In a recent order, the Delhi High Court allowed the petitioner, M/s Stesalit Limited, to file a reply to the show cause notice issued in a GST classification dispute concerning Roof Mounted Package Units (RMPUs) supplied to the Indian Railways.

The Court permitted the adjudication to proceed but directed that no final order shall be given effect to without further directions, keeping it subject to the outcome of the writ petition.

The petitioner, a manufacturer of RMPUs specially designed for air-conditioning in railway coaches, challenged a circular issued by the Ministry of Finance dated 11 October 2024. The circular classified RMPUs under HSN Code 8415, attracting 28% GST, whereas the petitioner claimed the correct classification is under HSN Code 8607 (parts of railway locomotives), which attracts a lower GST rate of 18%.

Senior Advocate Balbir Singh, appearing for the petitioner, contended that RMPUs have historically been classified under HSN 8607 and that the impugned circular seeks to override the statutory adjudication mechanism by prescribing a binding classification. He argued that this amounts to an overreach of jurisdiction. The petitioner relied on advance rulings from GST authorities in Uttar Pradesh, Madhya Pradesh, and Himachal Pradesh, all of which had supported the classification under HSN 8607.

The Court examined the circular, which stated that air-conditioning machines under Heading 8415 are excluded from being classified as railway parts under Heading 8607 due to Section Note 2 of Section XVII of the Customs Tariff Act, 1975. It explicitly stated that RMPU air-conditioning machines for railways fall under HSN 8415.

Acknowledging the existence of conflicting views, the Court observed that the petitioner had been issued a show cause notice post the previous hearing and found it appropriate to allow the adjudication process to continue. However, it emphasized that the Adjudicating Authority must consider all relevant materials, including the advance rulings, the petitioner’s reply, and the contents of the impugned circular.

The Court granted the petitioner 30 days to submit a reply to the show cause notice, with adjudication to follow. It clarified that any final order by the Adjudicating Authority shall remain inoperative until further orders of the Court.

The matter has been posted for further hearing on 9 May 2025.

Case Title: M/s Stesalit Limited & Anr vs. Union of India & Ors.
Case No: W.P.(C) 3138/2025 & CM APPLs. 14824/2025, 21403/2025, 21404/2025
Coram: Justice Pratibha M. Singh and Justice Rajneesh Kumar Gupta
For Petitioner: Sr. Adv. Balbir Singh, Advs. Divyakant Lahoti, Praveena Bisht, Siddharth Tripathi, Karan Sachdeva, Shivali Shah
For Respondents: Adv. Aditya Singla (Senior Standing Counsel), Adv. Umang Misra