^Applicability of judgment in Dilip Kumar case – Nowhere in the judgment in Dilip Kumar case, the Hon’ble Supreme Court has held that the inputs for animal feed are different from the animal feed – This issue was never figured in the

^Applicability of judgment in Dilip Kumar case – Nowhere in the judgment in Dilip Kumar case, the Hon’ble Supreme Court has held that the inputs for animal feed are different from the animal feed – This issue was never figured in the decision in Dilip Kumar case, where the larger principle of law alone was considered – the reason cited by the Board in paragraph 4.2. of the Circular No.80/54/2018-GST being one of the reasons to issue this clarification is also untenable and therefore, for that reason also, the respondent / Revenue cannot sustain the impugned Circular.

^Validity of CBIC Circular – the Section 168(1) of the CGST Act makes it clear that, only for the purpose of uniformity in the implementation of the Act, orders or directions to the Central Tax Officers, as deem fit, may be issued by the Board.
Therefore, most probably, such kind of orders, instructions or directions must be procedural in nature, not substantive in nature – The exemption provided by the Central Government by exercising its powers either under Section 11(1) of CGST Act, 2017 or under Section 6(1) of IGST Act, 2017 are the substantive right provided to the stake-holders by giving such exemption. Therefore, such kind of exemptions cannot be taken away or done away by issuing clarificatory Circulars by the Board, in exercise of its powers under Section 168 of the CGST Act, 2017 – the impugned clarificatory Circular cannot override the exemption provided under the exemption notifications

^If at all the exemption provided by the Central Government in issuing the Exemption Notification No.2/17 is to be revisited or reviewed and certain items have to be taken away from the purview of exemption, such exercise shall be undertaken either by the Parliament by making a law as has been done in Finance Act, 2020 or by the Central Government by exercising their powers either under Section 11(1) of the CGST Act, 2017 or under Section 6(1) of the IGST Act, 2017, as under such exercise of powers only those Exemption Notifications No.2/17 as well as the Amendment Notification No.28/2017 were issued, and only then, such kind of amendment could be made – However, no such attempt since has been made either by the Parliament or by the Central Government, by issuing a mere Circular exercising the powers under Section 168 of the CGST Act, 2017, such kind of right already vested, to get exemption, on the assessee, cannot be taken away by way of a clarificatory Circular, that too issued only to the benefit of the officials and staff of the department, as culled out from the language used in Section 168 of the Act. Therefore, for that reason also this Court feels that the impugned Circular would not stand in the legal scrutiny.

2021-VIL-763-MAD

BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT

W. P.(MD)Nos.16770 to 16776 of 2019 and
W.M.P.(MD)Nos.13372 to 13376 of 2019

DATED: 05.10.2021

W.P.(MD)No.16770/2019:

JENEFA INDIA

Vs

1. UNION OF INDIA, REPRESENTED BY ITS SECRETARY, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE,
[CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS), CENTRAL SECRETARIAT, NEW DELHI
2. TAX RESEARCH UNIT, REP. BY ITS SECRETARY,
MINISTRY OF FINANCE, DEPARTMENT OF REVENUE,
CENTRAL SECRETARIAT, NEW DELHI
3. COMMISSIONER OF CGST & CENTRAL EXCISE,
OFFICE OF THE COMMISSIONER OF CGST & CENTRAL EXCISE, MADURAI

For Petitioner: Mr. Joseph Prabakar
For Respondents: Mr. K. Prabhu, Standing Counsel

CORAM
THE HONOURABLE MR.JUSTICE R.SURESH KUMAR

COMMON ORDER

Since the issue raised in these writ petitions is one and the same, with the consent of the learned Counsel appearing for both sides, all these writ petitions were heard together and are being disposed of by this common order. Since the facts are similar in all these cases, for the sake of convenience and for easy reference, the facts in respect of the case in W.P.(MD)No.16770 of 2019, is traversed hereunder:

1.1. That the petitioner is a manufacturer of fish meal. The fish meal produced by the petitioner comes in powder form. The petitioner is registered under the Goods and Services Tax (hereinafter referred to the GST) Department, within the jurisdiction of the third respondent and it is an assessee on the file of the officers subordinate and under the administrative control of the third respondent.

1.2. In the manufacturing process, the petitioner would procure fresh fish and it would be carried up in to the steam cooker and steam boiled in the plant. The steam boiled fish then would be sent to the squeezer and the solid part of the fish is transferred into a steam drier where the excessive moisture is removed. Then, the moisture removed material would be conveyed to the pulverizer and the resultant material would be in powder form of fish meal which would be packed in sacks for sale.

1.3. Pursuant to the GST regime with effect from 01.07.2017, the Central
Government issued two notifications called Notification No.1 of 2017 Central Tax (Rate) dated 28th June, 2017, in short “Notification No.1/17”, and Notification No.2 of 2017, Central Tax (Rate) dated 28th June 2017, in short would be called as “Notification No.2/17”.

