The Bombay High Court on Monday quashed a 2020 press release by the Union Ministry of Finance that classified alcohol-based hand sanitizers as ‘disinfectants,’ attracting an 18% GST rate. The court emphasised that such classifications fall under the purview of judicial and quasi-judicial authorities, not the executive.
A bench of Justices MS Sonak and Jitendra Jain observed that the press release expressed a definitive stance on the classification of hand sanitizers, thereby encroaching on the authority of adjudicatory bodies under the Central Goods and Services Tax (CGST) Act. “The Ministry of Finance, by issuing the press release, virtually issued a fiat to the adjudicatory judicial and quasi-judicial authority to classify all alcohol-based hand sanitizers as disinfectants attracting a GST rate of 18 per cent,” the bench remarked.
The court emphasized that the determination of whether a product falls within a specific category should be made independently by judicial and quasi-judicial authorities, without interference from the executive. “Any press release or executive instruction meant to influence or, worse still, require the judicial or quasi-judicial authorities to exercise their functions in a particular manner would interfere with their functions. This cannot be allowed,” the judges stated, adding that the executive cannot encroach on the exclusive domain of judicial authorities.
The ruling came in response to a petition filed by M/s Schulke India Pvt. Ltd, a Mumbai-based manufacturer of hand sanitizers. The company argued that its products were ‘medicaments,’ subject to a lower GST rate. However, following the 2020 press release, the Directorate General of GST Intelligence issued a show-cause notice to the company in April 2023, demanding differential tax, interest, and penalties. Schulke India challenged both the press release and the demand notice in court, asserting that classification decisions should be made by judicial or quasi-judicial bodies, not dictated by the government.
The court, while quashing the press release, refrained from invalidating the notice issued to the petitioner, noting that it could have been issued independently of the press release. The bench clarified that the company still had an alternative remedy to challenge the notice.
“We are, however, satisfied that the petitioner has made out a case for quashing the press release so that the judicial and quasi-judicial authorities under the Act can decide on the issue of classification and, consequently, the rate of tax independently without even remotely being influenced by the press release,” the court concluded.
