Peetee Coach Builders Private Limited vs. Union Of INDIA

Facts

The petitioner, PEETEE Coach Builders Private Limited, challenged a show cause notice dated December 15, 2020, issued by the 4th respondent, the Commissioner of GST & Central Excise. The petitioner contended that the notice was contrary to Circular No. 52/26/2018-GST dated August 9, 2018, which clarifies GST rates for bus body building. The petitioner argued that they perform job work on chassis provided by the State Transport Corporation, and therefore, the applicable GST rate should be 18% for services, not 28% as proposed in the notice. The respondents argued that the writ petition was premature and the petitioner had an alternate remedy by filing a reply to the show cause notice.

Held

The Court held that while the show cause notice issued under Sections 73 and 74 of the GST Act, 2017, cannot be said to be without jurisdiction merely because there is a clarification in CBIC Circular No. 52/26/2018-GST, this circular is binding on the authorities. The Court acknowledged that the applicability of the circular must be considered on the merits of the facts and circumstances of the case. However, considering that circulars are binding on the respondents, the Court disposed of the writ petition by directing the petitioner to file a reply to the show cause notice within 60 days. The 4th respondent was directed to pass an order independently within 30 days thereafter, after considering the applicability of Circular No. 52/26/2018-GST to the facts of the case, and after affording the petitioner an opportunity to be heard. The Court did not decide the merits of the GST rate dispute but ensured the petitioner's contentions regarding the circular would be considered by the authority.

Key Issues

1. Whether the show cause notice issued by the 4th respondent, proposing GST at 28% for bus body building activity, is without jurisdiction and liable to be quashed, given the clarification in Circular No. 52/26/2018-GST dated August 9, 2018, which distinguishes between the supply of a bus (attracting 28% GST) and the service of fabrication of a body on a chassis provided by the principal (attracting 18% GST)? (Question of law and mixed fact and law, turning on the interpretation and applicability of Circular No. 52/26/2018-GST and the nature of the petitioner's activity). Petitioner's arguments: The petitioner argued that their activity falls under the second scenario described in the circular (para 12.2(b)), where they provide bodybuilding services on a chassis owned by the principal (State Transport Corporation), and thus, the applicable GST rate is 18%. They contended that the show cause notice, by proposing 28% GST, is contrary to the binding circular and therefore without jurisdiction. They also highlighted that the respondents admitted in their counter that the petitioner is engaged in bodybuilding activity on chassis supplied by the State Transport Corporation. Respondents' arguments: The respondents argued that the writ petition is premature and liable to be dismissed because the petitioner has an alternate remedy of filing a reply to the show cause notice. They cited the Supreme Court decision in Union of India and others Vs. Coastral Container Transporters Association and others.