1.4. In Notification No.1/17, the Rate of Tax (Schedules) for specified goods under CGST under these schedules i.e., Schedule I to VI have been provided. This notification and Notification No. 2/17 were issued by the Central Government in exercise of their powers conferred by Sub-Section 1 of Section 9 & 11, respectively, of the Central Goods and Services Tax Act, 2017, [In short, ‘CGST Act’].

1.5. Under Notification No.1/17, for goods specified in first Schedule, the rate of tax has been fixed as 2.5% for Central share that means totally, 5%. Like that, in second Schedule goods, it is 6% i.e., 12% in total. In third Schedule, it is 9% i.e., 18% in total. In fourth Schedule, it is 14% i.e., 28% in total. Like that, in fifth Schedule, it is 1.5% i.e., 3% in total. In 6th Schedule goods, it is 0.125%, i.e.,
0.250% in total.

1.6. Insofar as the present issue is concerned, we may take the table for Schedule I goods alone. The goods specified in Schedule I are liable to be taxed at the rate of 5% GST.

1.7. Number of items in various serial numbers have been enumerated under schedule I, wherein Sl.No.103 is relevant, which reads thus:

103. 2301 Flours, meals and pellets, of meat or meat offal, or fish or of crustaceans, molluscs or other aquatic invertebrates, unfit for human consumption; greaves

1.8. Therefore, the goods covered under the entry heading 2301 are liable to be taxed at the rate of 5%. As stated above, on the same day i.e., on 28.06.2017,
Notification No.2/17 also was issued by the Central Government, under which, the Central Government exempts from the whole of the Central Tax for certain intrastate supplies of goods which have been enumerated in the list covered under Notification No.2/17. In the said notification, among various entries, Sl.No.102 is relevant which reads thus:

102. 2302, 2304,
2305, 2306,
2308, 2309 Aquatic feed including shrimp feed and prawn feed, poultry feed & cattle feed, including grass, hay & straw, supplement & husk of pulses, concentrates & additives, wheat bran & de-oiled cake.

1.9. It is to be noted that, in Sl.No.102 of Notification No. 2/17, this head of entries namely 2302, 2304, 2305, 2306, 2308 & 2309 are included. By including these entries heading, the description also had been given, which are all the goods that are totally exempted from levy of GST. Therefore, in respect of these goods, the GST is nil.

1.10. In this context, it is to be noted that, the entries heading, which form part of the said two notifications, are taken out from the list of entries that form part of the Customs Tariff Act, 1975.

1.11. Under Chapter 23 of the Customs Tariff Act, Tariff Item 23.01 as well as 23.09 have been provided with a heading “Residues and waste from the food industries; prepared animal fodder”. Tariff item 23.01 consists of various subheadings like 2301.10, 2301.20 etc. In these sub-headings of Tariff item 23.01, specifically in 2301.20, it is mentioned that ‘flours, meals and pellets of fish or of crustaceans, molluscs or other aquatic invertebrates and fish meal unfit for human consumption’. Like that in sub-heading 2301 20 11, it is mentioned as ‘in powder form’.

1.12. Like that in Tariff item 2309 under the heading “Preparations of a kind used in animal feeding”, in the following sub-heading tariff item i.e., 2309 90 31 & 2309 90 32, the items included are “prawn and shrimps feed” and “fish meal in powdered form”, respectively. These tariff item entries 2301 & 2309 had been included in Sl.No.102 of Notification No.2/17. Infact, the tariff item 2301 was not originally included, however, by subsequent corrigendum notification in Notification No.354/117/2017-TRU dated 27.07.2017, the corrigendum is issued to the effect that in Sl.No.102 in column (2), for “2302” read “2301, 2302”.

1.13. Subsequently, by an amendment notification issued in Notification
No.28/2017–I.T. (Rate) dated 22.09.2017, an amendment has been made, where, in clause (vi), it has been mentioned that, in Sl.No.102, for the entries in Column (2), the entries “2301, 2302, 2308, 2309” shall be substituted. Thereby, the six entries which were included in Sl.No.102 of Notification No. 2/17, has been made only as four entries.

1.14. However, it is to be noted that, among the four entries, Entry No.2301 & 2309 continue to be form part of Sl.No.102 as per the amended Notification dated
22.09.2017.

1.15. Therefore, the items which are covered under Entry No.2301 as well as 2309 are fully included in Sl.No.102 of Exemption Notification No.2/17, referred to above and this position even after the corrigendum issued in this regard as well as the amendment notification dated 22.09.2017 had not been changed and in fact, entry 2301 & 2309 are saved in the exemption notification.

1.16. Therefore, in the exemption notification, what are all the goods covered under entry 2301 & 2309 are exempted from levying of GST. Therefore, in the said circumstances, the case of the petitioners is that, the product they manufacture is “fish meal”. In one hand it is a finished product as a feeding of aqua farm which includes fish farm, but at the same time, it can also be used as one of the input or raw material for making further finished product either in aqua farm or poultry farm or production of animal food.

