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TMI Blog2020 (2) TMI 1295X X X X Extracts X X X X X X X X Extracts X X X X ..... nt recovered and collected from the petitioners through their contractors as GST on milk chilling and packing services. 2. The petitioner No.1 - M/s. Gujarat Co-operative Milk Marketing Federation Limited is a co-operative society, registered under the Gujarat Co-operative Societies Act, 1961. The Federation is an apex body for marketing of milk and milk products produced by the various District Co-operative Milk Producers Unions which are co-operative societies of farmers and agriculturists of various districts and are also registered as co-operative societies under the said Act. The petitioners No.2 to 5 are four of such district co-operative societies which are members of the Federation. The petitioners No.2 to 5 are operating plants popularly known as dairies for production of milk and milk products. 3. The dairies are engaged in the activities of producing milk and milk products on co-operative principles and the goods so produced by the dairies are sold and marketed by the Federation. 4. Prior to 1.7.2017, that is before the goods and service tax laws came into force, the goods produced by the dairies were excisable goods covered under various chapters of the first Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qualifying for nil rate of tax. The term "agricultural produce" is also explained by virtue of paragraph 4(vii) of the notification. It is the case of the petitioners that since any produce out of rearing of any life form of animals is considered to be an agricultural produce for the notification, milk is an agricultural produce for the purpose of this notification, inasmuch as milk is a produce out of rearing of animals like cows and buffalos. Since packing as well as storage of agricultural produce is considered to be support service to agriculture for the purpose of this notification, chilling and packing of agricultural produce like milk are support services to agriculture, and hence chargeable to nil rate of tax. Accordingly, the contractors of the dairies, that is, petitioners No.2 to 5 herein had not been discharging liability of GST on chilling and packing services for milk. However, for any other services, that is, other than the chilling and packing of milk, the levy of GST is discharged by the contractors at appropriate leviable rates. 9. Though the Federation had received a legal opinion that GST was not chargeable on milk chilling and packing charges, the Federation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of milk chilling and packing charges. It is thus the dairies, that is, the petitioners No.2 to 5 herein, who have been bearing burden of GST on milk chilling and packing service supplied to them by the contractors. In addition to the regular payment of GST being made after the above referred circular and clarification by the Government of India, the dairies have also reimbursed the contractors with the entire amount of GST recoverable on milk chilling and packing services supplied by them for the period prior to the above referred clarification by the Government of India. A substantial financial burden for such past supplies is borne and discharged by the dairies, and GST burden at the rate of 5% is being discharged regularly for the period after clarification of the Government also. 13. It is the case of the petitioners that the Central Government has granted exemption to milk chilling, storage and packing service by virtue of serial No.24 of Notification No.11/2017 dated 28.6.2017, but this exemption is now denied to the petitioners by virtue of the Circular F. No.354/292/2018- TRU dated 9.8.2018 issued by the TRU. The petitioners are, therefore, constrained to deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST. 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 % vide Serial No.26(i) (f) of Notification No.11/2017-Central Tax (Rate) dated 28.6.2017 as amended vide Notification No.31/2017-Central Tax (Rate) dated 13th October 2017. Accordingly, the activity of chilling and packaging of such chilled milk provided by way of job work attracts levy of GST @5%. Therefore, the petitioners' claim that such services are exempt from GST is not legally and factually correct. It is further averred that the circular or clarification issued by TRU is not contrary to any legal position or GST Act or the notifications issued thereunder. Further, by setting aside the impugned circular of TRU, the petitioners or their job workers cannot escape or be exempted from payment of GST on such services as the liability to pay GST on such services provided by their job workers/contractors are imposed by virtue of serial No.26(i)(f) of Notification No.11/2017-Central Tax (Rate) dated 28.6.017 as amended vide Notification No.31/2017-Central Tax (Rate) dated 13.10.2017 on the recommendation of the GST Council. It is further submitted in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove notification would mean that services relating to rearing of all life forms of animals for food, or agricultural produce are "support services to agriculture", and packing as well as storage of agricultural produce is also considered to be support services to agriculture. Hence, any produce out of rearing of any life form of animals is considered to be an agricultural produce for the purpose of the notification, and therefore milk which is a produce out of rearing of animals like cows, buffalos and the like, is also an agricultural produce; and packing as well as storage of such agricultural produce (that is, milk) are support services to agriculture. It was urged that such services are fully exempt from recovery of GST, and the impugned circular which takes a contrary view is therefore liable to be set aside. 15.2 The learned advocate for the petitioners further submitted that chilling is a process for preserving milk, and when milk chilling is carried out by third parties, it is a support service rendered by such third parties for the milk belonging to dairies. Milk is stored in chilling plants, and thus milk chilling is a support service by way of storage of milk, which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondents, reiterated the averments made in the affidavit-inreply as referred to hereinabove. It was submitted that the services availed of by the contractors, are clearly not support services for agricultural produce and hence, vide the communication dated 9.8.2018, the respondents have rightly stated that chilling and packing of milk is not exempt from GST. 17. From the facts and contentions noted herein above, it appears that it is not in dispute that milk is an agricultural produce, it being a produce out of rearing of life forms of animals and for food. The present case relates to raw and unprocessed milk. What is brought to the centres is raw milk in which no further processing has been done and therefore, such milk is an agricultural produce. 18. 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. 19. Vide Notification No.11/2017 dated 28th June, 2017, services falling under H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead thus: "3. Chilled and packed milk for retail sale is not covered by the definition of 'agricultural produce' as the process of chilling and retail packing of milk are usually not done by a cultivator or producer. This is the reason why separate exemption entry exists for 'transportation of agricultural produce' and for 'transportation of milk [S. Nos.20 and 21 of Notification No.12/2017 - Central Tax (Rate) dated 28.6.2017as refer]. The processes of chilling and packing are not processes carried out at an agricultural farm. 4. Thus, chilling and packing of milk is not exempt from GST. 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% [S. No 26 (i)(f) of Notification No.11/2017-Central Tax (Rate)]. Accordingly, the activity of chilling and packaging of milk provided by way of job work, attracts levy of GST @ 5%. 5. As stated by you, job workers make substantial investment in plant and machinery for chilling and packing of milk. Exempting chilling and packing of milk would block input credit of job workers and increase their costs." 22. At this juncture it may be germane to refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the impugned circular, it is the case of the respondents that chilled and packed milk for retail sale is not covered by the definition of agricultural produce. While saying so, what is lost sight of is that support services are not provided to chilled and packed milk, but support services of storage and packing are provide to raw milk which is an agricultural produce. Therefore, the very basic premise on which the respondents have proceeded is fallacious and based on a factually incorrect premise. Another ground stated is that such processes are not carried out at an agricultural farm. This ground is based on a misconception of the nature of services being provided, inasmuch as, it is sub-clause (c) of clause (i) of the Explanation which requires processes to be carried out at an agricultural farm; whereas, sub-clause (e) does not contain any such prescription. 26. According to the respondents, there are separate exemption entries for transportation of agricultural produce and for transportation of milk [Serial No.20 and 21) of Notification No.12/2017 - Central Tax (Rate) dated 28.6.2017]. In this regard, a perusal of Serial No.20 of the said notification indicates that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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