2019 (7) TMI 1607 - AAAR - GST

Classification of goods - Fanta Fruity Orange - whether the product Fanta Fruity Orange being manufactured and supplied by the appellant is appropriately classifiable under Sub-heading 2202 10 or under Tariff Item 2202 99 20 or 2202 99 90? - challenge to AAR decision. HELD THAT - On going through the Explanatory Notes of HSN and the contents of the product Fanta Fruity Orange it is evident that the product Fanta Fruity Orange fully conforms to the description given in Explanatory Notes of HSN for Sub-heading 2202 10. Therefore the said product is found to be appropriately classifiable under Sub-heading 2202 10 - as per the contents of Fanta Fruity Orange the said product is sweetened (with Sugar and Sweetener) and flavoured (with Orange Juice Concentrate and added Orange flavours -natural and nature-identical flavouring substances). The same is also aerated as well as presented in PET bottles. As per explanatory notes referred to above the Sub-heading 2202 10 covers products flavoured with fruit juices or essences or compound extracts. Thus Fanta Fruity Orange flavoured with Orange Juice Concentrate and added Orange flavours would fall under sub-heading 2202 10 in view of the explanatory notes of HSN. There is nothing in the Customs Tariff or Explanatory Notes of HSN pertaining to Heading 2202 to suggest that the product containing Carbon Dioxide as preservative only would not fall under Tariff Sub Heading 2202 10. On the contrary Explanatory Notes of HSN for Sub Heading 2202 10 specifically mentions that the products of this Sub heading are often aerated with carbon dioxide gas. Therefore the product Fanta Fruity Orange is not excludible from Sub Heading 2202 10 on the ground that the product contains Carbon Dioxide as preservative only. Tariff Item 2202 99 20 which covers Fruit pulp or fruit juice based drinks - HELD THAT - The appellant has referred to Explanatory Notes of Heading 20.09 wherein it is mentioned that the term frozen orange juice also covers concentrated orange juice to buttress the argument that fruit juice based drinks under Tariff Item 2202 99 20 will also include fruit juice concentrates based drinks within its ambit - In the said Explanatory Notes it is mentioned that the juices of this heading may be concentrated (whether or not frozen) or in the form of crystals or powder. Thus this clarification is applicable to the Heading 20.09 only and cannot be applied to other Headings. Similarly the sub-heading note for sub-heading 2009.11 providing that the term frozen orange juice also covers concentrated orange juice will be applicable to that sub-heading only. These explanatory notes only reiterate the fact that the concentrated juices are known differently from juices and therefore the explanatory notes clarify that juices of heading 20.09 would cover concentrated juices . Hon ble CESTAT in appellant s own case M/S. HINDUSTAN COCA COLA BEVERAGES P. LTD. VERSUS CCE CHENNAI-IV 2017 (3) TMI 1410 - CESTAT CHENNAI has decided this issue - the view of the GAAR that the product Fanta Fruity Orange do not fall under Tariff Item 2202 99 20 is confirmed. As regards the third limb of the question raised for classification of Fanta Fruity Orange it is observed that the GAAR concluded that the said product would not fall under Sub heading 2202 10 but would fall under Sub heading 2202 99. As the GAAR further concluded that the said product would not fall under Tariff Item 2202 99 20 as Fruit pulp or fruit juice based drinks it held that the product would fall under residuary entry of Tariff Item 2202 99 90. However as we have already discussed that the product Fanta Fruity Orange is appropriately classifiable under Sub heading 2202.10 the question of classifying it under residuary entry of Tariff Item 2202 99 90 does not arise. The product Fanta Fruity Orange manufactured and supplied by M/s. Hindustan Coca Cola Beverages Private Limited (GSTIN 24AAACH3005M1ZX) is classifiable under Sub heading 2202 10 and Goods and Services Tax rate of 28% as per S. No. 12 of Schedule IV of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 as amended issued under the CGST Act 2017 and corresponding Notification No. 1/2017-State Tax (Rate) dated 30.06.2017 as amended issued under the GGST Act 2017 and Goods and Services Tax Compensation Cess rate of 12% as per S. No. 2 of Schedule of Notification No. 1/2017-Compensation Cess (Rate) dated 28.06.2017 are applicable to the said product - the decision of AAR modified to such extent.