1.17. Whatever be the usage of the finished product of the petitioners, namely “fish meal”, it is only a finished product and it is covered under the two entries referred to above i.e., 2301 & 2309. Therefore, since both entries find place in Sl.No.102 of the Exemption Notification, the said product of the petitioners are totally exempted. Therefore, in that footing they project their case.

1.18. In this context, it is to be further noted that, till the issuance of this Exemption Notification as well as Corrigendum and Amendment Notification referred to above, absolutely, there has been no quarrel. However, the trouble started only by issuance or from the issuance of a Circular called Circular No.80/54/2018-GST dated 31.12.2018.

1.19. This circular had been issued by the Board called “Central Board of Indirect Taxes and Customs, New Delhi,” probably under the powers that vests in them under Section 168 of the CGST Act, 2017.

1.20. In the said clarification circular, inter alia, one such clarification given is that, the “fish meal” and other raw material used for making cattle / poultry / aquatic feed cannot be said to be exempted within the meaning of Exemption Notification No.2/17 under Sl.No.102. The reasons for such clarification is also explained by the Board in the Circular at para 4.2., which reads thus:

“4.2. A number of raw materials such as fish meal falling under heading 2301, meat and bone meal also falling under heading 2301, oil cakes of various oil seeds, bran, sharps, residue of starch and all other goods falling under headings 2302, 2303, 2304, etc, are used to manufacture/formulation of, aquatic feed, animal feed, cattle feed, poultry feed etc. These raw materials/inputs cannot be directly used for feeding animal and cattle. The
Larger Bench of the Hon’ble Supreme Court in the Commissioner of
Customs (Import), Mumbai v. Dilip Kumar [2018 (361) E.L.T. 577 – 2018-VIL-23-SC-CU-CB] has laid down that inputs for animal feed are different from the animal feed. Said S. No. 102 covers the prepared aquatic/poultry/cattle feed falling under headings 2309 and 2301. This entry does not apply to raw material/inputs like fish meals or meat cum bone meal (MBM) falling under heading 2301.”

1.21. By virtue of this Circular having been issued by the Board, the revenue has taken a stand that, the product of the petitioners i.e., fish meal, since is also to be used as a raw material for the purpose of making cattle / poultry / aquatic feed, which is not exempted, therefore, tax are to be levied on these items at the rate of 5% and accordingly, they inspected the premises of the petitioners’ factories and demanded the tax and pursuant to which, the concerned officials of the Revenue i.e., from Directorate General of GST Intelligence [DGGI] had issued summons that, there would be an enquiry proceedings conducted in the name of judicial proceedings within the meaning of Section 193 and Section 228 of the Indian Penal Code. Therefore, they should appear before the officer concerned of the DGGI i.e., Directorate General of GST Intelligence.

1.22. Only at this juncture, the petitioners were triggered to challenge the Circular dated 31.12.2018, issued by the Board, by filing these writ petitions with the respective prayers.

2. Mr. Joseph Prabakar, learned Counsel appearing for the petitioners, has taken this Court extensively to the relevant entries made in Customs Tariff Act, 1975, to explain that, even from the year 1997-98, entries 2301 & 2309 were available in the Customs Tariff Act and it has never underwent any change for all these years despite the said Act especially the Schedule underwent various amendments over a period of time.

2.1. He would also submit that, insofar as the two entries namely, 2301 & 2309 are concerned, as available under the Customs Tariff Act, it makes clear that, even in Entry 2301, the sub-heading 2301 20 includes the fish meal unfit for human consumption, like that, in entry 2309 in sub-heading 2309 90 32, the “fish meal in powdered form”, has been included.

2.2. Both tariff heading 2301 & 2309 entries since have been included in Sl.No.102 of Exemption Notification 2/2017, as referred to above, there could be no further saying that, among these entries, there can be a dichotomy to distinguish that the fish meal being a finished product, since also being used as a raw material for manufacturing some other food for poultry and animal farm, it can be taken away from the purview of exemption.

2.3. According to the learned Counsel, the reason being, the manufacturing process of the petitioner has been explained, wherein, there could be no doubt to the revenue as the petitioners are getting fresh fish and it would be processed by various methods as has been explained and ultimately, the dried powdered form fish meal would be the finished product. The said fish meal finished product can be directly fed into fish farm or aqua farm as direct meal to them. For the said purpose, the fish meal in powdered form is being sold by the petitioners’ industries. But, at the same time, the very same finished product of “fish meal” in powdered form, is also being sold to some other manufacturing units, where they may use this fish meal in powdered form finished product as one of the ingredients or raw material for preparation of further form of poultry feed or animal feed.

2.4. Therefore, pointing out these differences, the leaned Counsel would canvas the point that, merely because the very same finished product called “fish meal in powdered form”, of the petitioners’ industries is also being used as one of the raw material or input for preparation of further finished product, it cannot be stated that it is only a raw material and not a finished product.

2.5. Therefore, in his first limb of arguments, learned Counsel would contend that, since the product of the petitioner industries namely, “fish meal in powdered form”, is a finished product and is totally exempted and covered under entry 2301
& 2309, therefore, since these entries have been included in Sl. No. 102 of the Exemption Notification, such a total exemption shall be given to the finished products of the petitioners’ industries.

