Category: Recent Developments In GST

A. CIRCULARS

(i) Clarifications – Procedure for review, revision and appeal Circular no.250/07/2025-GST dated 24.06.2025.

By above circular, clarifications about procedure for review, revision and appeal in respect of Orders-in-Original (O-I-Os) passed by Common Adjudicating Authorities (CAA), i.e., Joint/Additional Commissioners appointed for adjudicating SCNs issued by DGGI under GST are provided.

B. ADVISORY

i) Vide GSTN dated 16.6.2025, the information about introduction of Enhanced Inter-operable Services between E-way Bill portals is provided.

ii) Vide GSTN dated 18.6.2025, the information about Advisory to file pending returns before expiry of three years is provided.

iii) Vide GSTN dated 19.6.2025, the information about handling of inadvertently rejected records on IMS is provided.

C. ADVANCE RULINGS

EPC Contract – Divisible vis-à-vis indivisible contract Thyssenkrupp Industrial Solutions (India) Pvt. Ltd. (Now known as Thyssenkrupp UHDE India Pvt. Ltd.)

(AR Order No. GUJ/GAAR/R/2023/01 (in Appl. No. Advance Ruling/SGST&CGST/2023/AR/29) dated: 29.01.2025) (Guj)

The applicant is engaged in Engineering, Procurement and Construction (‘EPC’) jobs, as well as Engineering, Procurement and Construction Management services in the areas of Ammonia Storages, Nitric Acid, Urea, DMT etc. and is also involved in the setting up of Chlor Alkali plants, Hydrogen plants, Nitric Acid plants etc.

The applicant has undertaken a bid of IOCL for execution of EPC package (EPCC-09) for Catalytic De-Waxing Unit (‘CDWLP‘) for its Petrochemical and Lube Integration Project (‘LuPech’). As per tender the successful bidder is contractually obligated to execute the work on lump sum turnkey basis with single point responsibility.

The scope of EPC contract includes:

 Supply of imported components on a high seas sale basis and

 Clearance of imported goods for and on behalf of IOCL;

The acceptance letter issued by IOCL also clarified that the contract is for lump sum value including tax. It is provided that the imported goods should be sold to IOCL and the applicant should clear the same in the name of IOCL. IOCL was to pay applicable duty under Custom/IGST.

The applicant projected the above contract as a split contract in following components , though it is a single document.

It was the contention of applicant that since goods are sold on high seas sale (HSS) basis, it is sale simpliciter and hence cannot be part of works contract value.

With the above background, the applicant posed the following questions before ld. AAR.

“1. Whether the contract between the Applicant and IOCL is a divisible contract or a single and composite contract?

2. If the contract between the Applicant and IOCL is treated as an indivisible and a single composite contact whether the component imported goods will be taxable as a supply of goods at the time of importation or as a service at the time of incorporation in the works contract i.e. when the erection, commission and installation of goods takes place

3. When imported goods are sold by the supplier to a recipient on a high seas sale basis and such goods are cleared from customs by the recipient(as the importer on record) on payment of duty & Integrated Goods and Service Tax (under Section 5(1) of the Integrated Goods and Services Tax Act, 2017 read with Section 12 of the Customs Act and Section 3 of the Customs Tariff Act, and later such imported & duty paid goods are erected, commissioned and installed by the same supplier in such circumstances

[a] Whether a supply of goods can be subjected to GST twice, first as supply of goods at the time of importation in the hands of the recipient / importer and a second time as a component of supply of service in the hands of the supplier of FPC contract service at the time of incorporation of the imported goods in a works contract by way of erection, commission and installation?

[b] Whether the value of goods sold on a high seas can be added to the value of a works contract merely because such duty and IGST paid goods are incorporated in the works contract by way of erection, commission and installation.”

The ld. AAR referred to contract terms in detail along with relevant provisions under GST Act.

Regarding the contract of the applicant that the given contract is a split contract, the ld. AAR referred to judgment in case of Kone Elevator India Private Limited [2014 (304) E.L.T. 161 (S.C.) -2014-VIL-12-SC-CB] and held that the present turnkey EPC contract is a ‘works contract’. Since it is lump sum EPC contract, it cannot be divisible contract, though there are two separate work orders. The ld. AAR observed that both work orders are interdependent and cannot be performed independently.

Accordingly, the ld. AAR held that the impugned contract entered into by the applicant with IOCL is not a divisible contract.

So far as the question of tax liability on HSS of imported goods, the ld. AAR observed that it is not liable to GST in terms of Schedule III, read with section 7(2) of the CGST Act, 2017 as it is treated as neither a supply of goods nor a supply of services.

Regarding further question about the taxation of goods post HSS sale to IOCL, the ld. AAR observed that the said issue is not within the jurisdiction of its Authority, as it is a matter to be decided by the jurisdictional Customs Authority in terms of Customs Act, 1962 and Customs Tariff Act, 1975.

Regarding next question of taxability of HSS sale amount as a part of consideration for applicant, the ld. AAR relied upon Section 15 of the CGST Act, 2017.

The ld. AAR observed that what will be included and excluded in the value of supply is governed by sub-sections 15(2) & (3) of the CGST Act, 2017 and particularly sub-section 15(2). The ld. AAR held that the value of supply shall include any amount
that the supplier is liable to pay in relation to such supply which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both. Since the applicant is having EPC contract, the applicant is liable to provide the goods [supplied on HSS basis to IOCL] and therefore the submission of applicant to not include such value in valuation is held untenable.

The ld. AAR relied upon judgment in case of M/s. Shree Jeet Transport – 2023-VIL-764-CHG [Writ Petition (1) No. 117/2022 decided on 17.10.2023].

The plea of double taxation also rejected by ld. AAR observing that what is supplied under the works contract is not the imported goods but EPC contract service.
The argument that since duty & IGST paid goods are incorporated in the works contract by way of erection, commission & installation and hence the said value cannot be included in valuation is rejected by the ld. AAR on ground that the contract is composite contract amounting to one transaction of supply of service.

Thus, all questions were decided against the applicant.

GTA – Scope

Tanuja Jangir

(AR Order No. RAJ/AAR/2024-25/21 dated: 21.11.2024) (Raj)

The applicant, M/s. IKTAI is a registered proprietorship concern intending to expand into a new business vertical focused on goods transport as a Goods Transport Agency (GTA). The Applicant is desirous of entering into agreement with other GTA’s (Principal GTA) for transportation of goods.

As per the draft agreement, the customers of principal GTA will award contract (referred as ‘‘Main Contract’) for transportation of goods. The principal GTA will issue consignment notes to its customers for transportation of goods.

