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2024 (6) TMI 896 - CALCUTTA HIGH COURTDenial of refund of accumulated Input Tax Credit on account of inverted duty structure - Classification of Spunbonded Polypropylene Bed Sheets under GST - HELD THAT - Upon a thorough examination of the documents presented to the Court and taking into account the arguments put forth by the parties, this Court opines that respondent no. 4 inadequately considered various factual elements in its decision-making process. It is firmly established, as reiterated by the Supreme Court in Puma Ayurvedic 2006 (3) TMI 141 - SUPREME COURT , that the onus of proving a product's classification under a specific tariff heading lies with the revenue authority, which must demonstrate that such classification aligns with the understanding of consumers or common parlance. However, the respondent authorities have failed to fulfil this burden of proving that the PPSB Bed Sheets, manufactured by the petitioner, fall under tariff heading 5603 rather than 6304. As established by the Supreme Court in Union of India v. Garware Nylons Ltd 1996 (9) TMI 123 - SUPREME COURT , the burden of proof rests with the taxing authorities herein the respondent authorities to substantiate their claims regarding the taxable nature of a particular case or item. Mere assertions in this regard hold no weight. Thus, this Court has maintained that there must be tangible evidence to support the appropriate findings, which may be presented either orally or through documentation. The order of the appellate authority are quashed and set aside - application disposed off.
Issues Involved:
1. Classification of Spunbonded Polypropylene Bed Sheets under GST. 2. Procedural fairness and principles of natural justice in issuing Show Cause Notices. 3. Entitlement to refund of accumulated Input Tax Credit due to inverted duty structure. 4. Entitlement to interest on delayed refund. Summary: Classification of Spunbonded Polypropylene Bed Sheets under GST: The petitioner, engaged in manufacturing and supplying non-woven fabrics and Spunbonded Polypropylene Bed Sheets (PPSB Bed Sheets), classified these under chapter headings 5603 and 6304 of the Customs Tariff Act, 1975. The appellate authority, however, classified these bed sheets under heading 5603, denying a refund of Rs. 39,61,030/- due to an inverted duty structure. The petitioner argued that PPSB Bed Sheets should be classified under heading 6304, taxed at 5%, as they are made-up textile articles, not plastic products. Procedural Fairness and Principles of Natural Justice: The petitioner contended that the Show Cause Notices lacked specificity and failed to provide a rationale for questioning the classification. Additionally, the respondent no. 5 passed orders without granting an opportunity for a fair hearing, violating the Principles of Natural Justice. The petitioner emphasized that the classification should align with the Common Parlance Test, as supported by judicial precedents. Entitlement to Refund of Accumulated Input Tax Credit: The petitioner applied for a refund of accumulated Input Tax Credit due to the inverted duty structure, as per Section 54(3) of the CGST Act and Rule 89 of the CGST Rules. The refund was denied by respondent no. 5, who argued that the final products should be classified under Chapter 39 and taxed at 18%. The appellate authority revised this decision, categorizing PPSB Bed Sheets under heading 5603 and taxed at 12%. Entitlement to Interest on Delayed Refund: The petitioner claimed interest on the delayed refund under Section 56 of the CGST Act, as the refund remained unprocessed beyond the stipulated sixty-day period. The petitioner cited the Supreme Court's decision in Ranbaxy Laboratories Ltd. v. UOI to support this claim. Court's Decision: The Court found that the respondent authorities failed to prove that PPSB Bed Sheets fall under heading 5603 instead of 6304. The Court emphasized the importance of tangible evidence to support classification claims, as established in Puma Ayurvedic (supra) and Union of India v. Garware Nylons Ltd. The Court concluded that the respondent's decision lacked evidentiary support and proper consideration of pertinent factual and legal principles, necessitating a reassessment of the matter. The impugned order was quashed, and the appellate authority was directed to reassess the facts de novo, ensuring impartiality. All pending applications were disposed of, and there was no order as to costs. Urgent Photostat certified copies of the judgment were to be supplied to the parties upon fulfillment of requisite formalities.
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