GST rate dispute on tyres, tubes and flaps led to interim protection against coercive recovery of input tax credit demand.

Pending a writ petition challenging recovery of input tax credit demand, the Delhi HC considered whether coercive recovery could proceed and whether interim protection was justified. The dispute concerned the GST rate applicable to tyres, tubes and flaps, including whether the supplies amounted to a bundled supply and whether tax at 28% was payable on tubes and flaps. The Court recorded that the petitioners' submissions were not insubstantial and granted interim protection by restraining coercive steps under the impugned order until the next date of hearing.

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Issues: Whether, pending consideration of the writ petition, coercive steps could be taken to recover the input tax credit demand arising from the order-in-original, and whether the petitioners had made out a prima facie case for interim protection.

Analysis: The petitioners sought restraint against coercive recovery of the disputed input tax credit, interest and penalties. The controversy centred on the applicable GST rate on tyres, tubes and flaps, including whether the supplies constituted a bundled supply and whether the petitioners were liable to tax at 28% on tubes and flaps. The Court recorded that the petitioners' contentions were not insubstantial and found it appropriate to grant interim protection.

Outcome: Coercive steps pursuant to the order dated 13.09.2023 were restrained until the next date of hearing, and notice was issued with timelines for reply and rejoinder.

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