The Delhi High Court is set to deliver a significant verdict on the applicable GST rate for Roof-Mounted Air Conditioning Units (RMPUs) specifically designed for Indian Railways. The outcome could have substantial financial implications for manufacturers and contractors supplying such units to the railway sector.
Background of the Case
The petition has been filed by StesaLIT Limited, a railways and aerospace technology company, challenging a 2024 Circular issued by the Union Finance Ministry. The circular classifies RMPUs under HSN Code 8415, attracting 28% GST, instead of HSN Code 8607, which carries a lower 18% GST rate.
A Division Bench of Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta is hearing the case.
Petitioner’s Arguments
The Petitioner-company argued that:
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RMPUs supplied to Indian Railways have always been classified under HSN Code 8607, which pertains to parts of railway or tramway locomotives or rolling stock.
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Based on this classification, the company and others in the industry have entered into contracts and priced their supplies accordingly, charging 18% GST.
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The impugned circular exceeds the jurisdiction of the Ministry as it pre-empts the authority of the adjudicating officer to decide the appropriate classification based on facts.
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The company cited multiple Advance Rulings from different states (Uttar Pradesh, Madhya Pradesh, and Himachal Pradesh), all of which supported the classification of RMPUs under HSN 8607.
Key Advance Rulings Cited
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Uttar Pradesh AAR (Feb 14, 2020)
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Himachal Pradesh AAR (Apr 11, 2022)
Both rulings held that RMPUs designed and supplied exclusively for Indian Railways, following its specific technical layout, should fall under Chapter 86.07 of the GST Tariff, and thus attract 18% GST.
Court’s Interim Direction
Acknowledging the potential impact on ongoing tax proceedings, the High Court has directed that:
“The proceedings initiated against the Petitioner-company during pendency of the challenge shall be subject to the outcome of this petition.”
Additionally, it clarified that no final orders based on the impugned circular shall be enforced until further orders of the Court. The matter is scheduled for hearing on May 9, 2025, and the Respondent Department has been directed to file its response in the interim.
Legal and Industry Significance
This case raises critical questions about the classification powers of the GST Council versus adjudicating authorities, and could set a precedent for tax treatment of custom-designed components supplied exclusively for the Indian Railways. A decision in favor of the Petitioner may lead to reduced tax burden and contractual realignments for several vendors in the railways sector.
Case Details
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Case Title: Ms. StesaLIT Limited & Anr v. Union of India & Ors.
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Case Number: W.P.(C) 3138/2025
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Next Hearing Date: May 9, 2025
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Court: Delhi High Court
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Bench: Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta
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Counsel for Petitioner: Mr. Balbir Singh, Sr. Advocate with Mr. Divyakant Lahoti and team
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Counsel for Respondent: Mr. Aditya Singla, SSC with Mr. Umang Misra
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