Principal GTA will engage the applicant for transportation of goods. The applicant will be responsible to pick up the goods from the loading point and transport the goods to the designated unloading point, as per instructions of the principal GTA. The applicant will undertake the transport of goods on principal basis, i.e. he will issue and provide the principal GTA with a consignment note, for each transport, for transportation of goods.

Based on above facts the applicant has raised following issue before the ld. AAR.

“1. Whether the activity of the transportation of goods by the applicant will be exempted under entry No 18 of notification no 12/2017-Central Tax (Rate) dated 28.06.2017?”

Applicant’s main submission was that under GST, service by way of transportation of goods by road, other than GTA, is classified under Entry 18, Heading 9965 vide Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 as amended from time to time. It was the submission that, the service by way of transportation of goods by road, is exempt except in following cases-

 A goods transportation agency

 A courier agency

It was contested that as GTA, the liability falls on recipient under RCM, unless a different option is opted by GTA.

The applicant drew attention to the meaning of GTA provided in Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 which is as under:

“4. Explanation. – For the purposes of this notification, –

(xxxx) ‘goods transport agency’ means, – any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called.”

The applicant explained that the use of phrase “in relation to” has extended the scope of the definition of GTA and it includes not only the actual transportation of goods but any intermediate/ancillary service provided in relation to such transportation, like loading or unloading, packing or unpacking, temporary warehousing etc. If these services are not provided as independent activities but are the means for successful provision of GTA service, then they are also covered under GTA. It was submitted that, in respect of those who provide agency services in transport, the liability is cast on recipient (RCM) in most of the cases, unless ¬option to pay under forward charge has been exercised by the GTA.

Based on above, applicant was contemplating exemption to its activity.

Considering meaning of the GTA, ld. AAR observed that issuance of the consignment note is an essential condition for any person to act as GTA. The ld. AAR further observed that if such a consignment note is not issued by the transporter, the service provider will not come within the ambit of GTA, as issue of consignment note indicates that the lien on the goods has been transferred to the transporter and the transporter becomes responsible for the goods till its safe delivery to the consignee.

The ld. AAR also explored the meaning of term “consignment note” based on available material including under erstwhile service tax and observed that in case of Consignment Note, the goods are received by the goods transport agency either from the consignor or the consignee of the goods, the details of which are mentioned in the consignment note along with the description of the goods being transported.

The ld. AAR observed that in present case the service of transportation of goods is sub-contracted to the applicant by the principal GTA meaning thereby the contract to undertake transportation of goods is provided by the consignee/consignor to principal GTA and not to the applicant. The ld. AAR also observed that because principal GTA deals with the consignee/ consignor directly, they also issue E-way bills and consignment notes. As per ld. AAR, the role of the applicant is to just provide their vehicles to principal GTA as and when called for and the applicant is giving only vehicles to principal GTA and thus it is principal GTA which has the transportation contract with the consignee/consignor.

The ld. AAR, therefore, opined that the transaction in this case would be one of renting of vehicles and not that of a Goods Transport Operator.

The ld. AAR further observed that issuance of consignment note to the consignor is an essential condition to qualify as a GTA and if entity only provides vehicles on rent or hire or other services for transport of goods for some consideration then it cannot be called a GTA, but an activity of ‘renting of vehicles’. It is reiterated that merely owning of trucks and renting them out for transportation of goods does not qualify in the definition of GTA. The ld. AAR held the applicant’s business activity is only of rental services of transport vehicles which are notified under notification no.11/2017-Central Tax (Rate) dated 28.06.2017.

Accordingly, the ld. AAR held that the applicant’s activity is not eligible for exemption under entry 18 of Notification no.12/2017-CT (R) dt.28.6.2017.

Classification – Icing Sugar

Ros Products

(AAR Order No. KER/8/2024 dated: 29.10.2024) (Ker)

The applicant filed advance ruling on the following questions:

1. What is the HSN code of Icing sugar?

2. What is the rate of GST on Icing sugar?

The applicant contended that in the market, Icing Sugar is being sold under the HSN code 1701 at the rate of 5% GST and also being sold under HSN code 1702 at the rate of 18% GST and therefore, in the AR application they have sought clarification about correct rate.

The applicant furnished the relevant portion from the FSSAI Regulations 2011, which specifies icing sugar as the sugar manufactured by pulverizing refined sugar or vacuum pan (planation white) sugar with or without edible starch. It was explained that edible starch, if added, shall be uniformly extended in the sugar. It was clarified that Icing Sugar shall be in form of white powder, free from dust, or any other extraneous matter.

The applicant further clarified that Icing Sugar is manufactured with grounded/pulverized sugar (HSN 1701) and maize starch (HSN 1108), where maize starch is not more than 4% by weight on dry basis of maize starch.

The ld. AAR observed that there are different kinds of sugars as provided in heading 17 as under:

The ld. AAR observed that while a specific classification is not provided for icing sugar, the icing sugar deserves the very same classification applicable to the sugar from which icing sugar is made. The ld. AAR observed that in case of applicant, icing sugar is manufactured from refined sugar (sucrose) pulverized with starch and not added with any colouring or flavouring materials. Accordingly, the ld. AAR held that the appropriate classification of the product should be under chapter/heading/sub-heading/Tariff item-1701 of the Customs Tariff Act 1975 with product description-Cane or beet sugar and chemically pure sucrose in solid form.

Justifying above classification, the ld. AAR also observed that being added with edible starch, it is composite product, but the ratio of refined sucrose and edible starch is 96.4% and presence of starch does not affect the essential character (taste) of sugar and therefore, the classification of the product goes with original sugar from which it is made. The ld. AAR held that the rate applicable will be 12% being covered by HSN Code 17019990.

Liability of Club – Principle of Mutuality

Umed Club

(AAR Order No. RAJ/AAR/2024-25/23 dated: 2.12.2024) (Raj)

The facts are that the applicant is a club registered under GST which is engaged in providing various services such as short-term accommodation, restaurant, recreational services.

The applicant intended to seek clarification on the applicability of GST on various services provided by club to its members in the light of the judgment of Supreme Court in case of State of West Bengal & others vs. Calcutta Club Limited in Civil Appeal no.4184 of 2009 (2019-VIL-34-SC-ST).

The applicant put forth analytical background of the above judgment.

The applicant also brought to notice the scope of Section 7 of CGST Act. The applicant has put forth following question:

“Whether service tax is payable on the services provided by clubs to its’ members?”

The question was originally decided by AR No. RAJ/AAR/2021-22/23 dated 27.09.2021-2022-VIL-54-AAR and it was decided against applicant.

Against the said AR, the appeal was filed before AAAR and vide order no. RAJ/AAAR/11/2023-24 dated 20.02.2024, the ld. AAAR set aside the above Ruling and remanded the matter back to the AAR to decide the application afresh on merits after considering all the questions posed by the applicant in their application dated 20.02.2024.

