Poultry Crates Attract 18% GST: Maharashtra AAR

The Maharashtra Authority of Advance Ruling (AAR), which includes Rajiv Mangoo and T.R. Ramnani, has decided that chicken crates are subject to GST at a rate of 18 percent since they are “items for the conveyance or packing of products, or plastics.”

M/s. Nilkamal Limited, the applicant, has filed an advance ruling application under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017

The applicant manufactures a variety of products for storage, handling, and transportation of goods, including plastic crates, poultry crates, plastic pallets, insulated ice boxes, and fish tubs, as well as waste management tools, road safety products, hospitality solutions, aquaculture fish cages, manhole chambers, ripening solutions, material handling equipment, and metal shelving and racking systems.

Live birds are transported from the farm to the processing factory using the poultry crate. As birds must be captured, loaded, transported, and unloaded into a completely different environment, the industry has faced numerous obstacles. Harvesting the birds, feed withdrawals, and temperature variations during shipment are just a few of the issues. Meat quality will suffer as a result of poor quality control during shipping.

Facts:

The contested item in the case, a poultry crate, is made of plastic. It is used to transport chicken,  the commodity in question is covered under Tariff subhead 392310. The subject product, however, does not appear to fall under the T.l. 39231010, 39231020, 39231030, or 39231040. As a result, the contested product will be covered by the Tariff’s residual T.l., i.e. 39231090.

T.l. 39231090 correctly covers the disputed product, while T.l. 84362900 does not cover it at all. According to section 3( c ) of the general rules for the interpretation of the harmonized system (HSN), if an item is prima facie classifiable under two or more headings, it must be classified under the last heading in numerical order, and when two views are possible, the one that is most favorable to the assessee must be used.

The contested product, a poultry crate, is found to be exclusively classifiable under Chapter 39231090 in the subject instance, and hence the question of applying the general norms for the interpretation of the harmonized system (HSN) does not arise.

Issues:

1. Is the product crate classified as Poultry keeping machinery under Chapter 84, chapter heading 8436, sub heading 843610, and Tariff item 84362900, attracting a tax rate of 6% under both the Central and State Taxes?
2. Is the above-mentioned item classified as “Others” under Chapter 39 “Articles for the conveyance or packing of goods, of plastics” chapter heading 3923, subheading 392310, and Tariff item 39231090, attracting a tax rate of 9% under both the Central and State Taxes?
3. What is the appropriate classification of poultry crates and what is the rate of tax under Central and State Tax if the above product does not fall under either Chapter 84 OR Chapter 39?

Appellant’s  contention:

The contested poultry crates are constructed specifically for the purpose of carrying and transporting live birds from farms to plants, making them distinct from ordinary crates/containers and hence classifiable as poultry-keeping apparatus under chapter heading 8436. These chicken cages are made with the safety, hygiene, and reduced mental stress of live birds in mind, making them classifiable under chapter 84, chapter header 8436, and tariff item 84362900, and attracting a 6% CGST and MGST tax rate, respectively.

Respondent’s Contention:

Other agricultural, horticultural, forestry, poultry-keeping, or bee-keeping machinery, incl. germination plant fitted with mechanical or thermal equipment; Poultry incubators and brooders” is covered under Chapter Heading 8436. Feeding, drinking, and monitoring systems are all part of the poultry keeping gear. This equipment is crucial in the setup of a poultry operation. Incubators are among the different Poultry Keeping Machineries that assist in maintaining the optimal temperature for egg hatching.

Because “Poultry Crates” is not a type of poultry-keeping machinery, it does not fit under chapter heading-8436. Section XVI of the CETA, 1985, covers Chapters 84 and 85 and includes the following items: Electrical Equipment; Parts thereof; sound recorders and reproducers, Television Image and Sound Recorders and reproducers, Television Image and Sound Recorders and reproducers, and Parts and Accessories of such articles. The item “Poultry Crate” does not appear to be included under the category “Machine or Mechanical Appliance.”

“Articles for the transportation or packing of goods, of plastics, stoppers, lids, caps, and other closures, of plastics,” is covered under the Chapter Heading 3923. “Boxes, Cases, Crates, and Similar Articles” is the subheading under 392310. A crate is a type of container used for shipping or storage. Wood, plastic, metal, and other materials can be used to make crates. Poultry Crates are crates with a lot of pores or openings that are good for little birds. As a result, “Poultry Crates” falls under Chapter Heading-3923 and is subject to an 18% tax rate (9 percent each under Central Tax and State Tax). Further the respondents also contended that the case of Sun Export Corporation vs. Collector of Customs, Bombay [1997 (93) ELT 641 (SC) and C.C.E. Vs. Sharma Chemical Works 2003 1240 (SC) are also not relevant in this case.

Hearing:

On September 14, 2021, a preliminary e-hearing in the case was held. Shri. Vinod Kaushik, C.A., the applicant’s authorized representative, appeared and requested admission of the application. The inquisitive jurisdictional officer was not present.

The application was accepted and a final hearing was scheduled on February 8, 2022. Shri. Vinod Kumar, CA, the applicant’s authorized representative, was present. Both parties made oral submissions, with the Jurisdictional Officer, Shri. Praveen Kumar, Superintendent, Division-X, Commissionerate Mumbai East, in attendance. The case was taken into consideration.

Judgment:

Question 1: -Whether product poultry crate is falling under chapter 84, chapter heading-8436, sub heading 843610 and Tariff item 84362900 as Poultry keeping machinery, attracting rate of tax@ 6% each under Central and State Tax?
Answer:-Answered in the negative.

Question 2: -Whether the above mentioned item is falling under chapter 39 “Articles for the conveyance or packing of goods, of plastics” chapter heading 3923, subheading 392310 and Tariff item 39231090 as “Others” attracting rate of tax @ 9% each under Central and State Tax?

Answer:-Answered in the affirmative.

Question 3: What is the appropriate classification of poultry crates and what is the rate of tax under Central and State Tax if the above product does not fall under either Chapter 84 OR Chapter 39?

Answer: Not Answered in view of the answer to question number 2 above.

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