2023 (7) TMI 189 - AAR - GST

Classification of goods - Kandi Rave tobacco waste - to be classified as unmanufactured tobacco without lime tube or not? - HELD THAT - HSN notes for tariff item 2401, reproduced supra, covers unmanufactured tobacco in the form of whole plants/leaves in natural state, cured or fermented leaves, whole, stemmed/stripped, trimmed/semi trimmed broken/cut, blended cased with a liquid of appropriate composition mainly to prevent drying and to preserve the flavour. It also covers tobacco refuse eg waste resulting from the manipulation of tobacco leaves, or from the manufacture of tobacco products stalks, stems, midribs, trimmings, dust, etc). Though the applicant has undertaken the process of crushing tobacco refuse and thereafter mixing it with natural clay water, in terms of the HSN notes, it still remains an unmanufactured tobacco - This is more so because even in terms of section 2(72) of the CGST Act, 2017, which defines manufacture , since no new product emerges post the crushing of tobacco refuse mixing it with natural clay water, we find it appropriate that the product is classifiable under CTH 2401 as unmanufactured tobacco; tobacco refuse - It is held that the supply of applicant of 'kandi rave is classifiable under 24013000. The applicant has not disclosed the fact that as to whether they are using brand name for their product. The applicant was asked to provide additional submissions on the issue. The applicant, vide his additional submission received on 10.5.2023, has informed the they are not affixing any name or label on the packing, in which the packed goods are sold to their customers in 30-35 kgs bags - The photographs adduced by the applicant depicts that the goods are being sold without any brand name, labelling etc. In view of the foregoing, since the applicant proposes to supply/supplies the said kandi rave to their customers in 30-35 kg bags, without any brand name, labeling, etc, it is held that the applicant would be/is liable to pay GST 28% 14 % CGST and 14 % SGST in terms of notification No. 1/2017-CT(Rate), Sr. No. 13, Schedule IV.

Summary

Issues Involved:
1. Classification of the product 'Kandi Rave'.
2. Applicability of GST compensation cess on the product.

Summary:

Issue 1: Classification of the Product 'Kandi Rave'
The applicant, engaged in the wholesale/retail trading of unprocessed tobacco, sought a ruling on the classification of 'Kandi Rave', a tobacco waste mixed with natural clay and water. The applicant contended that this process does not amount to manufacture under Section 2(72) of the CGST Act, 2017, as no new product with a distinct name, character, and use emerges. The product remains unmanufactured tobacco, not used in pan masala or paan, and is different from chewing tobacco. The Authority for Advance Ruling (AAR) examined the HSN notes for tariff item 2401 and concluded that despite the mixing process, 'Kandi Rave' remains unmanufactured tobacco. Therefore, the product is classifiable under CTH 2401 as 'unmanufactured tobacco; tobacco refuse' and specifically under tariff item 24013000.

Issue 2: Applicability of GST Compensation Cess
The applicant argued that no compensation cess should be applicable to 'Kandi Rave' as it is sold without a lime tube and is not branded. Upon review, the AAR noted that the applicant did not initially disclose whether a brand name was used. However, additional submissions confirmed that the product is sold in 30-35 kg bags without any brand name or labeling. Consequently, the AAR ruled that the applicant is liable to pay GST at 28% (14% CGST and 14% SGST) as per notification No. 1/2017-CT(Rate), Sr. No. 13, Schedule IV, provided the goods are cleared without a brand name.

Ruling:
The supply of 'Kandi Rave' is classifiable under 24013000. The applicant is liable to pay GST at 28% (14% CGST and 14% SGST) according to notification No. 1/2017-CT(Rate), Sr. No. 13 of Schedule IV, subject to the condition that the goods are cleared without a brand name.