TMI Blog2020 (2) TMI 1295X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to the centres is raw milk in which no further processing has been done and therefore, such milk is an agricultural produce - The chilling and packing services provided by the contractors to the petitioners are in respect of raw milk. As farmers involved in rearing animals for the purpose of milk cannot directly connect to each of the consumers of the supply of milk, such farmers join hands to form a village co-operative society and supply milk to the member unions. Vide Notification No.11/2017 dated 28th June, 2017, services falling under Heading 9986 were exempted from payment of tax under Central Goods and Services Tax Act, 2017, State Goods and Services Tax Acts, 2017, Union Territory Goods and Services Tax Act, 2017 and the Integrated Goods and Services Tax Act, 2017. The services falling under clause (i) of the Heading 9986 are support services to agriculture, forestry, fishing, animal husbandry - the above notification was brought into force from 1.7.2017. On a perusal of paragraph 3 of the impugned circular, it is evident that the same is based on sub-clause (c) of clause (i) of the Explanation to clause (i) under Heading 9986, inasmuch as, according to the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (i) of Heading 9986 at Serial No.24 of the Table to Notification No.11/2017 dated 28.6.2017. The court is of the view that the interpretation given by the respondents to the activities of chilling and packing of milk as contained in the impugned letter/circular dated 9.8.2018 is not in consonance with the provisions contained in Serial No.24 of the Table to Notification No.11/2017 dated 28.6.2017 and, therefore, the impugned letter/circular cannot be sustained - The impugned letter/circular F No.354/292/2018-TRU dated 9.8.2018 (Annexure-F to the petition) issued by the Government of India, through the Tax Research Unit, New Delhi, is hereby quashed - It is hereby held that milk chilling and packing service provided by the contractors to the petitioners are exempted by virtue of Serial No.24 of the table to Notification No.11/2017 Central Tax (Rate) dated 28.6.2017 (Annexure-D to the petition). Petition allowed. - R/SPECIAL CIVIL APPLICATION NO. 8320 of 2019 - - - Dated:- 13-12-2019 - HONOURABLE MS.JUSTICE HARSHA DEVANI And HONOURABLE MS. JUSTICE SANGEETA K. VISHEN AMAL PARESH DAVE, MR PARESH M DAVE FOR THE PETITIONER MS TRUSHA K PATEL, RULE NOT RECD BACK, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chilling centers, where milk belonging to the dairies is stored at a particular temperature. In addition to providing such services of chilling and storing of milk, the contractors are also providing packing service to the dairies in respect of pouch packing of milk. Regular agreements are made between the dairies and such contractors, most of whom are individuals or firm of individuals. 6. It is the case of the petitioners that the dairies have been paying milk chilling charges as well as packing charges to the service providers in accordance with the rates agreed between the parties. The charges are paid by the dairies based on the quantum of work executed or service rendered by the contractors and the packing charges are paid on the quantum of milk packed. The dairies have made payment to the contractors in accordance with such invoices, which according to the petitioners have always been in accordance with rates agreed under the agreements between the parties. 7. After the introduction of the goods and service tax laws with effect from 1.7.2017, support services to agriculture, forestry, fishing and animal husbandry are classified under heading 9986 of the GST Tariff. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch Unit whereby it is clarified that chilling and packing of milk is not exempted from GST. It is also clarified that services by way of job work in relation to all food and food products falling under chapters 1 to 22 attract GST at the rate of 5% and accordingly, the activity of chilling and packing of milk by the job workers attract GST at the rate of 5%. 11. It is the case of the petitioners that there are several contractors with whom agreements are made by the dairies for operating and maintaining milk chilling centers in the State and also in other States. All such contractors supply the same services, that is, chilling and storing of milk, and packing of milk in pouch. Since all the dairies, namely, the member Unions of the Federation are selling and supplying milk all over the country and since their activities are not confined only within the State of Gujarat, chilling centers are kept and maintained at various places in the country, and milk belonging to the dairies is stored in a chilled condition and then packed, as required by the dairies at all such chilling centers. 12. Since the Government of India through TRU has clarified that milk chilling and packing w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g milk belonging to the petitioners. Thus, huge financial burden falls on the petitioners, who are obliged to reimburse the contractors with GST deposited by them with the Government on milk chilling and packaging services supplied to the petitioners for their milk. According to petitioners, these liabilities are not only contrary to the exemption allowed by the Government, but it is also against the objective of the Government of not imposing taxes on a product like milk and on activities of farmers and agriculturist co-operative Societies. It is in these circumstances, that the petitioners have approached this court seeking the reliefs noted herein above. 