led to an erroneous tax demand.

On the other hand, the department contended that the petitioners should have availed the statutory appellate remedy under Section 107 of the GST Act. Moreover, the department maintained that the petitioners bore the responsibility to bring these circulars to the notice of the adjudicating authority, which they allegedly failed to do.

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Justice Pankaj Bhatia observed that circulars issued by the GST Council are binding on the department and that their non-consideration vitiated the adjudication process. The Court held that no useful purpose would be served by directing the petitioners to file statutory appeals when the fundamental issue of the binding nature of the clarificatory circulars had been overlooked at the initial stage.

Accordingly, the bench set aside the impugned orders dated 21.11.2024 and remanded the matter back to the adjudicating authority for fresh consideration. The Court directed that the benefit of the circulars dated 01.08.2023 and 11.10.2024, as claimed by the petitioners, must be specifically assessed and factored into the fresh decision. The petitioners were also permitted to file an application detailing how they qualify for the benefit of these circulars.

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To expedite proceedings, the Court instructed the petitioners to appear before the adjudicating authority on 11.03.2025 at 12:00 noon, along with their submissions. The adjudicating authority was directed to pass a fresh order within four weeks thereafter, in accordance with law. With these directions, the High Court disposed of both writ petitions.

To Read the full text of the Order CLICK HERE

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