In a significant case the Madras High court disposed of writ petition by directing to reply to GST DRC-01 with respect to the HSN classification of electrical lighting. The above writ petitions are filed by the M/s.SL Lumax Limited. The petitioner is engaged in the business of manufacturing and supplying electrical lighting or signaling equipment used in motor vehicles.
The petitioners, who are listed as the third petitioner in each of the writ petitions, have asked for an interim stay of the summons’ execution to be applied to the appropriate District Collector of each of the five Districts. The petitioner was filing returns and paying applicable taxes by classifying the goods under chapter heading 8512 of the then Central Excise Tariff.
After the introduction of GST, the rate of CGST payable on various goods was notified. In the initial period commencing from 01.07.2017, the parts manufactured by the petitioner and falling under Chapter 8512 attracted 28% GST in the aggregate.
Under Notification No.41/2017 Central Tax ( Rate ) dated 14.11.2017, the tax rate was lowered to 18% overall as of November 16, 2017. As a result, as of November 14, 2017, the petitioner was paying 18% in taxes on these purchases.
Thereafter the petitioner received an intimation in Form DRC-01A on 11.12.2023 stating that the goods manufactured by the petitioner are classifiable under chapter 8708 and not under 8512 and indicating the amount payable by the petitioner.
Accordingly the petitioner replied that the goods are correctly classified under chapter 8512. Subsequently the show cause notices impugned herein were issued on 31.01.2024 upon receipt of the petitioner’s reply.
Dushyant Dave Senior Counsel, for petitioners, argued that After presuming and judging that the products belong in Chapter 8708 rather than 8512, the show cause notices were sent out. He also submits that the show cause notices were issued by relying on the judgment of the Supreme Court in Westinghouse Saxby Farmets Ltd. v. Commissioner of Central Excise, Calcutta.
C. Harsha Raj, Additional Solicitor General appearing for the respondent submitted that classification should be undertaken either by the assessing officer or the authority for advance rulings. Further He also points out that a show cause notice is merely a starting point and that upon receipt of the assessee’s reply, the assessing officer would complete the assessment only upon taking into consideration all relevant material.
The single bench during the proceedings observed that “In multiple judgments of this Court and the Supreme Court, the HSN Explanatory notes have been referred to and relied upon as an authoritative guide to issues relating to classification.”
Further the bench observed that the petitioner has also placed for consideration Instruction No.1/2022, which refers to several judgments of the Supreme Court. If the petitioner / assessee placed this material before the assessing officer, it is needless to say that the assessing officer is under an obligation to consider this material with an open mind in an objective manner before concluding the assessment.
Therefore the Single bench of Justice Senthilkumar Ramamoorthy disposed of by directing the petitioner to reply to the to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter conclude the assessments by taking note of the observations set out above respective show cause notices. Upon receipt thereof, the assessing officer is directed.
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