2024 (2) TMI 1061 - AAAR - GST

Classification of goods - Crackle manufactured and supplied by the appellant containing the ingredients sugar, cashew nuts, butter, liquid glucose and other permitted flavours - classified under SI. No. 32AA of Schedule -III (sic) of Notification No. 1/2017-Central Tax (Rate) as Sugar Boiled Confectionery, chargeable to tax at the rate of 12% or not - whether the product Crackle is a sugar boiled confectionery? - HELD THAT - As per the Appellant, the main ingredients of the product is Sugar @ 68% to 72%, Cashew Nuts accounts for 28% to 30% followed in a small measure, butter and Glucose. The description of the product manufactured by the Appellant and that described in the FSSAI Regulations and Indian Standard 1008 2024 support the claim of the Appellant that the product Crackle manufactured by them is a Sugar Boiled Confectionery . It must be stated that this Authority is basing its findings on the submissions and literature regarding the manufacturing process of Crackle as provided by the Appellant. Any suppression, misrepresentation of facts would be dealt with in terms of Section 104 of the CGST / SGST Act 2017. In the case at hand, there is a specific entry for Sugar Boiled Confectionery under SI. No. 32AA of Schedule -II of Notification No. 01/2017-CT(Rate). Based on the literature and claim made by the Appellant in their submissions, it is seen that the product Crackle would fall under the category of Sugar Boiled Confectionery . As such, the product Crackel would rightly be classified under Schedule-II SI. No. 32AA chargeable to a tax rate of 12%. As regards the finding of the AAR in IN RE M/S. SRI VENKATESWARA CASHEW CHIKKY MANUFACTURERS 2023 (9) TMI 162 - AUTHORITY FOR ADVANCE RULING, ANDHRA PRADESH that only products generally meant for immediate consumption are to be classified under CH 1704, it is found that the same has an inherent flaw. If the said HS Explanatory provisions of immediate consumption is to be made applicable to Crackle , then the same is equally applicable to all the products falling under Chapter Heading 1704 which are covered under Schedule -I, Schedule -II and Schedule -III as all these products are grouped under CH 1704. It cannot be said that products falling CH 1704 of Schedule -II only are hit by the said clause of immediate consumption and those falling under CH 1704 of Schedules I and III are not affected. Further, No alternative HSN was suggested by the AAR - the Committee opines that the Advance Ruling dated 26.05.2023 passed by the Authority for Advance Ruling for the State of Andhra Pradesh Is not in order. Therefore, the Committee sets aside the ruling pronounced in SRI VENKATESWARA CASHEW CHIKKY MANUFACTURERS. Thus, the product by name Crackle manufactured and supplied by the appellant containing the ingredients Sugar, Cashew Nuts, Butter, Liquid glucose and other permitted Flavours, should be classified under the Tariff Heading 1704 enumerated at Serial Number 32AA of Schedule -II (wrongly mentioned as Schedule-III) of Notification No. 01/2017-CT(Rate) as a Sugar Boiled Confectionery.

Summary

Issues Involved:
1. Violation of Principles of Natural Justice.
2. Classification of the product "Crackle" under GST.
3. Application of Common Parlance Test.

Summary:

1. Violation of Principles of Natural Justice:
The appellant argued that the Advance Ruling Authority did not consider the main submissions and supporting documents provided, such as the manufacturing process, Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011, and the Food Testing Laboratory Certificate. The appellant cited judgments from the Supreme Court and High Courts emphasizing the necessity for quasi-judicial authorities to provide cogent, clear, and succinct reasons in their orders, ensuring the principles of natural justice are upheld.

2. Classification of the Product "Crackle" under GST:
The appellant contended that "Crackle" should be classified under tariff head 1704 as "Sugar Boiled Confectionery" enumerated at Serial number 32AA of Schedule II of Notification No. 01/2017, dated 28-6-2017, and chargeable at 12% GST. They supported this claim with dictionary meanings, judicial interpretations, and technical specifications from FSSAI Regulations 2011 and Indian Standard IS 1008:2004. The appellant argued that "Crackle" fits the definition of "Sugar Boiled Confectionery" as it is a processed food article made from sugar with doctoring agents through a boiling process.

3. Application of Common Parlance Test:
The appellant emphasized that "Crackle" is commonly known as "Butterscotch Nuts" and used as toppings in ice creams and cakes. They argued that the classification should be based on the common parlance meaning, as supported by various Supreme Court judgments, which suggest that the trade or commercial meaning should be considered over scientific or technical definitions.

Discussion and Findings:
The Appellate Authority reviewed the submissions and found that the product "Crackle" manufactured by the appellant is indeed a "Sugar Boiled Confectionery" as per the descriptions in FSSAI Regulations and Indian Standard IS 1008:2004. The Authority noted that the AAR's ruling had an inherent flaw by not considering the specific entry for "Sugar Boiled Confectionery" under SI. No. 32AA of Schedule II of Notification No. 01/2017-CT(Rate). The Authority concluded that "Crackle" should be classified under Schedule II, SI. No. 32AA, chargeable at 12% GST.

Conclusion:
The Appellate Authority set aside the ruling of the Authority for Advance Ruling, Andhra Pradesh, and held that the product "Crackle" should be classified under the Tariff Heading 1704 enumerated at Serial Number 32AA of Schedule II of Notification No. 01/2017-CT(Rate) as a "Sugar Boiled Confectionery."