2.6. The second limb of arguments is that, assuming they admit that the fish meal is not a finished product completely from the point of view of its usage and therefore, it is not entitled to seek exemption under Sl.No.102 of Exemption Notification No.2/17, he would submit that, the description made in Sl.No.102 is not stopping with the words “aquatic feed, shrimp feed, prawn feed, poultry feed, cattle feed including grass, hay & straw, supplement & husk of pulses, but also included the words “concentrates and additives”.

2.7. Pointing out this, learned Counsel would strenuously contend that, the word concentrates and additives included in the description in Sl.No.102 of the Exemption Notification makes it very clear that, it does not stop with the finished product of aquatic feed, that may be a prawn feed, shrimp feed, poultry feed etc., but also the concentrates and additives, which by themselves cannot be called as finished product, but only can be treated as input or raw material and therefore, very consciously the Central Government, while issuing the Exemption Notification No.2/17, had included the words “concentrates and additives” also. Therefore, it does not stop with the finished aquatic feed, poultry feed etc., but it goes beyond. Therefore, even for the sake of arguments from the side of the Revenue, the stand taken by them that the exemption is made for finished product and not for raw material, is also a wrong presumption, he contended.

2.8. It is the further contention of the leaned Counsel for the petitioner that, insofar as the reason given for issuing the Circular which is impugned herein, as quoted in para 4.2 of the said Circular, it is mainly derived from the law laid down by the Hon’ble Supreme Court in the case of Commissioner of Customs (Import), Mumbai Vs. Dilip Kumar reported in 2018 (361) E.L.T. 577 – 2018VIL-23-SC-CU-CB, [in short, “Dilip Kumar case”]. It is pointed out by the learned Counsel that, the Board in para 4.2. of the impugned Circular has categorically stated that, the Supreme Court in Dilip Kumar case has laid down that, inputs for animal feed are different from the animal feed and that would have been the main thrust of the reason on the part of the Revenue to make a dichotomy between the material inputs like fish meals and the finished products, insofar as the fish meal is concerned.

2.9. In this context, learned Counsel pointed out that, in Dilip Kumar case, it was an issue before the constitution Bench of the Hon’ble Supreme Court that, to examine the correctness of the ratio in Sun Export Corporation, Bombay Vs. Collector of Customs, Bombay reported in (1997) 6 SCC 564 – 1997-VIL-15SC-CU, namely what is the interpretation rule to be applied while interpreting the tax exemption provision / notification, when there is an ambiguity as to its applicability with reference to the entitlement of the assessee or the rate of tax to be applied.

2.10. Only to answer the said query posed before the Constitution Bench, the issue was discussed in detail and ultimately, it was held that, when there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the assessee and it must be interpreted in favour of the Revenue.

2.11. Pointing out this, learned Counsel would contend that, on the entire reading of the judgment in Dilip Kumar case, he does not find anything, as has been claimed by the Board in para 4.2. of the impugned Circular, has been held by the Hon’ble Supreme Court.

2.12. Therefore, learned Counsel would contend that, the very reasoning cited by the Board in para 4.2 of the impugned Circular itself is under wrong premise. Therefore, even that reason cannot be countenanced to justify the clarification sought to be given through the impugned circular, by which the exemption provided to the finished product of the petitioners under Sl.No.102 of the Exemption Notification No.2/17, was sought to be removed.

2.13. The learned Counsel for the petitioners also raised a point that, if at all the impugned circular is issued by the Board, such powers vests in them only under Section 168 of the CGST Act, 2017, where such a power is given to the Board, only in case of necessity or expedient, so to do for the purpose of uniformity in the implementation of the Act i.e., GST Act, the Board can issue such orders or instructions or directions to the Central Tax Officers, as it may deem fit and thereupon, all such officers and the persons employed in the implementation of the Act shall observe such orders and follow the directions. Therefore, if at all such circular is issued by the Board under Section 168 of the Act, that would be only for the purpose of clarity to the officers and staff employed under the department and therefore, it is not binding on the assessee or any stake-holders. Moreover, such a clarificatory Circular issued under Section 168 of the Act cannot override the exemption provided under the Notification, which is a statutory notification issued by the Central Government by exercising its powers under Section 11(1) of the CGST Act. Therefore, on that ground also, the impugned circular cannot be sustained in the scrutiny of law, learned Counsel contended.

3. Per contra, Mr. K. Prabhu, learned Standing Counsel appearing for the respondents / Revenue, firstly has relied upon the averments made in paragraph Nos.4, 5 & 10 of the counter affidavits filed by the respondents. In order to have a quick reference of those averments heavily relied upon by the learned Standing Counsel, the relevant portions of the counter affidavit are extracted hereunder:

“4. It is submitted that the contention of the petitioner that addition of the entry regarding fish meal (under HS 2301) was added in the exemption notification, clearly establishes that fish meal is exempt (as both raw materials and the finished product are exempt) is incorrect. A notification cannot be read in isolation. In the exemption notification along with the HS code, the description of the goods is provided. As can be seen from the description, the exemption is available only to aquatic feed including shrimp feed and prawn feed, poultry feed and cattle feed including grass hay and straw supplement and husk of pulses, concentrates and additives, wheat brawn and de-oiled cake. None of the above products are raw materials such as fish meal.

