Supreme Court admits SLP challenging levy on extruded unfried snack pellets, despite issue not being raised before the adjudicating authority, due to High Court not entertaining the writ petition on grounds of circular violation.
Issue:
Whether a Special Leave Petition (SLP) is maintainable before the Supreme Court when a High Court has refused to entertain a writ petition challenging a GST levy on the ground that the specific issue (non-taxability of extruded unfried snack pellets prior to a certain date as per circulars) was not raised before the adjudicating authority, even if the challenge in the writ petition was based on a violation of relevant GST circulars.
Facts:
- The issue at hand involves the levy and collection of GST on “extruded unfried or un-cooked snack pellets.”
- The assessee challenged an impugned order in a writ petition before the High Court.
- The main contention in the writ petition was that the impugned order was in violation of Circular No. 200/12/2023-GST, dated August 1, 2023, and Circular No. 235/29/2024-GST, dated October 11, 2024.
- The assessee submitted that, according to these circulars, tax was not leviable on such products prior to July 27, 2023.
- The High Court, however, held that the writ petition should not be entertained because the specific issue regarding the non-taxability as per the circulars was not raised by the assessee before the adjudicating authority at the time of adjudication.
Decision:
The Supreme Court admitted the Special Leave Petition, condoning the delay in filing. The decision was in favor of the assessee.
Key Takeaways:
- Maintainability of SLP: The Supreme Court’s decision to admit the SLP indicates that it found a substantial question of law or a significant injustice that warranted its intervention, despite the High Court’s refusal to entertain the writ petition on the grounds of not exhausting the primary remedy.
- Exhaustion of Remedies vs. Merits of the Case: While the principle of exhaustion of remedies (raising all issues before the primary authority and then through appeals) is generally followed, the Supreme Court might relax this principle in cases involving interpretations of crucial circulars or when there’s a clear legal point that was overlooked or not adequately addressed at lower levels due to procedural reasons.
- Importance of CBDT/CBIC Circulars: Circulars issued by the CBDT/CBIC are generally binding on the tax authorities. If a levy is contrary to a circular, it raises a significant legal question, even if not explicitly argued at the initial adjudication stage.
- Potential for Injustice: The Supreme Court’s decision to admit the SLP suggests that the denial of tax benefit based on a circular, potentially leading to a higher tax liability than intended by the government’s own clarification, might be seen as an injustice that needs to be addressed.
- Condonation of Delay: The condonation of delay indicates that the court found sufficient cause for the delay in filing the SLP, further suggesting a desire to hear the matter on its merits.
- Scope of Review: The admission of the SLP means the Supreme Court will now examine whether the High Court was justified in refusing to entertain the writ petition and whether the tax on “extruded unfried or un-cooked snack pellets” was indeed leviable prior to July 27, 2023, in light of the cited circulars.