AAR on GST on Supply of animal carcass in its natural shape to Army

In re M/s. Ahmednagar District Goat Rearing and Processing Co-Op Federation Ltd. (AAR Maharashtra)

Also Read AAAR Ruling- No GST on Supply of animal carcass in its natural shape to Army: AAAR

FULL TEXT OF ORDER OF APPELLATE AUTHORITY OF ADVANCE  RULING, MAHARASHTRA

Q.1  Whether the whole (Sheep/Goat) animal carcass in its natural shape in frozen state in different weight and size packed in LDPE bags without mentioning the weight and one or two such LDPE bags further packed in HDPE bags being supplied to Army by applicant against tender shall qualify as product put up in “unit container”?

A.1  The question is answered in the affirmative.

Q.2 Whether the products as mentioned in query 1 shall be taxable under GST as per entry no. 4 of schedule II of the Notification no. 1/2017- Integrated Tax (Rate) dated 28th June 2017 upto 14th November 2017 and thereafter as per entry no. 1 of schedule I of the Notification No. 43/2017-Integrated Tax (Rate) dated 14th November 2017 or fall under exemption list as per entry no 10 of Notification No. 2/2017-Integrated Tax (Rate) New Delhi dated 28th June 2017 upto 14th November 2017 and thereafter as per entry no. 9 of the Notification No. 44/2017-Integrated Tax (Rate) dated 14th November 2017?

A.2 The impugned product would be covered by –

– the schedule entry 4 of the Notification no. 1/2017- Integrated Tax (Rate) during the period 1-7-2017 TO 13-11-2017.

– the entry 1 of the Notification no. 1/2017- Integrated Tax (Rate) from 14-11-2017 onwards.

RELEVANT TEXT OF ADVANCE RULING

05. OBSERVATIONS

We have gone through the facts of the case. A perusal of the submission reveals that the questions require us to interpret the words ‘unit container’ as found in the schedule entries of the Notifications issued under the provisions of the IGST Act. We begin the discussion as under-

Question 1

Whether the whole (Sheep/Goat) animal carcass in its natural shape in frozen state in different weight and size packed in LDPE bags without mentioning the weight and one or two such LDPE bags further packed in HDPE bags being supplied to Army by applicant against tender shall qualify as product put up in “unit container”?

The words ‘unit container’ have been defined similarly in both the Notification no. 1/2017- Integrated Tax (Rate) and Notification No. 2/2017-Integrated Tax (Rate) of the IGST Act as under –

(i) The phrase “unit container” means a package, whether large or small (for example, tin, can, box, jar, bottle, bag, or carton, drum, barrel, or canister) designed to hold a predetermined quantity or number, which is indicated on such package.

The present product, as informed by the applicant, is Sheep/goat meat in carcass form i.e. the whole animal carcass in its natural shape. It is supplied in frozen state in LDPE and HDPE bags. The above definition covers a package and the examples of such a package include a ‘bag’. The aspects which now need to be seen are –

• Whether the bag is designed to hold a predetermined quantity or number?
• Whether the quantity or number is indicated on the bag?

The Application supplies the above product to the Army. We were provided with photo copies of the bags in which the product is supplied. The facts as informed are thus –

The ‘Acceptance of Tender’ document copies as supplied by the applicant reveal thus –

CONTRACT FOR SUPPLY OF MEAT DRESSED CHILLED/FROZEN AT SUKNA FOR THE PERIOD FROM 01 APR 2017 TO 31 MAR 2018 (BOTH DAYS INCLUSIVE) ON FORTNIGHTLY PAYMENT BASIS