5. It is submitted that the Fish meal is the raw material and is distinct from the feed or additives or supplements. As per the Indian Standard – IS 4307-1983 (reaffirmed 2014), specification for fish meal as live stock feed ingredient published by Indian Standard Institution, fish meal suitable for use as live stock feed ingredient is made either by washing, cooking, pressing, drying and pulverizing non-fatty or fatty fresh fish or fish waste. It can be prepared by heat treating non-fatty unsalted dry fish to such an extent as would ensure destruction of harmful micro organism, followed by pulverising the treated material to required mesh size. As per the standards the fish meal shall be obtained from fresh fish and / or fish wastes or from unsalted dried fish or all of them, after eliminating poisonous fishes. Fish meal is a product obtained from cooking, cleaned, dried, un decomposed whole fish or fish cuttings, either or both, with or without extraction of part of the oil.

6. to 9. …..

10. It is submitted that Fishmeal in per GST era was exempted in Central
Excise as well as in VAT Act. In per GST era vide S1.No.102 of Notification No.02/2017 dated 28.06.2017, fishmeal cleared as an prepared aquatic feed that has been given exemption along with shrimp feed and prawn feed, poultry feed & cattle feed including grass, hay & straw, supplement & husk of pulses, concentrates & additives, wheat bran & de oiled cake falling under chapter heading 2302, 2308 and 2309. It means that fishmeal falling under chapter heading 2301 cleared as input/raw material to animal/aquatic/poultry/cattle feed are not covered in the said sl. no. The well settled principle is that when the words in a statute are clear, plain and unambiguous, only one meaning can be inferred.
Further, it was held in district Mining officer Vs Tata Iron and Steel Company (2001) 7 SSC 358 that “if a statutory provision is open to more than one interpretation, the Court has to choose that interpretation which represents the true intention of the Legislature.” Further, it was opined in Kesoram Industries case, (2004) 10 SSC 201 – 2004-VIL-37-SC that “A taxing statute cannot be interpreted on any presumption or assumption and it has to be interpreted in the light of what is clearly expressed.” As per the above laid principle, the intention of the law maker is clear to exempt prepared animal feed from levy of GST. The fishmeal falling under Chapter heading 2301 covered in Sl. No. 102 dated 28.06.2017, if supplied as prepared animal food is eligible for the said exemption. The fishmeal supplied by the petitioner is not a prepared animal/aquatic/poultry/cattle feed. This was confirmed by Para no. 20 of the affidavit filed by the petitioner that “it is submitted that the petitioner absolutely agrees with the proposition that inputs for animal feed are indeed different from animal feed. This is an admitted position.” This being the case, there is no ambiguity with regard to fishmeal supplied as input or raw material to the animal / aquatic / poultry / cattle feed manufacturers not getting covered in the said entry and attracts 2.5% CGST and 2.5% SGST as per the notification issued.”

3.1. By relying upon these averments made in the counter affidavit, the learned Standing Counsel would submit that, as per the Exemption Notification, the exemption is available only to aquatic feed including shrimp feed and prawn feed, poultry feed and cattle feed including grass, hay and straw supplement and husk of pulses etc. Therefore, none of the above products are raw materials such as fish meal. He further submits that at the same time, the fish meal is the raw material and is distinct from the feed or additives or supplements. Fish meal is a product obtained from cooking, cleaned, dried, un-decomposed whole fish or fish cuttings, either or both, with or without extraction of part of the oil.

3.2. He would also submit that, under Exemption Notification No.2/17, exemptions were given to prepare aquatic feed, prawn feed, poultry feed, cattle feed etc., including grass, hay & straw, supplement & husk of pulses, concentrates & additives, wheat bran & de-oiled cake falling under chapter heading 2302, 2308 & 2309. That means, fish meal falling under Chapter heading 2301 cleared as input / raw material to animal / aquatic / poultry / cattle feed are not covered in the said Sl. No.

3.3. Therefore, a clear dichotomy can be formed, where the fish meal in raw material form cannot be sought for any exemption under Exemption Notification No.2/17, whereas, if a fish meal if it is a finished product which is not being used as input or raw material in any further product, then only they can seek exemption under Sl.No.102 of the Exemption Notification No.2/17.

3.4. The learned Standing Counsel would further contend that, the Circular which is impugned herein issued by the Board is clarificatory in nature and it does not provide any new classification. Power vests in the Board under Section 168 of the CGST Act, 2017, in order to maintain the uniformity in implementation of the Act, where orders, instructions and directions can be issued by the Board and once such orders or instructions or directions are issued, that should be followed while implementing the provisions of the Act by the officers and staff of the department concerned. Therefore, this clarificatory Circular was issued in order to clear the ambiguity in the minds of the officials or staff concerned of the department as well as the assessees to state that, the product “fish meal”, claimed to be the finished product of the petitioners’ industries are not covered under the exemption provision under the Notification No.2/17, because admittedly, the fish meal is being used as input or raw material for the purpose of producing further finished goods.