The ld. AAR observed that in light of judgment of Hon. Supreme Court in the case of State of West Bengal V/s Calcutta Club Limited in Civil Appeal No. 4184 of 2009 vide their Order dated 03.10.2019 -2019-VIL-34-SC-ST, no tax applied on its transactions with members due to principle of mutuality. The ld. AAR thereafter referred to amendments brought in GST Act vide Finance Act, 2021 dated 28.3.2021 which are also brought into force vide Notification No.39/2021-CT dated 21.12.2021 with retrospective effect from 1.7.2017.
The applicant also put forward the contention that as per Section 7(1)(A) and Schedule II of CGST / RGST Act, the Supply of Goods by the applicant Club to its member is only a taxable event under GST Act and not providing services.

The ld. AAR referred to definition of “person” in section 2(84) wherein, Clause (f) provides to include “(f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India;” in category of person.

The ld. AAR further referred to Section 2(102) of CGST Act, which provides meaning of ‘services’ and also, section 7 giving ‘scope of supply’. The ld. AAR highlighted the amended part i.e. Clause (aa) in Section 7 which reads as under:

“(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice versa, for cash, deferred payment or other valuable consideration.

Explanation. -For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another.”

The ld. AAR held that as per above legal provision, GST laws have expanded the scope of ‘supply’ to tax supplies between the club/association and its members as also to overcome the principle of mutuality. The ld. AAR held that the scope of supply clearly ascertains that the supply made by a person registered under GST is exigible to GST if it falls under section 7(1) of GST Act.

It further observed that by adding that the person and its members or constituents shall be deemed to be two separate persons, an overriding effect has been given to the judgements of any Court, Tribunal or any other authority. It accordingly observed that the decision given by the Hon’ble Supreme Court in State of West Bengal & Ors. vs. Calcutta Club Limited for erstwhile Service tax regime, is no more applicable on account of specific overriding effect over judgments and accordingly held that the applicant is liable to pay GST on Service transactions effected by it with its members.

(Note: After above ruling there is ruling of Hon. Kerala High Court in case of Indian Medical Association vs. Union of India (2025-VIL-338-KER) wherein a different view is taken about application of principle of mutually and may be relevant to see correctness of above ruling)

BCAJ Admin

A. NOTIFICATIONS

i) The Government has published the GST Appellate Tribunal (Recruitment, Salary and Other Terms and Conditions of Service of Group “C” Employees) Rules, 2024, dated 21st June, 2024 by Notification No. G.S.R 340(E), dated 21st June, 2024.

B. CIRCULARS

The following circulars have been issued by CBIC.

i) Monetary Limit for filing appeals by Department — Circular no.207/01/2024-GST dated 26th June, 2024.

By the above circular, monetary limits are indicated for the filing of appeals by the department. Different limits are provided for appeals to different forums like GSTAT, High Courts and Supreme Court.

ii) Clarifications in respect of manufacturers of specified commodities — Circular no.208/02/2024-GST dated 26th June, 2024.

By the above circular, various issues regarding compliance with special procedures in respect of specified commodities like Pan Masala and tobacco products are clarified.

iii) Clarification regarding Place of Supply — Circular no.209/03/2024-GST dated 26th June, 2024.

In the above circular, clarification is given about the Place of Supply in case of supply to an unregistered person. It is clarified that if the delivery address is different from the billing address, then the delivery address should be considered as the place of supply.

iv) Clarification on the valuation of Import Services- Circular no. 210/04/2024-GST dated 26th June, 2024.

In case of import of services between related parties, the importer is liable to pay tax under RCM, even though there is no consideration. By the above circular, clarification is given about valuation in such cases.

v) Clarification regarding ITC of Tax paid under RCM— Circular no.211/05/2024-GST dated 26th June, 2024.

In case, there are any inward supplies, received from unregistered suppliers, on which the recipient is liable to pay tax under RCM, in the above circular it is clarified that the year for considering the time limit under section 16(4) for availing ITC should be the year in which the self-invoice is created for such supply.

vi) Clarification regarding deduction towards discount — Circular no.212/06/2024-GST dated 26th June, 2024.

As per section 15(3)(b)(ii), if any discount is given by the supplier to the recipient then such discount is deductible from the value of such supply. One of the conditions for getting the claim is that the recipient should reduce his ITC proportionately. However, at present there is no facility to know the reduction made by the recipient. The circular has provided that, in such cases, a self-declared undertaking can be obtained from the recipient about a reduction in ITC and if such reduction is more than 5 lakhs, then a certificate from CA/CMA should be obtained.

vii) Clarification regarding Taxability of Shares / Securities – Circular no.213/07/2024-GST dated 26th June, 2024.

By the above circular clarifications are given about the taxability of ESOP / ESPP / RSU (Issue of Shares/Securities) provided by the Company to its employees through its overseas holding Company. Mainly it is clarified that such transactions are related to Shares / Securities, which are neither goods nor services, hence not liable to tax under GST as import of services.

viii) Clarification about reversal of ITC in case of Life Insurance — Circular no.214/08/2024-GST dated 26th June, 2024.

When there is an exempt supply, the ITC is required to be reversed on a proportionate basis. In the above circular it is clarified that in respect of the amount of premium for taxable life insurance policies, which is not included in taxable value as determined under Rule 32(4), there is no need for reversal of pro rata ITC.

ix) Clarification regarding taxability of Salvage — Circular no.215/09/2024-GST dated 26th June, 2024.

In the case of the insurance claim for goods, there are pre-determined terms for the treatment of salvage while deciding the claim amount. In the above circular, clarifications are given about taxability and valuation of salvage/wreckage.

x) Clarification regarding GST liability and ITC in case of Warranty— Circular no.216/10/2024-GST dated 26th June, 2024.

In the above circular, various clarifications are given with respect to GST liability and availability of ITC in cases involving warranty / Extended Warranty. This is in continuation of earlier circular no.195/07/2023-GST- dated 17th July, 2023.

xi) Clarification regarding ITC to the Insurance Companies — Circular no.217/11/2024-GST dated 26th June, 2024.

By the above circular, clarifications are given about the entitlement of ITC by insurance companies on the expenses incurred for the repair of motor vehicles in case of reimbursement mode of insurance claim settlement.

xii) Clarification regarding Taxability of providing loan — Circular no.218/12/2024-GST dated 26th June, 2024.

In the above circular, clarifications are given about the taxability of transactions of providing a loan by an overseas affiliate to an Indian affiliate or by a related person.

xiii) Clarification about ITC on Ducts and Manholes — Circular no.219/13/2024-GST dated 26th June, 2024.

