The Gujarat High Court has directed the GST Council to decide on compensation cess on Branded Tobacco Products export via merchant exporters.
The bench of Justice Bhargav D. Karia and Justice D.N.Ray has observed that till the GST Council considers the issue in accordance with law for recommendation of the exemption from levy of Compensation Cess, the respondents shall not initiate further proceedings by issuing show cause notice or by passing any adjudication order in respect of levy of Compensation Cess at normal rate on the goods supplied to the merchant exporter for export if the petitioners fulfill the conditions as prescribed under Exemption Notification No.40/2017 and Exemption Notification No.41/2017 and also file an undertaking before the respondent authorities to deposit the Compensation Cess if GST Council recommends otherwise.
The petitioner/assessee is engaged in the business of manufacture of branded tobacco products falling under HSN 24039910 on which GST is payable at the rate of 28% and Compensation Cess is payable at the rate of 160%. The goods manufactured by the petitioners are exported directly or through merchant exporters.
The goods supplied by the petitioner i.e. branded tobacco is always leviable to excise duty and NCCD even after introduction of GST and such excise duty and NCCD is payable in addition to GST.
The petitioner has also complied with the conditions of Notification No.42/2001-CE(NT) dated 26.06.2001 issued under Rule 19(3) of Central Excise (No.2) Rules, 2011 for export of goods without payment of excise duty and NCCD.
The officers of DGGI, Surat Zonal Unit initiated an investigation on 12.06.2021 against the petitioner in respect of non payment of Compensation Cess on supplies of tobacco made to the merchant exporters.
The petitioner has preferred the petitions though alternative remedy is available under the provisions of GST Act to challenge the order before the Commissioner (Appeals) on the ground that the impugned order is violative of Article 14 and Article 19(1)(g) of the Constitution of India.
The court directed to keep the operation and implementation of orders in abeyance till the GST Council reconsider on the issue of recommending exemption from payment of Compensation Cess on the products supplied by the petitioners to merchant exporters for export at par with recommendation issued for exemption from levy of GST and IGST in excess of 0.1% in its 22nd Meeting which has resulted into issuance of Notification No.40/2017 and Notification No.41/2017 dated 23.10.2017.
Case Details
Case Title: M/S. Sopariwala Export Pvt. Ltd. Versus Joint Commissioner, Cgst And Central Excise & Ors.
Case No.: R/SPECIAL CIVIL APPLICATION NO. 6701 of 2023
Date: 09/05/2025
Counsel For Petitioner: V Sridharan, Senior Advocate With Mr Anand Nainawati
Counsel For Respondent: Paresh M Dave