3.5. The learned Standing Counsel would further point out that, if the fish meal is used as a raw material for production of cattle feed, prawn feed etc., then it covers under entry 2301, which forms part of one of the entry in Schedule I and for those items, GST at the rate of 5% can be levied. This is specifically mentioned in Sl.No.103 of Notification No.1/17 dated 28.06.2017.

3.6. Merely because the entry 2301 has subsequently been included in Sl.No.102 of the Exemption Notification No.2/17, it does not automatically provide an exemption to the raw material like fish meal which otherwise covers under entry 2301, which in fact, did not form part of Sl.No.102, at the time of original issuance of Exemption Notification No.2/17. However, subsequently, the said notification underwent an amendment on 22.09.2017, prior to that a Corrigendum Notification dated 27.07.2017 was issued and under both notifications, the entry 2301 though has been saved that would not ipso facto give any leverage to the industries like the petitioners, to seek exemption for the raw material like fish meal. Therefore, the claim made by the petitioners that the petitioners’ production of fish meal is an end product and therefore, it is to be exempted, is unacceptable.

3.7. Only in order to clear this doubt, and to have uniformity in implementing the provisions of the Act, such a clarificatory Circular was necessitated and that was issued of course by exercising powers of the Board under Section 168 of the Act and that is how the impugned Circular has been issued. Therefore, it is fully under the domain of the Board to issue such Circular to give a clarification, by which, no new classification since has been introduced, the impugned circular is sustainable, he contended.

4. I have considered the rival submissions elaborately made by the learned Counsel appearing for both sides and also have perused the materials placed before this Court.

5. Though such an extensive submissions were made in this batch of cases, by learned Counsel appearing for both sides, the issue to be answered, in the considered opinion of this Court, is in a very narrow campass.

6. After the GST regime, which came into effect from 01.07.2017, the Customs Tariff Act, 1975 classification selectively has been adopted by the GST regime. Therefore, few days prior to the implementation of the GST regime, these two notifications, namely, Notification No.1/17 and Notification No.2/17, were issued by the Central Government, of course, by exercising their powers under Sections 9(1) and 11(1) of the CGST Act, respectively.

7. Under Notification No.1/17, what are all the items or entries in chapter heading and sub-heading are to be included for the purpose of levying tax, had been provided in six Schedules which had been discussed hereinabove. We are concerned only about the goods specified in Schedule I, which are liable to be levied a 5% GST. In the list of goods specified in schedule I, as per Notification No.1/17, in Sl.No.103, the entry 2301 has been mentioned which has been quoted hereinabove, where the words flours, meals and pellets of meat or meat offal of fish or of crustaceans, molluscs etc., has been given.

8. If we have a conjoint reading of these words by using the proper grammatical method, it should be read only as flours of fish, meals of fish, pellets of fish. Therefore, even under entry 2301, the fish meal, the fish pellet and fish flour can be said to be included.

9. Like that, in entry 2309, it is mentioned that, preparations of a kind used in animal feeding. Among various goods under sub-heading 2309 90 20 feeds for fish, (prawn etc.), is mentioned. In sub-heading 2309 90 31, prawn and shrimp feed is mentioned. In sub-heading 2309 90 32, fish meal in powdered form is mentioned. It is to be noted that, the entire entries of the heading 2309 are in Nil GST category. It may be a food for fish, which includes prawn etc., it may be a fish meal in powdered form. Therefore, one thing becomes clear that, if it is a fish meal in powdered form, that can very well be exempted. If it is a food of fish which means food for prawn etc., which may extend to various other category of animals or sea living creatures for whom also if the feeds of fish are used, that can also be treated as an exempted one.

10. If we come to entry 2301, in sub-heading 2301 20, it says flours, meals and pellets of fish and also it says fish meal unfit for human consumption. In subheading 2301 20 11, it further says, in powdered form. Therefore, flours, meals and pellets of fish unfit for human consumption in powdered form, can also be exempted, because it comes under 2301 entry, which also forms part of Sl. No. 102 of Exemption Notification No.2/17.

11. Therefore, it may be either under 2301 or may be under entry 2309. In both way, the fish meal is explicitly provided under exemption category.

12. Only in this context, the Revenue has taken a stand that, if the fish meal is utilised for feeding the fish or aqua including prawn, then it can be treated as a finished product, for which, exemption can be claimed. However, this fish meal is being sold to another manufacturer to prepare the feed for cattle, poultry etc. Therefore, in such manufacturing process, this so called fish meal will be used only as raw material. Therefore such kind of raw material cannot be treated as an exempted one within the meaning of entry 2301 or under entry 2309.

