Madras HC Sets 12% GST Rate on Aluminium Foil Container

In a recent ruling, the Madras High Court has determined that the Aluminum Foil Container is subject to a 12% Goods and Services Tax (GST).

The petitioner, M/s. Veeram Natural Products is a partnership firm involved in the production and distribution of Aluminum Foil Containers and Aluminum Foil in Roll Form, as well as Plastic Articles. Before the introduction of the GST system, this particular product was subject to taxation under the Central Excise Law and was categorized as an Aluminum Foil Container under Chapter heading 7607, with a duty rate of 12.5%.

After the implementation of GST, the petitioner reclassified the product under 7615 with a 12% tax rate. However, the tax authorities contended that the product should be categorized under 7607 with an 18% tax rate. This dispute centred around the classification of whether it should fall under 7607 or 7615.

The petitioner’s legal representative argued that under GST, the taxable event for levying tax is the “supply” of goods and services. Sections 7 and 9 of the GST Act, 2017, as amended, define the scope of supply and the imposition of taxes. Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017, as amended, prescribes the rate of Central Tax for the intra-state supply of certain goods based on their chapter headings.

In the GST system, the classification of specified goods is based on the Customs Tariff Act. The petitioner further contended that, in this case, since the Aluminum Foil Container supplied by the petitioner was used for packaging and serving food items, it should be classified under 7615. However, the tax authorities classified it under 7607, describing it as “Aluminum foil (whether or not printed or backed with paper, paperboard, plastics, or similar backing materials) of a thickness (excluding any backing) not exceeding 0.2 mm.”

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The petitioner argued that the matter had already been settled by the Ahmedabad Tribunal in the case of Hindalco Industries Limited Vs. CCE. The Tribunal had relied on the opinion of the World Customs Organization, which, in turn, had considered the decision made by the Harmonized System Committee and the South African Supreme Court Tribunal’s classification of Aluminum Foil Containers as 7615.

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Justice S. Srimathy, presiding over a single bench, observed that the issue raised by the petitioner had been resolved in favour of the petitioner by the Honorable Supreme Court, as per previous decisions. Therefore, the Court concluded that the Aluminum Foil Container should be classified under 7615 with a GST rate of 12%. Consequently, the contested order is deemed invalid and is hereby quashed.

However, the petitioner had paid taxes before at the rate of 18% for the period from July 2017 to November 2017, resulting in an accumulated credit for the petitioner. The High Court, though, declined to rule on the refund issue, citing the need for consideration of various factors. The matter of the refund is left open to be decided by the provisions of the law between the parties.