GST Council Can Recommend Rates, But Can't Determine Classification: High Court Allows Petition Challenging Flavoured Milk Classification

[CA Bimal Jain]

The Hon’ble Madras High Court in the case of M/s. Parle Agro Private Limited v. Union of India & Ors. [2023 (11) TMI 601 - MADRAS HIGH COURT] allowed the Writ Petition and held that the Flavoured Milk is to be classified under Heading 0402 of the Customs Tariff Act, 1975 (“the Customs Tariff Act”) and is therefore, liable to Central Tax at the rate of 2.5 per cent in terms of Entry 8 to First Schedule to Notification No. 1/2017-Central Tax (Rate) dated June 28, 2017 (“the Goods Rate Notification”).

Facts:

M/s. Parle Agro Private Limited (“the Petitioner”) filed writ petition [W.P. No. 16608 of 2020] before the Hon’ble Madras High Court praying for issuance of a Writ of Certiorarified Mandamus for calling the record of the 31st GST Council relating to Minutes of Meeting held on December 22, 2018, pertaining to the decision to classify the ‘Flavoured Milk’ under HS Code 2202, and quashing the said entry. 

The Petitioner also filed another writ petition [W.P. No. 16613 of 2020] before the Hon’ble Madras High Court praying for the issuance of Writ of Mandamus directing the Revenue Department (“the Respondent”) to classify the goods under Chapter 0402 and levy GST accordingly.

Issue:

Whether Flavoured Milk would be classified under Chapter 0402 for the purpose of levying GST, at the rate of 2.5 per cent?

Held:

The Hon’ble Madras High Court in the case of M/s. Parle Agro Private Limited v. Union of India & Ors. [2023 (11) TMI 601 - MADRAS HIGH COURT] held as under:

• Relying upon the judgement of Union of India v. Mohit Mineral Private Limited [2022 (5) TMI 968 - SUPREME COURT] the Court observed that, the recommendations of the GST Council are not binding in nature. The Court further stated that the GST Council does not have the power to determine the classification of goods.
• Noted that, ‘Beverage Containing Milk’ includes only such beverage which contains seed-based, fruit based or plant-based milk and cannot be extended to ‘Dairy Milk’ from milch cattle and therefore, cannot come within the purview of sub-heading 2202 90 30 as ‘Beverage Containing Milk’.
• Further noted that, the GST Council cannot impose a wrong classification of ‘Flavoured Milk’ as a ‘Beverage Containing Milk’ under the residuary item as ‘Non-Alcoholic Beverage’ under Sub Heading 2202 90 30 of the Customs Tariff Act. Therefore, the recommendation of the GST Council Meeting dated December 22, 2018, concluding that flavoured milk is classifiable under HSN Code 2202 and thereby suggesting that flavoured milk will be liable to tax at the rate of 6% Central Goods and Services Tax (“the CGST”) cannot be upheld. The Classification ought to have been independently determined by the Respondent Assessing Officer. 
• Opined that, the Flavoured Milk manufactured by the Petitioner is to be classified under Heading 0402 of the Customs Tariff Act and is therefore, liable to the CGST at the rate of 2.5 per cent in terms of Entry 8 to First Schedule to the Goods Rate Notification.
• Held that, it is left open for the Government to issue fresh Notification for
  amending Entry No. 8 to Schedule I & and Entry No. 50 to Schedule II to the Goods Rate Notification to tweak the rate of tax, based on the well-settled principle that Central Government Authorities have the power to fix the rate of tax based on the recommendation of GST Council or by its own discretion. Hence, the writ petition is allowed.

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