CESTAT Mumbai Holds 12% IGST Applicable on Poultry Machinery Parts with Retrospective Benefit

Introduction

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai, in Quality Systems And Equipments Pvt. Ltd. Vs Commissioner of Customs, has delivered a significant ruling on the applicable IGST rate for imports of “Poultry Keeping Machinery” and its parts.

The appeal arose from the confirmation of differential IGST of Rs. 63,36,223/- under Section 28(4) of the Customs Act, 1964, interest under Section 28AA, redemption fine of Rs. 1 crore under Section 111(m), and penalties under Sections 114A, 114AA and 112(a) of the same Act.

The central issue was whether parts of poultry keeping machinery, classified under tariff item 84369100, were liable to IGST at 12% or 18% during the period from September 2017 to December 2021 in light of notifications and subsequent CBIC circulars.

CESTAT Mumbai allowed the appeal, holding that the assessee had correctly discharged IGST at 12% and that the later CBIC circulars, being beneficial and clarificatory, applied retrospectively and regularised past imports on an “as is where is basis”.

Background of the Dispute

Nature of Imports and Classification

The assessee, M/s. Quality Systems And Equipments Pvt. Ltd., imported:

  • “Poultry Keeping Machinery”, and
  • “parts/equipments of Poultry Keeping Machinery”

during the period from September 2017 to December 2021. These were classified as follows:

  • Poultry keeping machinery – CTSH 84362900
  • Parts/equipments of poultry keeping machinery – CTSH 84369100

On these imports, the assessee paid IGST at 12% under Serial No. 199 of Schedule II to Notification No. 1/2017-IGST (Rate) dated 28.06.2017.

Department’s Objection

During post-clearance audit, the department issued an alert and took the view that:

  • While poultry keeping machinery could attract 12% IGST,
  • Parts of such machinery falling under tariff heading 8436 were not expressly covered under Serial No. 199.

As a result, the department held that such parts should fall under:

  • Serial No. 453 of Schedule III of Notification No. 1/2017-IGST (Rate) dated 28.06.2017,
  • which applies to goods not specified in Schedule I, II, IV, V & VI,
  • thereby subjecting the parts to IGST at 18%.

On this basis, a show cause notice was issued, demanding:

  • Differential IGST of Rs. 63,36,223/- under Section 28(4) of the Customs Act, 1964,
  • Interest under Section 28AA,
  • Redemption fine of Rs. 1 crore in lieu of confiscation under Section 111(m), and
  • Penalties under Sections 114A, 114AA and 112(a).

The Commissioner of Customs, NS-V, JNCH, confirmed the demand and imposed the above fine and penalties vide Order-in-Original No. 145/2024-25/Commr/NS-V/JNCH dated 12.09.2024.

Assessee’s Contentions before CESTAT

1. Coverage of Parts under Serial No. 199 – GST Council Recommendation

The assessee argued that:

  • The Fitment Committee had recommended to the GST Council that parts of machinery should be specifically covered under Serial No. 199 of Schedule II to Notification No. 1/2017-CT (Rate) dated 28.06.2017.
  • This recommendation had been accepted by the GST Council and notified.

Thus, the legislative intent was always to apply the 12% rate to parts of such machinery, including those under tariff item 84369100.

2. Reliance on CBIC Circular No. 229/23-2024/GST dated 15.07.2024

The assessee placed strong reliance on CBIC Circular No. 229/23-2024/GST dated 15.07.2024. This circular clarified that:

  • Tariff item 84369100 (parts of poultry keeping machinery) would attract GST at 12% under Serial No. 199 of Notification No. 1/2017-CT (Rate) dated 28.06.2017.

The assessee highlighted that:

  • By the time the adjudication proceedings were concluded by the Commissioner, this circular dated 15.07.2024 was already in force.
  • The Commissioner, however, failed to take cognizance of this clarification, even though it directly covered the disputed goods and their rate of tax.

3. Subsequent Circular Regularising Past Period – Circular No. 236/30/2024-GST

The assessee further relied on:

  • Circular No. 236/30/2024-GST dated 11.10.2024, issued by the Tax Research Unit.

This subsequent circular clarified, particularly in Para 5, that: