Facts of the Case

The petitioner, PEETEE Coach Builders Private Limited, Karur, engaged in bus body building, received a show cause notice dated 15.12.2020 from the Commissioner of GST & Central Excise, Tiruchirapalli, under Sections 73 and 74 of the CGST Act, 2017, proposing GST at 28% by treating its activity as supply of a motor vehicle rather than job-work. The petitioner contended it merely built bodies on chassis supplied by the State Transport Corporation under a tender, attracting only 18% GST as per CBIC Circular No. 52/26/2018-GST dated 09.08.2018. It approached the Madurai Bench of the Madras High Court under Article 226 seeking certiorari to quash the notice as contrary to the binding circular and without jurisdiction.

Issues Involved

  1. Whether a show cause notice issued under Sections 73/74 of the CGST Act, 2017, proposing GST at 28% on bus body building activity, can be quashed as without jurisdiction solely on the ground that it is contrary to CBIC Circular No. 52/26/2018-GST.
  2. Whether the applicability of the circular to the facts of a given case is a matter to be examined by the adjudicating authority on merits, or one that can be decided in writ jurisdiction at the show cause notice stage.

Petitioner's Arguments

  • The notice is contrary to CBIC Circular No. 52/26/2018-GST, which clarifies that fabrication of a bus body on a chassis supplied by the principal is a job-work service liable to 18% GST, not 28%.
  • The tender terms confirm the petitioner only builds bodies on chassis supplied by the customer and does not supply the complete bus.
  • Even the 4th respondent's counter affidavit admitted that the petitioner was engaged only in bodybuilding on chassis supplied by the State Transport Corporation, making the attempt to distinguish the circular unwarranted; hence the notice is without jurisdiction.

Respondent's Arguments

  • The writ petition is premature and liable to be dismissed since the petitioner has an efficacious alternate remedy of filing a reply before the adjudicating authority, who could then consider Circular No. 52/26/2018-GST.
  • Reliance was placed on the Supreme Court's decision in Union of India vs. Coastal Container Transporters Association (Civil Appeal No. 2276 of 2019) against writ interference at the notice stage.

Court Order/Findings

  • A show cause notice under Sections 73/74 cannot be held without jurisdiction merely because a CBIC circular may, on merits, clarify a lower rate.
  • CBIC circulars are binding on the tax authorities, per Collector of Central Excise, Vadodara vs. Dhiren Chemical Industries, (2002) 2 SCC 127, though not binding on courts, per CCE, Bolpur vs. Ratan Melting and Wire Industries, (2008) 13 SCC 1.
  • Whether the circular applies to the facts is a matter for the adjudicating authority on merits, not for writ jurisdiction at the notice stage.
  • The Court disposed of the petition, directing the petitioner to file its reply within 60 days, with the 4th respondent to pass an independent, reasoned order within a further 30 days, after considering Circular No. 52/26/2018-GST and hearing the petitioner.

Important Clarification

  • Bus body building on job-work basis, where the chassis is supplied by the principal, attracts 18% GST as a service; where the body builder owns the chassis and supplies a complete bus, the transaction attracts 28% GST as a supply of a motor vehicle — this distinction under CBIC Circular No. 52/26/2018-GST binds the tax authorities.
  • A show cause notice is not rendered jurisdictionally invalid merely because it appears inconsistent with a beneficial circular; the assessee's remedy is to raise the circular before the adjudicating authority, who is bound to consider it while deciding on merits.

Sections Involved

  • Section 73, CGST Act, 2017 — determination of tax not paid, for reasons other than fraud.
  • Section 74, CGST Act, 2017 — determination of tax not paid by reason of fraud or wilful misstatement.
  • Article 226, Constitution of India — writ jurisdiction of High Courts, invoked to challenge the show cause notice.

Decision – In Favour of

Disposed of with directions, in part in favour of the Assessee — the show cause notice was not quashed, but the adjudicating authority was directed to decide the matter afresh after mandatorily considering CBIC Circular No. 52/26/2018-GST and hearing the petitioner.

Related Case Laws

No related case laws are available on this site at present for cross-reference on this specific point.

Case Details

  • Court: Madurai Bench of Madras High Court
  • Case No.: W.P.(MD) No. 2133 of 2021
  • Coram: Hon'ble Mr. Justice C. Saravanan
  • Date of Order: 06.04.2022

Link to Download the Order

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