Supply Of Holographic Stickers By Prohibition & Excise Dept For Affixing On Alcohol Bottles Is Supply Of “Goods”, Not Taxable: Madras High Court

Justice C Saravanan noted that the holographic sticker was a label and therefore a good within the meaning of Section 2(52) of the CGST Act and the supply of label by the department had to be construed as a supply of “goods” and not a supply of “service”.

“Thus, there is no dispute that “label” is “thing” viz., noun. It is a thing and therefore “goods” within the meaning of Section 2(52) of the respective GST enactments as “goods” means every kind of movable property. The expression “service” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged. Thus, the supply of “label” is only supply of “goods” and not a supply of “services” by the Prohibition and Excise Department of the Government of Tamil Nadu,” the court said.

The court was hearing a petition filed by United Breweries Limited against an order of the Joint Commissioner of GST and Central Excise (Appeals II) refusing to refund the GST paid by them on RCM basis.

FACTS

The petitioner company was engaged in the manufacture and sale of beer from its brewery. The company informed the court that it was under the Bonafide belief that it was liable to pay tax on Reverse Charge Basis on the “holographic stickers” purchased from the State Government for affixing on the beer bottles, as per Section 9(3) of the CGST Act read with Notification NO. 13/2017 Central Tax (Rate) dated 28.06.2017. On this Bonafide belief, the company discharged GST on the stickers from April 2018 to February 2020.

While so, the GST Council, in its 37^th GST Meeting belatedly issued a clarification pursuant to which the Government also issued a Notification No. 25/2019 – Central Tax (Rate) dated 30.02.2019 notifying certain activities/ transactions undertaken by the Central Government, State Government, Union Territory and Local Authority in which they are engaged as public authorities to be treated as neither supply of goods nor services for payment of GST. It was clarified that their actions will not authorise the levy of GST.

The petitioner company argued that the supply of holographic sticker was supply of goods and not service and therefore not liable to tax in terms of the 2017 notification. The company thus argued that it was entitled to refund of the amount paid on tax on Reverse Charge Basis under the 2017 notification. It was submitted that since it was purchasing the holographic stickers from the department, it is not taxable in the hands of the petitioner as there is no Notification issued under the provisions of the GST Act mandating the payment of tax. The company thus argued that the tax paid was a mistake and that it was entitled to a refund.

Though the department argued that the supply of label was a “composite label”, the court noted that as per Section 2(30) of the Act, the supply should consist of two or more taxable supplies of goods or services or both, or any combination which are naturally bundles and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. The court noted that the supply of holographic sticker was not a taxable supply within the meaning of definition in Section 2(108) of the Act as grant of excise license was exempted under the 2019 notification. Thus, the court held that the supply of the holographic sticker was not a composite supply.

The court also added that merely because the petitioner had unwittingly paid the tax on Reverse Charge Basis in the past, it would not mean that it was bound by its past practices. Thus, the court held that there was no contract with the authority for invoking promissory estoppel against the company. The court thus held that the company was entitled to claim refund and directed the authorities to process the refund claim and refund the amount paid by the company in accordance with Section 54 of the Act and Rule 89 of the Rules within a period of 3 months.

Counsel for the Petitioner: Mr. G. Natarajan

Counsel for the Respondents: Mr. Anu Ganesan Junior Standing Counsel and Mr. B. Ramanakumar Senior Standing Counsel

Case Title: M/s.United Breweries Limited v. The Joint Commissioner of GST and Central Excise (Appeals II)

Citation: 2025 LiveLaw (Mad) 77

Case No: W.P.No.14080 of 2021