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2021 (10) TMI 55 - AAAR - GST


Issues Involved:
1. Classification of the product "Papad" of different shapes and sizes.
2. Applicable rate of Goods and Services Tax (GST) on the product.

Detailed Analysis:

1. Classification of the Product "Papad" of Different Shapes and Sizes:

The appellant, engaged in the manufacturing and trading of "Papad" of various shapes and sizes, contends that their product should be classified under Chapter Tariff Heading 1905 of the Customs Tariff Act, 1975. They argue that despite the shapes and sizes varying, the ingredients, proportion of ingredients, composition, and recipe remain similar to traditional round-shaped Papad. The appellant submitted that their product is not fully cooked nor ready to eat and needs to be fried or roasted before consumption.

The Gujarat Authority for Advance Ruling (GAAR) initially classified the product as "Un-fried Fryums" under Tariff Item 2106 90 99, attracting an 18% GST rate. GAAR observed that in common parlance, Fryums and Papad are distinct products with individual identities.

Upon appeal, it was noted that the term "Papad" is not defined in the CGST Act, 2017, or the Customs Tariff Act, 1975. Therefore, the common parlance test was applied, which considers how the product is understood by people conversant with the subject matter. The appellant argued that their product should be classified as Papad under Tariff Heading 1905 90 40, which is exempt from GST as per Entry No. 96 of Notification No. 02/2017-CT (Rate) dated 28.06.2017.

The appellate authority considered the ingredients and manufacturing process of the product, which are similar to traditional Papad. The product is made from dough consisting of wheat flour, rice flour, starch, corn flour, and other similar ingredients, and is not ready to eat until fried or roasted. The authority concluded that the product, despite its different shapes and sizes, retains the essential characteristics of Papad.

The authority also referred to various judicial precedents, including the Supreme Court's ruling in Shiv Shakti Gold Finger Vs. Assistant Commissioner, Commercial Tax, Jaipur, and the Karnataka High Court's decision in State of Karnataka Vs. Vasavamba Stores, which supported the classification of similar products as Papad irrespective of their shapes and sizes.

2. Applicable Rate of Goods and Services Tax (GST) on the Product:

The appellant argued that their product should be classified under Tariff Heading 1905 90 40 as "Papad," which is exempt from GST as per Entry No. 96 of Notification No. 02/2017-CT (Rate) dated 28.06.2017. The entry specifies "Papad, by whatever name it is known, except when served for consumption," which includes all types of Papad irrespective of their names or shapes.

The appellate authority agreed with the appellant's contention, stating that the product in question is similar to traditional Papad in terms of ingredients, manufacturing process, and use. Therefore, it should be classified under Tariff Heading 1905 90 40 and attract a NIL rate of GST as per the specified notification.

The authority modified the GAAR's ruling, holding that the product "different shapes and sizes Papad" merits classification under Tariff Heading 1905 90 40 of the Customs Tariff Act, 1975, and is chargeable to NIL rate of GST.

Conclusion:

The appellate authority concluded that the product "different shapes and sizes Papad" should be classified under Tariff Heading 1905 90 40 of the Customs Tariff Act, 1975, and is exempt from GST as per Entry No. 96 of Notification No. 02/2017-CT (Rate) dated 28.06.2017. The authority emphasized that the product retains the essential characteristics of Papad despite its different shapes and sizes and should be treated as such for classification and taxation purposes.

 

 

 

 

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