2023 (3) TMI 28 - HC - Customs

Validity of SCN - SCN issued within jurisdiction or not - SCN is issued within authority under law or not - pre-determinaton of the issue - HELD THAT - As seen from the impugned show cause notice, the respondents have stated that the parts supplied by the petitioner can also be used for other purposes and only on that ground, the show cause notice has been issued stating that the classification will fall under Chapters 84 and 85 of the Customs Tariff Act 1975. The impugned show cause notice has given reasons as to why the classification of the goods will fall under Chapters 84 and 85 of the Customs Tariff Act and not under Chapter 86. If the petitioner is aggrieved by the same, necessarily the petitioner will have to respond to the same stating their objections and producing evidence to show that the classification will fall only under Chapter 86 of the Customs Tariff Act 1975. Even without responding to the impugned show cause notice, the petitioner has approached this Court prematurely challenging the said show cause notice, which in the considered view of this Court is not maintainable, after this Court had given a careful consideration to the contents of the impugned show cause notice. The judgment of the Hon'ble Supreme Court in WESTINGHOUSE SAXBY FARMER LTD. VERSUS COMMR. OF CENTRAL EXCISE CALCUTTA 2021 (3) TMI 291 - SUPREME COURT relied upon by the learned counsel for the petitioner cannot be considered at this stage in view of the categorical assertion made by the respondents that after making minor alternations, the goods sold by the petitioner to the Railways, can be used for other purposes as well. Therefore, only after a reply is sent by the petitioner to the impugned show cause notice, the real truth can be unearthed. Petition disposed off.

Summary

Issues:
Challenge to show cause notice under Section 74 of the Central Goods and Services Tax Act 2017 based on predetermined classification of goods under Chapters 84 and 85 of the Customs Tariff Act 1975 instead of Chapter 86, leading to a higher GST rate.

Analysis:
The petitioner challenged the show cause notice, contending that the respondents had predetermined the issue by classifying the goods under Chapters 84 and 85 of the Customs Tariff Act 1975, attracting an 18% GST rate, instead of Chapter 86, with lower rates. The petitioner argued that the goods were exclusively designed for Railways and could not be used for other purposes, thus falling under Chapter 86. The respondents, however, issued the notice based on the belief that the goods could be utilized for other purposes, justifying the classification under Chapters 84 and 85. The Court noted that the challenge to a show cause notice is permissible only on specific grounds, such as lack of jurisdiction, authority, or predetermined issue.

The respondents' show cause notice lacked specific references to any study report supporting their classification decision. The petitioner relied on a Supreme Court judgment stating that parts exclusively for Railways should be classified under Chapter 86. The respondents argued that the goods could serve other purposes, justifying their classification under Chapters 84 and 85. The Court emphasized that a proper response to the notice was necessary before challenging it prematurely.

The Court directed the petitioner to respond to the show cause notice within thirty days, allowing the respondents to make a final decision based on the objections raised. The judgment highlighted the importance of a detailed reply to the notice to clarify the classification issue and ensure a fair assessment. The Court refrained from influencing the final decision of the respondents, emphasizing the need for a thorough review of the objections raised by the petitioner.