2023 (10) TMI 964 - AT - Customs

Nutritional Supplements Correctly Classified at 18% IGST; Demand for Higher Rate Time-Barred and Dismissed.

The Tribunal held that the appellant's imported Nutritional Supplements were correctly classified under Serial No. 453 of Schedule III, attracting an IGST ... Classification of imported goods - Nutritional Supplements, which are preparations of substances such as Creatine, Nitrates, Glutamine and Amino Acids - classifiable under CTSH 2106 9099 or not - liable to IGST at 28% under Sr.No.9 of Schedule IV of Notification No.1/2017-IGST-Rate or at 18% under Sr. No.453 of Schedule III of the said Notification - demand barred by time limitation or not - suppression of facts or not. HELD THAT:- From tariff entry of 2106, it can be seen that the entry covers various food preparation not elsewhere specified or included. However, out of the many items provided under tariff item 2106, the serial No. 9 described only some of those goods. This also establish that Serial No. 9 is not a general entry which covers entire entry of 2106 but only some of the goods which are specified in the description of goods are provided under serial no. 9 of Schedule IV,. This fact also strengthens the claim of the appellant that their goods are not covered under serial no. 9 of the schedule IV of Notification 1/2017-IGST-Rate and correctly falls under Serial No. 453 according to which the rate of IGST is 18%. From decision in CASTROL INDIA LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, CALCUTTA-I [2005 (2) TMI 847 - SUPREME COURT], it is clear that the word “that is to say” is “mutatis mutandis” applies in respect of the expression “i.e.” in the present case. Accordingly, the word used “i.e.” at serial number 9 of schedule IV of Notification it is fixed, specific and clear that only the description given in such entry shall be covered by serial no. 9. Consequently the goods of the appellant will fall under Serial No. 453 of Schedule III of the Notification 1/2017-IGST, therefore, the demand of differential custom duty shall not sustain. Time Limitation - HELD THAT:- In the present case for the clearance for the period July 2017 to November 2017, the show cause notice was issued on 09.07.2022 - since there was no suppression of fact on the part of the appellant, the demand is also hit by limitation. There are force in the submission of the learned counsel that whatever IGST needs to be paid by the appellant, it was available as an input tax credit to them, therefore, the present case is involved revenue neutrality. Accordingly, the malafide intention cannot be attributed to the act of the appellant. For this reason, the demand for the extended period is not sustainable also on time bar. The impugned order is not sustainable - Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether imported nutritional supplements comprising preparations of substances such as creatine, nitrates, glutamine and amino acids, classifiable under CTSH 2106 9099, are liable to IGST at 28% under Serial No. 9 of Schedule IV of Notification No. 1/2017-IGST-Rate ('Schedule IV entry') or at 18% under Serial No. 453 of Schedule III of the said Notification ('residuary Schedule III entry'). 2. Whether the demand for differential IGST raised for imports made July 2017-November 2017, with issue of Show Cause Notice on 09.07.2022, is without jurisdiction and barred by limitation, having regard to assessment record, absence of suppression and availability of input tax credit. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Rate applicability: 28% under Schedule IV entry vs. 18% under residuary Schedule III entry Legal framework - Notification No. 1/2017-IGST-Rate prescribes IGST rates by schedules; Schedule III prescribes 18% for goods specified therein and includes Serial No. 453 as a residuary entry for 'Goods which are not specified in Schedule I, II, IV, V or VI'. Schedule IV prescribes 28% and contains Serial No. 9 under Chapter 2106 described as 'Food preparations not elsewhere specified or included i.e. Protein concentrates and textured protein substances, ... Custard Powder' (emphasis in original). Precedent treatment - The Court relied on authoritative interpretation of the expression 'that is to say'/'i.e.' as restrictive (descriptive, enumerative and exhaustive) from earlier apex jurisprudence, which held that such expressions ordinarily fix or circumscribe the meaning of the principal clause and are words of limitation rather than inclusio expansiva. The Court cited and applied principles from that precedent to the present tariff language. Interpretation and reasoning - The textual construction of Serial No. 9 was examined in light of the whole tariff entry for Chapter 2106. Serial No. 9 lists specific items following 'i.e.', and the impugned imports (creatine, nitrates, glutamine, amino acids preparations) do