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2021 (12) TMI 165 - AAAR - GSTClassification of goods - rate of tax - sale/ supply of Fryums (papad) manufactured by the applicant - HELD THAT - The classification of goods under GST regime has to be done in accordance with the Customs Tariff Act, 1975, which in turn is based on Harmonised System of Nomenclature, popularly known as HSN . The rules of interpretation, section notes and chapter notes as specified under the Customs Tariff Act, 1975 are also applicable for classification of Goods under GST regime. However, once an item is classified in accordance with the Customs Tariff Act, 1975, the rate of tax applicable would be arrived at on the basis of notifications issued under GST by respective governments. From the ingredient of the product in question as submitted by the appellant, it is seen that the impugned product are manufactured from the wheat flour, superfine wheat flour, rice flour, starch, corn flour, cereal flour and all these products are covered under Chapter 10 and 11 of Customs Tariff Act. The said product can be categorized as crispy savoury food product as such it is made from the dough based on flour like wheat flour, rice flour, starch, corn flour and cereal flour. Therefore, the products of the appellant fall under the Chapter Heading 1905. However, the question still remains whether the products of the appellant can be termed as Papad. The product Papad is an eatable item, originated and mainly consumed in India. Therefore, there is no mention of the product Papad in the Explanatory Notes of the HSN. The term Papad has neither been defined in the Customs Tariff Act, 1975 nor under the CGST Act, 2017 or the Notifications issued there under. Fryums is brand name of a company and not the generic name of the impugned product, therefore it would not be logical to hold that the appellant s product is Fryums . However, in general public, Fryums is popular word for different shapes and sizes like round, square, semi-circle, hollow circle with bars in between or square with bars in between intersecting each other or shape of any instrument, equipment, vehicle, aircraft, animal type Papad. Similarly, calling product in question of different shapes and sizes by Fryums does not change the basic character of the product and the product in question remains papad - traditionally PAPAD is round shaped but the PAPAD is ready to cook product and can be consumed after roasting or frying in oil and consumed as snacks with the Indian meal or soup. Similarly, the product in question of different shape and size is a ready to cook product and can be consumed after roasting or frying in oil and consumed as snack. Further cereal flour of Chapter 10 and 11 of Customs Tariff Act, 1975 are the ingredients of both the product. Both the products i.e. PAPAD and product in question are same except they are known by different name in general public i.e. as PAPAD and Fryums . The products of the appellant has found its use as an alternative to regular round shaped Papad or as an additional variety of Papad in the Indian meal, especially the meals served during the community functions. The caterers, who prepare the meals for the community functions, as well as the people in general, consider such products as a different type or variety of Papad only - the applicant s products of different shapes and sizes of papad, are nothing but Papad, classifiable under Tariff Item 1905 90 40 of the Customs Tariff Act, 1975. CTH No. 2106 of Customs Tariff Act, 1975 covers the Food preparations not elsewhere specified or included means under this heading all types of foods preparation are covered which are not covered under the specific heading of tariff. It is important to refer to Chapter Notes of Heading #21 wherein under clause 5 (b) it is stated that Heading 2106 includes preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption and under clause 6 it has been stated that Tariff item 2106 90 99 includes sweet meats commonly known as Misthans or Mithai or called by any other name. They also include products commonly known as Namkeens , mixtures , Bhujia , Chabena or called by any other name. Such products remain classified in these subheadings irrespective of the nature of their ingredients - in the case at hand, the product different shapes and sizes Papad is Papad of different shapes and size and find specific entry at CTH No. 19059040, therefore as per rule of interpretation, the product is to be classified under CTH No. 19059040 only and not under CTH No. 21069099 of the Customs Tariff Act, 1975 as classified by the GAAR. The product different shapes and sizes Papad involved in the present case merit classification under Tariff heading No. 19059040 of the Customs Tariff Act, 1975. As it is already held that the product in question is classifiable under CTH No. 1905 of the Customs Tariff Act, 1975, the said CTH No. 1905 is covered under entry No. 16 of Schedule-III of Notification No. 1/2017-CT (Rate) dated 28.06.2017 and accordingly chargeable to 18% 9% CGST 9% SGST rate of Goods and Services Tax.
Issues Involved:
1. Classification of the product "Fryums" under GST. 2. Determination of the applicable GST rate on the product "Fryums". Detailed Analysis: 1. Classification of the product "Fryums" under GST: The appellant, engaged in the manufacturing and supply of Fryums, contended that Fryums should be classified as "Papad" under Tariff Item 19059040, which is exempt from tax as per Entry No. 96 of Notification No. 02/2017-Central Tax (Rate) dated 28.06.2017. They argued that Fryums, despite being fried and seasoned with masala, retain their character as Papad. The Gujarat Authority for Advance Ruling (GAAR) disagreed, stating that in common parlance, fried Fryums are not recognized as Papad but as a distinct product. GAAR classified Fryums under Tariff Item 2106 90 99, attracting 18% GST. The Appellate Authority examined the ingredients and manufacturing process of Fryums, noting that they are similar to traditional Papad. Despite the difference in shape and size, Fryums are made from cereal flours and are consumed similarly to Papad. The Authority acknowledged that "Fryums" is a brand name and not a generic term, and that the product in question is essentially a type of Papad, albeit in different shapes and sizes. The Authority referred to various judicial precedents, including: - Shiv Shakti Gold Finger Vs. Assistant Commissioner, Commercial Tax, Jaipur: The Supreme Court held that irrespective of shape and ingredients, Papad remains Papad. - State of Karnataka Vs. Vasavamba Stores: The Karnataka High Court ruled that Fryums, irrespective of their shape and size, qualify as Papad. Based on these precedents and the common parlance test, the Authority concluded that the product "different shapes and sizes of Papad" should be classified under Tariff Item 19059040. 2. Determination of the applicable GST rate on the product "Fryums": The appellant argued that their product should be exempt from GST under Entry No. 96 of Notification No. 02/2017-Central Tax (Rate) dated 28.06.2017, which exempts "Papad, by whatever name it is known, except when served for consumption." They contended that "served for consumption" refers to serving in hotels or eating houses. The Authority clarified that the term "served for consumption" refers to products ready to be consumed without further processing. Since the appellant's product is fried and seasoned, it is ready to eat and does not require further processing. Therefore, it does not fall under the exempt category of Entry No. 96. The Authority ruled that the product "fried Fryums" falls under Schedule III, Entry No. 16 of Notification No. 1/2017-CT (Rate) dated 28.06.2017, attracting 18% GST (9% CGST + 9% SGST). Conclusion: The Appellate Authority modified the Advance Ruling No. GUJ/GAAR/R/66/2020, holding that: - The product "fried - different shapes and sizes Papad" merits classification under Tariff Item 19059040 of the Customs Tariff Act, 1975. - The product is chargeable to 18% GST as per Sl. No. 16 of Schedule III of Notification No. 1/2017-CT (Rate) dated 28.06.2017 and Notification No. 1/2017-IGST (Rate) dated 28.06.2017.
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