CONTRACT FOR SUPPLY OF MEAT DRESSED CHILLED/FROZEN AT RANGIA AND DELIVERY POINT BARAMA FOR THE PERIOD FROM 01 APR 2017 TO 31 MAR 2018 (BOTH DAYS INCLUSIVE) ON

b. Each frozen carcass is put in LDPE Bag (Primary Packing) which is not sealed & no weight is mentioned on such LDPE Bag. Thereafter, generally two of such LDPE Bags are put in HDPE Bag (Secondary Packing) and manually weight of two carcass is mentioned by marker. For instance, if one of the carcass weights 7 Kg & other one weight 6.5 Kg, the HDPE Bag would bear the marking as “8 +7.5 =15.5 Kg”.

c. The bags are numbered. Hence, there is a bag number mentioned on each bag.

d. There is a statement maintained which keeps a cumulative total of the bags sent and the weight of the carcasses as sent in these bags.

e. The ‘Acceptance of Tender documents reveal that invoices are raised every fortnight. The details in these documents could be seen thus –

“6. Taxes and Levies Payable — As declared in BoQ at the time of submission of hid.

Payment Terms

7. Bills & Payment, The bills will be presented by your firm every fortnight which will mention the basic cost of Meat Dressed Chilled/Frozen supplied, followed by the details of all levies & taxes paid by you separately. Contract Operating Officer will make 95% payment of the total billed amount including taxes through electronic transfer :-

(a) 95% of Basic Cost. Contract Operating Officer will make the payment after verifying the quantity supplied.

(b) 95% of Taxes and Levies. 95% payment of the taxes and levies will only be paid by the Contract Operating Officer upon production of tax deposit receipts and certificates from Chartered Accountant of your firm and reconciliation with all connected documents.”

f. In the invoice raised on the Army, there is mention of the total number of bags supplied and the total weight contained in these bags on the basis of the statement in point e above.

A perusal of all above makes us infer thus –

a. The phrase “unit container” is defined as “means a package, whether large or small (for example, tin, can, box, jar, bottle, bag, or carton, drum, barrel, or canister) designed to hold a per determined quantity or number, which is indicated on such package.”.

The definition of ‘unit container’ requires that there should be mention of a predetermined quantity or number on the package (a package includes a bag).

c. The definition has not specified any condition as to sealing of the package.

b. The words used are “quantity or number”.

e. Each LDPE bag would carry one carcass. And each HDPE bag would carry two carcasses.

f. There is mention of the weight of the two carcasses on the bag in the manner as follows :

“8 +7.5 =15.5 Kg”

g. The above manner of marking on the bag indicates that the sum is of two items. Thus, the manner of marking reveals a “number”.

h. The “number” in point (f) is a ‘predetermined number’ as the concerned persons from the Army are aware that each LDPE bag would carry one carcass and each HDPE bag would carry two carcasses. Thus, the bags are designed to hold a ‘predetermined number’.

i. The manner of indicating the weight would satisfy the requirement of the words ‘predetermined number indicated on such package’.

In view of all above, we are convinced that the impugned packing would satisfy the requirement of the definition of “unit container” as found in the Notification No.1-Integrated Tax (Rate) and Notification No. 2/2017-Integrated Tax (Rate) issued under the provisions of the IGST Act. In view thereof, the bags being supplied to Army by the applicant against tender qualify as product put up in “unit container”.

We find that the applicant has placed reliance on many case laws. Each case law rests on the facts of the referred specific case. And the facts in the instant case are not similar to the facts in the cases cited before us. We see that the reliance on the case laws in the case of CCE v Simba Chips (cited supra) and Surya Agro Oils Ltd. v. Commissioner of Central Excise, Indore (cited supra) would not be applicable herein as the definition under consideration in these cases is not similar to the one that we are dealing with herein. The definition in the said cases was —

The Note to Section IV defines that a “Unit Container” as one whether larger or small (for example tin, can, box, jar, bottle, bag or carton, drum, barrel or canister) designed to hold a (predetermined) quantity or number.

Thus, the aspect of mention of the predetermined quantity or number on the package was not a requirement of the definition. The facts of the instant case before us being distinct, we wish not to deliberate on the arguments and case laws as put forth by the applicant.

