GSTAT Lucknow Holds SUV Ground Clearance Must Be Measured Unladen Even Before July 2023 — Declines to Follow Bombay High Court’s Mercedes-Benz Ruling

Restoring a 22% Compensation Cess demand on Hyundai Creta, Alcazar and Tucson, the Tribunal held that the 2023 ‘unladen’ explanation was clarificatory and that a laden-condition standard cannot be read into the pre-amendment entry.

The Lucknow Bench of the GST Appellate Tribunal has allowed a departmental appeal and restored a differential Compensation Cess demand of Rs. 25,66,695 against a Hyundai dealer, holding that ground clearance under Entry 52B of Notification No. 05/2017-Compensation Cess (Rate) is to be measured in the unladen condition even for the period before Notification No. 03/2023 expressly said so [Ajit Kumar Minz v. Natasha Automobiles Pvt. Ltd.].

The bench of Santosh Kumar Srivastava, Member (Judicial) and Arvind Kumar, Member (Technical) was hearing the Revenue’s challenge to an order of the Commissioner (Appeals), which had split the period at 26.07.2023 and, relying on ARAI certificates showing laden ground clearance below 170 mm, held that cess at 20% was correctly paid on the Creta 1.6, Alcazar 2.0 and Tucson 2.0 for the earlier period.

The Tribunal held that the vehicles were “popularly known as SUVs” on the strength of the manufacturer’s own brochures and press releases, and that such product literature carried significant evidentiary weight. ARAI certificates, issued for safety compliance under the Central Motor Vehicles Rules, were relevant technical evidence but could not by themselves decide a fiscal classification.

Expressly declining to follow the Bombay High Court’s decision in Mercedes-Benz India Pvt. Ltd. v. Union of India and the Maharashtra AAAR ruling in Tata Motors — treating them as persuasive only — the Tribunal relied on the Constitution Bench decision in Commissioner of Customs v. Dilip Kumar & Co. to hold that the lower-rate claim must be construed strictly. It observed that the default state of a vehicle delivered from the factory is unladen, and that the 2023 amendment was “purely clarificatory and declaratory of the natural trade configuration.” CBIC Circular No. 247/04/2025-GST, which states that the amendment applies on or after 26.07.2023, was read as not mandating a laden standard for the earlier period.

The Tribunal also recorded a finding that the short payment arose from suppression of facts with intent to evade tax, and restored the Order-in-Original in full, including penalties under Sections 74 and 122(1)(i). The ruling sets up a direct conflict with the Bombay High Court on the pre-July 2023 period and is likely to be tested further.

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