2021 (1) TMI 548 - AAR - GST

Classification of goods - rate of GST - Papad of different shapes and sizes - applicant in his submission has tried to equate un-fried Fryums with Papad under Tariff Item as 1905 90 40 - HELD THAT - What is Papad has not been defined or clarified under Customs Tariff Act, 1975, the Central Goods and Services Tax Act, 2017 (CGST Act, 2017), the Gujarat Goods and Services Tax Act, 2017 (GGST Act, 2017), Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as the IGST Act, 2017 or the Notifications issued under the CGST Act, 2017/GGST Act, 2017/IGST Act, 2017 - It is now well settled principle of interpretation of statute that the word not defined in the statute must be construed in its popular sense, meaning that sense which people conversant with the subject matter with which the statute is dealing would attribute to it . It is to be construed as understood in common language. The issue of proper classification of the product Fry Snack Foods called Fryums and admissibility of exemption notification under Central Excise regime was examined by the Hon ble Customs, Excise and Gold Appellate Tribunal in the case of T.T.K. Pharma Ltd. v. Collector of Central Excise 1992 (8) TMI 183 - CEGAT, NEW DELHI where it was held that the product Fry Snack Foods called Fryums have been considered as Namkeen and not as Papad . From the photos produced, it can be seen that PAPAD is a thing entirely different and distinct from FRYUMS. Therefore, in common parlance or in market, Fryums are not sold as PAPAD instead of PAPAD sold as papad and Fryums are sold as Fryums. Both the products are different and have their individual identity. Accordingly, in common parlance test, the applicant s product i.e. different shapes and sizes of Papad is not Papad but is Un-fried Fryums - the applicant himself has mentioned the fact in their application that in common parlance their product is popularly known as Fryums in the market - This fact indicates that applicant himself knows that in the market their product is called Fryums and not Papad as such the fact is that in the market Papad is known as Papad and not Fryums . Therefore, the Un-fried Fryums are not classifiable as Papad under Tariff Item 1905 90 40. Appropriate classification of Unfried Fryums - HELD THAT - In the instant case the most appropriate rule of interpretation which is to be used while interpreting the phrase by whatever name it is known is the legal principle of Ejusdem Generis. The application of this Rule is necessitated because of the use of a general phrase preceded by specific words. The words ejusdem generis mean of the same kind or nature . Ejusdem generis is a rule of interpretation that where a class of things is followed by general wording that is not itself expansive, the general wording is usually restricted things of the same type as the listed items. The principle of ejusdem generis is applicable in interpreting the CTH No. 1905 whereby the phrase by whatever name it is known , should be read in conjunction with the terms Papad and hence the scope of the term Papad would get limited to only such word which is similar to Papad or such class of individuals. In the instant case the applicant goods un-cooked Fryums is not similar to Papad or such class of Individuals - phrase by any other name and by whatever name it is known have a proximate purpose in a statute and hence the principle laid down by the P H High Court supra will apply on all squares. Therefore, in the instant Case the goods Papad cannot be termed as Fryums hence applicant goods is to be classified under CTH No. 2106 and not under CTH No. 1905 of Custom tariff Act, 1975 - the product different shapes and sizes un-fried Fryums is appropriately classifiable under Tariff Item 2106 90 99. Sl. No. 23 of Schedule III of Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017, as amended vide Notification No. 41/2017-Central Tax (Rate), dated 14-11-2017 issued under the CGST Act, 2017 and corresponding Notification No. 1/2017-State Tax (Rate), dated 30-6-2017, as amended, issued under the GGST Act, 2017 covers Food preparations not elsewhere specified or included other than roasted gram, sweetmeats, batters including idli/dosa batter, namkeens, bhujia, mixture, chabena and similar edible preparations in ready for consumption form, khakhra, chutney powder, diabetic foods falling under Heading 2106. Therefore, Goods and Services Tax rate of 18% is applicable to the product Un-fried Fryums as per Sl. No. 23 of Schedule III of Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017, as amended, issued under the CGST Act, 2017 and Notification No. 1/2017-State Tax (Rate), dated 30-6-2017, as amended, issued under the GGST Act, 2017 or IGST Act, 2017. Thus, it can be concluded that applicant s product of different shape and sizes is un-fried Fryums and it cannot be called as Papad as claimed in the application and therefore merits classifiable under Tariff Heading 21069099 of the Custom Tariff Act, 1975.

