Case: Small Scale Ice Cream Manufacturer Association (Reg.) & Anr. v. Union of India & Anr.
Court: High Court of Chhattisgarh, Bilaspur
Petition No.: W.P.(C) No. 2139 of 2019
Date of Judgment: 01/04/2024 (Order reserved: 21/03/2024)
Category of Dispute: Eligibility for Composition Scheme under GST
Relevant Provisions: Section 10(1) of CGST Act, 2017; Article 14 of the Constitution of India
Facts (Paras 1–5)
The petition was filed by the Small Scale Ice Cream Manufacturer Association and its Vice President challenging the GST Council’s decision to exclude ice cream manufacturers from the Composition Scheme under Notification No. 8/2017-Central Tax dated 27.06.2017.
The petitioners contended that ice cream, being a milk-based product, was arbitrarily equated with pan masala and tobacco in the negative list. They argued that such exclusion lacked rationale, was unjust and detrimental to small-scale ice cream units which form nearly 80–90% of the sector. Reliance was placed on Supreme Court decisions in Aashirwad Films v. Union of India (2007) 6 SCC 624, Ayurveda Pharmacy v. State of TN (1989) 2 SCC 285, and East India Tobacco Co. v. State of A.P. AIR 1962 SC 1733.
Questions before Court (Paras 5–6)
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Whether the GST Council’s decision to exclude small scale ice cream manufacturers from the composition scheme under Section 10(1) of the CGST Act was arbitrary and violative of Article 14.
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Whether ice cream, being a widely consumed milk product, could reasonably be clubbed with pan masala and tobacco for exclusion.
Observations (Paras 7–14)
The Court noted that taxation laws must meet the test of Article 14, ensuring reasonable classification with a rational nexus to legislative objectives.
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The Supreme Court in Aashirwad Films held that taxation should not be arbitrary and must align with constitutional values, including reduction of inequalities.
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In Ayurveda Pharmacy, it was observed that commodities in the same category cannot be taxed differently without rational basis.
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The Delhi High Court in Delhi Small Ice Cream Manufacturers Welfare Association v. Union of India (W.P.(C) 5252/2019) had already directed reconsideration of a similar exclusion.
The Court found that the GST Council had not provided any reasons for equating ice cream with pan masala and tobacco. Ice cream is consumed widely across all socio-economic groups and cannot be regarded as a luxury item. Hence, the classification lacked rationale and failed the Article 14 test.
Judgment (Paras 15–16)
The writ petition was disposed of with directions to the GST Council to reconsider the exclusion of small scale ice cream manufacturers from the benefit of Section 10(1) of the CGST Act, 2017 in light of Supreme Court and Delhi High Court judgments. The Council was directed to take a decision preferably within three months.
Table of Precedents Cited
| Case | Citation | Ratio Decidendi |
|---|---|---|
| Aashirwad Films v. Union of India | (2007) 6 SCC 624 | Tax classification must satisfy Article 14; taxation is also an instrument of reducing inequality. |
| Ayurveda Pharmacy v. State of TN | (1989) 2 SCC 285 | Different tax rates within the same category must have rational basis; arbitrary distinction invalid. |
| East India Tobacco Co. v. State of A.P. | AIR 1962 SC 1733 | Reasonable classification under tax laws is valid, but arbitrary grouping is unconstitutional. |
| Delhi Small Ice Cream Manufacturers Welfare Assn. v. UOI | W.P.(C) 5252/2019 (Del HC) | Directed GST Council to reconsider exclusion of ice cream manufacturers from composition scheme. |
Between Fine Lines
This judgment highlights that GST classification must be reasonable and backed by sound rationale. Arbitrary clubbing of milk-based products like ice cream with socially harmful goods such as tobacco undermines constitutional equality. For small businesses, the decision offers relief as the GST Council must now reassess whether ice cream units deserve composition benefits to ensure level playing field and survival of small-scale industries.
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