Legal principle

The GST Council's power is merely recommendatory — it cannot determine the classification of goods, which must be strictly in accordance with the Customs Tariff Act, 1975 and independently determined by the Assessing Officer.

Court decision

The writ petitions were allowed in favour of Parle Agro, but not on the Amrit Food ground — the Court held that flavoured milk merits classification under the residuary sub-heading 0402 99 90 of the Customs Tariff Act, 1975 and not under Heading 2202. The GST Council's recommendation was held to be a wrong one: the Council cannot determine classification (its power is merely recommendatory), and classification must be independently determined by the Assessing Officer strictly in accordance with the Customs Tariff Act, 1975. The Court left it open to the Government to issue a fresh notification amending Entries 8 and 50 to Notification No.1/2017-CT(Rate) to tweak the rate of tax.

Facts

M/s. Parle Agro Pvt. Ltd., a manufacturer proposing to produce flavoured milk, challenged the GST Council's decision (Minutes of its meeting dated 22.12.2018, 31st Council meeting) accepting the Fitment Committee's view that 'flavoured milk' is classifiable under HS Code 2202 as a 'Beverage Containing Milk' rather than under Chapter/Heading 0402. The Council declined to issue a clarification that flavoured milk falls under heading 0402, whose HSN explanatory notes exclude milk containing added sugar or sweetening matter. The trigger for the 2020 writ petitions was the Tamil Nadu Authority for Advance Ruling in Re: Britannia Industries Ltd. classifying UHT sterilized flavoured milk under CTH 2202 99 30, which was upheld by the Appellate Authority for Advance Ruling. Parle Agro filed two Article 226 writ petitions before the Madras High Court — one for certiorarified mandamus to quash the Council's classification as contrary to Commissioner v. Amrit Food (2015) 324 ELT 418 (SC) and Articles 279A(4), 14, 19(1)(g) and 265, and one seeking a mandamus to classify flavoured milk under 0402 and levy GST accordingly.

Key provisions

• Section 28A, Customs Act, 1962 —  Power not to recover duties not levied or short-levied as a result of general practice
• Section 5, Customs Tariff Act, 1975 — Levy of a lower rate of duty under a trade agreement
• Section 25, Customs Act, 1962 — Power to grant exemption from duty