Rs. 124 Crore GST Liability on Two-Wheeler Seats Misclassification for 6 AYs: Madras HC Orders to issue Separate Notices for Availing 2024 Amnesty Scheme [Read Order]

In a recent ruling, the Madras High Court ordered the issuance of separate Goods and Services Tax ( GST ) liability notices on two-wheeler seat misclassification for six assessment years. The decision was made to allow the petitioner to avail of Amnesty Scheme 2024.

Uno Minda Limited, the petitioner challenged the impugned show cause notice dated July 25, 2024, which included a demand for a shortfall in GST payment due to the misclassification of two-wheelers.

The main issue of the case was whether the two-wheeler seats should be classified under CTH 9401 for furniture, attracting 18% GST, or under CTH 8714 which covers parts and accessories of two-wheelers, attracting 28% GST

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The petitioner had classified two-wheeler seats under Customs Tariff Heading (CTH) 9401, whereas, the authorities asserted they should have been classified under CTH 8714, which would have resulted in a higher GST rate of 28% instead of the 18% they had been paying between July 2017 and October 2023.

The petitioner’s counsel argued that their classification of two-wheeler seats under CTH 9401 was based on the interpretation of the Customs Tariff Act, and they deposited 10% of the differential GST amount under protest amounting to Rs. 124.74 crores.

The petitioner’s counsel prayed to quash the single show cause notice covering six assessment years and issue separate notices for each year. This would help the petitioner to benefit from the Amnesty Scheme, which allows a waiver of interest and penalties.

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The counsel relied on the Titan Company Ltd., vs the Joint Commissioner of GST & Central Excise, Salem, 2024 case, where the court set aside the bunching of show cause notices. The petitioner’s counsel further submitted that they would not claim a refund of Rs.1,24,74,14,950 which was already deposited and would not raise any limitation issues.

The respondent’s counsel did not oppose the petitioner’s submission and left the matter for the court’s consideration.

Justice Krishnan Ramasamy heard both sides' arguments. The court observed the petitioner's intention to avail Amnesty Scheme and acknowledged the complexity of the classification dispute.

The court noted the petitioner’s assurance that they would not claim a refund of the Rs. 124.74 crores already deposited and would not raise any limitation issue if the show cause notices were split by year.

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Therefore, the court set aside the impugned show cause notice that covered multiple assessment years and directed the respondent to issue separate show cause notices for each year within two weeks.

The petitioner’s writ petition was disposed of with the direction that no costs were to be imposed and the court would review the compliance of its orders on October 16, 2024.

To Read the full text of the Order CLICK HERE

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