13. The fallacy of the said argument, even if we take the reason cited in para 4.2 of the impugned circular, may appear to be a clever distinction, but factually it is not so. The reason being that, what is the nature of the product being manufactured by an industry or a manufacturer is the matter. Here, both under entry 2301 as well as 2309, the fish meal in the form of finished product used for feeding the fish, aqua, including prawn etc., and also flours, meals and pellets of fish etc., in the powdered form are exempted.

14. Merely because such a finished product of fish meal produced by the petitioners’ industries are being utilised also for the purpose of further manufacturing of further animal feed or poultry feed, by that reason itself, it cannot be stated that, it is only a raw material and not a finished product.

15. In this context, if we look at the reasoning given by the Board in the impugned Circular, in Clause (ii) it says, fish meal and other raw materials are used for making cattle / poultry / aquatic feed. Therefore, their intention is to separate the fish meal being used as raw material for making cattle / poultry or aquatic feed from the purview of exemption. Assuming that, if this is the intention of the Central Government, while giving the Exemption Notification, where they already inserted all items covered under entry 2301 & 2309, the present attempt made by the Board through the Circular to separate these fish meals in the case of raw material for making cattle feed, that separation is impossible because the manufacturer manufactures this fish meal primarily for feeding of fish and aqua. But, at the same time, incidentally that product is being used as one of the raw material in some other industries to prepare animal feed or cattle feed or poultry feed, because of which, the very finished product, namely, fish meal would not lose its character and identity.

16. The Central Government while giving Exemption Notification No.2/17, though originally included only Entry Nos. 2302, 2304, 2305, 2306, 2308 & 2309, subsequently, issued a corrigendum that entry 2302 should be read as 2301 & 2302. Therefore, 2301 also is included.

17. Subsequently, when Amendment Notification No.28/17 dated 22.09.2017 was issued, under Clause (vi) of the notification, the amendment made is that Sl.No.102 for the entries in Column (2), the entries “2301, 2302, 2308 & 2309” shall be substituted. Therefore, the final conclusion which was arrived by the Central Government is that, what are all the items covered under entry 2301, 2302, 2308 & 2309 are to be totally exempted and that is the reason why the amendment notification was issued by exercising its powers under sub-section 1 of section 6 of IGST Act, 2017.

18. On the said notification originally issued i.e., Notification No.2/17 under Section 11(1) of the IGST Act, 2017 as well as an Amendment Notification issued under Section 6(1) of CGST Act, 2017, if we take a coherent and conjoint reading, it explicitly makes it clear that the goods covered under four entries namely 2301, 2302, 2308 & 2309 are exempted.

19. If at all anything to be taken away from the purview of such exemption already provided under those entries, it is for the Central Government to come to the rescue of the Revenue by issuing further amendment to the Exemption Notification No.2/17 as amended by the Amendment Notification No.28/2017 and can issue a fresh or additional amendment, showing the proper intention of the Central Government to take away the exemption provided in any particular type of goods or product covered under the four entries referred to. Such an action has not been taken by the Central Government so far.

20. In this context, it has been pointed out by the learned Counsel for the petitioner that, if at all the impugned Circular have been issued by the Board, that should have been issued by the Board exercising the powers under Section 168. For the sake of convenience, Section 168 of the said Act is extracted hereunder:

“168. Power to issue instructions or directions:
(1) The Board may, if it considers it necessary or expedient so to do for the purpose of uniformity in the implementation of this Act, issue such orders, instructions or directions to the central tax officers as it may deem fit, and thereupon all such officers and all other persons employed in the implementation of this Act shall observe and follow such orders, instructions or directions.

(2) The Commissioner specified in clause (91) of section 2, sub-section (3) of section 5, clause (b) of sub-section (9) of section 25, sub-sections (3) and (4) of section 35, sub-section (1) of section 37, sub-section (2) of section 38, sub-section (6) of section 39, sub-section (5) of section 66, subsection (1) of section 143, sub-section (1) of section 151, clause (1) of subsection (3) of section 158 and section 167 shall mean a Commissioner or Joint Secretary posted in the Board and such Commissioner or Joint Secretary shall exercise the powers specified in the said sections with the approval of the Board.”

21. Section 168(1) makes it clear that, only for the purpose of uniformity in the implementation of the Act, orders or directions to the Central Tax Officers, as deem fit, may be issued by the Board. Therefore, most probably, such kind of orders, instructions or directions must be procedural in nature, not substantive in nature.

22. The exemption provided by the Central Government by exercising its powers either under Section 11(1) of CGST Act, 2017 or under Section 6(1) of IGST Act, 2017 are the substantive right provided to the stake-holders by giving such exemption. Therefore, such kind of exemptions cannot be taken away or done away by issuing clarificatory Circulars by the Board, in exercise of its powers under Section 168 of the CGST Act, 2017.

23. Therefore, for the said reason also, this Court feels that the impugned clarificatory Circular cannot override the exemption provided under the notifications referred to above.

24. Though the judgment in Sun Export Corporation case and Dilip Kumar case have been relied upon by both sides, the said judgment can be taken as an aid only for the limited purpose to know what has been stated in the said judgment with regard to the present issue.

