HC Relegates Factual Dispute on “Mixed Supply” Classification to Appellate Authority.
Issue
Can a High Court, in its writ jurisdiction, adjudicate a complex factual dispute regarding the classification of supplies (i.e., whether they are “mixed,” “composite,” or “standalone”), or must the taxpayer first exhaust the statutory appellate remedy, even if the appeal is time-barred?
Facts
- The petitioner, a manufacturer of diagnostic items, makes two types of supplies: standalone reagents and reagents bundled with instruments.
- The GST department passed an Order-in-Original, treating all supplies as “mixed supply,” which subjected them to the highest applicable GST rate, and confirmed a substantial demand.
- The petitioner disputed this, contending that the supplies were either standalone (taxable as such) or “composite supplies” (where the instrument is the principal supply), which would attract a different rate.
- The petitioner filed a writ petition challenging the order on these classification grounds. This filing and subsequent refiling (due to defects) consumed time, causing the statutory deadline for an appeal under Section 107 to expire.
- The petitioner sought relief on the merits from the High Court or, alternatively, permission to file the time-barred appeal.
Decision
- The High Court did not entertain the writ petition on its merits.
- It held that determining the nature of the supplies is a complex factual examination that must be undertaken by a fact-finding authority (the Appellate Authority), not by a writ court.
- The petitioner was relegated to the statutory appellate remedy under Section 107.
- The court used its writ power to provide a specific remedy for the delay:
- It granted the petitioner a fresh window (until November 15, 2025) to file the appeal along with the requisite pre-deposit.
- It directed the Appellate Authority to hear the appeal on its merits and not to dismiss it on the ground of limitation (delay), considering the time was spent in the bona fide pursuit of the writ petition.
Key Takeaways
- Writ Court is Not for Factual Disputes: This case is a classic example of the “Rule of Alternate Remedy.” High Courts will not adjudicate complex factual disputes (like classification of supply) in their writ jurisdiction.
- Appeal is the Proper Forum: The statutory appellate authority is the correct forum for a first-level challenge on the merits of an assessment, as it is designed to conduct the necessary factual inquiry.
- Bona Fide Writ Petitions Condon Delay: A taxpayer does not lose their right to appeal just because they first filed a writ petition in good faith. The time spent in the High Court is a valid reason for the court to condone the delay in filing the statutory appeal.
- Preservation of One Appeal: The court’s order ensures the taxpayer is not left without a remedy and gets to exercise their statutory right to one round of appeal on the merits of the case.
HIGH COURT OF DELHI
ORTHO Clinical Diagnostics India (P.) Ltd.
v.
Union of India
PRATHIBA M. SINGH and SHAIL JAIN, JJ.
W.P.(C) No.15083 of 2025
CM APPL. Nos.62049 and 62050 of 2025
CM APPL. Nos.62049 and 62050 of 2025
SEPTEMBER 26, 2025
V. Lakshmikumaran, Yogendra Aldak and Agrim Arora, Advs. for the Petitioner. Akash Verma, Sr. Standing Counsel, Ms. Aanchal Uppal and Ms. Dhairya Gupta, Advs. for the Respondent.
ORDER
1. This hearing has been done through hybrid mode.
CM APPL. 62050/2025 (for exemption)
2. Allowed, subject to all just exceptions. Application is disposed of.
W.P.(C) 15083/2025, CM APPL. 62049/2025
3. The present petition challenges the impugned Order-in-Original dated 7th January, 2025 by which the demand raised against the Petitioner has been confirmed in the following terms:
” 38. In consideration of the preceding discussions and findings, I hereby proceed to issue the following order:-
ORDER:
| (i) | I hereby confirm the demand of Rs.39,82,52,601/-(Rupees Thirty Nine Crores Eighty Two Lacs Fifty Two Thousand Six Hundred one only) (IGST of Rs.19,59,52,169/-, CGST & SGST of Rs.10,11,50,216/-each) under Section 74 (9) of CGST Act, 2017 read with corresponding provisions of Delhi GST Act, 2017 and IGST Act, 2017; along with applicable Interest under Section 50 of CGST Act, 2017; |
| (ii) | I hereby confirm the demand of Interest under Section 50 of CGST Act, 2017 read with corresponding provisions of Delhi GST Act, 2017 and IGST Act, 2017; and |
| (iii) | I hereby impose a penalty of Rs.39,82,52,601/-(Rupees Thirty Nine Crores Eighty Two Lacs Fifty Two Thousand Six Hundred one only) (IGST of Rs.19,59,52,169/-, CGST & SGST of Rs.10,11,50,216/-each) under Section 74 (9) read with Section 122 of the CGST Act, 2017 read with corresponding provisions of Delhi GST Act, 2017 and IGST Act, 2017.” |
4. The case of the Petitioner is that it is engaged in the manufacture and supply of reagents, consumables and calibrators which are used for diagnostic testing. The customers of the Petitioner include laboratories and hospitals to whom the Petitioner provides reagents along with laboratory equipment.
5. As per Mr. Lakshmikumaran, ld. Counsel for the Petitioner, pure reagents attract a tax at 5% or 12% depending upon the type of reagents. However, the GST Department has proceeded on the basis that all the supplies provided by the Petitioners are ‘mixed supply’ under Section 2 (74) of the Central Goods and Services Tax Act, 2017 and hence, the highest rate of 18% has been imposed. The Petitioner is aggrieved by the said categorisation, and it is the Petitioner’s case the same would constitute ‘composite supply’.
6. The submission on behalf of the Petitioner is that there are two categories of supplies made by the Petitioner:
| (i) | Only reagents; |
| (ii) | Reagents along with instruments. |
7. The first category constitutes a substantial portion of the supplies and hence, they could not have been categorized as ‘mixed supplies’. Even if the GST Department’s case is taken at its best, the mixed supplies rate would only apply qua the second category of supplies.
8. Thus, the question raised in the present petition is whether the supply of reagent with equipment would constitute ‘composite supply’ or ‘mixed supply’ and what would be the rate of tax that would be attracted in such a case. Secondly, whether the demand in respect of the first category of supplies is even tenable.
9. In the opinion of this Court, this issue would have to be decided by the Appellate Authority, as there would be a factual examination that would be required. In addition, the impugned order itself is an appealable order under Section 107 of the CGST Act.
10. It is noted that the impugned order is dated 7th January, 2025 and the writ petition was stated to have been first filed on 4th April, 2025, but was returned under defects and has been refiled on 24th September, 2025. This in the opinion of this Court would be at best a delay in refiling.
11. The Petitioner is accordingly relegated to avail of the appellate remedy under Section 107 of the CGST Act and file the appeal by 15th November, 2025 along with the requisite pre-deposit. If the same is filed within the said time, the matter would be heard on merits and shall not be dismissed on the ground of limitation.
12. A personal hearing shall be given by the Appellate Authority and a reasoned order shall be passed in accordance with law.
13. Petition is disposed of in these terms. All pending applications, if any, are also disposed of.