not appear among those specific items. - The Court held that 'i.e.' in Serial No. 9 operates as words of limitation (mutatis mutandis to 'that is to say'), meaning the entry covers only the specified items enumerated after 'i.e.' and does not expansively include all products falling under heading 2106. Thus Serial No. 9 is not a general or residual entry for all 2106 goods but applies only to the specifically enumerated categories. - Given that the appellant's goods are not among the enumerated items in Serial No. 9, they cannot be taxed under Serial No. 9 (Schedule IV, 28%). Instead, such goods fall within Serial No. 453 of Schedule III (residuary entry for goods not specified in Schedules I, II, IV, V or VI) and thereby attract 18% IGST. Ratio vs. Obiter - Ratio: The binding ratio articulated is that where a tariff entry uses 'i.e.' (or equivalent 'that is to say') followed by specific enumerated items, such expression is to be interpreted as limiting the scope of the entry to those specific items, and non-enumerated goods under the same chapter/heading fall to the residuary entry (Serial No. 453) unless specifically covered elsewhere. The Court applied this rule to hold the appellant's goods liable at 18% and not 28%. - Obiter: Observations regarding the full tariff text of Chapter 2106 and descriptive commentary on various items were ancillary to the primary interpretive conclusion and serve clarificatory purpose. Conclusions - Serial No. 9 of Schedule IV is a specific, limiting entry; the phrase 'i.e.' confines its scope to the enumerated goods listed in that entry. - The appellant's nutritional supplement imports are not described in Serial No. 9 and therefore do not attract the 28% IGST under Schedule IV. - Serial No. 453 of Schedule III (residuary entry) applies, and the correct IGST rate is 18% for the impugned goods. Issue 2 - Limitation and jurisdictional viability of differential IGST demand Legal framework - Limitation and extended period demands in indirect tax matters are governed by statutory timelines and principles concerning suppression of facts, bona fide reliance on assessment, and availability of input tax credit. Jurisdictional exercise to reopen assessed entries typically requires satisfaction of specified grounds (e.g., suppression, fraud, mis-statement). Precedent treatment - The Court referred to principles from apex decisions concerning limitation, assessment finality and meaning of suppression or fraud for invocation of extended period. Established authorities were cited in support of the proposition that, absent suppression or mala fide, belated demands beyond statutory assessment windows are vulnerable. Interpretation and reasoning - Facts found: the bills of entry were physically assessed by Customs officers at the time of clearance; description, classification and claim under the Notification were declared and known to assessing officers; no suppression of fact by the importer was established. - Timeline: imports took place during July-November 2017; Show Cause Notice issued on 09.07.2022. The Court noted that had the revenue taken a different view at the time of assessment, objections or show cause proceedings could have been initiated contemporaneously; the long delay without any finding of suppression or concealment renders the demand infirm on limitation grounds. - Revenue neutrality: any differential IGST allegedly payable would have been available as input tax credit to the appellant, reinforcing the absence of fiscal prejudice and negating intentional evasion; this factor supports the finding against invoking extended period jurisdiction. Ratio vs. Obiter - Ratio: Where goods are declared at the time of physical assessment and there is no suppression of fact or mala fide on the part of the importer, belated issuance of a show cause notice after an extended interval is barred by limitation and cannot sustain a demand for the extended period. Availability of input tax credit and revenue neutrality are relevant factors undermining allegations of malafide. - Obiter: Remarks about the practical opportunity for the department to raise objections contemporaneously are explanatory of the Court's approach to delay and are ancillary. Conclusions - The demand for differential IGST raised by the Revenue by the Show Cause Notice dated 09.07.2022 in respect of imports made July-November 2017 is time barred, as there was no suppression of facts and the classification and claim were on record at time of physical assessment. - The absence of mala fide and the availability of input tax credit contribute to the conclusion that the extended period demand is not sustainable. Disposition - The impugned order denying the appellant the benefit of Serial No. 453 (Schedule III, 18%) and treating the goods under Serial No. 9 (Schedule IV, 28%) is unsustainable and set aside; the appeal is allowed.