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2021 (10) TMI 55 - AAAR - GSTClassification of goods - HSN Code - PAPAD of different shapes and sizes manufactured / supplied by the appellant - merit classification under CTH No. 1905 of Custom Tariff Act, 1975 or otherwise? - HELD THAT - Traditionally PAPAD is round shaped but the PAPAD is ready to cook product and can be consumed after roasting or frying in oil and consumed as snacks with the Indian meal or soup. Similarly, the product in question of different shape and size is a ready to cook product and can be consumed after roasting or frying in oil and consumed as snack. Further cereal flour of Chapter 10 and 11 of Customs Tariff Act, 1975 are the ingredients of both the product. Both the products i.e. PAPAD and product in question are same except they are known by different name in general public i.e. as PAPAD and Fryums . The manufacturing process of the products under consideration has been submitted by the appellant. It has been submitted that ingredients are mixed in machine with water and oil, dough is prepared and passed through die of different shapes and size to manufacture different shapes and size of papad and then dried through various stages. The product of the appellant, thus prepared, is thin and wafer like product. At this stage, the product is not ready for consumption. Though, traditionally Papad has been prepared manually, in round shape. However, when ingredients and process are similar in case of PAPAD and impugned product, then the product in question is nothing but a kind of PAPAD irrespective of their shape and sizes. The products of the appellant has found its use as an alternative to regular round shaped Papad or as an additional variety of Papad in the Indian meal, especially the meals served during the community functions. The caterers, who prepare the meals for the community functions, as well as the people in general, consider such products as a different type or variety of Papad only - the applicant s products of different shapes and sizes of papad, whose pictures are reproduced above, are nothing but Papad, classifiable under Tariff Item 1905 90 40 of the Customs Tariff Act, 1975. CTH No. 2106 of Customs Tariff Act, 1975 covers the Food preparations not elsewhere specified or included means under this heading all types of foods preparation are covered which are not covered under the specific heading of tariff. It is important to refer to Chapter Notes of Heading #21 wherein under clause 5 (b) it is stated that Heading 2106 includes preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption and under clause 6 it has been stated that Tariff item 2106 90 99 includes sweet meats commonly known as Misthans or Mithai or called by any other name - in the case at hand, the product different shapes and sizes Papad is Papad of different shapes and size and find specific entry at CTH No. 19059040, therefore as per rule of interpretation, the product is to be classified under CTH No. 19059040 only and not under CTH No. 21069099 of the Customs Tariff Act, 1975 as classified by the GAAR. The product different shapes and sizes Papad involved in the present case merit classification under Tariff heading No. 19059040 of the Customs Tariff Act, 1975 - the product in question is classifiable under CTH No. 1905 of the Customs Tariff Act, 1975, the said CTH No. 1905 is covered under entry No. 96 of Notification No. 02/20178-CT (Rate) dated 28.06.2017 and accordingly chargeable to NIL rate of Goods and Services Tax.
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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