Notification No. 3/2023 - Compensation Cess (Rate) dt. 26.07.2023-Is it retrospective?

[K.lakshmipati rao]

Dear Experts,

Greetings for the Day!

The 50th GST Council Meeting held on dt.11-07-2023. On the recommendations of GST Council, below Notification issued.

Notification No. 3/2023 - Compensation Cess (Rate) dt. 26.07.2023:

(xlv) against S. No. 52B, in column (3), for the entry, the entry “Motor vehicles known as Utility Vehicles, by whatever name called including Sports Utility Vehicles (SUV), Multi Utility Vehicles (MUV), Multi-purpose vehicles (MPV) or Cross-Over Utility Vehicles (XUV), with engine capacity exceeding 1500 cc ; Length exceeding 4000 mm and Ground Clearance of 170 mm and above.

Explanation: For the purpose of this entry, the Ground Clearance means ground clearance in unladen condition.” shall be substituted;

This notification shall come into force on 27th July 2023.

However, the GST dept., issued SCN demanding CESS @22% retrospectively w.e.f. 11-09-2017, under entry 52B by virtue of Notification No.05/2017- Compensation CESS (Rate) date 11-09-2017.

Therefore, I request the Experts to share any Supreme Court orders, wherein, we can find that any Clarifications, Amendments, Explanations of any previous Law whether Prospective or Retrospective in Nature?

Best wishes

K.Lakshmipati Rao

9618904545

AI Summary

Clarification of compensation cess notification may not create retrospective liability; late explanations can support bona fide defence.
The department issued a demand seeking higher compensation cess for past periods under the 2017 notification and cites the 2023 notification's substituted entry and explanation defining ground clearance in unladen condition. Because the statutory mechanism for inserting explanations treats explanations issued within one year as part of the original notification, and the 2023 explanation was issued after that period, the pre 2023 legal position must be determined from the 2017 entry itself. Taxpayers can contest classification, insist revenue bears the burden of proof, and use the 2023 explanation as evidence of bona fide ambiguity for limitation and penalty defenses.