25. However, when we look at the decision in Sun Export Corporation case, the law propounded by the Hon’ble Supreme Court is that, if there is any ambiguity in the notification like exemption notification, such benefit arising out of ambiguity be conferred on the assessee. However, the said law laid down in Sun Export
Corporation case has been negated and overruled by the Constitution Bench in Dilip Kumar case, referred to above, where the Hon’ble Supreme Court ultimately has held as follows:

“52. To sum up, we answer the reference holding as under –
(1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.

(2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of revenue.

(3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export case (supra) stands overruled.

53. The instant civil appeal may now be placed before appropriate Bench for considering the case on merits after obtaining orders from the Hon’ble Chief Justice of India.”

26. As has been asserted by the learned Counsel appearing for the petitioners, no where in the said judgment in Dilip Kumar case, the Hon’ble Supreme Court has held that the inputs for animal feed are different from the animal feed.

27. This issue was never figured in the decision in Dilip Kumar case, where the larger principle of law alone was considered and it was held in paragraph No.52, which has been quoted hereinabove. Therefore, the reason cited by the Board in paragraph 4.2. of the impugned Circular being one of the reasons to issue this clarification is also untenable and therefore, for that reason also, the respondent / Revenue cannot sustain the impugned Circular.

28. It has also been brought to the notice of this Court by the learned Counsel for the petitioners that, in the Finance Act, 2020, (the Act No.12 of 2020) in Section 132, the parliament thought it fit to give exemption from levying the Central Tax in respect of supply of fish meal falling under heading 2301 during the period commencing from the first day of July, 2017 and ending with 30th day of
September, 2019. In order to have a quick reference to Section 132 of the Finance Act, 2020, the same is extracted hereunder:

“132. Retrospective exemption from, or levy or collection of, central tax in certain cases. – (1) Notwithstanding anything contained in the notification of the Government of India in the Ministry of Finance (Department of Revenue) number G.S.R. 673(E), dated the 28th June,
2017, issued by the Central Government, on the recommendations of the
Council, in exercise of the powers under sub-section (1) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017), –

(i) no central tax shall be levied or collected in respect of supply of fishmeal (falling under heading 2301), during the period commencing from the 1st day of July, 2017 and ending with the 30th day of September, 2019 (both days inclusive);

(ii) central tax at the rate of six percent, shall be levied or collected in respect of supply of pulley, wheels and other parts (falling under heading 8483) and used as parts of agricultural machinery (falling under headings
8432, 8433 and 8436), during the period commencing from the 1st day of July, 2017 and ending with the 31st day of December, 2018 (both days inclusive).

(2) No refund shall be made of all such tax which has been collected, but which would not have been so collected, had sub-section (1) been in force at all material times.”

29. Though only for a particular period such exemption has been provided under the aforesaid provision of the Finance Act, 2020, this has been quoted by the learned Counsel for the petitioners to substantiate the very intention of the Legislature that, such kind of exemption can be provided for levying Central Tax or collecting such tax on the supply of fish meal.

30. This is what is indicated by this Court in the earlier part of this order that, if at all the exemption provided by the Central Government in issuing the Exemption Notification No.2/17 is to be revisited or reviewed and certain items have to be taken away from the purview of exemption, such exercise shall be undertaken either by the Parliament by making a law as has been done in Finance Act, 2020 or by the Central Government by exercising their powers either under Section 11(1) of the CGST Act, 2017 or under Section 6(1) of the IGST Act, 2017, as under such exercise of powers only those Exemption Notifications No.2/17 as well as the Amendment Notification No.28/2017 were issued, and only then, such kind of amendment could be made.

31. However, no such attempt since has been made either by the Parliament or by the Central Government, by issuing a mere Circular exercising the powers under Section 168 of the CGST Act, 2017, such kind of right already vested, to get exemption, on the assessee, cannot be taken away by way of a clarificatory Circular, that too issued only to the benefit of the officials and staff of the department, as culled out from the language used in Section 168 of the Act. Therefore, for that reason also this Court feels that the impugned Circular would not stand in the legal scrutiny.

32. For the discussions hereinabove made and for all these reasons which have been quoted, this Court feels that the impugned Circular insofar as Clause (ii) of the same, namely, fish meal and other raw materials used for making cattle / poultry / aquatic feed is concerned, is unsustainable and therefore, insofar as the said product is concerned, whatever the clarification issued in the impugned Circular dated 31.12.2018 is set aside. As a sequel, the petitioners, so long as they make a finished product fish meal from their manufacturing units, can enjoy the benefit of exemption as provided under Sl.No.102 of Exemption Notification No.2/17 dated 28.06.2017. Therefore, all consequential actions, if any taken on the part of the Revenue against the petitioners pursuant to the impugned Circular, would not stand in the legal scrutiny. Therefore, they are also declared to be invalid.

33. With these directions and orders, all these writ petitions are allowed to the term indicated above. However, there shall be no order as to costs. Consequently, connected miscellaneous petitions are closed.