2020 (11) TMI 268 - AAR - GST

Classification of goods - Nizam Pakku - classifiable under Chapter heading 0802 8030 of the Customs Tariff or not - SI. No. 28 of Schedule I of Notification 1/2017 Central Taxes (Rate) Dt- 28.06.2017 - HELD THAT - The product is marketed as NIZAM PAKKU . From the Tax Invoice furnished Invoice No.783 cit. 12-Nov-2019,729 dated 24-0ct-2019,680 dated 29.10.20191, it is seen that the description is NIZAM BETELNUT GRADE II , BETELNUT GRADE 11 250 PCSX20PKTS, LOOSE BETELNUT 100X50, etc, the HSN code is specified as 0802 and the rate of tax charged is CGST @ 2.5% SGST @ 2.5%. The product is said to be used for chewing with or without betel leaves. It is evident that CTH 21069030 covers Betel nut product known as Supari , while Areca (betel) nuts Whole, Split, Ground, Other are specifically mentioned as classified under sub-heading 08028010, 08028020, 08028030 and 08028040 of Chapter head 0802. In the case at hand, the applicant s product is marketed as Nizam Pakku . The betelnut/ arecanut(broken/pulverised) is heated with Vegetable oil, menthol for the purpose of preserving and Sugar, glucose syrup, menthol and spices, viz., cardamom and cloves are added. As per the test reports furnished by the applicant, (from the excellence Laboratory dated 13.11.2019) the percentage content of betel nut is 92% the other ingredients are cardamom(0.9%),Sugar(Betel Nut)-1.9%; Vanaspati/EdibIe Oil-4.7%, which are the admissible ingredients as per Chapter Note 3 of Chapter 08 of the Customs Tariff. Also, the test report of Bureau Veritas India Pvt Ltd states that The sample is cut pieces Of dried edible Betelnut . Thus it is seen hat the essential character of betel nut (arecanut) remains the same in the product supplied by the applicant. Therefore, following Rule 1 of General principles of Interpretation of the Tariff, the product merits classification under Chapter head 080280 and not under CTH 2106. Rate of GST - HELD THAT - The rate of CGST is notified vide Notification No. 01/2017-C.T.(Rate) dated 28.06.2017 as amended in respect of goods and that of SGST is notified vide Notification No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017 as amended. The rate pertaining to Chapter Head 0802 are available at Sl.No 28, 29 of Schedule I- 2.5% of the Notifications, and Sl.no.15 of Schedule 11-6% of the Notifications - while Dried areca nuts, whether or not shelled or peeled are subjected to GST @5% as per Sl.No. 28 of Schedule I; those products classified under 0802 other than dried areca nuts are subjected to GST @ SGST-6% as per Sl.No. 15 of Schedule II. Thus, it is evident that only those dried areca nut, not called as betel nut is subjected to 5% GST under Sl. No. 28 of Schedule I. The product in hand being betel nut, the applicable rate is 6% CGST as Per SI. No. 15 of Schedule II of the said Notifications.

Summary

Issues Involved:
1. Classification of "Nizam Pakku" under the Customs Tariff.
2. Applicable GST rate for "Nizam Pakku".

Issue-wise Analysis:

1. Classification of "Nizam Pakku" under the Customs Tariff:

The applicant sought an advance ruling on whether "Nizam Pakku," a product made from betel nut, is classifiable under Chapter heading 0802 8030 of the Customs Tariff, attracting 2.5% CGST and an equal rate of SGST. The manufacturing process involves drying betel nuts, breaking them into smaller pieces, heating them with Vanaspati, and adding sugar, glucose syrup, menthol, and spices. The applicant argued that the product retains the essential character of betel nut and should be classified under Chapter 8, which includes edible fruits and nuts. They referenced Chapter Note 3 of Chapter 8, which allows certain treatments for additional preservation or stabilization, provided the essential character of the dried fruits or nuts is retained.

The applicant also submitted that the product has been classified under HSN 0802 9013 by the Tamil Nadu Food Safety and Drug Administration Department and has been exported under the same classification. They cited several judicial precedents, including decisions by the Supreme Court and CESTAT, which have classified similar products under Chapter 8.

The authority examined the relevant Customs Tariff items and Chapter Notes. Chapter 8 covers edible fruits and nuts, including areca nuts, while Chapter 21 includes "betel nut product known as supari." The authority noted that the product retains the essential character of betel nut, as confirmed by test reports and the manufacturing process, which involves permissible treatments under Chapter Note 3 of Chapter 8. Therefore, the product was classified under CTH 08028090 (Other) and not under CTH 21069030 (Betel nut product known as "Supari").

2. Applicable GST rate for "Nizam Pakku":

The applicable GST rates are notified under Notification No. 01/2017-C.T. (Rate) dated 28.06.2017. The authority referred to the GST Council Meeting minutes, which discussed the rate for areca nuts. It was decided that dried areca nuts, whether or not shelled or peeled, should be taxed at 5% if not called betel nut. However, the product in question is marketed as betel nut, and thus, the applicable rate is 6% CGST as per Sl. No. 15 of Schedule II of the said Notification.

Ruling:

"Nizam Pakku" traded by the applicant merits classification under Chapter 0802 80 90 of the Customs Tariff and attracts 6% CGST as per Sl.No. 15 of Schedule II under Notification 1/2017-Central Tax (Rate) Dt. 28.06.2017 and 6% SGST under Notification No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017 as amended.