2025 (4) TMI 416 - AAR - GST

Rectification of mistake - Classification of goods - Tapioca flour obtained by crushing the dried roots and remnants of tapioca roots/tubers - Applicability of Notifications issued under the provisions of Act in respect of goods falling under entry No. 78 and tariff item 1106 of Part-A of Exempted goods and tariff item 1106 in SI. No. 59 of Part-C in schedule 1 of the said Act - requirement of trader/dealer to register - HELD THAT - As per the facts presented before the Advance Ruling Authorities by the applicant seeking ruling on the clarification sought by them in the original application it was rightly classified by the members that the product traded by the applicant would fall under the Chapter heading 23031000 attracting 5% of GST. Further the applicant himself has informed that the said product is not fit for human consumption as such and also not used in the food industry for further processing. The same can be marketable for livestock. Accordingly the product is rightly classifiable under Chapter 23 as Residues and waste from the food industries; prepared animal fodder and specifically under 23031000 as Residues of starch manufacture and similar residues liable to tax @ 5%. The advance ruling on any of the clarification sought by the applicant under Section 97 (2) is given by the Advance Ruling Authority based on the facts and circumstances submitted by the applicant. From the above facts submitted by the applicant originally it is crystal clear that the conclusion arrived at by the members is in order and therefore it is opined that no rectification is warranted in this case as well as no error or mistake is noticed on the part of the Advance Ruling Authorities. The instant application for rectification of advance ruling is liable for rejection in terms of Section 98 (2) of the CGST/TNGST Acts 2017.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment revolve around the classification of tapioca flour under the Goods and Services Tax (GST) regime. Specifically, the issues are:

Whether the tapioca flour, as described by the applicant, should be classified under HSN 2303.10 as 'Residues of starch manufacture and similar residues' liable to 5% GST, or under HSN 1106, which attracts a NIL rate of tax when sold without a brand name.
Whether the classification of the product by the Advance Ruling Authority in the original ruling was erroneous and requires rectification under Section 102 of the CGST Act, 2017.
The applicability of specific GST notifications concerning the exemption of certain goods.
The determination of tax liability and registration requirements for the trader/dealer of the said goods.

ISSUE-WISE DETAILED ANALYSIS

Classification of Tapioca Flour

Relevant Legal Framework and Precedents: The classification of goods under GST is guided by the Harmonized System of Nomenclature (HSN). Chapter 11 covers 'Products of the milling industry; malt; starches, inulin; wheat gluten', while Chapter 23 deals with 'Residues and waste from the food industries; prepared animal fodder'. The applicant argues for classification under HSN 1106, whereas the original ruling placed it under HSN 2303.10.
Court's Interpretation and Reasoning: The Tribunal examined the processes described by the applicant and compared them with standard industry practices. It was determined that the product in question is a by-product of the starch manufacturing process, aligning with Chapter 23 rather than Chapter 11.
Key Evidence and Findings: The applicant's description of the process, which involves drying and crushing inferior quality tapioca tubers, was pivotal. The Tribunal noted that these processes result in a product used primarily for animal feed, consistent with Chapter 23's classification.
Application of Law to Facts: The Tribunal applied the descriptions and processes provided by the applicant to the relevant HSN codes. It found that the product fits the description of 'Residues of starch manufacture and similar residues' under Chapter 23.
Treatment of Competing Arguments: The applicant's argument that the product should be classified under HSN 1106 was considered. However, the Tribunal found no evidence to support the claim that the product is a direct flour of sago or roots or tubers, as described in Chapter 11.
Conclusions: The Tribunal concluded that the original classification under HSN 2303.10 was correct and that no rectification was warranted.

Applicability of Notifications and Tax Liability

Relevant Legal Framework and Precedents: Notification No. 02/2017-CT (Rate) exempts certain goods from GST if sold without a brand name and not in unit containers.
Court's Interpretation and Reasoning: The Tribunal noted that the exemption applies to goods classified under specific chapters, which do not include residues of starch manufacture.
Key Evidence and Findings: The applicant's product is marketed in large gunny bags without a brand name, but this does not affect its classification under Chapter 23.
Application of Law to Facts: The Tribunal applied the notification's provisions to the facts, determining that the exemption does not apply to the applicant's product.
Conclusions: The product remains taxable at 5% under Chapter 23, and the applicant is required to comply with GST registration and tax payment obligations.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The product is rightly classifiable under Chapter 23 as Residues and waste from the food industries; prepared animal fodder and specifically under 23031000 as 'Residues of starch manufacture and similar residues' liable to tax @ 5%."
Core Principles Established: The classification of goods under GST must adhere to the HSN codes, and the specific processes and uses of the product are critical in determining the correct classification.
Final Determinations on Each Issue: The application for rectification of the advance ruling was rejected, affirming the original classification and tax liability determination. The Tribunal found no error apparent on the face of the record in the original ruling.