Summary

Issues Involved:
1. Classification of "Fanta Fruity Orange" under the appropriate tariff heading.
2. Applicability of Goods and Services Tax (GST) rate for "Fanta Fruity Orange."

Issue-wise Detailed Analysis:

1. Classification of "Fanta Fruity Orange":

Sub-heading 2202.10:
- The appellant argued that "Fanta Fruity Orange" should be classified under Tariff Item 2202 99 20 as "Fruit pulp or fruit juice based drinks." However, the GAAR ruled that the product should be classified under Tariff Item 2202 99 90 as "Other non-alcoholic beverages."
- The manufacturing process involves using orange juice concentrate (1.6%) reconstituted to 10.5% orange juice, blended with sugar syrup, additives, and preservatives, and then carbonated.
- The product label indicates it contains carbonated water, sugar, orange juice concentrate, acidity regulators, preservatives, stabilizers, sweeteners, synthetic food color, and added orange flavors.
- The Explanatory Notes of HSN for Sub-heading 2202 10 include beverages like orangeade, which consist of ordinary drinking water, sweetened or not, flavored with fruit juices, essences, or compound extracts, often aerated with carbon dioxide gas.
- The product "Fanta Fruity Orange" conforms to this description, containing carbonated water, sugar, sweetener, orange juice concentrate, and added orange flavors, and is presented in PET bottles.
- Therefore, "Fanta Fruity Orange" is appropriately classifiable under Sub-heading 2202 10 as it fully conforms to the description given in Explanatory Notes of HSN for Sub-heading 2202 10.

Tariff Item 2202 99 20:
- The appellant contended that the product should be classified under Tariff Item 2202 99 20 as "Fruit pulp or fruit juice based drinks" due to its 10.5% orange juice content.
- The GAAR, however, concluded that Tariff Item 2202 99 20 does not cover drinks made from fruit juice concentrates, relying on the appellant's own case (Hindustan Coca Cola Beverages P. Ltd. Vs. Commissioner of Central Excise, Chennai-IV), where it was decided that "concentrate" based drinks do not fall under "Fruit pulp or fruit juice based drinks."
- The Explanatory Notes of Heading 20.09 clarify that "juices" of this heading would cover "concentrated juices," but this clarification is specific to Heading 20.09 and cannot be applied to other headings.
- The GAAR's conclusion that "Fanta Fruity Orange" does not fall under Tariff Item 2202 99 20 is confirmed, as the product is not manufactured from "Fruit pulp" or "Fruit juice," but from "Orange Juice Concentrate."

Tariff Item 2202 99 90:
- The GAAR initially classified "Fanta Fruity Orange" under the residuary entry of Tariff Item 2202 99 90 as "Other non-alcoholic beverages."
- However, given that the product is appropriately classifiable under Sub-heading 2202 10, the classification under Tariff Item 2202 99 90 does not arise.

2. Applicability of Goods and Services Tax (GST) Rate:
- The product "Fanta Fruity Orange" is classifiable under Sub-heading 2202 10.
- The applicable GST rate is 28% (CGST 14% + GGST 14%) as per S. No. 12 of Schedule IV of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 and corresponding Notification No. 1/2017-State Tax (Rate) dated 30.06.2017.
- Additionally, a Goods and Services Tax Compensation Cess rate of 12% as per S. No. 2 of Schedule of Notification No. 1/2017-Compensation Cess (Rate) dated 28.06.2017 is applicable to the product.

Conclusion:
The Advance Ruling No. GUJ/GAAR/RULING/07/2019 dated 30.03.2019 is modified to classify "Fanta Fruity Orange" under Sub-heading 2202 10 with a GST rate of 28% and a Compensation Cess rate of 12%.