Executive cannot direct authorities on alcohol-based hand sanitizer GST classification through press release lacking constitutional compliance

The Bombay HC set aside a Ministry of Finance press release dated 15.07.2020 that directed authorities to classify alcohol-based hand sanitizers as disinfectants attracting 18% GST. The court held that the press release failed to comply with Article 77 constitutional requirements and improperly transgressed judicial functions. The executive cannot direct judicial or quasi-judicial authorities on product classification matters, as such determinations fall within their exclusive province and must be exercised independently. While the petition was partly allowed by quashing the press release, the show cause notice remained valid as it could have been issued independently.

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Issues Involved:

1. Classification of alcohol-based hand sanitisers as "medicaments" or "disinfectants."
2. Validity of the Press Release dated 15.07.2020 issued by the Ministry of Finance.
3. Authority of executive instructions under Article 73 and Article 77 of the Constitution.
4. Separation of powers and the role of executive instructions in judicial/quasi-judicial functions.

Issue-wise Detailed Analysis:

1. Classification of Alcohol-Based Hand Sanitisers:

The primary contention revolves around whether alcohol-based hand sanitisers should be classified as "medicaments" or "disinfectants" for GST purposes. The Petitioner argues that these products have been consistently classified under HSN 3004 as "medicaments," attracting a lower GST rate. In contrast, the Respondents classify them as "disinfectants," subject to an 18% GST rate. The Court, however, refrained from adjudicating this classification issue, stating that it should be resolved by the appropriate adjudicatory authorities under the Act, considering the factual and legal aspects involved.

2. Validity of the Press Release Dated 15.07.2020:

The Press Release issued by the Ministry of Finance classifies alcohol-based hand sanitisers as "disinfectants," attracting an 18% GST rate. The Petitioner challenges this as arbitrary and beyond the authority of the executive, arguing it preempts judicial and quasi-judicial determination. The Court found that the Press Release effectively directed adjudicatory authorities to classify these products in a specific manner, which is not permissible. The Court quashed the Press Release, emphasizing that the classification should be independently determined by judicial and quasi-judicial bodies without influence from such executive instructions.

3. Authority of Executive Instructions Under Article 73 and Article 77:

The Respondents argued that the Press Release was an executive instruction under Article 73, which allows the Union to exercise executive power over matters Parliament can legislate. However, the Court noted that the Press Release did not explicitly indicate it was issued under Article 73 or 77. Without compliance with Article 77's requirements, the Court could not accept the Press Release as a legitimate exercise of executive power. The burden to prove such compliance was on the Respondents, which they failed to discharge.

4. Separation of Powers and Executive Instructions:

The Court highlighted the doctrine of separation of powers, stating that the executive cannot encroach upon judicial functions. The classification of products is a matter of interpretation, which falls within the judicial and quasi-judicial domain. The executive cannot direct these authorities on how to interpret and apply the law. The Court cited precedents affirming that executive instructions cannot override or dictate judicial determinations, reinforcing the need for independent adjudication by the relevant authorities.

Conclusion and Reliefs:

The Court quashed the Press Release dated 15.07.2020, ensuring that the classification of alcohol-based hand sanitisers is determined independently by judicial and quasi-judicial authorities. The impugned show cause notice cum demand notice can proceed, but must be decided on its merits without influence from the quashed Press Release. The Court emphasized maintaining the separation of powers and ensuring that executive instructions do not interfere with judicial functions. The petition was partly allowed, with no order as to costs.

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