2019 (8) TMI 1805 - AAAR - GST

Classification of goods - pizza topping - classifiable under Heading 0406 as claimed by the appellant or classifiable under Heading 2106 as determined by the Authority for Advance Ruling Haryana? - applicability of S. No. 13 of Schedule-1 of Notification No 1/2017-Integrated Tax (Rate) dated June 28 2017 - HELD THAT - The impugned item contains vegetable fat as a substantial portion being 22% of the ingredients apart from mozzarella cheese which is only 14.5% of the combination of ingredients. Thus the impugned item mainly comprises of vegetable fat . It is apparent from the above definition of process cheese as appearing in the HSN explanatory notes that vegetable fat is not a prescribed ingredient for process cheese hence the presence of vegetable fat in substantial quantity results the impugned item do not qualify to be categorized as Process cheese or a type of cheese. The appellant relied upon the decision of Appellate Authority for Advance Ruling Uttar Pradesh in the case of IN RE SAVENCIA FROMAGE AND DAIRY PVT. LTD. 2019 (4) TMI 1545 - APPELLATE AUTHORITY FOR ADVANCE RULING UTTAR PRADESH . In this case Appellate Authority for Advance Ruling Uttar Pradesh has held that the product Breaded Cheese is classifiable under Heading 0406 - On going through the said case it is found that cheese form the most important constituent (55% of total volume). Since the product in question in this case consisting predominantly cheese hence the Authority has correctly classified the product under Heading 0406. However in the present case cheese is not the predominant constituent. Hence the case relied upon by the appellant is not at all applicable in the case. Thus the impugned item pizza topping is not covered under the Chapter Heading 0406 of the 1st schedule to the Customs Tariff Act 1975 in the light of HSN explanatory notes as discussed in preceding paras and accordingly not covered by serial number S.No 13 of schedule II to Notification No 1/2017-Integrated Tax (Rate) Notification No.l/2017-Central Tax (Rate) and Notification no.35/ST-2 and chargeable to GST @ 12%. Applicability of Chapter 2106 - HELD THAT - Chapter 21 essentially covers Miscellaneous Edible Products . Obviously the term Miscellaneous indicates that this particular chapter would contain all such edible products which are not specifically covered elsewhere under the Tariff. The Chapter Headings further describes various edible preparations such as extracts of Coffee tea Yeast Soups broths Sauces etc. under Heading 2101 to 2105. Further as is the convention Heading 2106 has been given to include all those items which are not elsewhere specified. Furthermore 2106 further sub-divides and classifies various edible items like Protein Concentrates Pan Masala Sharbats Supari Custard Powder etc. under Sub-headings 2106 10 00 to 2106 90 80 and to conclude there is a residual entry as Others under 2106 90 99. The product in question i.e. Pizza Topping is a product made out of mozzarella cheese vegetable oil and milk solids as main ingredients with premixes of emulsifiers and stabilizers. The mozzarella cheese is blended with other ingredients and heated upto a required degree. After heating the materiel is transferred to a mould of requisite capacity for packing the product into pouches containing smaller quantities (1 kg and 200 grm). These pouches are sealed and packed in an outer carton. The product cannot be termed as Processed Cheese as already discussed above. However there is no doubt that being edible preparation for human consumption it would merit classification under Chapter 21 i.e. Miscellaneous Edible Preparations - the impugned product viz. Pizza Topping would merit classification as Food preparations not elsewhere specified or included under Chapter Heading 2106 of the schedule to the Customs Tariff Act 1975 and chargeable to GST as applicable. Thus the impugned goods shall be aptly classifiable under Chapter Head 2106 of the schedule to the Custom Tariff Act 1975 as Food preparations not elsewhere specified or included and chargeable to IGST @ 18%.

Summary

Issues Involved:
1. Classification of the product "Pizza Topping" under the appropriate GST heading.
2. Whether the product qualifies as "processed cheese" under Chapter Heading 0406.
3. Determination of the applicable GST rate for the product.

Detailed Analysis:

Classification of the Product "Pizza Topping"
The primary issue is whether the product "Pizza Topping" should be classified under Chapter Heading 0406 as "cheese" or under Chapter Heading 2106 as "Food Preparations not elsewhere specified or included."

Whether the Product Qualifies as "Processed Cheese" under Chapter Heading 0406
The appellant argued that "Pizza Topping" containing 14.5% Mozzarella cheese and 15% other milk products should be classified as cheese under Chapter Heading 0406, which attracts a GST rate of 12%. The appellant contended that the product maintains its cheesy character even after the addition of other ingredients.

The appellant cited the HSN Explanatory Notes and various judicial precedents to support their claim that the product should be classified as "processed cheese." They argued that the presence of vegetable fat (22%) is for texture and cost reduction and does not alter the essential character of the cheese.

However, the Authority for Advance Ruling (AAR) determined that the product could not be classified under Chapter Heading 0406. The AAR noted that the substantial presence of vegetable fat (22%) disqualifies it from being categorized as "processed cheese" under HSN 0406 30, which only allows the addition of cream, other dairy products, salt, spices, flavoring, coloring, and water.

Determination of the Applicable GST Rate
The AAR classified the product under Chapter Heading 2106 as "Food Preparations not elsewhere specified or included," attracting a GST rate of 18%. The AAR reasoned that the product is an edible preparation for human consumption but does not fit the specific criteria for cheese under Chapter Heading 0406.

The appellant relied on various judicial precedents and international rulings to argue that the product should be classified as cheese. However, the AAR found these precedents inapplicable as the product in question predominantly contains vegetable fat rather than cheese.

Final Decision
The Appellate Authority upheld the AAR's ruling, confirming that the product "Pizza Topping" is correctly classified under Chapter Heading 2106 and not under Chapter Heading 0406. Consequently, the product is subject to an 18% GST rate (IGST @ 18%, CGST @ 9%, and SGST @ 9%).

Conclusion
The Appellate Authority for Advance Ruling, Haryana, upheld the AAR's decision, classifying "Pizza Topping" under Chapter Heading 2106 as "Food Preparations not elsewhere specified or included," subject to an 18% GST rate. The appeal filed by the appellant was dismissed.