14. The respondents have filed an affidavit-in-reply in response to the averments made in the memorandum of petition, wherein a reference has been made to serial No.24 of Notification No.11/2017 Central Tax (Rate) and it is stated that chilling of milk is usually not done by a cultivator or producer of milk nor is it carried out for making it marketable in the primary market. Chilling takes place in chilling plants and is carried out as part of the process for making milk ready for sale in the secondary and tertiary market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andry are chargeable to nil rate of duty by virtue of serial No.24 of the Table to Notification No.11/2017-Central Tax (Rate) dated 28.6.2017. Support services are explained under Serial No.24 to mean inter alia 'services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce'. Several services are specified under clauses (a) to (g) under the Explanation; and clause (e) inter alia covers packing, storage or warehousing of agricultural produce'. It was submitted that admittedly chilling is a support service by way of storage of milk. Even packing of milk is also specified as a support service. Thus, the expressions packing and storage under clause (e) of the Explanation under Serial No.24 of the Table to the notification cover chilling and packing of milk in tetra packs or plastic pouches. 15.1 It was further submitted that chilling and packaging of milk are processes which are undertaken after milk is produced. It was submitted that under para 4 (vii) of the notification, agricultural produce' is explained to mean any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to Notification No.11/2017 dated 28.6.2017, milk chilling services and also packing of milk are fully exempt from payment of GST and, therefore, no CGST is chargeable from the petitioners contractors or any other person providing such services in relation to milk. 15.3 The learned advocate further submitted that the clarification issued by the TRU is incorrect and erroneous, inasmuch as this clarification is apparently based on a misconception about the scheme of exemption contained at Serial No.24 of Notification No.11/2017 dated 28.6.2017. It was submitted that the impugned TRU clarification proceeds on the basis that chilled and packed milk for retail sale was not covered by the definition of agricultural produce as according to the TRU, the processes of chilling and retail packing of milk were usually not done by a cultivator or a producer. It was contended that this may be true, but that would only mean that chilled and packed milk was not agricultural produce ; whereas the question involved in this case is not whether chilled and packed milk was agricultural produce or not. The question is whether ordinary milk (that is, before it is chilled and packed milk) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: Explanation. Support services to agriculture, forestry, fishing, animal husbandry mean. (i) Services relating to cultivation of plants and rearing of all life forms of animals except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce by way of - (a) xxx (b) xxx (c) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations, which do not alter the essential characteristics of agricultural produce but make it marketable for the primary market. (d) xxx (e)loading, unloading, packing, storage or warehousing of agricultural produce. 20. Note 4 below the notification, to the extent the same is relevant for the present purpose, reads thus:- Note 4 For the purposes of this notification:- (vii) agricultural produce means any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw materials or other similar products, on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market. On a perusal of paragraph 3 of the impugned circular, it is evident that the same is based on sub-clause (c) of clause (i) of the Explanation to clause (i) under Heading 9986, inasmuch as, according to the respondents the process of chilling and packing of milk is not usually done by the cultivator or producer and are not carried out at an agricultural farm. 23. In the opinion of this court, if the petitioners were claiming that the support services to agricultural produce fall under sub-clause (c) of clause (i) of the Explanation, the respondents may have been justified in coming to such conclusion. However, it is the case of the petitioners that the support services are of packing and storage of agricultural produce falling under sub-clause (e) of clause (i) of the Explanation which reads thus: (e)loading, unloading, packing, storage or warehousing of agricultural produce . 24. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods listed thereunder. The present case relates to providing services of storage and packing and not transportation and hence, no reliance can be placed on the said entry. 27. In the impugned circular, it is also stated that chilling and packing is not exempt from GST inasmuch as services by way of job work in relation to all food and food products falling under Chapters 1 to 22 attract levy of GST @ 5% and therefore, the activity of chilling and packaging of milk provided by way of job work attracts levy of GST @ 5%. In this regard, this court is of the view that the levy of 5% GST on job work on food and food products falling under Chapters 1 to 22 would be attracted if the services provided are not support services as contemplated under clause (i) of Heading 9986 at Serial No.24 of the Table to Notification No.11/2017 dated 28.6.2017. 28. In the light of above discussion, the court is of the view that the interpretation given by the respondents to the activities of chilling and packing of milk as contained in the impugned letter/circular dated 9.8.2018 is not in consonance with the provisions contained in Serial No.24 of the Table to Notification No.11/2017 da ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
