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Case Law Details

Case Name : In re G. N. Chemicals (GST AAR Chhattisgarh)
Appeal Number : Advance Ruling No. STC/AAR/04/2018
Date of Judgement/Order : 05/09/2018
Related Assessment Year :
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In re G. N. Chemicals (GST AAR Chhattisgarh)

Under HSN code 1211 there is no ambiguity that Plants and parts of plants (including seed and fruits) used as “fresh or chilled” would be tax free, whereas plants and parts of plants (including seed and fruits) used as “frozen or dried, whether or not cut, crushed or powdered” would be taxable @ 5% GST.

It is also observed that under HSN code – 1209, the Seed useful for sowing i.e. ‘Seeds, fruit and spores of a kind used for sowing’ is tax free. The crucial determination point here in this entry is the word ‘sowing’. Thus in case the quality of seed is not suitable for sowing, it cannot be treated as of seed quality, thereby making it exigible to GST @ 5%. In this regard, the Government of India has enforced the Seeds Act, 1966 in which Section 5 to Section 9 clearly stipulate the provisions for authentication of seed quality on the basis of which any seed would be defined as ‘tax free seed for sowing.’

Seeds are the foundation of agriculture. Seed quality plays an important role in the production of agronomic and horticultural crops. Characteristics such as trueness to variety, germination percentage, purity, vigour, and appearance are important to farmers planting crops. Seed quality is the degree of excellence in regard to the characteristics referred to above that determines the seed quality. If the seed lot possesses high genetic purity and high germination percentage and is inter alia free from diseases, it is categorized as possessing high quality. Generally the standards fixed for certified seeds are considered of having quality standards. It implies that if a seed lot meets the certification standards, it is a good quality seed and if does not meet the certification standards, it is obviously not of seed quality. Thus effectively for the goods placed under HSN code 1211 to be termed as of seed quality, it necessarily must possess the germination capacity.

The applicant in their defense has put forth the concept of ‘common parlance’ or ‘trade parlance’, to bring home their contention. On examination of aforesaid claims by the applicant it is seen that currently in commercial sector ‘dry neem fruit’ is not identifiable with ‘seed for sowing’. The Neem fruit is known as ‘Nimouli’ in Chhattisgarh and is collected in both fresh and dry forms and is used for making neem oil only, after drying the neem seed. Dry neem fruit is not generally used for trading for horticulture or agro-based commercial purpose i.e. dry neem fruit is not identifiable with seed commercially. Thus on the basis of ‘common parlance’ or ‘trade parlance’ theory too propagated by the applicant, the goods intended to be supplied by the applicant can by no stretch of imagination be categorized as those attracting tax @ 0%.

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July 2024