The Delhi High Court has on 16 November 2023 observed that the Tax Research Unit (TRU) of the Ministry of Finance has not been clothed with the authority or jurisdiction to render a clarification with respect to classification of goods.
Taking note of Section 168 of the Central Goods and Services Tax Act, 2017, the Court also observed that such power is exclusively conferred upon the Central Board of Indirect Taxes and Customs (‘CBIC’ or ‘Board’).
Quashing Circular No. 80/54/2018-GST, dated 31 December 2018, issued by the TRU in respect of classification of polypropylene woven and non-woven bags, the Court also noted that the Circular while clarifying on classification of the product under Chapter 39 rested its conclusions solely on the basis of the provisions of Chapter 39 while not alluded to Section XI of the Customs Tariff Act, 1975 nor referred to Chapter 56 or 63 thereof. It noted that the Circular also failed to advert to the Notes in Chapter 39, which in unambiguous terms exclude textiles from the ambit thereof.
Allowing the writ petition, the Court in Association of Technical Textiles Manufacturers and Processors v. Union of India was also of the view that divergent or contrary views by the appropriate AARs’ or AAARs’ cannot be put to rest by issuance of a directive or clarification of the nature as the impugned Circular. Reliance in this regard was placed on the Supreme Court’s decision in the case of Union of India v. Bharat Forge Ltd. [2022 SCC Online SC 1018].
It may be noted that the High Court left the issue of classification open for the consideration of the competent authority in appropriate proceedings.