By the above circular, clarification is given about the applicability of Section 17(5)(d), i.e., regarding the blocking of ITC with respect of ducts and manholes used in the network of optical fibre cables (OFCs).

xiv) Clarification about the place of supply in case of Banks — Circular no.220/14/2024-GST dated 26th June, 2024.

By the above circular clarifications are given about the place of supply applicable for Custodial Services, provided by the bank to Foreign Portfolio Investors.

xv) Clarification regarding Time of supply in case of Construction services of Road — Circular no.221/15/2024-GST dated 26th June, 2024.

In the above circular, clarifications are given about Time of supply in relation to the supply of services of construction of road and maintenance thereof of National Highways of the National Highways Authority of India under a Hybrid Annuity Mode.

xvi) Clarification about Time of supply in case of Spectrum Uses — Circular no.222/16/2024-GST dated 26th June, 2024.

By the above circular, clarifications are given about the time of supply of services Spectrum uses and other similar services.

C. ADVANCE RULINGS

19 GST on EPC/Turnkey Contract vis-à-vis Imported goods

M/s. Tecnimont Private Limited (AR Order No.GUJ/GAAR/R/2024/02 (In Application No.Advance Ruiling/SGST& CGST/2023/AR/15) dt. 5th January, 2024 (Guj)

The applicant M/s Tecnimont Private Limited has entered into a turnkey contract with Indian Oil Corporation Ltd. (for short — IOCL), vide contract No. 44AC9100-EPCC-1 dated 19th January, 2021, for executing EPC work of Acrylic Acid Unit (90 KTA) and Butyl Acrylate Unit (150 KTA) of Acrylic/Oxo-Alcohol Project’, located at IOCL Dumad Complex, Nr. Gujarat Refinery, Vadodara.

The applicant has stated that, in terms of the contract, all imported materials required to be supplied under the contract will be sold by the applicant to IOCL on High Seas Sale [HSS] basis by endorsing bill of lading in favour of IOCL who will be filing the bill of entry for warehousing and subsequently for home consumption by paying the applicable customs duty and IGST.

The applicant has further clarified that the contract value is fixed as a lump sum price of ₹18,72,00,48,047.50 comprising of:

“(i) ₹14,70,30,56,131 for domestically sourced material and supply of service;

(ii) Foreign Exchange Euros of € 4.55.18,322 (i.e., converted @ 1 EURO = INR88.25 as on the date of opening of price bid ₹401,69,91,916.5) based on the terms and conditions of Contract No. 44AC9100-EPCC-1 towards goods imported outside India;

(iii) ₹32,89,75,280.89 towards custom Duty & SWS on Foreign Component imported which is reimbursable according to contractual terms.”

As per the applicant, during the course of importation, before the goods reached the Customs frontiers of India, they entered into an HSS agreement with IOCL, transferring the ownership of the goods to IOCL at the price agreed in the contract. The applicant raises a Custom Invoice with respect to goods sold to IOCL under HSS without charging GST. IOCL then files a bill of entry as an importer of the said goods and discharges customs duty and IGST by clearing the goods for warehousing or home consumption. The applicant intends to treat this portion of the supply of imported goods as a separate supply of goods distinct from the works contract supplies.

In other words, the applicant wanted to say that the contract No. 44AC9100-EPCC-1 entered into with IOCL, identifies two separate sets of supplies for the turnkey project, (i) works contract for EPC work and [ii] supply of imported materials for the said work.

With respect to consideration mentioned in respect of contract part at (i) above, the applicant intends to charge GST @ 18 per cent, as works contract service.

In respect of part (ii), the applicant intends to claim exemption from the levy of tax in terms of para 8(b) of Schedule-III of CGST Act,2017;

As per above entry 8(b) in Schedule-III, the sale by transfer of documents of title to goods before goods are cleared for home consumption is exempt.

With the above background, the applicant has put forth the following questions before the ld. AAR for its ruling:

“1. Whether the transaction of sale of goods by Tecnimont Pvt. Ltd. (TCMPL) to Indian Oil Corporation Ltd. (IOCL) on a High Seas Sale basis in terms of Contract No. 44AC9100-EPCC-1 would be covered under Entry No. 8(b) of Schedule III of the CGST Act and shall be excluded from the value of work contract service for charging GST?

2. Whether the transaction of sale of goods on a high seas sale basis by the Applicant to IOCL in terms of Contract No. 44AC9100-EPCC-1 would be treated as a works contract and whether Applicant is liable to charge GST on the goods sold on a high seas sale basis to IOCL? If yes, what will be the applicable rate of tax on such goods supplied?”

The ld. AAR went through the agreement and minutes recorded in follow-up to the award of the contract. The ld. AAR referred to various clauses in the agreement and observed about scope of important features of the contract as under:

“18. The contract in question is in respect of a turnkey EPC contract. The terms ‘Turnkey’ and ‘EPC contract’ are not defined under the CGST Act. Now, what constitutes an EPC contract? We find that an Engineering, Procurement and Construction (‘EPC’) contract is a particular form of contracting arrangement wherein the EPC contractor is made responsible for all the activities right from design, procurement, construction, commissioning, and thereafter handover of the project to the end-user or owner. Likewise, Turnkey contracts, place the responsibility for designing, engineering, procurement, and construction of the entire project on a single contractor. Such contracts further ensure that following completion, the client receives a ready-to-use facility. Further, these contracts are usually ‘fixed price’ contracts.”

The ld. AAR noted that in contrast to the above features of the contract, the applicant has submitted that there are two separate contracts within the EPC contract i.e.,

“[i] supply of imported materials for the project; and

[ii] works contract for EPC work pertaining to EPCC-1 project.”

In this respect, the ld. AAR referring to the definition of ‘works contract’ given in section 2(119) analyzed the aspects of said definition as under:

• “works contract must be in relation to any immovable property;
• composite supply undertaken on goods say fabrication or paint job would perse not fall within the ambit of works contract under GST; such contract would continue to remain composite supplies;
• In terms of Schedule-II, para 6(a), works contract shall be treated as a supply of services;
• GST aims to put at rest the controversy by defining what will constitute a works contract (applicable for immovable property only) by stating that a works contract will constitute a supply of service and specifying a uniform rate of tax applicable on the same value across India.”

The ld. AAR referred to important judgment about the implication of transactions being works contract-like, judgment in the case of Kone Kone Elevator India Private Limited [2014 (304) E.L.T. 161 (S.C.) — 2014-VIL-12-SC-CB] and other judgments.

Based on the ratio of the above judgments the ld. AAR observed that the contract dated 19th January, 2021, entered into by the applicant & IOCL, is to execute the work of “EPCC-1 Package for Acrylic Acid & Butyl Acrylate Unit of Acrylic/ Oxo-Alcohol Project” which is a lump sum turnkey EPC contract. The ld. AAR observed that to divide a turnkey EPC contract into two parts is legally not tenable. It is tenable if they have entered into two different contracts.

