2022 (11) TMI 210 - HC - GST

Classification of goods - rate of tax - Food/food products or not - alcoholic liquor for human consumption - argument of the learned counsel for the petitioner appears to be that since liquor also falls within the category of Food and food products under Chapter 22, as it was sought to be inserted at serial No.26 after clause e , the rate of tax payable is only 5%. Whether imposing tax at 18% for the job work done in relation to manufacture of liquor for human consumption at 18% is prospective in operation? HELD THAT - It is an admitted fact that there is no definition of food and food products under the Act but at the same time, whatever consumed by human beings cannot be construed as food and food products for the purpose of exemption under G.S.T. In COLLECTOR OF CENTRAL EXCISE VERSUS PARLE EXPORTS (P) LTD. 1988 (11) TMI 108 - SUPREME COURT , the Hon ble Supreme Court held that it will never be the intention of legislature to exempt expensive items like alcoholic liquor under the category of food and food products though the same is for human consumption. While dealing with the meaning of the word food products or food beverages , the Hon ble Supreme Court, in Parle Exports case, observed that there is no direct evidence, as such, as to how in commercial parlance, unlike in ordinary parlance, non-alcoholic beverage bases are treated or whether they are treated as food products or food preparations. The purpose of exemption is to encourage food production and also give boost to the production of goods in common use and need. After all, the purpose of exemption is to help production of food and food preparations at cheaper price and also help production of items which are in common use and need. Notification No.6/2021, dated 30.09.2021, published in the Gazette on 30.09.2021 itself incorporates services by way of job work in relation to manufacture of alcoholic liquor for human consumption as item No.(ica) in Column No.3 of Serial No.26 and the rate of tax is mentioned @ 9% (i.e., 9% 9% 18%). Since the manufacture by the petitioner relates to alcohol for human consumption by way of job work, the petitioner is liable to pay tax at 18%. Whether the petitioner is liable to pay tax at 18% with prospective or retrospective effect? - HELD THAT - The petitioner is liable to pay tax at the rate of 18% in terms of Notification No.6/2021, dated 30.09.2021. Apart from that, it is also to be noticed that at no point of time, any exemption was specifically granted to alcoholic liquor for human consumption . Neither the notification nor the items mentioned in Chapters 1 to 22 spell out clearly that alcoholic liquor for human consumption as food or food product. The petitioner, on its own, has been claiming exemption, which lead to issuance of notification No.6/2021. Though the same was published in Gazette on 30.09.2021, but this being clarificatory in nature, it has to be retrospective in operation. In view of law laid down by Hon ble Supreme Court and as the notification issued herein being of clarificatory in nature it is retrospective in operation. Petition dismissed.

Summary

Issues Involved:
1. Whether alcoholic liquor for human consumption falls within the meaning of food or food products.
2. Whether imposing tax at 18% for the job work done in relation to the manufacture of liquor for human consumption is prospective in operation.

Detailed Analysis:

Issue 1: Whether alcoholic liquor for human consumption falls within the meaning of food or food products.
The petitioner, a manufacturer of Indian Made Foreign Liquor, challenged the assessment levying CGST amounting to Rs. 24,94,104/- with penalty and interest for the tax periods 2017-2018, 2018-2019, and 2019-2020. The petitioner contended that the job work charges related to the manufacture of alcoholic liquor should be taxed at 5% as per Notification No.6/2021-Central Tax (Rate) dated 30.09.2021, rather than at 18%.

The petitioner argued that since alcoholic beverages fall under Chapter 22 of the First Schedule to the Customs Tariff Act, they should be considered as "food and food products" and taxed at 5%. However, the assessing authority held that not all products under Chapters 1 to 22 attract a 2.5% tax, and only food and food products are eligible for this exemption. The Supreme Court in Collector of Central Excise Vs Parle Exports Pvt Ltd (1998) held that non-alcoholic beverages were not eligible for exemption as food products, implying that expensive items like alcoholic liquor were never intended to be exempted under the category of food and food products.

The court noted that there is no definition of "food and food products" under the Act, and not everything consumed by humans can be considered as such for tax exemption purposes. The GST Council, in its 45th Meeting on 17.09.2021, clarified that food and food products exclude alcoholic beverages for human consumption. Therefore, services by way of job work in relation to the manufacture of alcoholic liquor for human consumption are not eligible for the 5% GST rate.

Issue 2: Whether imposing tax at 18% for the job work done in relation to the manufacture of liquor for human consumption is prospective in operation.
The petitioner argued that Notification No.6/2021, dated 30.09.2021, should be prospective and not retrospective. However, the court held that the notification does not substitute the earlier notification but clarifies it by incorporating a clause in line with the law laid down by the Supreme Court.

The court referred to the Supreme Court's decision in CIT v Vatika Township Pvt Ltd, which stated that if a statute is curative or merely declaratory of the previous law, retrospective operation is generally intended. The court concluded that Notification No.6/2021 is clarificatory in nature and therefore retrospective in operation.

Conclusion:
The court dismissed the writ petition, holding that alcoholic liquor for human consumption does not constitute food or food products under Chapters 1 to 22 of the First Schedule of the Customs Tariff Act, 1975. Consequently, the petitioner is liable to pay tax at 18% as per Notification No.6/2021, and this notification is retrospective in operation. The petition was dismissed with no order as to costs, and any pending miscellaneous petitions were closed.