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2021 (12) TMI 269 - AAAR - GSTClassification of goods - rate of GST - Fryums (different shapes and sizes of PAPAD) manufactured by the applicant - HELD THAT - Papad in ready to cook/un-fried form is purchased by the appellant from the market. The same is first fried and various masala powders are applied and packed in small packets for being sold in market. The shape and size may vary but the ingredients, the proportion of ingredients, the composition and the recipe remains similar, if not exactly the same. The said product Papad of different shapes and sizes that are ready to eat condition eligible to be classified under Chapter Tariff Heading 1905 of Customs Tariff Act, 1975 accordingly, vide entry at Sr. No. 96 under Not. No. 02/2017-CT (Rate) dated 28.06.2017 product in question is exempted from the levy of Goods and Services Tax. 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 - 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. It can be said that 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 has been prepared manually, in round shape. However, when ingredients and process are similar in case of PAPAD and impugned product, then the product in question is nothing but a kind of PAPAD irrespective of their shape and sizes. The traditionally Papad has been prepared manually, in round shape. However, when ingredients and process are similar in case of PAPAD and impugned product, then the product in question is nothing but a kind of PAPAD irrespective of their shape and sizes. 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. 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% rate of Goods and Services Tax.
Issues Involved:
1. Classification of the product (Fryums/Papad) under the Customs Tariff Act, 1975. 2. Determination of the applicable Goods and Services Tax (GST) rate for the product. Detailed Analysis: 1. Classification of the Product: The appellant, engaged in manufacturing and trading Fryums, argued that their product should be classified as "Papad" under Tariff Item 1905 90 40, which is exempt from GST. They contended that Fryums, despite being fried and spiced, retain the essential characteristics of Papad, which are traditionally exempt from tax. They cited various legal precedents to support their claim that the product's shape or form should not alter its classification as Papad. The Gujarat Authority for Advance Ruling (GAAR) initially ruled that Fryums are not Papad, emphasizing that Papad is typically sold in a ready-to-cook form, whereas Fryums are sold ready-to-eat. GAAR classified Fryums under Tariff Item 2106 90 99, attracting an 18% GST rate. Upon appeal, it was noted that the term "Papad" is not defined in the CGST Act, 2017. The common parlance test was applied, which considers how the product is understood in the market. It was acknowledged that traditionally, Papad is a thin, round wafer, but advancements in technology have introduced various shapes and sizes. The ingredients and manufacturing process of Fryums were found to be similar to those of traditional Papad. The appellate authority concluded that despite the shape and size variations, Fryums retain the essential characteristics of Papad. Therefore, the product should be classified under Tariff Item 1905 90 40, which includes Papad by whatever name it is known. 2. Determination of Applicable GST Rate: The appellant argued that their product should be exempt from GST under Entry No. 96 of Notification No. 2/2017-CT (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" means served in hotels or eating houses, which is not applicable to their product. The appellate authority examined this contention and found that the term "served for consumption" refers to products ready for immediate consumption without further processing. Since Fryums are sold in a ready-to-eat form, they do not fall under the exempted entry for Papad. Instead, they are covered under Schedule-III of Entry No. 16 of Notification No. 1/2017-CT (Rate) dated 28.06.2017, which attracts an 18% GST rate. Conclusion: The appellate authority modified the GAAR ruling, holding that: 1. The product "fried - different shapes and sizes Papad" is classified under Tariff Item 1905 90 40 of the Customs Tariff Act, 1975. 2. The product is chargeable to an 18% GST rate as per Entry No. 16 of Schedule-III of Notification No. 1/2017-CT (Rate) dated 28.06.2017.
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