In respect of HSS sales of imported goods to IOCL, the ld. AAR held that the sale is covered by entry 8(b) of Schedule III and hence not liable to GST.

However, in respect of the liability of the applicant, the ld. AAR refers to provisions of section 15 of the GST Act which provides for the valuation of Taxable Supply.

The ld. AAR, amongst others, referred to section 15(2)(b) which reads as under:

“(b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;”

The ld. AAR observed that in terms of the contract, the applicant is liable to provide the goods [supplied on an HSS basis] and hence the submission that this value is not to be included in the transaction value in respect of the works contract service is legally not tenable. The ld. AAR observed that, in terms of section 15, the value of such imported goods would form a part of the transaction value for payment of GST in the hands of the applicant.

In this respect the ld. AAR made reference to the Judgment decided by the Hon’ble Chhattisgarh High Court in the case of M/s. Shree Jeet Transport [Writ Petition (T) No. 117/2022 decided on 17th October, 2023] – 2023-VIL-764-CHG.

In this case, the diesel supplied free by contractee to the contractor providing transport services is held liable to tax in the hands of the contractor.

Applying said principle, the ld. AAR held that the value of imported goods is to be included in taxable contract value.

Based on the above analysis the ld. AAR gave the ruling as under:

“1. The transaction of sale of goods by Tecnimont Pvt. Ltd. (TCMPL) to Indian Oil Corporation Ltd. (IOCL) on a High Seas Sale [HSS] basis in terms of Contract No.44AC9100-EPCC-1 is covered under Entry 8(b) of Schedule III of the CGST Act. However, in terms of the findings recorded supra, the value of such HSS supply would form a part of the transaction value under section 15, ibid, for computing the value of work contract service for charging GST.

2. The transaction of sale of goods on a high seas sale [HSS] basis by the applicant to IOCL in terms of Contract No. 44AC9100-EPCC-1 as has been held supra, is covered under entry 8(b) of Schedule III of the CGST Act, 2017 and is therefore the HSS supply is neither a supply of goods nor a supply of services.”

20 ITC vis-à-vis Solar Plant for Captive Consumption

Unique Welding Products P. Ltd. (AR Order No.GUJ/GAAR/R/2024/01 (in application no. Advance Ruling/SGST & CGST/2023/AR/14) dt. 5th January, 2024 (Guj)

The applicant, M/s Unique Welding Products Pvt. Ltd., is engaged in the business of manufacturing and sale of welding wires and it is registered with the GST department.

The applicant supplies its products i.e., Welding Wires etc. after discharging GST @ 18 per cent. The applicant has entered into an interconnection agreement with power distribution licensee (Madhya Gujarat Vij Company Ltd) for captive use of power generated by Roof Top Solar System and has installed a rooftop solar system with a capacity of 440 KW (AC) on the factory roof for power generation. The applicant generates power solely and captively for use in its manufacturing activity of welding wires within the same premises.

The applicant further submitted that their business of manufacturing and sale of welding wires from their manufacturing plant constitutes as ‘business’ as per section 2(17) of the CGST Act, 2017 and is eligible for ITC as per section 16(1).

In light of the above background, the applicant has sought an advance ruling on the below-mentioned questions:

“1. Whether the applicant is eligible to take ITC as ‘inputs/capital goods’ or ‘input services’ on the purchased rooftop solar system with installation & commissioning in terms of sections 16 & 17 of the CGST/GGST/IGST Act?

2. Whether the rooftop solar system with installation and commissioning constitutes plant and machinery of the applicant which are used in the business of manufacturing welding wires and hence not blocked input tax credit under section 17(5) of the CGST/GGST/ IGST Act?”

In the course of the hearing, the applicant provided a copy of the Ruling in the case of M/s. The Varachha Co.op Bank Ltd., Surat.

Copy of the Annual report of the applicant for the FY 2022–23, showing addition to Plant and machinery under fixed assets, copy of the invoice from rooftop solar plant and copy of interconnection agreement signed with MGVCL for rooftop solar plant were filed before the Ld. AAR.

The applicant further clarified that the solar rooftop plant is bolted to the factory roof by means of screws and bolts for operational efficiency and safety. Further, it was clarified that the rooftop solar plant can be dismantled and sold if required. Accordingly, it was submitted that, the rooftop solar plant is not permanently fastened to the building hence it will not be an immovable property. It was further submitted that the rooftop solar plant qualifies as a plant and machinery used for the furtherance of the business of supplying taxable goods and hence not covered under blocked credit mentioned in section 17(5)(d) of the CGST Act, 2017.

The ld. AAR referred to relevant provisions like a definition of business, the scope of ITC as per section 16 and blocked credit u/s.17(5) of the CGST Act.

The ld. AAR also referred to the later issued by Additional Chief Engineer (RA&C), Madhya Gujarat Vij Company Limited, Vadodara addressed to Superintending Engineer, Circle Office, MGVCL, granting approval to the applicant, for grid connectivity of Solar Roof Top Photo-Voltaic systems as per the provisions of the Gujarat Solar Power Policy-2021. The relevant paras are reproduced in the AR as under:

“With reference to the above subject, it is to state that application of M/s. Unique Welding Products P Ltd for the installation of a 440.00 KW(AC) Solar Roof Top Photo Voltaic System has been registered by GEDA.

Now regarding the connectivity with MGVCL network for injection of Solar Energy from 440.00 KW Solar Power Plant, consumer M/s. Unique Welding Products P Ltd hearing consumer no. 15453 has paid connectivity charges of ₹50000 and executed a connectivity agreement with MGVCL.

The connectivity has been granted for a period of 25 years. Accordingly, the connectivity agreement has been executed for 25 years and it shall be in force for the period of 25 years only.

Copy of the connectivity agreement, connectivity charge paid receipt, CEI approved single line diagram, earthing diagram, wiring diagram and installation charging approval received from CEI is attached herewith.”

Based on the above documents and legal provisions, the ld. AAR observed as under:

“17. It is therefore, clear that the roof solar plant, affixed on the roof or the building is not embedded to earth. Accordingly, it is not an immovable property but a plant and machinery, which is utilized to generate electricity which is further solely and captively used in the manufacture of welding wires. The applicant is engaged in the business of supply of welding wires on payment of GST at the applicable rates. The applicant has further stated that they have capitalized the roof solar plant in their books of accounts. The Roof Solar Plant, as is evident is not permanently fastened to the building. Thus, it qualifies as a plant and machinery and is not an immovable property, hence, it is not covered under blocked credit as mentioned in 17(5)(d) of the CGST Act, 2017. Therefore, we hold that the applicant is eligible for input tax on roof solar plant.”

