Madras High Court allows petition of Parle Agro challenging classification of flavored milk

Madras High Court allows petition of Parle Agro challenging classification of flavored milk

States that the Goods and Services Tax Council can recommend rates but cannot determine classification

The Madras High Court has allowed the petition of Parle Agro Pvt Ltd to challenge the classification of flavored milk.

The bench comprising Justice C. Saravanan observed that the Goods and Services Tax (GST) Council could not impose the wrong classification of flavored milk as a ‘beverage containing milk’ under the residuary item ‘non-alcoholic beverages’ under the sub-heading 2202 90 30 of the Customs Tariff Act, 1975.

The petitioner/assessee, Parle Agro, challenged the decision of the Authority for Advance Ruling (AAR) in the Britannia Industries Ltd case.

The AAR noted that the classification of 'flavored milk' was represented before the GST Council, which considered it in the 31st GST Council Meeting. It held that the UHT Sterilized Flavoured Milk marketed under the brand name 'Britannia Winkin Cow Thick Shake' by the applicant did not classify under the tariff heading 0402/0404 but fell under CTH 2202 99 30.

The AAR followed the impugned recommendation based on the decision of the Council’s Fitment Committee.

The assessee contended that the GST Council could only recommend the rate but could not determine the classification of goods or services. It said that flavored milk was naturally classifiable under Heading 0402. That’s because, in its policies, the Government of India considered flavored milk products as dairy products.

However, the department contended that the decisions rendered in the Central Excise Act, 1944, and the Central Excise Tariff Act, 1975, were totally irrelevant. The ratio could not be imported into the classification of goods under the GST regime. The issue of the rate of duty was the subject matter of the Minutes of the Meeting of the GST Council held on 22 December 2018.

The judges thus held that the GST Council gave the wrong recommendation. It could not determine the classification, as it did not fall within its purview.

The court held, “Having adopted classifications of ‘Goods’ and ‘Services’ under the First Schedule of the Customs Tariff Act, the 3rd respondent GST Council cannot impose a wrong classification of flavored milk as a ‘Beverage Containing Milk’ under the residuary item as ‘Non-Alcoholic Beverages’ under the sub-heading 2202 90 30 of the Customs Tariff Act.”

The court held that the GST Council was merely recommendatory. It was for the government to fix appropriate rates on the goods classified under the Customs Tariff Act. Since the Act was adopted for interpreting Notification No.1/2017-CT(Rate) of 28 June 2017, the classification had to be in accordance with the Customs Tariff Act. This was irrespective of the fact that concessions were given under the earlier Central government regime under Sections 5 and 11C and Section 4A of the Central Excise Tariff Act, 1985.