Question 2

whether the products as mentioned in query 1 shall be taxable under GST as per entry no. 4 of schedule II of the Notification no. 1/2017- Integrated Tax (Rate) dated 28th June 2017 upto 14th November 2017 and thereafter as per entry no. 1 of schedule I of the Notification No. 43/2017-Integrated Tax (Rate) dated 14th November 2017 or fall under exemption list as per entry no. 10 of the Notification No. 2/2017-Integrated Tax (Rate) New Delhi dated 28th June 2017 upto 14th November 2017 and thereafter as per entry no. 9 of the Notification No. 44/2017-Integrated Tax (Rate) dated 14th November 2017?

To answer the above question, we look at the schedule entries as have been contended to be applicable. Let us reproduce the same as under –

The applicability of each of the entry could be discussed thus –

FOR THE PERIOD 1-7-2017 TO 13-11-2017

1. Schedule entry no.10 of the Notification No. 2/2017-Integrated Tax (Rate) does not cover frozen meat of sheep or goats put up in unit container.

2. Schedule entry 4 of the Notification no. 1/2017- Integrated Tax (Rate) covers frozen meat of sheep or goats put up in unit container.

3. In view thereof, the impugned product would be covered by schedule entry 4 of the Notification no. 1/2017- Integrated Tax (Rate) during the period 1-7-2017 TO 13-11-2017.

FOR THE PERIOD FROM 14-11-2017 ONWARDS

1. Schedule entry no.9 of the Notification No. 2/2017-Integrated Tax (Rate) has conditions regarding unit container and brand name. The applicant has stated that there is clarity on two conditions i.e. product is frozen and branded. We have seen above that the supply by the applicant qualifies as a product put up in “unit container”. Now, the Schedule entry no.9 does not cover frozen meat of sheep or goats when put up in unit container and bearing a brand name.

2. Schedule entry 1 of the Notification no. 1/2017- Integrated Tax (Rate) also has conditions regarding unit container and brand name. The applicant has stated that there is clarity on two conditions i.e. product is frozen and branded. We have seen above that the supply by the applicant qualified as a product put up in “unit container ” Now, the Schedule entry no. 1 covers frozen meat of sheep goats when put up in unit container and bearing a brand name.

3. In view thereof, the impugned product would be covered by the schedule entry 1 of the Notification no. 1/2017- Integrated Tax (Rate) from 14-11-2017 onwards.

06. In view of the deliberations as held hereinabove, we pass the order as follows :

ORDER

(under clause (xviii) of section 20 of the Integrated Goods and Services Tax Act, 2017 read
with section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)

NO.GST-ARA-21/2017-18/B-27

Mumbai, dt. 21/4/2018

For reasons as discussed in the body of the order, the questions are answered thus –

Q.1  Whether the whole (Sheep/Goat) animal carcass in its natural shape in frozen state in different weight and size packed in LDPE bags without mentioning the weight and one or two such LDPE bags further packed in HDPE bags being supplied to Army by applicant against tender shall qualify as product put up in “unit container”?

A.1  The question is answered in the affirmative.

Q.2 Whether the products as mentioned in query 1 shall be taxable under GST as per entry no. 4 of schedule II of the Notification no. 1/2017- Integrated Tax (Rate) dated 28th June 2017 upto 14th November 2017 and thereafter as per entry no. 1 of schedule I of the Notification No. 43/2017-Integrated Tax (Rate) dated 14th November 2017 or fall under exemption list as per entry no 10 of Notification No. 2/2017-Integrated Tax (Rate) New Delhi dated 28th June 2017 upto 14th November 2017 and thereafter as per entry no. 9 of the Notification No. 44/2017-Integrated Tax (Rate) dated 14th November 2017?

A.2 The impugned product would be covered by –

– the schedule entry 4 of the Notification no. 1/2017- Integrated Tax (Rate) during the period 1-7-2017 TO 13-11-2017.

– the entry 1 of the Notification no. 1/2017- Integrated Tax (Rate) from 14-11-2017 onwards.