2023 (7) TMI 873 - HC - GST

Change in the classification of goods (to avail concessional rate of duty) - flavored milk drinks/dairy products - to be classified under Chapter-22 or under Chapter-4 - HELD THAT - A perusal of the impugned order would show that prior to coming into force of the GST Act, under the earlier regime the product was classified under HSN 22029930 in order to avail the concessional rate of central excise duty. After the introduction of the GST, the petitioner has deliberately changed the classification of flavored milk to a head under HSN 042/0403 in order to avail a low rate of GST ie; from 12% to 5%. However, there is absolutely no change either in the ingredients or in the manufacturing process. Further, the authority below has analyzed the export invoices of the petitioner which would clearly show that the petitioner was adopting the HSN 22029930 for Badam Milk. The further analyzes of the export details between January, 2021 and October, 2021, it is seen that all the export products are classified under HSN 22029930. Therefore, the respondents have considered each and every arguments put forward by the petitioner and the respondents have also analyzed the documents submitted by them. If aggrieved, the remedy is only by filing an appeal, since the petitioner has not been able to establish that there has been grave error in the exercise of jurisdiction or that there has been violation of principles of natural justice warranting the petitioner to approach this Court directly. The Writ Petition is disposed of with liberty to the petitioner to file an appeal before the appropriate authority under Section 107 of the Act.

Summary

Issues involved:
The issues involved in the judgment are the classification of flavored milk products for GST purposes, the authority's decision on classification under HSN codes, the petitioner's contention of misclassification, and the availability of alternative remedies under the law.

Classification of Flavored Milk Products:
The petitioner, engaged in manufacturing and supplying milk-based drinks, contested the classification of their products under the GST regime. They argued that their flavored milk products, containing more than 87% milk, should be classified under HSN 22029930 attracting 12% GST, not under HSN 042/0403 attracting 5% GST. The petitioner claimed that their products were wrongly considered as water-based beverages by the GST Intelligence Wing, leading to the dispute in classification.

Decision on Classification under HSN Codes:
The court noted that prior to the GST Act, the petitioner had classified their products under HSN 22029930 to avail concessional central excise duty rates. However, post-GST implementation, the petitioner shifted the classification to HSN 042/0403 to benefit from a lower GST rate without any change in ingredients or manufacturing process. The court observed that export invoices and documents indicated the use of HSN 22029930 for certain products, contradicting the petitioner's classification claims. The authority had thoroughly analyzed the arguments and documents submitted by both parties.

Petitioner's Contention of Misclassification:
The petitioner contended that their flavored milk products were wrongly considered as water-based beverages, emphasizing that a test report confirmed the milk-based nature of their products. They sought the court's intervention under Article 226 of the Constitution of India due to the serious dispute regarding the classification. The petitioner's counsel argued for the impugned order's interference based on the classification discrepancy.

Availability of Alternative Remedies:
The Standing Counsel for the respondents highlighted that the petitioner had an alternative remedy through an appeal under Section 107 of the Act, which they had not exhausted before approaching the court. Emphasizing the existence of a serious classification dispute, the Standing Counsel argued that the appellate authority, not the Writ Court, should address such matters. The respondents contended that the petitioner themselves admitted to the product's classification under Chapter-22, warranting dismissal of the writ petition.

Conclusion:
After hearing both sides, the court disposed of the writ petition, directing the petitioner to pursue an appeal before the appropriate authority under Section 107 of the Act. The court clarified that the time spent in court would not count towards the limitation period for filing the appeal. No costs were awarded in the matter, and the connected Miscellaneous Petition was closed, concluding the legal proceedings.