Services by way of job work in relation to manufacture of alcoholic liquor for human consumption are taxable at 8%

Case Title: Esveeaar Distilleries (P.) Ltd. v. Assistant Commissioner (State Tax)

Court: High Court of Andhra Pradesh

Petition No.: Writ Petition No. 15534 of 2022

Date of Judgment: October 20, 2022

Category of Dispute: Classification, Rate of GST

Relevant Sections: Section 9(1), 11(1), 15(5), and 16(1) of CGST Act, 2017; Notification No. 11/2017-Central Tax (Rate), Notification No. 31/2017, Notification No. 6/2021

Key Issue: Whether alcoholic liquor for human consumption falls within the meaning of ‘food or food products’ and is eligible for 5% GST rate on job work?

Facts of the Case

1. The petitioner, a distiller and franchisee of United Spirits Ltd., was subjected to assessment for FY 2017–18 to 2019–20 with tax levied at 18% on job work related to alcoholic beverages. [¶2]
2. Petitioner contended that job work related to alcoholic liquor should be taxed at 5% based on earlier GST notifications (Notification No. 11/2017 and No. 31/2017) and that Notification No. 6/2021 (raising the rate to 18%) is prospective. [¶4–6]

Questions in Consideration

1. Whether alcoholic liquor for human consumption can be classified as “food or food products”? [¶9]
2. Whether GST at 18% under Notification No. 6/2021 is applicable prospectively or retrospectively on job work for liquor manufacturing? [¶9, ¶20]

Observation of Court

1. The court noted that “food and food products” are not defined in the Act, but based on CCE v. Parle Exports Pvt. Ltd. and GST Council clarifications, alcoholic liquor is not considered food for the purpose of concessional GST rate. [¶10, ¶13–15, ¶17]
2. Chapter 22 of the Customs Tariff includes alcohol but the intention of law was not to include luxury items like liquor under food products eligible for exemption. [¶13–14, ¶18]
3. Notification No. 6/2021 is a clarificatory notification, not a new substitution, hence retrospective in operation as per principles of statutory interpretation laid down in CIT v. Vatika Township (P.) Ltd. [¶12, ¶21–22]

Judgment of the Court

• The writ petition was dismissed.
• The Court held that alcoholic liquor is not a food product and is rightly taxed at 18% for job work under Notification No. 6/2021.
• The said notification is clarificatory in nature and thus has retrospective effect. [¶23–24]

Between Fine Lines

• Liquor is not “food or food product” under GST notifications.
• Concessional 5% GST on job work for food items does not apply to liquor.
• Notification No. 6/2021 merely clarified existing law and is retrospective.
• GST at 18% on job work for liquor stands valid from the beginning.
• Petition dismissed; petitioner liable to pay differential tax with penalty and interest.

Summary of Referred Cases