No vested power exist with Tax Research Unit (TRU) to issue circular under the GST law

The Delhi High Court has ruled that the Tax Research Unit (TRU) does not have the legal authority to issue circulars clarifying the classification of goods under GST law. The court found no provision in the CGST Act that grants such power to the TRU, stating this authority rests exclusively with the Central Board of Indirect Taxes and Customs (CBIC). Consequently, a specific circular issued by the TRU regarding the classification of polypropylene bags was quashed.

The Hon'ble Delhi High Court in the case of Association of Technical Textiles Manufacturers and Processors &Anr. V. Union of India & ors. [W.P.(C) 5933/2019 dated November 16, 2023] held that, the respondents could not draw attention to any provision of the Central Goods and Services Tax, 2017 ("the CGST Act"), in terms of which the Tax Research Unit ("TRU") could be said to have been clothed with the authority or jurisdiction to render a clarification, with respect to the classification of goods and articles. That power clearly appears to stand conferred upon the Board exclusively. We are thus of the considered opinion that no authority vested in the TRU to issue the clarification impugned before us. Thus, in the absence of a conferral of any power upon the TRU, or it being recognized as being statutorily enabled to issue any clarification or directive under Section 168 of the CGST Act, Circular No. 80/54/2018-GST dated December 31, 2018, is liable to be quashed and set aside on this ground alone and thus, the writ petition shall stand allowed.

Facts

Association of Technical Textiles Manufacturers and Processors and ANR.("the Petitioners") filed writ petition before the Delhi High Court aggrieved by Circular No. 80/54/2018-GST dated December 31, 2018 ("the Impugned Circular"), issued by the TRU clarifying that polypropylene woven and non-woven bags including those laminated with Biaxially Oriented Polypropylene are classifiable under Chapter 39 of First Schedule with the Tariff Heading 3923 of the Customs Tariff Act, 1975 ("the Customs Tariff Act").The Petitioners contend that polypropylene non-woven fabric is a textile, which is classifiable under Chapter 56 with Tariff Heading 5603 of the Customs Tariff Act. 
Further, the Petitioners drew attention to Section 168 of the CGST Act and submitted that provision, the power to issue orders, instructions, or directions to Central Tax Officers stands vested exclusively in the Central Board of Indirect Taxes and Customs ("the CBIC"), and even if clarification about classification were to be issued under the CGST Act, the same could have been achieved only by way of a directive issued by the CBIC and none other.

Issue

Whether circular issued by the TRU stands vested under the CGST Act?

Held

The Hon'ble Delhi High Court in the case of W.P.(C) 5933/2019 held as under:

• Noted that, the Impugned Circular while purporting to convey a position with respect to the classification of non-woven polypropylene bags has rested its conclusions solely on the basis of the provisions contained in Chapter 39. It has neither alluded to Section XI of the First Schedule to the Customs Tariff Act nor has it referred to Chapter 56 thereof. The contention of the petitioners that non-woven polypropylene is an article which would fall within Tariff Heading 5603 was neither questioned nor contested before us by the respondents. In any case, a reading of the impugned circular would establish that it fails to examine the issue on the anvil of the distinction which the Customs Tariff Act appears to construct when it places plastics under Chapter 39 and textiles and articles thereof separately in Section XI, and more particularly, as was contended by the petitioners in Chapters 56 and 63 of the said enactment. The Impugned Circular also fails to advert to the Notes placed in Chapter 39, and which in unambiguous terms, exclude textiles from the ambit thereof.
• Opined that, the conflict of opinion that may exist would have to be resolved by parties taking appropriate steps as contemplated under the CGST Act.
• Further opined that, the respective side of the parties failed to place adequate material related to classification of polypropylene woven and non-woven bags and so without the proper evidence the court cannot give opinion on classification issue and any findings should not be founded on material which is tenuous and inadequate.
• Held that, the Revenue could not draw our attention to any provision of the CGST Act, in terms of which the TRU could be said to have been clothed with the authority or jurisdiction to render a clarification with respect to classification of goods and articles. That power clearly appears to stand conferred upon the Board exclusively. We are thus of the considered opinion that no authority vested in the TRU to issue the clarification impugned before us. In the absence of a conferral of any power upon the TRU, or it being recognized as being statutorily enabled to issue any clarification or directive under Section 168 of the CGST Act, the circular is liable to be quashed and set aside on this ground alone. 
• Further held that, the writ petition itself stood restricted to the validity of the circular, it would be imprudent for us to hand down a verdict imbued with attributes of finality. We are thus of the considered opinion that the issue of classification should be left open for the consideration of the competent authority in appropriate proceedings. Thus, writ petition stands allowed. The Impugned Circular is hereby quashed.