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Informist, Friday, Dec. 5, 2025

 

NEW DELHI – The Madras High Court has set aside proceedings against Apollo Tyres Ltd. by the Goods and Services Tax department which had made a tax demand of INR 2.79 billion from the company for paying reduced tax rate on tubes and flaps. The high court noted that Apollo Tyres had voluntarily come forward and said that the supply of tyres, tubes and flaps by the company is a "composite supply" and accordingly, paid the entire tax dues along with interest, to settle the matter.

 

In such cases, the tax department cannot attribute any bad intention, such as fraud, wilful misstatement or suppression of material facts, against Apollo Tyres, said the high court. At worst, the same could be considered as tax not paid or short paid due to confusion in the entire industry and that Apollo Tyres deferred the payment of tax and paid the same once the doubts had been cleared, the court said.

 

The high court said the tax department cannot invoke the provisions of Section 74 the Central Goods and Services Tax Act, 2017, merely on the ground that the tax amount was remitted by Apollo Tyres subsequent to an investigation by the Directorate General of GST Intelligence. In this case, the company had expressed its intention to pay the tax dues, through a communication in 2019, which is much prior to the date of investigation, said the court. "When such being the case, as stated above, no criminal motive, viz., fraud, wilful misstatement or suppression of material facts, can be attributed against the petitioner (Apollo Tyres), since the petitioner had voluntarily disclosed the short payment vide the aforesaid communication," the court added.

 

The short payment on the part of Apollo Tyres had occurred only due to the confusion among industries to treat the subject supply as "composite supply" due to the reduction of tax rate for the tubes with effect from Nov. 15, 2019 and for the flaps from Jan. 1, 2019, said the court. The confusion prevailed till Jan. 12, 2019 and thereafter, a clear decision was taken by Apollo Tyres and other industries that the supply of tyres, tubes and flaps effected by them is a "composite supply", said the court.

 

Apollo Tyres is engaged in manufacturing and trading automotive tyres, tubes and flaps. Initially, Apollo Tyres was supplying tyres, tubes and flaps directly to the manufacturers. As on the date of introduction of GST from Jul. 1, 2017, all the three items are chargeable to tax at the rate of 28%. Subsequently, with effect from Nov. 15, 2017, the rate of duty on tubes was reduced to 18% from 28%. Likewise, from Jan. 1, 2019, the duty on flaps was reduced to 18% from 28%.

 

Tubes and flaps were kept inside the tyres and wrapped together by Apollo Tyres and thereafter, supply was effected. The tax department said that while effecting supply, a common invoice was sent by Apollo Tyres by mentioning different duties for each goods. However, after 2019, Apollo Tyres treated the supply of tyres, tubes and flaps in a carrying strap as "composite supply", said the department. It is clear that the previous action of Apollo Tyres in payment of the duties by reducing the tax rate to 18% from 28% for tubes and flaps, without treating the supply as "composite supply", is deliberate and motivated, said the tax department.

 

According to Apollo Tyres, a mere wrapping up would not amount to natural bundling of the goods, so as to consider it as a "composite supply". However, to avoid further confusion, Apollo Tyres had treated that the supply of tyres, tubes and flaps in a carry strapping form is a "composite supply" and offered to pay the tax at the rate of 28%.

 

On Friday, shares of Apollo Tyres ended nearly 2% lower at INR 521.45 on the National Stock Exchange.  End

 

Reported by Surya Tripathi

Edited by Ashish Shirke

 

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