2019 (3) TMI 926 - AAR - GST

Classification of goods - rate of tax - vadams made of maida - Held that - The product is made out of dough of maida as main ingredient along with preservatives. The mixed dough is cut into desirable shapes and dried in oven. The Applicant uses machinery for making the same. The products are sold by the Applicant in retail packing which have s shelf life of around 6 months as they have added preservatives are not fully cooked and are not ready to eat. On purchase byte consumer, they are to be fried in edible oil before consumption. It is seen from the samples and photographs produced during the hearing, that the items are indeed edible only after frying in oil which is not done by the Applicant but those who purchase it. Whether the product in question is Papad falling under Ch. 1905 or a namkeen falling under Ch. 2106? - Held that - Chapter 21 only covers edible preparations and Namkeens which are ready to eat are covered under the same. In the instant case, Maida vadam/papads are made of Maida, Sugar and Vanaspathi , Edible Salt, preservatives and dried in oven. They become edible only after frying in oil which is done by the ultimate consumer and the Applicant only supplies the dried/ semi - cooked version of it. Hence, they are not covered under Chapter 21. Papad is specifically specified under 1905 05 40 and papad are preparations of various flours or lentils which are dried, traditionally in the sun or made by machinery in commercial scale. They are not edible as such and the final consumer has to fry in oil before making them edible. This is the case. in respect of the goods supplied by the Applicant too. Therefore, the product is to be classified under 1905 05 40 - Sl.no. 96 of Notification No. 02/2017-CT (Rate) dt 28.06.2017 as amended and Notification No. II(2)/CTR/532(d-5)/2017 vide G.O. (Ms) No. 63 dated 29.06.2017 exempts Pappad, by whatever name it is known, except when served for consumption from CGST and SGST respectively.

Summary

Issues Involved:
Classification of product as 'Papad' or 'Namkeen' under GST Act based on manufacturing process and characteristics.
Determining the applicable tax rate and HSN Code for the product 'Maida Vadam/Papad'.

Detailed Analysis:
1. Classification Issue:
The applicant sought an advance ruling on the classification of their product, 'Maida Vadam/Papad,' under the GST Act. The product is made of maida, salt, and bicarbonate, dried in an oven, and needs to be fried in oil before consumption. The applicant argued that the product should be classified as 'Papad' under Chapter 1905, citing similarities with traditional papads and fulfilling general characteristics of papads, as per their submission and supporting documents.

2. Manufacturing Process and Characteristics:
The applicant provided details of the manufacturing process, highlighting the use of machinery, preservatives, and the need for frying before consumption. They emphasized that the product is similar to 'Papad' and not 'Namkeen,' as it requires further processing by the consumer. The Authority analyzed the relevant Customs Tariff chapters and notes to determine the appropriate classification based on the nature of the product and its characteristics.

3. Legal Interpretation and Precedents:
The Authority referred to Notification No. 1/2017 - Central Tax (Rate) and relevant Customs Tariff chapters to interpret the classification criteria for the product. They compared the characteristics of 'Papad' and 'Namkeen,' considering the product's readiness for consumption and the manufacturing process. The Authority also cited a precedent related to a similar product, emphasizing the importance of the final processing step before consumption in determining classification.

4. Ruling and Conclusion:
After thorough analysis, the Authority ruled that the product 'Maida Vadam/Papad' is classifiable under '19050540' as 'Papad.' They further exempted the product from CGST and SGST as per Notification No. 02/2017-CT (Rate) and relevant state notification. The ruling clarified the tax treatment and classification of the product based on its characteristics and manufacturing process, providing a definitive conclusion for the applicant's query.