2023 (8) TMI 1218 - HC - GST

Refund of amount deposited by the petitioner under protest during the investigation along with interest - respondents are insisting for deposit of the balance amount of GST demanded under the impugned notices besides interest and penalty - HELD THAT - Matter requires consideration. As an interim measure, it is provided that the effect and operation of the Circular dated 6.10.2021 (Annexure 2 to the writ petition), impugned SCN shall remain stayed provided the petitioner deposits a sum of Rs. 10 crores with the respondents within three weeks from today which shall be kept in a separate account and submits a bank guarantee of the balance amount other than cash within the same period. List this case after expiry of six weeks.

Summary

Issues Involved:
The issues involved in the judgment are the classification of "flavoured and coated illaichi" under GST, authority of the GST Council to change classification and increase GST rate, refund of deposited amount under protest, and validity of show cause notices.

Classification of Goods under GST:
The petitioner challenged the decision of the GST Council classifying "flavoured and coated illaichi" under heading 21:06 and attracting GST at 18%. The petitioner contended that their products fall under Chapter 20 and attracted 12% GST. They argued that the GST Council exceeded its authority by changing the classification and increasing the GST rate. The petitioner sought a declaration that the decision and subsequent circulars are ultra vires the CGST Act, 2017.

Refund of Deposited Amount:
The petitioner deposited Rs. 5 crores under protest during investigations and requested a refund with interest. However, the respondents demanded an additional amount of Rs. 25,36,60,985/- along with interest and penalty. The petitioner claimed that the deposited amount should be refunded as it is liable to be returned with interest.

Validity of Show Cause Notices:
The petitioner sought to quash two show cause notices dated 2.3.2023 and restrain the Addl./Joint Commissioner from proceeding with adjudication. The petitioner argued that the notices were unwarranted and insisted on the refund of the deposited amount. The Court stayed the operation of the show cause notices and circulars subject to the petitioner depositing Rs. 10 crores and providing a bank guarantee for the balance amount.

The High Court of Allahabad heard the case regarding the classification of goods under GST and the validity of show cause notices. The petitioner challenged the decision of the GST Council classifying their products under a higher GST rate, contending that the classification was incorrect and exceeded the Council's authority. The petitioner also sought a refund of the amount deposited under protest during investigations. The Court granted time for filing counter affidavit and ordered a stay on the operation of show cause notices pending further proceedings.