With the above background the ld. AAR gave a ruling on pertinent questions as under:

“1. The applicant is eligible to avail of ITC rooftop solar system with installation & commissioning under the CGST/GGST Act.

2. The rooftop solar system with installation and commissioning constitutes as plant and machinery of the applicant and hence is not blocked ITC under section 17(5) of the CGST/GGST Act.”

21 Catering Services to Education Institution

M/s. Sri Annapurneshwari Enterprises (AR Order No.KAR ADRG 04/2023 dt. 23rd January, 2023 (Kar)

The applicant, M/s. Sri Annapumeshwari Enterprises is a Partnership firm registered under GST. The applicant is engaged in the business of hotel and catering services.

The applicant has sought an advance ruling in respect of the following question:

“i. Whether providing catering services to Educational Institutions from 1st standard to 2nd of Pre University Course (PUC) is taxable or not according to Notification No. 12/2017- Central Tax Rate –under Heading 9992.”

The applicant has stated that they are carrying on the business of the hotel and they are supplying ready-to-eat breakfast, and lunch to the KLE Independent Pre University (PU) College, Bengaluru. They are not collecting any charges from the students. They are billing to college and college is paying the amount.

In this respect the ld. AAR noted that the applicant is providing catering services to Educational Institutions from 1st Standard to 2nd PUC and referred to entry No.66 of Notification No. 12/2017-Central Tax (Rate) dated 28th June, 2017 as amended vide Notification No.02/2018-Central Tax (Rate) dated 25th January, 2018 and reproduced the same as under:

The ld. AAR observed that the services provided by way of catering to an educational institution, which is providing services by way of pre-school education and education up to higher secondary school are exempted from GST.

The ld. AAR also referred to the meaning of recipient of service as defined in section 2(93) and further observed that the concerned education institution is the recipient and it also fulfils the condition of being an Education Institution as defined in clause (v) of para 2 of the Notification no.12/2017-Central Tax (Rate) dated 28th June, 2017.

The ld. AAR arrived at the conclusion that since the applicant is providing ready-to-eat food by way of catering to a Pre-University College, the services provided by the applicant under question are covered under entry No.66 of Notification No. 12/2017-Central Tax (Rate) dated: 28.06.2017 as amended further and hence exempted from GST.

The ld. AAR issued a ruling accordingly.

22 Unit Run Canteen — Tax Position

M/s. Central Police Canteen (AR Order No. KAR ADRG 35/2023 dt. 16th November, 2023 (Kar)

The applicant is a subsidiary canteen of the Central Police Force Canteen System (CPFCS/CPF Canteen System), which is set up vide letter No.27011/75/2011-R&W dated 18th November, 2011, issued by the Resettlement & Welfare Department, Police Division-II, Ministry of Home Affairs, Government of India. They have claimed that they are entitled to avail of CPF Canteen facilities.

The applicant has quoted the Notification No.7/2017-Central Tax (Rate) dated 28th June, 2017, contending that their canteen is covered under “Unit Run Canteens” and thus the supply of goods by them to the authorized customers is exempted from levy of GST.

The applicant also contemplated that they are entitled to claim a refund of fifty per cent of the applicable central tax paid by it on all inward supplies, under notification no. 06 of 2017— Central Tax (R) dated 28th June, 2017

Applicant has put the following questions for the ruling of AAR.

“a. Whether the applicant being a recognized Unit Run Canteen be exempted from levying CGST on goods sold by it to authorized customers?

b. Whether similar exemption can be availed under State GST also?

c. Is the applicant eligible to claim a refund of CGST and SGST paid by it on goods purchased to date?”

The ld. AAR considered each question. In respect of the first question about exemption from the levy of CGST on goods sold by it to authorized customers, the learned AAR referred to Notification No. 07/2017-Central Tax (Rate) dated 28th June, 2017. Said Notification contemplates to grant exemption as under:

The heading CTH 8711 and 8713, are described as under The ld. AAR observed that CSD i.e., Canteen Stores Department, Unit Run Canteens of the CSD and the authorized customers of CSD mentioned in the above notification are under the Ministry of Defence, Government of India. Applicant is a subsidiary canteen of the Central Police Force Canteen System (CPFCS), under the Ministry of Home Affairs, Government of India, formed in terms of permission granted vide letter No. DAVII/ SC-CP/2013 dated 28th November, 2013.

Therefore, the ld. AAR held that the applicant is not covered under the Unit Run Canteen as they are a subsidiary canteen of CPF canteen under the Ministry of Home Affairs. Accordingly, the ld. AAR held that the applicant is not entitled to claim the exemption provided under Notification No.7/2017-Central Tax (Rate) dated 28th June, 2017.

In respect of the second question, exemption under SGST, the ld. AAR held that, like CGST, no exemption is eligible under SGST.

Regarding, the third question about a refund, the ld. AAR referred to Notification No. 6/2017-Central Tax (Rate) dated 28th June, 2017, which reads as under:

“In exercise of the powers conferred by section 55 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby specifies the Canteen Stores Department (hereinafter referred to as the CSD), under the Ministry of Defence, as a person who shall be entitled to claim a refund of fifty per cent, of the applicable central tax paid by it on all inward supplies of goods received by it for the purposes of subsequent supply of such goods to the Unit Run Canteens of the CSD or to the authorized customers of the CSD.

2. This notification shall come into force with effect from the 1st day of July, 2017.”

Since the above notification covers CSD under the Ministry of Defence, as a person who shall be entitled to claim a refund, the ld. AAR held that the applicant cannot be covered by the above notification as it is not under the Defence Ministry but under the Home Ministry.

Thus, all questions are answered in negative.

23 Scope of Article 243G and 243W vis-à-vis Exemption.

M/s. Sanjeevini Enterprises (AR Order No.KAR ADRG 03/2023 dt. 23rd January, 2023 (Kar)

The applicant has sought an advance ruling in respect of the following questions:

“i. Whether works contract service provided to Bio Centers, Department of Horticulture and Center of Excellence are exempted as per GST Exemptions?

ii. Whether other services like data entry operator and security, provided to the Horticulture Department attract GST?

iii. Whether materials like fertilizers, soil, and sand supplied for use of bio centres exempted as per GST?”

The applicant has stated that they are bidding for a tender called by the Department of Horticulture which includes the supply of manpower for Bio-Centre, Department of Horticulture, Centre of Excellence for Floriculture, Tunga Horticulture Farm, Shivamogga, which includes the following works:

1) Department of Horticulture: Handling the complete process of tissue culture production of various agriculture plants and mushroom research, growing under the guidance of the agriculture officer including cleaning and maintenance of equipment used for production under the tissue culture process.

