Case Details: Mercedes-Benz India Pvt. Ltd. Versus Union of India (2025) 30 Centax 343 (Bom.)
Judiciary and Counsel Details
- Firdosh P. Pooniwalla & B.P. Colabawalla, JJ.
- S/Shri Prasad Paranjape, Kumar Harshvardhan, Advs. & Dhruvi Shah, Adv. i/b. Lumiere Law Partner for the Petitioner.
- S/Shri Jitendra Mishra, Ms Mamta Omle & Rupesh Dubey, Advs. for the Respondent.
Facts of the Case
The petitioners, engaged in the manufacture and supply of motor vehicles, challenged the levy of Compensation Cess at the rate of 22% under Sr. No. 52B of Notification No. 1/2017-Compensation Cess (Rate), on the ground that their vehicles did not meet the minimum requirement of 170 mm ground clearance when measured in a laden condition. For the period from September 2017 to July 2022, they contended that the term ‘Ground Clearance’ used in the said entry should be construed as laden ground clearance, aligning with industry practice and vehicle certification norms under motor vehicle regulations.
However, the tax authorities contended that ground clearance should be measured in the unladen condition, relying upon the later clarification issued by the GST Council and subsequent amendment introduced through Notification No. 3/2023-CC (Rate), dated 26-07-2023. This Notification amended Entry 52B to explicitly define ‘Ground Clearance’ as unladen clearance. A consequential clarification was issued by the Board through Circular No. 247/04/2025-GST, stating that the amendment is prospective in nature and applicable only from 26-07-2023. Nevertheless, the impugned order was passed treating the amendment as retrospective and thereby sustaining the levy of higher cess for the disputed period. The petitioners, therefore, sought relief before the Hon’ble High Court.
High Court Held
The Hon’ble High Court held that the amendment introduced via Notification No. 3/2023-CC (Rate), dated 26-07-2023, which defined ground clearance in an unladen condition for Entry 52B of the Compensation Cess Notification, is prospective in nature. It was observed that Circular No. 247/04/2025-GST, issued by the Board, had categorically clarified that the said amendment is effective only from 26-07-2023 and does not apply retrospectively.
The Court concluded that this clarification is binding on the tax authorities under the administrative discipline of the GST regime. Accordingly, for the period prior to 26-07-2023, the applicable Compensation Cess rate had to be determined based on the ground clearance of motor vehicles measured in a laden condition. The Court set aside the impugned order to the extent it applied the amended provision retrospectively and provided relief to the petitioners.
List of Circulars and Notifications Cited
- Circular No. 247/04/2025-GST dated 14th February, 2025
- Sr. No.52B of Notification No.1/2017-CC (Rate) dated 28th June, 2017, as amended by 05/2017-CC (Rate) dated 11th September, 2017
- Notification No. 3/2023 – CC (Rate) dated 26th July, 2023
