2020 (6) TMI 183 - AAR - GST

Classification of goods - preparation of Whole Wheat parota and Malabar parota - whether classified under Chapter heading 1905, attracting GST at the rate of 5%? - Applicability of the benefit of entry No.99A of Schedule I to the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended vide Notification No. 34/2017-Central Tax (Rate) dated 13.10.2017 - HELD THAT - Rule 1 is not applicable since no Heading, Chapter Note or Section Note mention porota . Rule 2 is also not applicable since there is no mention of the finished article, i.e. porota anywhere in the tariff. Rule 3 is about classification of mixed or composite goods, prima facie, classifiable under two or more headings. In the instant case the product porota is though, made up of whole wheat flour or refined flour (maida) along with common ingredients like RO purified water, edible vegetable oil or refined oil, edible common salt and edible vegetable fat, there is no specific entry competing against a general entry (Rule 3 (a)); or has any specific essential characteristic by which we can describe the product (Rule 3 (b)) - Rule 3 (c) provides that when goods can t be classifiable under Rule 3(a) or 3(b), then they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. Thus even if the applicant s argument of classification of impugned products under heading 1905 as well as the classification under heading 2106 are considered as two relevant headings, the heading 2106 occurs last in numerical order and hence the heading 2106 would be more appropriate and right classification by virtue of Rule 3(c). Applicability of the benefit of entry No.99A of Schedule I to the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended vide Notification No. 34/2017-Central Tax (Rate) dated 13.10.2017 - HELD THAT - The GST rate of 5% is applicable to the products subject to fulfillment of the conditions that (i) they should be classified under heading 1905 or 2106 and (ii) they must be either khakhra, plain chaptatti or roti. In the instant case the first condition of classification is fulfilled as the classification of the impugned products has been resolved as 2106. As for as the second condition is concerned the impugned products are described as parota and hence are neither khakhra, plain chaptatti nor roti. Further the products khakhra, plain chaptatti or roti are completely cooked preparations, do not require any processing for human consumption and hence are ready to eat foods preparations, whereas the impugned products are not only different from the said khakhra, plain chaptatti or roti but also are not like products in common parlance as well as in respect of the essential nature of the product. The benefit of entry No.99A of Schedule I to the Notification No. 1/2017 -Central Tax (Rate) dated 28.06.2017, as amended vide Notification No.34/2017-Central Tax (Rate) dated 13.10.2017 is not applicable to the instant case and the applicant is not entitled for the same.

Summary

Issues Involved:
1. Classification of Whole Wheat Parota and Malabar Parota under GST.
2. Applicability of GST rate of 5% under Chapter heading 1905.
3. Applicability of residual entry at Sl.No.453 of Schedule III to Notification No.01/2017-Central Tax (Rate).

Issue-wise Detailed Analysis:

1. Classification of Whole Wheat Parota and Malabar Parota under GST:

The applicant, a food products company, sought an advance ruling on whether their products, Whole Wheat Parota and Malabar Parota, should be classified under Chapter heading 1905, which attracts a GST rate of 5%. The applicant contended that their products, made from refined wheat flour (maida), water, vegetable oil, fat, and salt, merit classification under Chapter heading 1905 as they are akin to "Khakhra, plain chapatti or roti."

2. Applicability of GST rate of 5% under Chapter heading 1905:

The applicant argued that their products should fall under Chapter heading 1905, which includes "Bread, pastry, cakes, biscuits and other baker’s wares," according to the Customs Tariff Act 1975. They relied on general rules of interpretation, judicial precedents, and explanatory notes issued by the World Customs Organisation. The applicant emphasized that their products are made from cereals (wheat flour) covered under Chapter 11 and require heating before consumption, thus fitting under Chapter heading 1905.

However, the authority examined the classification and determined that Chapter 19 covers preparations of flour that are ready for consumption. Since the applicant's products require heating before consumption, they do not fit under Chapter heading 1905. Instead, the authority found that the products are more appropriately classified under heading 2106, which covers "food preparations not elsewhere specified or included."

3. Applicability of residual entry at Sl.No.453 of Schedule III to Notification No.01/2017-Central Tax (Rate):

The applicant argued against classifying their products under the residual entry at Sl.No.453, which is for goods not specified in other schedules. They cited various Supreme Court judgments to support their claim that residual classification should only be used when no other specific entry applies.

The authority concluded that the products do not merit classification under heading 1905 and instead fall under heading 2106. Consequently, the products do not qualify for the GST rate of 5% applicable to "Khakhra, plain chapatti or roti" under entry No.99A of Schedule I to Notification No. 1/2017-Central Tax (Rate). The products are not like "Khakhra, plain chapatti or roti" as they require further processing before consumption.

Ruling:

The product 'parota' is classified under Chapter Heading 2106 and is not covered by entry No.99A of Schedule I to the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended. The applicant is not entitled to the 5% GST rate under the specified entry.