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2025 (6) TMI 990 - HC - GSTClassification of mango pulp - classifiable under Entry No. 30A of Schedule I of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 attracting GST at the concessional rate of 5% or not - validity of Circular No. 179/11/2022-GST dated 03.08.2022 - HELD THAT - In Vimal Agro 2024 (5) TMI 266 - GUJARAT HIGH COURT this Court has held that as mango pulp would fall under the third category of mangoes (other than mango sliced dried) would be liable to levy at the rate of 12% as per Entry No. 16 which was amended so as to clarify the intention of council to continue to levy GST at 12% on mangoes (other than mango sliced dried) which would include mango pulp from 1st July 2017. The controversy in the present petitions is identical to the issues which were decided in Vimal Agro and therefore the aforesaid decision in Vimal Agro will be squarely applicable to the present petitions. Accordingly it is clarified that the petitioners would be liable to pay GST on the product Mango pulp at the rate of 12% from 1st July 2017 and not at the rate of 5% (as claimed by the petitioners) or 18% (as claimed by the Respondents) for the period 01.07.2017 to 18.07.2022. Conclusion - i) Mango pulp is taxable at 12% GST from 01.07.2017. ii) The impugned Circular No. 179/11/2022-GST is valid and not ultra vires. iii) The petitioner s challenge to the Circular and classification is rejected. iv) The petitioner is liable to pay GST at 12% for mango pulp for the period 01.07.2017 to 18.07.2022. v) The show cause notices issued for recovery of differential GST are valid but limited to the 12% rate and relevant period. Petition allowed in part.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court are: - Whether mango pulp is correctly classifiable under Entry No. 30A of Schedule I of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, attracting GST at the concessional rate of 5% (2.5% CGST + 2.5% SGST), as contended by the petitioner. - Whether the Circular No. 179/11/2022-GST dated 03.08.2022, particularly paragraph 4, which clarifies that mango pulp falls under a separate category attracting a higher GST rate of 12%, is ultra vires the CGST Act and the relevant Notifications. - The validity and applicability of the GST Council's decisions and subsequent amendments to the GST rate notifications concerning classification and tax rates on mango pulp. - Whether retrospective application of the higher GST rate on mango pulp from 01.07.2017 to 18.07.2022 is valid. - Whether the petitioner is liable to pay GST at the rate of 12% or the reduced rate of 5% on mango pulp for the period prior to 18.07.2022. - Whether the show cause notices issued by the revenue authorities for recovery of differential GST on mango pulp are sustainable. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Classification of Mango Pulp under GST Notifications and Applicable Tax Rate Relevant Legal Framework and Precedents: The GST rate notifications issued under Sections 9 and 11 of the CGST Act prescribe tax rates based on the Harmonized System of Nomenclature (HSN) codes as notified by the World Customs Organization. Chapter 8 of HSN covers edible fruits including mangoes under heading 0804, which includes fresh and dried mangoes. Notifications No. 1/2017 and No. 2/2017 respectively list taxable and exempt goods, with fresh mangoes exempted and dried mangoes initially taxed at 12%. The GST Council's 22nd meeting reduced the rate on sliced and dried mangoes to 5%, reflected in Entry No. 30A. The 47th GST Council meeting clarified a third category of mango products, including mango pulp, attracting 12% GST under Entry No. 16. Court's Interpretation and Reasoning: The Court examined the HSN classification and the GST Council's decisions. It noted that the General Chapter Note of HSN 0804 includes fruits that may be pulped. However, the GST Council's 47th meeting explicitly recognized mango pulp as distinct from "mango sliced, dried" and confirmed it attracts GST at 12%. The Court held that the Notifications and Circulars reflect this classification and rate structure. The petitioner's contention that mango pulp falls under Entry 30A (5%) was found untenable in light of the Council's clarification. Key Evidence and Findings: The Court relied on the text of Notifications, the GST Council meeting minutes, and Circular No. 179/11/2022-GST. The Circular explicitly states mango pulp attracts 12% GST. The petitioner's prior practice of paying 5% GST was based on an earlier understanding, which was superseded by the Council's clarification. Application of Law to Facts: Applying the GST law and the Notifications, the Court concluded mango pulp is taxable at 12% GST from 01.07.2017, not at the concessional 5% rate applicable only to "mango sliced, dried". Treatment of Competing Arguments: The petitioner argued that only two categories of mangoes exist under HSN 0804 (fresh and dried) and that mango pulp is a form of sliced mango, hence taxable at 5%. The Court rejected this, emphasizing the GST Council's explicit clarification creating a third category. The respondent's position that mango pulp attracts 12% GST was upheld. Conclusions: Mango pulp is classifiable under the category attracting 12% GST under Entry No. 16 of Schedule II of Notification No. 1/2017-Central Tax (Rate) effective from 01.07.2017. Issue 2: Validity of Circular No. 179/11/2022-GST and Retrospective Application of GST Rate Relevant Legal Framework and Precedents: Section 168 of the CGST Act empowers the CBIC to issue circulars for clarification. The GST Council's recommendations and Notifications govern tax rates. The Court referred to its earlier decision in Vimal Agro Product Pvt. Ltd. (2024) where similar issues were adjudicated. Court's Interpretation and Reasoning: The Court held that the Circular does not amend the rate but clarifies the GST Council's intent. The Circular's retrospective application aligns with the original Notification No. 1/2017, which was clarificatory in nature. The Court observed that Section 9 of the CGST Act does not permit amendment of rates by the CBIC, but clarifications consistent with Council's decisions are valid. Key Evidence and Findings: The Circular's paragraph 4 explicitly clarifies the classification and tax rates. The GST Council's 47th meeting minutes support the retrospective clarification. The petitioner's reliance on earlier communications without GST Council approval was insufficient. Application of Law to Facts: The Circular's retrospective clarification is valid and binding. The petitioner's challenge to paragraph 4 of the Circular as ultra vires and arbitrary was rejected. Treatment of Competing Arguments: The petitioner contended the Circular was arbitrary and violated Articles 14 and 19(1)(g) of the Constitution. The Court found no arbitrariness or violation, as the Circular merely reflects the GST Council's considered decision. The petitioner's claim of retrospective amendment was dismissed as the Circular is clarificatory, not amending. Conclusions: The Circular is valid, clarifies the GST rate at 12% on mango pulp retrospectively from 01.07.2017, and is not ultra vires the CGST Act. Issue 3: Liability for GST Payment and Validity of Show Cause Notices Relevant Legal Framework and Precedents: Section 74 of the CGST Act empowers authorities to issue show cause notices for recovery of unpaid tax. The Court referenced the Vimal Agro decision, which addressed the tax liability on mango pulp. Court's Interpretation and Reasoning: The Court held that the petitioner is liable to pay GST at 12% on mango pulp from 01.07.2017 to 18.07.2022. The show cause notices issued for recovery of differential GST at 12% (instead of 5%) were justified. However, the Court quashed the notices to the extent they sought recovery beyond the 12% rate or for any other period. Key Evidence and Findings: The Court relied on the GST Council's clarifications, Notifications, and the Circular. The petitioner's payment of 5% GST was found to be underpayment. Exports assessed at 5% IGST were noted but did not affect domestic tax liability. Application of Law to Facts: The petitioner must pay GST at 12% on mango pulp for the relevant period. The show cause notices are sustainable but were quashed to the extent inconsistent with the Court's findings. Treatment of Competing Arguments: The petitioner sought to restrict tax liability to 5% or at most 6%. The respondents sought 12% or even 18%. The Court rejected both extremes, fixing liability at 12% as per the Notifications and Council's decisions. Conclusions: The petitioner is liable to pay GST at 12% on mango pulp from 01.07.2017 to 18.07.2022. Show cause notices are valid but limited to this rate and period. 3. SIGNIFICANT HOLDINGS The Court's important legal reasoning includes the following verbatim extracts from the Vimal Agro decision, which the Court applied: "[43] The petitioner is, therefore, liable to pay GST at the rate of 12% as per Entry no. 16 from 01.07.2017 and not 5% as per Entry No.30A, which provides for 'mangoes sliced, dried' only. The contention of the petitioners that there was an amendment to the rate Notification with effect from 18th July 2022 is not tenable. As such the Notification is only clarificatory and would apply with effect from 1st July 2017 as per Notification No.1/2017." "[45] In view of the above discussion, as 'mango pulp' would fall under the third category of 'mangoes (other than mango sliced, dried)' would be liable to levy GST at the rate of 12% as per Entry No.16 which was amended so as to clarify the intention of council to continue to levy GST at 12% on 'mangoes (other than mango sliced, dried)' which would include 'mango pulp' from 1st July 2017." Core principles established:
Final determinations on each issue:
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