2021 (11) TMI 227 - HC - GST

Classification of goods - Fish Meal in powdered form - covered under entry 2301 2309 or not - Scope of clarification / circular issued by the board (CBIC) - exemption under Sl.No.102 of Exemption Notification No.1/17 or N/N. 2/17 - HELD THAT - After the GST regime, which came into effect from 01.07.2017, the Customs Tariff Act, 1975 classification selectively has been adopted by the GST regime. Therefore, few days prior to the implementation of the GST regime, these two notifications, namely, Notification No.1/17 and Notification No.2/17, were issued by the Central Government, of course, by exercising their powers under Sections 9(1) and 11(1) of the CGST Act, respectively. It may be either under 2301 or may be under entry 2309. In both way, the fish meal is explicitly provided under exemption category. Merely because such a finished product of fish meal produced by the petitioners' industries are being utilised also for the purpose of further manufacturing of further animal feed or poultry feed, by that reason itself, it cannot be stated that, it is only a raw material and not a finished product - The Central Government while giving Exemption Notification No.2/17, though originally included only Entry Nos. 2302, 2304, 2305, 2306, 2308 2309, subsequently, issued a corrigendum that entry 2302 should be read as 2301 2302. Therefore, 2301 also is included. Section 168(1) makes it clear that, only for the purpose of uniformity in the implementation of the Act, orders or directions to the Central Tax Officers, as deem fit, may be issued by the Board. Therefore, most probably, such kind of orders, instructions or directions must be procedural in nature, not substantive in nature - The exemption provided by the Central Government by exercising its powers either under Section 11(1) of CGST Act, 2017 or under Section 6(1) of IGST Act, 2017 are the substantive right provided to the stake-holders by giving such exemption. Therefore, such kind of exemptions cannot be taken away or done away by issuing clarificatory Circulars by the Board, in exercise of its powers under Section 168 of the CGST Act, 2017. This Court feels that the impugned Circular insofar as Clause (ii) of the same, namely, fish meal and other raw materials used for making cattle / poultry / aquatic feed is concerned, is unsustainable and therefore, insofar as the said product is concerned, whatever the clarification issued in the impugned Circular dated 31.12.2018 is set aside - Petition allowed.

Summary

Issues Involved:
1. Classification and Taxability of Fish Meal under GST.
2. Validity of Circular No. 80/54/2018-GST dated 31.12.2018.
3. Interpretation of Exemption Notifications No. 1/2017 and 2/2017.
4. Powers of the Central Board of Indirect Taxes and Customs under Section 168 of the CGST Act, 2017.

Detailed Analysis:

Issue 1: Classification and Taxability of Fish Meal under GST
The petitioner, a manufacturer of fish meal, contended that their product is exempt from GST under entries 2301 and 2309 of the Customs Tariff Act, 1975, which are included in Sl.No.102 of Exemption Notification No. 2/2017. The process involves procuring fresh fish, steam boiling, drying, and pulverizing it into a powder form. The petitioner argued that fish meal, whether used directly as aquatic feed or as an ingredient in other feeds, should be exempt from GST.

Issue 2: Validity of Circular No. 80/54/2018-GST dated 31.12.2018
The Circular issued by the Central Board of Indirect Taxes and Customs clarified that fish meal and other raw materials used for making cattle/poultry/aquatic feed are not exempt under Sl.No.102 of Exemption Notification No. 2/2017. The petitioner challenged this Circular, arguing that it incorrectly interpreted the exemption notification and contradicted the legislative intent.

Issue 3: Interpretation of Exemption Notifications No. 1/2017 and 2/2017
The court examined the relevant entries in the Customs Tariff Act and the exemption notifications. It was noted that entries 2301 and 2309, which include fish meal in powdered form, are explicitly covered under the exemption. The court found that the finished product of fish meal, even if used as an ingredient in other feeds, retains its exempt status. The court emphasized that the exemption notifications should be interpreted in a manner that aligns with the legislative intent and the explicit inclusion of fish meal under the exempted entries.

Issue 4: Powers of the Central Board of Indirect Taxes and Customs under Section 168 of the CGST Act, 2017
The court scrutinized the powers granted under Section 168, which allows the Board to issue orders or instructions for uniform implementation of the Act. It was determined that such powers are procedural and not substantive. The court held that the Board's Circular cannot override the statutory exemption provided under the notifications issued by the Central Government. The Circular was deemed to be beyond the scope of the Board's authority as it attempted to substantively alter the exemption status of fish meal.

Conclusion:
The court concluded that the impugned Circular was unsustainable and set it aside. It was ruled that the petitioner's fish meal, as a finished product, is entitled to exemption under Sl.No.102 of Exemption Notification No. 2/2017. Consequently, any actions taken by the Revenue based on the Circular were declared invalid. The court allowed the writ petitions, affirming the petitioner's right to the claimed exemption.