Gujarat High Court Upholds 12% GST On Mango Pulp Since GST Inception, Rejects Petitioner's Claims For Lower Tax Rate

The Gujarat High Court has upheld the imposition of a 12 percent tax on Mango Pulp since the inception of GST. The court clarified that Circular No. 179/11/2022-GST dated August 3, 2022, and Notification No. 06/2022 dated July 13, 2022, simply reinforce that mango pulp falls under the 12 percent GST bracket, specifically after the inclusion of "Mangoes (other than mangoes, sliced, dried)" following guava.

The petitioner, Vimal Agro Products Pvt. Ltd., specializes in supplying mango pulp to a hundred percent export-oriented unit, which then exports the pulp after minor processing or repackaging. Initially, the petitioner paid a tax rate of 5 percent on the supply of mango pulp in sliced form. However, the Revenue Department proposed that a third category of mangoes under HSN 0804, other than fresh and dried mangoes, should be taxed at 12 percent. This suggestion led to the introduction of Entry No. 16 in Schedule-II of Notification No. 1/2017-Central Tax (Rate) dated June 28, 2017, where mangoes (other than sliced and dried mangoes) were included after guava.

Subsequently, through an issued circular, the Revenue Department clarified that mango pulp would attract a GST rate of 12 percent. Additionally, a Show Cause Notice was sent to the petitioner asserting that they were liable to pay GST at the rate of 18 percent under the residual entry no. 453 of Schedule-III of the Goods Rate Notification. This was because mango pulp was not classified under any other category during the period from July 1, 2017, to July 18, 2022.

Discontented with the issued Show Cause Notice, the petitioner filed a writ petition before the High Court.

The issue before the High Court was 'Whether tax is leviable at the rate of 12 percent on Mango Pulp from the beginning of GST regime?'

The Court observed, “The impugned circular dated 3rd August 2022 only clarifies the insertion of Entry No.16 vide Notification No.6/2022 and therefore, the argument and contention raised by the petitioner that by the impugned circular, the GST rate of 12% sought to be introduced is without any basis. For “mango pulp”, the GST rate was 12% from 1 st July 2017 as per Notification No.1/2017. It is only the petitioner, who interpreted the Notification No.34/2017 pursuant to the recommendations of the GST Council in its 27th meeting to reduce the GST rate from 12% to 5% on the product “mango sliced, dried.”

'“The “mango pulp” was not included in the Entry No.30A of the Schedule – II, which came into effect by Notification No.34/2017. Therefore, there was a need for clarification by the GST Council in its 47th meeting held on 28th June 2022 to clarify that the third category of mango in HSN 0804 other than fresh and dried mangoes are required to be clarified to be taxed at the rate of 12%,” the Court added.

The High Court thus observed that, the Impugned Notification and Circular is not in the nature of amending the tax rate by increasing the tax rate with retrospective effect. the impugned Notification and circular were not in the nature of amending the tax rate with increasing the tax rate with retrospective effect.

In fact, the Court stated that they are clarificatory so far as the product “mango pulp” is concerned, as admittedly, Entry No.30A does not include the “mango pulp”.

The Court rejected the stand of the respondents that “mango pulp” would fall in the residuary category as the same was not included either in the Notification No.1/2017 or covered by the Entry No.30A is also not as per clarification made by the GST Council.

The Court held, “Therefore, the respondents are also not justified to apply rate of 18% GST as per residuary Entry no.453 as “mango pulp” would be falling under HSN 0804, which broadly categorized fresh and dried mangoes. Therefore, naturally, “mango pulp” would go with the mango sliced, dried and would be covered by mango sliced, dried attracting 12% rate prior to Notification no.34/17. The GST Council has only clarified that the third category of mangoes other than “mango sliced and dried” would attract 12% of GST. Therefore, the contention of the respondents to tax on “mango pulp” at 18% is also not tenable.”

“As the petitioners were not liable to pay the GST rate at 12% and it was clarified by the GST Council that mangoes other than sliced, dried are liable to be taxed at 12%, the same would be applicable as per Notification No.1/2017 and the petitioner would not be entitled to have the benefit of reduced rate of GST from 12% to 5%, as claimed in these petitions for the interregnum period from 01.07.2017 to 18.07.2022,” the Court added.

The Court ruled that adding the phrase "mangoes (other than mangoes sliced, dried)" after "guavas" was merely clarifying the intent of Entry No.16 of Schedule II, effective from July 1, 2017, in Notification No.1/2017. This clarification meant that mangoes (excluding sliced and dried ones) were to be included under Entry No.16, aligning with the GST Council's intention to reduce the GST rate from 12% to 5% solely on "mango sliced, dried," which led to the addition of a new Entry No.30A via Notification No.34/2017.

The Court emphasised that Notification No.1/2017 was amended to change "mangoes, mangosteens, dried" to "mangosteens and dried," and the missing inclusion of "mangoes (other than sliced, dried)" was rectified by the GST Council during its 47th meeting, clarifying that such mangoes would be subject to a 12% GST rate.

Regarding the petitioner's argument on Notification No.6/2022 and a circular dated August 3, 2022, alleging an amendment to include "mango pulp" under Entry No.16 with a 12% GST rate effective from July 18, 2022, the Court clarified that the substitution by Notification No.6/2022 was merely a clarification to apply a 12% GST rate to all types of dried mangoes, i.e., mangoes (other than sliced and dried).

The Court ruled that adding the phrase "mangoes (other than mangoes sliced, dried)" after 'guavas' is simply a clarification, meaning that such mangoes are to be included in Entry No.16 of Schedule II, effective from July 1, 2017, under Notification No.1/2017. This clarification stemmed from the GST Council's intention to reduce the GST rate from 12% to 5% solely on "mango sliced, dried," leading to the insertion of a new Entry No.30A via Notification No.34/2017.

Further, the Court clarified, "Therefore, the Notification No.1/2017 containing the words “mangoes, mangosteens, dried” were modified as “mangosteens and dried” and the words “mangoes (other than sliced, dried)” missed at the relevant point of time is clarified by the GST Council in its 47th meeting that “mangoes other than mangoes sliced and dried” would be governed by 12% of GST."

"The petitioner is therefore not right in contending that by Notification No.6/2022 and the circular dated 3rd August 2022, there was a amendment in Entry No.16 to include product like “mango pulp” attracting GST at the rate of 12% with effect only from 18th July 2022 as such substitution by the Notification No.6/2022 is only by way of clarification to apply the GST at 12% on all types of dried mangoes i.e. mangoes (other than mangoes sliced and dried)," the Court added.

Thus, the Court partly allowed both the petitions and quashed the impugned show cause notice while holding that the petitioners would be liable to pay GST at the rate of 12% from 1st July 2017 on the product “mango pulp” and not at the rate of 5% (as claimed by the petitioners) or 18% (as claimed by the respondents) for the period from 01.07 2017 to 18.07.2022.

Case Title: Vimal Agro Products Pvt. Ltd. & Anr. Vs Union of India & Ors

LL Citation: 2024 LiveLaw (Guj) 70

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