Importers of denatured ethyl alcohol drag government to court over GST classification issue
Synopsis :In the writ petition, the importer said that the customs department’s stand could impact the supply of some of the crucial materials needed during the Covid pandemic.
Importers of denatured ethyl alcohol, a raw material used in hand sanitisers and disinfectants, and a constituent used in Remdesivir, have approached the Bombay High Court after the customs department initiated investigations into the classification of imported products.
Hearing the writ petition filed by one of the companies, Satyam Petrochemicals, the court asked the customs department to give at least a week’s notice before taking any “coercive steps”.
The importers had claimed that the customs department had conducted seizures that could have impacted their supply and created a shortage of the raw material.
“Any coercive action which impacts the imports of any essential raw material can have an impact on the supply of essential output supplies and any coercive measure must be tested in writ courts,” said Abhishek A Rastogi, partner at Khaitan & Co. “Any summons that are issued without jurisdiction must also be tested before the writ court so that there is fair adjudication against the taxpayers.”
In the writ petition, the importer said that the customs department’s stand could impact the supply of some of the crucial materials needed during the Covid pandemic.
The categorisation dispute over the raw material emanates from how it can be defined and the tax rate applicable.
Importers of denatured ethyl alcohol have been paying a lower or concessional rate of customs duty over the years as this was categorised as ‘excisable goods’.
Until recently, these importers were only paying 2.5% duty on all their imports.
Now, they have been asked to cough up an additional 2.5% duty.
However, under the new GST framework, this part—excisable goods—was injected into the new regulations and that is causing confusion, say tax experts.
The customs department said that since excise is not part of GST, the importers must pay additional taxes as per the existing regulations.
Some of the companies had in March last year approached the Gujarat High Court and Bombay High Court in this regard.
The Gujarat High Court had asked the indirect tax department to submit its explanation after several companies importing a key raw material used to make sanitisers and disinfectants dragged the government to court following their inability to avail benefits under the Goods and Services Tax (GST) framework.
Tax experts say raw material importers have come under the scanner as their imports grew during the pandemic.
SOURCE: The Economic Times