LI Network
Published on: November 17, 2023 at 00:30 IST
The Madras High Court has issued a significant ruling pertaining to the classification and taxability of flavoured milk, specifically providing relief to Parle Agro Pvt. Ltd.
The court asserted that the GST Council lacks the authority to determine the classification of flavoured milk and declared a 5 percent GST rate for this product.
The judgment, delivered by a single judge bench led by Justice C. Saravanan, contradicts the previous classification made by the GST Council on December 22, 2018.
The council had classified ‘flavoured milk’ under HSN Code 2202 with a 12 percent GST rate. Justice Saravanan emphasized that the GST Council’s recommendation was incorrect and beyond its scope to determine classification.
The key question in consideration was whether flavoured milk falls under the category of ‘beverage containing milk’ (HS Code 2202, GST rate 12 percent) or ‘Milk and Cream’ (Chapter 0402, GST rate 5 percent). The court ruled that the responsibility for classification lies with the Assessing Officer, and the government is obligated to set the appropriate rate for goods under the Customs Tariff Act, 1975.
The court referenced the Supreme Court decision in the Mohit Minerals case, highlighting that the GST Council’s suggestions are not binding. The removal of Article 279B and the addition of Article 279(1) in the Constitution Amendment Act 2016 signify Parliament’s intent for the GST Council’s recommendations to carry persuasive weight.
Regarding the term ‘flavoured milk,’ the court determined that it must inherently contain alcohol of specified strength. The phrase ‘Beverage Containing Milk’ was interpreted to include only beverages with plant or seed-based milk, incidentally containing specified-strength alcohol. Examples include coconut milk, almond milk, peanut milk, and others.
The bench deemed notifications under the former Central Excise Act, 1944, classifying ‘Flavored Milk’ as ‘Beverage Containing Milk’ as ‘erroneous.’ It clarified that classifications under the previous indirect tax regime hold no relevance in determining the accurate classification under the new GST regime.
In conclusion, the court ruled that the ‘Flavored Milk’ proposed by Parle Agro should be classified under Tariff Heading 0402 of the Customs Tariff Act, 1974, subject to a Central Tax at 2.5 percent (5 percent after adding SGST at 2.5 percent) per Entry 8 in the First Schedule to Notification No.1/2017-CT(Rate) dated 28.06.2017.
However, the Central Government retains the authority to adjust the rate based on the GST Council’s recommendation or independently. The case title is M/s. Parle Agro Pvt. Ltd. vs. Union of India.