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2021 (12) TMI 112 - AAR - GSTDetermination of the liability to pay Tax - Sales of Aorom Herbal Smokes (regular flavour) - relevant HSN Code - rate of tax - inter-state as well as intra-state supply - HELD THAT - The subject cigarettes have specific entry at HSN 24029010 as Cigarettes of tobacco substitutes. We hold that Classification of goods under GST is based on HSN. The Customs Tariff is based on HSN. The general Interpretative Rules are to be sequentially followed as the way to classify the goods. We are to classify within the confines of law and procedure as laid down in GST scheme of law and procedure. The Section notes of Custom Tariff are part and parcel of the Custom Tariff Act, 1975 which is to say, part and parcel of law enacted by the Parliament and therefore, we are obliged to follow the classification based on Section Notes as per law. As per Rule 1 of the General Rules for the Interpretation of CTA, 1975, for legal purposes, classification shall be determined according to the terms of the headings and any Section or Chapter Notes. The subject goods find their specific description as cigarettes of tobacco substitutes at HSN 20029010. The Explanatory notes to HSN have guidance value to classify goods. The Explanatory Notes page IV-24-I to Chapter 24 specifies that this Chapter covers not only unmanufactured and manufactured tobacco but also manufactured tobacco substitutes which do not contain tobacco. The said goods are leviable to 1. 28% IGST on inter state supply along with Compensation Cess of ₹ 4006 per thousand. 2. 14% CGST 14% SGST on intra state supply along with Compensation Cess of ₹ 4006 per thousand.
Issues: Classification of goods for tax purposes
Analysis: 1. Classification under HSN 30049011: The applicant claimed that the goods, 'Aorom Herbal Smokes,' should be classified under HSN 30049011. However, the Authority noted that this HSN pertains to Ayurvedic medicaments, and preparations intended to assist smokers to stop smoking are excluded from this category as per Section Note 1(b) of Chapter 30 of the Customs Tariff Act. 2. Exclusion from Ayurvedic Medicines: The applicant did not establish that the goods qualified as Ayurvedic medicines under the Drugs and Cosmetics Act, 1940. The Authority opined that in the market, these goods are perceived as cigarettes without Tobacco/Nicotine, not as medicinal products, based on common understanding. 3. Classification under HSN 24029010: Considering the absence of Nicotine in the product and its nature as a tobacco substitute, the Authority classified the goods under HSN 24029010 as 'Cigarettes of tobacco substitutes.' This classification aligns with the Customs Tariff Act and the General Rules for Interpretation. 4. Tax Liability: The Authority determined the tax liability for the goods as follows: 28% IGST on inter-state supply with Compensation Cess, and 14% CGST + 14% SGST on intra-state supply with Compensation Cess. This decision was based on the specific classification of 'Cigarettes of tobacco substitutes' under the GST regime. In conclusion, the Authority ruled that the 'Aorom Herbal Smokes' should be classified as 'Cigarettes of tobacco substitutes' under HSN 24029010 for tax purposes, attracting the specified tax rates and Compensation Cess as per the GST notifications. The decision was grounded in the legal framework, including the Customs Tariff Act and the relevant statutory provisions.
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