2026-VIL-242-GSTAT-LCK
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SGST Tribunal

GST - Compensation Cess - Condition of being popularly known as SUV under Entry 52B of Notification No. 05/2017-Compensation Cess (Rate) – Respondent-assessee supplied motor vehicles of Heading 8703 having engine capacity exceeding 1500 cc, and discharged Compensation Cess at 20% - The Department alleged liability at 22% under Entry 52B of Notification No. 05/2017-Compensation Cess (Rate) dated 11.09.2017 for the period from 11.09.2017 to 14.03.2024 - The Order-in-Original confirming the differential cess was set aside by the FAA - Whether the disputed models are motor vehicles popularly known as SUVs for the purposes of Entry 52B - HELD - The taxpayer supplied vehicles falling under Heading 8703. The relevant entry prescribing the higher rate of Compensation Cess applies where the vehicle satisfies the specified conditions relating to engine capacity exceeding 1500cc, length exceeding 4000 mm, ground clearance of at least the prescribed threshold, and being popularly known as an SUV - The taxpayer has contended that all these conditions must be satisfied cumulatively and that its vehicles do not fulfil the prescribed ground-clearance requirement. However, the taxpayer's contention that the vehicles are not covered by the higher rate cannot be accepted merely on the basis of its own classification or the rate of Cess charged by the manufacturer - The expression used in the pre-amendment Entry 52B is popularly known as Sports Utility Vehicles, and hence commercial identity and the manner in which the manufacturer presents the product to consumers are directly relevant. The models were represented and marketed by the manufacturer itself as SUVs, and brochures, press releases, advertisements and specifications constitute relevant evidence for determining how a product is understood in commercial and common parlance. The Respondent cannot contend that the models are outside Entry 52B merely because some technical document employs a different description - On the material placed on record, the Creta, Alcazar and Tucson satisfy the condition of being popularly known as SUVs, which however is not by itself sufficient as the prescribed ground clearance requirement must independently be satisfied - Levy of Compensation Cess - Measurement of ground clearance in laden or unladen condition for the period prior to Notification No. 03/2023-Compensation Cess (Rate) - Evidentiary value of ARAI certificates - The FAA held that for the period prior to 26.07.2023 ground clearance was to be examined in laden condition, whereas the Department relied on the manufacturer's specifications showing ground clearance above 170 mm and contended that ARAI certification is meant only for safety compliance - Whether ground clearance for the pre-amendment period is to be determined in laden or unladen condition and whether the demand is sustainable - HELD - The earlier Entry 52B did not expressly employ the words laden or unladen, and the Explanation defining ground clearance as ground clearance in unladen condition was inserted by the amendment effective 26.07.2023. The CBIC Circular only clarifies that the amendment applies on or after 26.07.2023 and does not validate a laden standard for the earlier period - Taxing statutes are strictly construed, no words can be added by implication, and any claim of a lower rate within a classification entry must be construed strictly against the assessee, so that in the absence of explicit words directing laden measurement, the unladen condition, being the default state in which a vehicle is delivered from the factory, is the only sustainable baseline - ARAI certificates are issued for safety compliance under the Central Motor Vehicles Rules and cannot be treated as conclusive for tariff classification, though they remain relevant technical evidence of physical measurement. The manufacturer's own specifications showing ground clearance above the threshold cannot be discarded as irrelevant - The Respondent's explanation that it followed the rate in the manufacturer's invoices does not absolve it of its independent statutory responsibility to determine the correct tax liability - The vehicles are liable to Compensation Cess at the higher rate and the differential cess is recoverable - Compensation Cess - Invocation of Section 74 for short payment of cess - Respondent contended that the dispute was one of interpretation of the notification, that supplies were disclosed in statutory records and that fraud, wilful misstatement or suppression was not established, while the Department alleged that a lower rate was charged to reduce tax liability and the discrepancy came to light only after investigation - Whether the differential cess is recoverable along with interest and penalty under Section 74 read with Section 11 of the Compensation to States Act - HELD - The allegations of lower rate being charged to reduce tax liability must be supported by evidence establishing the requisite intent. It was found that the Department has established that the differential Compensation Cess was short paid by reason of suppression of facts with intent to evade tax - The Order-in-Appeal passed by the FAA is quashed and set aside - The Order-in-Original confirming the differential Compensation Cess demand is fully restored – The appeal filed by the Revenue is allowed
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