2) Center for Excellence, Tunga Floriculture Center: Handling the complete process of research on flowers, planting and growing process and maintenance under the guidance of the agriculture officer including cleaning and maintenance of equipment used and handling of wastage.

The ld. AAR referred to entry no.3 of the Notification No.12/2017-Central Tax (Rate) dated 28th June, 2017 which reads as under:

“Pure Services (excluding works contract service or other composite supplies involving any goods) provided to the Central Government, State Government or Union territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.”

The ld. AAR observed that the applicant has to satisfy two conditions:

“1. Pure Services (excluding works contract service or other composite supplies involving any goods) provided to the Central Government, State Government or Union territory or local authority

2. by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.”

The ld. AAR observed that the first condition of supplying pure services to the Karnataka Government is satisfied.

The ld. AAR refers to functions listed under Articles 243G and 243W. The ld. AAR found that the activity of the applicant is not directly covered by any entry in the above articles. The ld. AAR examined whether it can fall under the entry for Agriculture.

The ld. AAR held that the issue certainly cannot amount to agriculture and there is no other direct entry to cover the above activity in Article 243G/243W.

The ld. AAR answers negative as under:

“i. Works contract service provided to Bio Centers, Department of Horticulture and Center of Excellence are not exempted from GST.

ii. Providing Manpower services like data entry operator, and security to the Horticulture Department is exigible to GST at 18 per cent (CGST @ 9 per cent and KGST @ 9 per cent).

iii. Materials like fertilizers, soil and sand supplied for use of bio centres are not exempted under GST.”

BCAJ Admin

NOTIFICATIONS

(1) One-time waiver of late
fees – Notification No. 52/2020-Central Tax, dated 24^th June, 2020

Non-filers of GST
returns for the period July, 2017 to January, 2020 who file their returns
before 30^th September, 2020 shall not be required to pay any late
fees. Further, the revised dates for filing GSTR3B for taxpayers with turnover
less than Rs. 5 crores for the months June and July, 2020 have been extended as
follows:

June, 2020 –

Group A States = 23^rd
September, 2020

Group B States = 25^th
September, 2020

July, 2020 –

Group A States = 27^th
September, 2020

Group B States = 29^th
September, 2020

(2) Capping of maximum late
fee – Notification No. 57/2020-Central Tax, dated 30^th June, 2020

Notification No.
52/2020-Central Tax is amended and a new proviso is added vide
this Notification to cap the maximum amount of late fee payable by late filers
of GSTR3B for the period starting from February, 2020 and up to July, 2020. The
maximum late fee payable for the above periods shall be Rs. 500 per return, if
the returns are filed after the due date but before 30^th September,
2020.

(3) SMS facility for Nil
returns – Notification No. 58/2020-Central Tax, dated 1^st July, 2020

This Notification has amended the CGST rules to provide for filing of
Nil GSTR1 or GSTR3B using Short Messaging Service (SMS) directly, using OTP
authentication.

CIRCULARS

(i) Clarifications on Covid-19
– Relief measures Circular No. 141/11/2020-GST

By the above Circular, the CBIC has clarified some doubts regarding the
Covid-19 relief measures provided by the Government. It has been clarified that
the interest shall be payable as per the interest applicable across different
time periods. For example, if GSTR3B for the month of April, 2020 is filed on
28^th June, 2020, where the original due date was 20^th
May, the conditional extended filing date was 4^th June, 2020, the
interest will be payable as follows:

No. of days
delay = 39

Interest = Nil for
15 days (up to 4^th June, 2020)

             
9% for 20 days (up to 24^th June, 2020)

             
18% for 4 days (up to 28^th June, 2020)

ADVANCE RULINGS

(A) Rate of tax
on mehandi /
henna

Sunil Kumar Gehlot (Sunil Kumar & Co.) (Order No.
RAJ/AAR/2020-21/01, dated 6^th May, 2020)

The issue regarding
rate of tax on henna was before the learned AAR, Rajasthan. The applicant
wishes to start manufacturing mehandi / henna powder.

The applicant
submitted that the classification dispute as regards mehandi / henna
powder was prevalent since the days of the Central Excise Laws and the
confusion continued to persist in the GST era. He further submitted that while
selecting the commodities at the time of filing the registration application,
the HSN Code 14041019 specifically mentions ‘Henna Powder’ and so the applicant
has mentioned the classification of the product under Chapter 14 and,
accordingly, the rate of GST applicable is 5%.

The applicant
stated that the rate on henna powder was decided at 5% since the inception of
GST. He produced the agenda list of the fitment committee for the consideration
of the GST Council. In that, it could be seen from Agenda Item No. 10 that the
rate was decided to be kept at 5%. He produced the relevant extracts and
supporting documents for the consideration of the AAR.

The AAR considered
the above arguments and heard the jurisdictional officers for their views. They
had relied on Wikipedia for the meaning / definition of the word ‘henna / mehandi’
and observed that henna and mehandi are the same product with different
names and are obtained from the mehandi tree by grinding its leaves.

They further
observed that tariff items 14041011 to 14041090 have been omitted from the
Customs Tariff Act, 1975 and hence no such tariff item is available in the said
Act. In view of the above, the question of classification of products under
discussion under 14041011 does not arise.

The learned AAR
observed that it is a well-known fact that henna / mehandi powder has a
natural property of dyeing / tanning and is generally used as hair dye.
Therefore, the product is rightly classified under Chapter Heading 3305 as
preparations for use on hair and covered under amended Notification No.
41/2017-CT(R) dated 14^th November, 2017 and shall attract GST @ 18%.

(B) Sale of land
plot with basic amenities

Shri Dipesh Anilkumar Naik (Order No. GUJ/GAAR/R/11/2020, dated 19^th
May, 2020)

The applicant has
submitted that he has a vacant land outside the municipal area of the town on
which he has some proposed business activity and has all the necessary
approvals for the project from the Plan Passing Authority (i.e., zilla
panchayat). The applicant has further submitted that as per the said
Authority, the seller of land is required to develop the primary amenities like
sewerage and drainage line, water line, electricity line, land levelling for
road, pipeline facilities for drinking water, street lights, telephone line,
etc. The applicant also submitted that they will sell the individual plots to
different buyers without any construction on the same but by providing the
primary amenities as mentioned above, which are the mandatory requirements of
the Plan Passing Authority.

The applicant
wished to know the applicability of GST on the proposed sale of plots with the
amenities as mandated by the Authority.

The AAR referred to
Schedule III to the GST Act. This Schedule sets out the activities or
transactions which are treated as neither a supply of goods nor as supply of
services. Therein, Entry 5 covers sale of land which is excluded from GST levy.
On the basis of this entry, the AAR observed that where the nature of activity
is that of only sale of immoveable property of a plot, it is excluded from GST
levy.

