2025 (1) TMI 156 - AT - Customs

Classification of imported goods - health supplements - Food supplements - classifiable under CTH 2106 9099 are liable to IGST @28% under Sr. No. 9 of Schedule IV of Notification No. 1/2017- IGST rate or at 18% under serial No. 453 of Schedule III of the said notification? - demand for differential IGST is barred by limitation or otherwise. Classification of health supplements - HELD THAT - The issue in the present case is no longer res-integra as the same has been considered by this Tribunal in the case of Neuvera Wellness Venture Pvt Ltd 2023 (10) TMI 964 - CESTAT AHMEDABAD wherein by the detailed finding, this Tribunal has considered that the nutrient/health supplements is not covered under Sr. No. 9 of Schedule IV whereas the same is covered under Serial No. 454 of Schedule iii for the purpose of charging the IGST - In view of the above judgment, the issue being identical is no longer res-integra. Accordingly, the assessee imported good attract 18% IGST and not 28%. Food supplement - HELD THAT - It is found that the goods are ready to human consumption. Department seeks to classify under CTH 21061000 as Protein Concentrates and Textured protein substances. By description itself it appears that Protein Concentrates cannot be fit for human consumption. At the most Protein Concentrates can be categorized as input for making Protein based food/Health supplement. The department has neither got the goods tested nor adduced any evidence to establish the exact nature of the goods that whether the same is Protein Concentrates or otherwise. Therefore, the burden cast on the revenue in the matter of classification of goods has not been discharged. For this reason, itself as per settled legal position on this point, the case of department clearly fails. Food Flavouring Material - HELD THAT - On scrutiny of records and the products leaflets available in appeal papers, it is not found any product which bears the name Food Flavouring Materials. There may be Food/Health supplement products containing miniscule percentage of food flavour which does not mean the said goods itself is food flavour material, therefore, the department's contention on this point cannot be agreed upon. Time limitation - HELD THAT - Firstly the appellants have declared the goods as appearing in all the import documents. Therefore, there is no suppression of fact on that part. Secondly, this is a case of demand of IGST which is available as input tax credit for further sale of the goods. Therefore, under any circumstances, the mala fide intention cannot be attributed to the appellant. Accordingly, the demand under extended period is not sustainable also on the ground of limitation. Conclusion - The health supplements were subject to an 18% IGST rate under Sr. No. 453 of Schedule III, and the demand for differential IGST was time-barred. The impugned order set aside - appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The legal judgment from the Appellate Tribunal CESTAT Ahmedabad considered the following core legal questions:

• Whether the health supplements imported by the assessee, classifiable under CTH 2106 9099, are liable to Integrated Goods and Services Tax (IGST) at 28% under Sr. No. 9 of Schedule IV of Notification No. 1/2017-IGST rate, or at 18% under Sr. No. 453 of Schedule III of the said notification.
• Whether the demand for differential IGST is barred by limitation.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification and Applicable IGST Rate

• Relevant legal framework and precedents: The classification of goods and applicable IGST rates are governed by Notification No. 1/2017-IGST Rate. The tribunal referred to previous judgments, including Neuvera Wellness Venture P. Ltd, Bright Performance Nutrition, and Raptakos Brett & Co. Ltd., to interpret the classification of health supplements.
• Court's interpretation and reasoning: The tribunal found that the health supplements do not fall under Sr. No. 9 of Schedule IV, which specifies a 28% IGST rate for certain food preparations. Instead, these goods are covered under Sr. No. 453 of Schedule III, which attracts an 18% IGST rate. The tribunal emphasized the specific nature of the items listed under Sr. No. 9, which did not include the imported goods in question.
• Key evidence and findings: The tribunal noted that the lower authorities had incorrectly applied the 28% IGST rate. The tribunal also highlighted the absence of evidence from the revenue to prove that the imported goods were protein concentrates or textured protein substances, which would justify the higher tax rate.
• Application of law to facts: By analyzing the tariff entry 2106 and the specific goods description, the tribunal concluded that the imported health supplements were not covered by the items listed under Sr. No. 9. Therefore, the correct classification was under Sr. No. 453, attracting an 18% IGST rate.
• Treatment of competing arguments: The tribunal addressed the revenue's contention regarding the classification under CTH 21061000, finding it unsupported by evidence. The tribunal also considered the appellant's argument that the goods were ready for human consumption, further supporting the 18% tax rate classification.
• Conclusions: The tribunal concluded that the imported goods should be taxed at 18% under Sr. No. 453 of Schedule III, not 28% under Sr. No. 9 of Schedule IV.

Issue 2: Limitation on Demand for Differential IGST

• Relevant legal framework and precedents: The tribunal considered the principles of limitation under the customs law, particularly the requirement for timely issuance of show cause notices.
• Court's interpretation and reasoning: The tribunal found that the demand for differential IGST was time-barred. It emphasized that the appellant had correctly declared the goods in the import documents, and there was no suppression of facts.
• Key evidence and findings: The tribunal noted that the show cause notice was issued long after the assessment and audit observation periods had expired. The tribunal also considered the revenue neutrality of the case, as any IGST paid would be available as input tax credit.
• Application of law to facts: The tribunal applied the principles of limitation and found that the extended period for demanding duty was not applicable due to the absence of any malafide intention or suppression of facts by the appellant.
• Treatment of competing arguments: The tribunal rejected the revenue's arguments for invoking the extended period, citing the lack of evidence for suppression or misrepresentation by the appellant.
• Conclusions: The tribunal concluded that the demand for differential IGST was unsustainable due to being time-barred.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "The expression 'that is to say' is descriptive, enumerative, and exhaustive and circumscribes to a great extent the scope of the entry."
• Core principles established: The tribunal reinforced the principle that specific tariff entries must be strictly interpreted, and only the items explicitly listed under a tariff heading are subject to the specified tax rate. It also emphasized the importance of timely issuance of show cause notices and the implications of revenue neutrality in tax disputes.
• Final determinations on each issue: The tribunal determined that the health supplements were subject to an 18% IGST rate under Sr. No. 453 of Schedule III, and the demand for differential IGST was time-barred.

The tribunal set aside the impugned orders and allowed the appeals with consequential relief, confirming that the imported goods attract an 18% IGST rate and that the demand for differential IGST is barred by limitation.