GST Council Can Recommend Rate But Can’t Determine Classification: Madras High Court Allows Parle Agro’s Petition Challenging Classification Of Flavoured Milk

The Madras High Court has allowed Parle Agro’s petition challenging the classification of flavoured milk.

The bench of Justice C. Saravanan has observed that the GST Council cannot impose the wrong classification of “flavoured milk” as a “beverage containing milk” under the residuary item "non-alcoholic "beverages" under Subheading 2202 90 30 of the Customs Tariff Act, 1975.

The petitioner/assessee, M/s.Parle Agro Pvt. Ltd., has challenged the decision of the Authority for Advance Ruling (AAR) in the case of Britannia Industries Ltd. The AAR noted that the classification of 'flavoured milk', has been represented before the GST Council, and the Council considered the same in the 31st GST Council Meeting. It was held that UHT Sterilized Flavoured Milk marketed under the brand name 'Britannia Winkin' Cow Thick Shake' by the applicant is not classifiable under the tariff heading '0402/0404" but classifiable under CTH 2202 99 30.”

The Authority for Advance Ruling followed the impugned recommendation of the GST Council based on the decision of the Fitment Committee of the GST Council.

The assessee contended that the GST Council can only recommend the rate but cannot determine the classification of goods or services. It is submitted that “flavored milk” is naturally classifiable under Heading 0402. The Government of India has considered “flavoured milk products” as dairy products in its policies.

The department contended that the decisions that were rendered in the context of the Central Excise Act, 1944, and the Central Excise Tariff Act, 1975, are totally irrelevant. It is submitted that the ratio rendered therein cannot be imported in the context of the classification of goods under the above notification under the GST regime. The issue relating to the rate of duty was the subject matter of the Minutes of the Meeting of the GST Council held on December 22, 2018.

The court held that the GST Council had given the wrong recommendation. It also cannot determine the classification. The determination of classification also does not fall within the purview of the GST Council.

“Having adopted classifications of ‘Goods’ and ‘Services’ under the First Schedule to the Customs Tariff Act, 1975, the 3rd respondent GST Council cannot impose a wrong classification of “Flavoured Milk” as a “Beverage Containing Milk” under the residuary item as “Non-Alcoholic Beverages” under Sub Heading 2202 90 30 of the Customs Tariff Act, 1975,” the court said.

The court held that the GST Council is merely recommendatory. It is for the government to fix appropriate rates on the goods that are classifiable under the Customs Tariff Act, of 1975. As long as the Customs Tariff Act, 1975, is adopted for the purpose of interpreting Notification No.1/2017-CT(Rate) dated June 28, 2017, classification has to be strictly in accordance with the classification under the Customs Tariff Act, 1975, irrespective of the fact that concessions were given under the earlier regime by the Central Government under Sections 5 and 11C and Section 4A of the Central Excise Tariff Act, 1985.

Counsel For Petitioner: Vijay Narayan

Counsel For Respondent: P.J.Anitha

Case Title: M/s.Parle Agro Pvt. Ltd. Versus Union of India

Citation: 2023 LiveLaw (Mad) 352

Case No.: W.P.Nos.16608 & 16613 of 2020 and W.M.P.Nos.20602 & 20604 of 2020

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