Further, the AAR
found that the plotted development is a scheme which involves forming land into
a layout after obtaining necessary plan approval from the Development
Authority, get all other permissions required to take up, commence and complete
what would be the layout, comprising of individual sites. In the activity of
plot development, the following are done – levelling the land, construction of
boundary wall, construction of roads, laying of underground cables and water
pipelines, laying of underground sewerage lines with sewage treatment plants,
development of landscaped gardens, drainage system, water harvesting system,
demarcation of individual plots, construction of overhead tanks and other
infrastructure works.

In addition, common
amenities like garden, community hall, etc. are also offered in some schemes.
The sale of such sites is done to the end customers who may construct houses /
villas on the plots.

The AAR noted that
sellers charge the rates on super built-up basis and not the actual measurement
of the plots. The super built-up area includes the area used for common amenities,
roads, water tank and other infrastructure on a proportionate basis. Thus, in
effect, the seller is collecting charges towards the land as well as the common
amenities, roads, water tank and other infrastructure on a proportionate basis.
In other words, such common amenities, roads, water tank and other
infrastructure are an intrinsic part of the plot allotted to the buyer.

The AAR held that
the above indicates that the sale of a developed plot is not equivalent to the
sale of land but is a different transaction. Sale of such plotted development
was tantamount to rendering of service. This view has also been taken by the
Supreme Court in the case of M/s Narne Construction P. Ltd. reported at
2013 (29) STR 3 (SC).

He further held
that the activity of the sale of developed plots would be covered under the
clause ‘construction of a complex intended for sale to a buyer’ as contained in
Schedule II to the CGST Act. Thus, the AAR ruled that the said activity is
covered under ‘construction services’ and GST is payable on the sale of
developed plots in terms of the CGST Act / Rules and relevant Notifications
issued from time to time.

(C)
Classification of popcorn sold in containers

Jay Jalaram Enterprises (Order No. GUJ/GAAR/R/03/2020, dated 11^th
March, 2020)

The applicant was involved in the manufacture and supply of the above
item. The popcorn is sold in a sealed plastic bag bearing a registered brand
name ‘[J.J.’s] Popcorn’, under the Trade Marks Act, 1999.

The applicant submitted that their product is manufactured by using corn
/ maize grains. The raw grain is heated in an electric machine / oven @ 180/200
degrees temperature and due to the heat so given to the grains, they turn into
puffed corns / popcorns which are known in Gujarati as ‘dhani’ and are similar
to puffed rice which is known as ‘murmura’. They are then sieved so as to
remove the grains that remained unpuffed. During the process, salt, edible oil
and turmeric powder are mixed in required quantities. Thereafter, the product
is packed in plastic pouches in quantities of 15 grams.

The applicant contended that its product, which is popularly known as
popcorn, is nothing but corn / maize, which is a cereal, falling under Chapter
10. They placed reliance on a judgment delivered by the Apex Court in M/s
Alladi Venkateshwaralu and others vs. Government of A.P. (1978) 41 STC 394 (SC),
wherein it was held that the term ‘atukulu’ (parched rice) and ‘muramaralu’
(puffed rice) are ‘rice’. Applying the same ratio, the applicant further
submitted that the term used in the above entry as maize (corn) also includes
puffed maize / popcorn as being a cereal within its meaning and therefore
[J.J.’s] Popcorn is covered in Entry No. 50 in the above tariff item 1005 of
Schedule I and is taxable accordingly. The applicant also submitted that though
this judgment is under the provisions of the Central Sales Tax Act, 1956, it is
still relevant as it used to be in earlier times for determining the
classification of commodities. The principle laid down therein is that a cereal
grain, even after applying the process of heating, does not lose its basic
characteristics and thus it remains the same grain and this principle is also
applicable squarely to maize as popcorn.

The AAR relied on the classification notes to Notification No.
1/2017-CT(R) which provides as follows:

‘Explanation – For the purposes of this
notification, –

(i) ……………

(ii) ………….…

(iii) “Tariff item”, “sub-heading”, “heading” and
“Chapter” shall mean, respectively, a tariff item, sub-heading, heading and
chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51
of 1975).

(iv) The rules for the interpretation of the First
Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section
and Chapter Notes and the General Explanatory Notes of the First Schedule
shall, so far as may be, apply to the interpretation of this notification.’

The AAR further relied on the decision of the Hon’ble Supreme Court in
the case of L.M.L. Ltd. vs. Commissioner of Customs [Civil Appeal No.
3764 of 2003, decided on 21^st September, 2010 reported at 2010 (258)
ELT 321 (S.C.)]. It held as follows:

‘12. In Collector of Central Excise, Shillong vs.
Woodcrafts Products Ltd. reported in (1995) 3 SCC 454, it was held by this Court that as expressly
stated in the statements of objects and reasons of the Central Excise Tariff
Act, 1985, the Central Excise Tariffs are based on the Harmonious System of
Nomenclature (HSN) and the internationally accepted nomenclature was taken into
account to reduce disputes on account of tariff classification. Accordingly,
for resolving any dispute relating to tariff classification, a safe guide is
the internationally accepted nomenclature emerging from the Harmonious System
of Nomenclature (HSN). Although the decision in the case of Woodcraft Products
(Supra) dealt with the interpretation of the provisions of the Central
Excise Tariff, there can be no doubt that the HSN Explanatory Notes are a
dependable guide even while interpreting the Customs Tariff.’

Relying on the above interpretation rules, the AAR observed that the
goods in question is ready-to-eat prepared food and fits the description as
‘Prepared foods obtained by the roasting of cereal’. This description attracts
classification under Chapter Sub-Heading 1904 10 of the First Schedule to the
Customs Tariff Act, 1975.

The AAR mentioned that there is no specific entry for the product
‘popcorn’ in Notification No. 1/2017-Central Tax (Rate) dated 28^th
June, 2017. But there is an entry most akin to the product and process (Chapter
heading 1904) at Sr. No. 15 of Schedule III of Notification No. 1/2017-CT(R)
dated 28^th June, 2017 and attracts 9% CGST and 9% SGST, or 18% IGST.

As against the applicant’s contention that the product be classified as
maize, the AAR held that Note 1(A) to Chapter 10 clearly mentions that ‘the
products specified in the headings of this Chapter are to be classified in
those headings only if grains are present, whether or not in the ear or on the
stalk’. The applicant’s product loses the presence of grain in it, so it does
not deserve to be classified in that heading.

The applicant had also clarified that to make the
heated maize more palatable, salt, turmeric and some oil was added to it; this
makes it clear that the product is not grain but processed food.

BCAJ Admin