CESTAT Mumbai Sets Aside Rs. 63.36 Lakh IGST Demand On Quality Systems, Confirms Tax At 12%

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on 13 February set aside a demand of Rs. 63.36 lakh towards differential IGST on parts of poultry-keeping machinery, holding that payment of GST at 12% by Quality Systems and Equipments Pvt. Ltd. was proper in view of subsequent CBIC clarifications.

A Bench comprising Dr. Suvendu Kumar Pati (Judicial Member) and Mr. M.M. Parthiban (Technical Member) allowed the appeal filed by the company against the Order-in-Original dated 12 September 2024 passed by the Commissioner of Customs, Nhava Sheva.

The Department had alleged that the appellant wrongly paid IGST at 12% under Serial No. 199 of Schedule II of Notification No. 1/2017-IGST (Rate) on parts of poultry machinery imported between September 2017 and December 2021. It contended that the goods were covered under the residuary entry attracting 18% IGST and confirmed differential duty under Section 28(4) of the Customs Act, along with interest, redemption fine, and penalties.

Before the Tribunal, the appellant relied on a CBIC Circular dated 15 July 2024 clarifying that tariff item 84369100 attracts GST at 12%, and a subsequent Circular dated 11 October 2024, which stated that for the past period, payment at the lower rate would be treated as proper on an “as is where is” basis.

The Tribunal noted that these clarificatory circulars were in force by the time adjudication took place and observed that beneficial circulars are binding on the Department, referring to paragraph 4.3 of the clarification.

The Bench further noted:

"Further, on the basis of recommendations of GST Counsel, in view of prevailing genuine doubts, the issue for the past period is regularized on an 'as is where is' basis, which was further clarified to be proper payment of duty even at the lower rate of 12% vide clarificatory circular dated 11.10.2024."

Holding that the appellant had “duly discharged CGST… @12%” on the imported parts, the Tribunal concluded that the Commissioner's order was “unsustainable both in law and facts.”

Accordingly, the Tribunal allowed the appeal and set aside the impugned order.

Appearance for the Appellants: Shri J. C. Patel, Advocate with Ms. Shamita J. Patel, Advocate

Appearance for the Respondents: Shri Dinesh Nanal, Dy. Commissioner, Authorised Representative