Case Law Details
Tvl. Vibis Natural Bee Farms Vs Deputy State Tax Officer-1 (Madras High Court)
Summary: The Madras High Court addressed the case of Tvl. Vibis Natural Bee Farms v. Deputy State Tax Officer-1, where the petitioner, engaged in selling live honey bees, contested the tax demand on packing material supplied for these bees. The court observed that the live honey bees are exempt from GST as per Schedule 1 of the CGST Act, and deemed the packing materials as part of a composite supply, which also includes an exempt product. As the petitioner was unaware of preceding notices leading to the assessment orders, the court set aside these orders and remanded the matter for fresh assessment. The petitioner must deposit ₹1,00,000 within 30 days and can respond to the show-cause notices prior to the new order issuance. The ruling clarifies that when goods are sold with packing materials as a bundled supply, the tax is based on the principal item, which, in this case, is the live honey bees, thus exempting the packing material from GST.
The Hon’ble Madras High Court in the case of Tvl. Vibis Natural Bee Farms v. Deputy State Tax Officer-1 [Writ Petition (MD) No.s 17237 to 17240 of 2024 dated July 26, 2024] disposed of the writ petition where the Assessee was engaged in sale of live honey bees and sale of packing material for selling live honey bees was to be treated as part of composite supply with exempted product. Thus, the order passed against the Assessee treating value of packing material as a value of supply demanding tax was to be set aside and matter was to be remanded to pass fresh orders.
Facts:
M/s Tvl. Vibis Natural Bee Farms (“the Petitioner”) was a small-time operator and a dealer in selling live honey bees which is exempted from tax in terms of serial no.6 to the Schedule 1 to the Central Goods and Services Tax Act, 2017 (“the CGST Act”).
They were unaware of the notices that preceded the respective assessment orders (“the Impugned Order”). Thus, failed to participate in the proceedings before the Deputy State Tax Officer-1 (“the Respondent”).
The Respondent had treated the value of the packing material for selling live honey bees as a value of supply and has demanded tax from the Petitioner.
Hence, aggrieved by the Impugned Order, passed for the assessment years 2018-19 to 2021-22, the Petitioner had filed the present writ petition.
Issue:
Whether packing material supplied for selling live honey bee is a part of composite supply?
Held:
The Hon’ble Madras High Court in Writ Petition (MD) No. s 17237 to 17240 of 2024 held as under:
- Observed that, the Petitioner has made out prima facie case as the live honey bees traded by the Petitioner may not be liable to GST in terms of Schedule 1 of the CGST Act. As far as the packing materials are concerned, it appears to be a part of the composite supply with the exempted product as defined in Section 2(30) of the CGST Act read with Section 8(a) of the CGST Act.
- Held that, the Petitioner has made out a prima facie case on merits and warranting interference. Further, the Petitioner has neglected in not responding to the respective notices that preceded the Impugned Orders. It is expected that the Petitioner shall file reply within a period of 30 days from the date of receipt of a copy of the order together with the pre-deposit.
Our Comments:
Section 2 of the CGST Act governs “Definitions”. Section 2(30) of the CGST Act defines “composite supply”, which means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.
Illustration: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply.
Section 8 of the CGST Act governs “Tax liability on composite and mixed supplies”. It states that the manner in which the tax liability on a composite or mixed supply shall be determined. Clause (a) of the CGST Act states that a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and clause (b) states that a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.
Basic difference in Composite and Mixed Supply
Particulars | Composite supply | Mixed Supply |
Main Item | Principal item | Item with highest tax rate |
Tax rate applicable | Tax rate of principal item | Highest tax rate of all the items |
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
By this common order, these four Writ Petitions are taken up for disposal.
2. Heard the learned counsel for the petitioner and the learned Additional Government Pleader for the respondent.
3. The petitioner claims to be a dealer in selling live honey bees. In these Writ Petitions, the petitioner has challenging the respective assessment orders passed for the assessment years 2018-19 to 2021-22 as detailed below:
S. No | W.P.(MD)Nos. | Assessment year |
Assessment order/ dated | Demand Rs. |
1. | 17237/2024 | 2020-21 | 33AIBPJ3432C1Z1/2020-21/ 31.07.2023 | 8,61,634 |
2. | 17238/2024 | 2021-22 | 33AIBPJ3432C1Z1/2021-22/ 31.07.2023 | 5,23,488 |
3. | 17239/2024 | 2019-20 | 33AIBPJ3432C1Z1/2019-20/ 01.08.2023 | 6,94,948 |
4. | 17240/2024 | 2018-19 | 33AIBPJ3432C1Z1/2018-19/ 31.07.2023 | 4,05,458 |
4. The case of the petitioner is that the petitioner is a small time operator 3/9 and was unaware of the notices that preceded the respective assessment orders and thus, failed to participate in the proceedings before the respondent, which is culminated in the impugned order.
5. It is submitted that for the same reason that the petitioner was also unaware of the impugned orders passed as detailed above, the petitioner has failed to approach this Court at an earlier point of time.
6. Specifically, the learned counsel for the petitioner submits that the petitioner is engaged in sale/supply of live honey bees, which is exempted from tax in terms of serial No.6 to the Schedule 1 to the GST Act, 2017.
7. It is submitted that the respondent has treated the value of the packing material for selling live honey bees as a value of supply and has demanded tax from the petitioner.
8. In this connection, the learned counsel for the petitioner has drawn attention to Section 8(a) of the respective GST enactments, in which, in terms of composite supply comprising two or more supplies, one of which is a principal supply shall be treated as a supply of such principal supply.
9. It is submitted that the petitioner cannot be mulcted with the tax on the value of packing material as the petitioner is engaged in sale of live honey bees.
10. The learned counsel for the petitioner submits that the petitioner is willing to abide by the reason with conditions, which the Court may impose so that the petitioner can explain the case afresh before the respondent.
11. On the other hand, the learned Additional Government Pleader for the respondent would submit that these Writ Petitions are liable to be dismissed on account of latches, in the light of the decision of the Hon’ble Supreme Court in the case of Assistant Commissioner (CT) LTU, Kakinada and others vs. Glaxo Smith Kline Consumer Health Care Limited reported in 2020 SCC Online SC 440.
12. It is submitted that the appellate remedy is also time barred in terms of 5/9 limitation under Section 107 of the respective GST Enactments as held by the Hon’ble Supreme Court in the case of Singh Enterprises Vs. Commissioner of Central Excise, Jamshedpur and others reported in (2008) 3 SCC 70 and submitted that these Writ Petitions are liable to be dismissed.
13. Having considered the submissions made by the learned counsel for the petitioner and learned Additional Government Pleader for the respondent, the Court is of the view that the petitioner has made out prima facie case as the live honey bees traded by the petitioner may not be liable to GST in terms of Schedule 1 of the GST Act, 2017. The Schedule has been downloaded by the petitioner from the Central Board of Indirect Taxes and Customs website.
14. As far as the packing materials are concerned, it appears to be a part of the composite supply with the exempted product as defined in Section 2(30) read with Section 8(a) of the respective GST enactments.
15. Thus, in my view, the petitioner has made out a prima facie case on merits and warranting interference. Further, the petitioner has neglected in not responding to the respective notices that preceded the respective impugned orders.
16. Considering the same, the Court is of the view that the impugned orders can be set aside on terms. The petitioner shall deposit a sum of Rs.1,00,000/-(Rupees One Lakh only) to the credit of the respondent from its Electronic Cash Register within a period of 30 days from the date of receipt of a copy of this order.
17. The impugned orders, which stand quashed, shall be treated as addendum to the respective show cause notices that preceded the respective impugned orders.
18. It is expected that the petitioner shall file reply within a period of 30 days from the date of receipt of a copy of this order together with above deposit. The respondent shall thereafter pass fresh orders on merits and in accordance with law as expeditiously as possible preferably within a period of two months. Needless to state, the petitioner shall be heard before passing the order.
These Writ Petitions are disposed of with above directions. No costs. Consequently, connected miscellaneous petitions are closed.
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