Summary

Issues Involved:
1. Classification of "Papad" of different shapes and sizes.
2. Determination of the applicable tariff heading and GST rate for "Papad" of different shapes and sizes.

Detailed Analysis:

Issue 1: Classification of "Papad" of different shapes and sizes

The applicant, engaged in the manufacturing and trading of "Papad" of various shapes and sizes, sought an advance ruling on the classification of their product under GST. The applicant argued that their product should be classified under Chapter Tariff Heading 1905, which covers "Papad, by whatever name it is known, except when served for consumption," and thus should attract a NIL rate of tax under the GST regime.

The applicant relied on several judicial precedents and argued that "Papad" remains "Papad" irrespective of its shape or size. They cited various cases, including the Supreme Court's judgment in the case of Shiv Shakti Gold Finger Vs. Assistant Commissioner, Commercial Tax, Jaipur, where it was held that "Papad" remains "Papad" regardless of its shape or ingredients.

Findings and Discussion:

The Authority for Advance Ruling (AAR) considered the submissions and relevant facts. It noted that the term "Papad" is not defined under the Customs Tariff Act, 1975, the CGST Act, 2017, the GGST Act, 2017, or the IGST Act, 2017. The AAR emphasized the principle that words not defined in a statute must be construed in their popular sense, meaning the sense which people conversant with the subject matter would attribute to it.

The AAR referred to the common parlance test, which is the standard for interpreting terms in taxing statutes. The AAR observed that in common parlance, "Papad" and "Fryums" are distinct commodities. "Papad" is known and sold as "Papad," while "Fryums" are known and sold as "Fryums." The AAR also noted that the applicant themselves mentioned that their product is popularly known as "Fryums" in the market.

The AAR referred to the judgment of the Customs, Excise, and Gold Appellate Tribunal (CEGAT) in the case of T.T.K. Pharma Ltd. v. Collector of Central Excise, where "Fryums" were considered as "Namkeen" and not "Papad." The AAR also referred to the Supreme Court's judgment in the case of Commercial Tax, Indore v. T.T.K. Health Care Ltd., where "Fryums" were likened to "seviyan" and not classified as "Papad."

The AAR concluded that "Un-fried Fryums" are not classifiable as "Papad" under Tariff Item 1905 90 40.

Issue 2: Determination of the applicable tariff heading and GST rate

The AAR examined the appropriate classification of "Un-fried Fryums." Chapter Heading 2106 of the First Schedule to the Customs Tariff Act, 1975, covers "Food preparations not elsewhere specified or included." The AAR noted that Chapter Note 5 and 6 of Chapter 21 provide an inclusive definition covering preparations for use either directly or after processing for human consumption.

The AAR applied the principle of Ejusdem Generis, which means that general words following specific words should be interpreted in the context of the specific words. The AAR concluded that "Un-fried Fryums" are appropriately classifiable under Tariff Item 2106 90 99.

The AAR referred to Sl. No. 23 of Schedule III of Notification No. 1/2017-Central Tax (Rate), which covers "Food preparations not elsewhere specified or included" and attracts a GST rate of 18% (CGST 9% + GGST 9% or IGST 18%).

Ruling:

The product "Un-fried Fryums" manufactured and supplied by the applicant is classifiable under Tariff Item 2106 90 99 of the First Schedule to the Customs Tariff Act, 1975. The applicable GST rate for "Un-fried Fryums" is 18% (CGST 9% + GGST 9% or IGST 18%).