In a major relief to Hindustan Coca Cola, the Kerala High Court recently quashed the notices issued by the Goods and Service Tax (GST) department and directed to release the seized goods which were detained on the ground of bonafide misclassification of goods.
Facts of the case:
The petitioner, Hindustan Coca Cola Private Limited is engaged in the manufacture and supply of fruit-based beverages or drinks registered in the State of Kerala. According to the petitioner, the carbonated fruit drinks manufactured by them were classified under HSN 2202 9920 under GST and discharging GST @ 12% on all intra State and inter-State supplies.
During the course of Business of supplying the goods interstate, the drinks were brought within the jurisdiction of Kerala from Karnataka Manufacturing Plant and the vehicles carrying the goods were intercepted on the basis that the goods were wrongly classified, in fact, they would be falling under the head 2202 10, for which the GST rate is 28%. Consequently, the goods were detained by the authority and the notices were issued.
Interpretation of law and conclusions:
Aggrieved by the order, the petitioner approached the High Court contending that it was not a case of tax evasion but a bonafide dispute concerning the eligibility of tax ie. the rate of tax. The single-judge bench relying on the decision in J.K Synthetics Limited V. Commercial Taxes Officer held that the charging provisions must be construed strictly but not the machinery provisions which would be construed like any other statute.
Justice Amit Rawal, while presiding over the case directed the squad officer to release the seized goods on the grounds that there was a bonafide miscalculation as to whether the goods would be exigible to 12% or 28% of GST.
The High Court observed that the process of detention of the goods cannot be resorted to when the dispute is bonafide, especially concerning the eligibility of tax and, more particularly, the rate of tax.