Article

The bittersweet classification of Flavoured Milk

By Preeti Goyal and Neha Jain

Classification of goods under the correct tariff item is the first, and arguably, most important step for a taxpayer. This is also the most litigative issue in any tax jurisdiction. The article hence analyses the implications of a recent Madras High Court decision in the case of Parle Agro Pvt. Ltd. which has held that flavored milk is classifiable under Heading 0402 and not under Heading 2202 of the Tariff covering beverage containing milk. Deliberating on the reasoning adopted by the High Court and the relevance of this decision, the authors highlight various issues which need to be understood by the industry, before falling prey to the impulsive decision of changing the classification of this product. They discuss the HSN Explanatory Notes, scheme of classification under GST and Customs, different objectives of FSSAI regulations (which were relied upon by the High Court), deviation from international jurisprudence, change in character of the product with addition of flavours, and how the perspective that only the plant-based milk beverages would be classified under Heading 2202 needs to be re-examined. According to the authors, the judgment should not be thoughtlessly followed for the classification of milk-based drinks.

Goods and Services Tax (GST)

Notifications and Circulars

• Amnesty Scheme notified for condoning delay in filing of appeal against demand orders
• Services - GST on certain services clarified
• Monetary limits revised for filing appeals by the Department before CESTAT, High Courts and Supreme Court

Ratio decidendi

• Tax Research Unit (TRU) of Ministry of Finance has no authority to clarify on classification - Circular No. 80/54/2018-GST quashed - Delhi High Court
• Registration cannot be cancelled ab initio for not furnishing returns for 6 months - Delhi High Court
• No interest and penalty if ITC wrongly taken is reversed without utilisation - Punjab & Haryana High Court
• Blocking of electronic credit ledger cannot be for an amount more than the pre-deposit amount required for appeal - Punjab & Haryana High Court
• Seizure during search - No authorisation required for each and every person, article, goods, books, and documents discovered during search - Kerala High Court
• Refund due to inverted duty structure available if input supplier mistakenly charges higher tax - Madras High Court
• Refund due to inverted duty structure is not deniable on premise that ‘rate is more or less the same’ - Rajasthan High Court
• Refund - Time limit under Section 54(1) is not mandatory - Furnishing of supporting documents at time of personal hearing only when is not fatal - Madras High Court
• Interest on delayed refund available @ 6% after 60 days from date of initial refund application till 60 days of second application filed pursuant to favourable appellate order - Delhi High Court
• Demand - Reasonable period to respond to SCN ought to be 30 days - Madhya Pradesh High Court
• Non reference of particular statutory provision in SCN when is not fatal - Kerala High Court
• Unsigned Order even if uploaded by competent authority is not valid - Andhra Pradesh High Court
• SEZ supplies - IGST refund not to be denied for delay in obtaining, or mistake in, endorsement - Madras High Court
• GST Council cannot determine classification of goods - Flavored milk made from dairy milk is not ‘beverage containing milk’ under Heading 2202 - Madras High Court
• Inspection and affiliation fees are not covered under certain exempt ‘education services’ - GST liable - Telangana High Court
• Exemption available to contractor cannot be extended to sub-contractor - Both constitute independent supplies - Telangana AAR
• Canteen and transportation services provided to employees when liable to GST - Telangana AAR
• Rate revision for works executed before 1 July 2017 - Issuance of invoice - Telangana AAR
• Gold coins and white goods provided to dealers for achieving certain targets is ‘supply’ - ITC is not restricted as gift, and there is no permanent transfer of business assets - Telangana AAR

Customs

Notifications and Circulars

• Postal exports - Authorization of 170 additional booking post office under the Postal Export (Electronic Declaration and Processing) Regulations, 2022
• Courier Shipping Bills - Provision introduced for advance assessment
• Sugar exports - Restrictions extended beyond 31 November 2023
• Onion exports exempted from export duty but Minimum Export Price effective from 29 November

Ratio decidendi

• EPCG Scheme - Spares can be imported for pre-production purposes also - CESTAT Kolkata
• Valuation - Effect of discharge of service tax on import of designs and drawings - CESTAT Kolkata
• Valuation - Appeal against enhanced value maintainable even when price initially accepted in B/E or letter - CESTAT Ahmedabad
• MEIS benefit on flexible intermediate bulk containers - Retrospective withdrawal from 7 March 2019 by Public Notice dated 29 January 2020 is not correct - Delhi High Court
• Description of goods as ‘used’ when machine used only for trial run, when correct - CESTAT Ahmedabad
• Customs assessing authority is empowered to make assessment regarding claim of exemption from IGST - Kerala High Court
• Non-compliance of Standing Order is only a procedural lapse - Letter signed by authorised customs agent must be taken as signed by importer - CESTAT Ahmedabad
• ASEAN FTA benefit not deniable when invoice raised by third-party country or for minor discrepancies in invoice number mentioned in the CoO certificate - CESTAT Chennai
• Drawback - Delay in realisation of export proceeds is procedural lapse - CESTAT Prayagraj
• Transfer Door Color Strip, classifiable under TI 3919 90 90, is eligible for benefit of Notification No. 57/2017-Cus. (Sl. No. 9) - CESTAT Ahmedabad
• Clear Float Glass is classifiable under TI 7005 10 90 and not under TI 7005 29 90 - CESTAT Kolkata
• Goods used for positioning of patients on X-ray machines covered under Heading 9022 - CESTAT Ahmedabad

Central Excise, Service Tax & VAT

Ratio decidendi

• Validity of audit and inspection under Service Tax Rule 5A(2) - Delhi HC refers issue to Larger Bench
• Export of services - Routing of consideration through a third-party is not material - CESTAT Chandigarh
• Permanent transfer of lease hold rights is not ‘sub-lease’ - CESTAT Kolkata