2024 (10) TMI 1422 - AAAR - GST

Classification of goods - appropriate Chapter Heading under which the product proposed to be manufactured - applicable rate of GST - timelines of filing appeal - HELD THAT - The food product is either Table Margarine or Bakery Industrial Margarine, if the fat content is not be less than 80 per cent mass/mass. The impugned product is indicated to have fat content of 22.94%. Thus, as per 'Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011, the impugned product 'Cream' cannot be classified as Margarine under chapter heading 1517 10. The Authority in its findings have found that the other ingredients, i.e. sugar and premix (emulsifiers, stabilizers, acidity regulators and preservatives) are not been found mentioned in the HSN explanatory notes in respect of preparations of vegetable oil in the nature of an emulsion of water-in-oil, though it may resemble like a regular cream and it can't be understood to be included in the proposed product to fall under chapter heading 1517. In this regard we find that the appellant has submitted that sugar contains only 1% and premix (emulsifiers, stabilizers, acidity regulators and preservatives) comprises 5.5% if the impugned product. Then the proposed product 'Cream' is a preparation of vegetable fat more specifically covered under 1517 90 90, therefore classifying the same under residuary chapter heading 2106 is not warranted - Since the proposed product is preparation of vegetable oil and does not contain animal fat, therefore GST rate applicable on the proposed product shall be 5% in terms of S. No. 89 of Schedule I to Notification No. 1/2017 - IGST(Rate) dated 28.06.2017.

Issues Involved:
1. Classification of the product under the appropriate Chapter Heading of GST Law.
2. Determination of the applicable rate of GST on the product.
3. Condonation of delay in filing the appeal.

Issue-wise Detailed Analysis:

1. Classification of the Product:
The appellant, a proprietorship firm, proposed to manufacture a product termed 'Cream,' primarily composed of vegetable fat (23%), along with milk solids, sugar, and other additives. The appellant contested the classification under Chapter Heading 2106 as determined by the Authority for Advance Ruling (AAR) and argued for classification under Chapter sub-heading 1517 90 90. The AAR had ruled that the product should be classified under Chapter Heading 2106, which pertains to "Food preparations not elsewhere specified or included."

The appellant argued that the product is fundamentally a preparation of vegetable oil, and the addition of minor ingredients like sugar and emulsifiers does not alter its essential character. The appellant referred to the Harmonized System of Nomenclature (HSN) explanatory notes and contended that the product does not fit the description of margarine under Chapter Heading 1517 due to its fat content being less than 80%, as per the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011.

The Appellate Authority found that the product is not margarine but a preparation of vegetable oil, and since it is not covered under any specific category within Chapter Heading 1517, it is appropriately classified under sub-heading 1517 90 90. The Authority concluded that the product should not be classified under the residual Chapter Heading 2106 as it is more specifically covered under 1517 90 90.

2. Applicable Rate of GST:
The AAR had previously determined an 18% GST rate for the product under Chapter Heading 2106. However, given the reclassification to Chapter sub-heading 1517 90 90, the Appellate Authority determined that the applicable GST rate is 5% as per S. No. 89 of Schedule I to Notification No. 1/2017 - IGST (Rate) dated 28.06.2017. This decision is based on the product being a preparation of vegetable oil without animal fat.

3. Condonation of Delay:
The appellant filed the appeal with a delay of 5 days, citing the proprietor's absence from the station. The Appellate Authority, referencing Section 100(2) of the CGST Act, 2017, condoned the delay, finding the appellant's reason satisfactory and thereby allowing the appeal to be heard on merits.

Conclusion:
The Appellate Authority set aside the ruling of the AAR, holding that the appropriate classification for the product is under Chapter sub-heading 1517 90 90, with a GST rate of 5%. The decision is specific to the facts of the appellant's case and is valid within the jurisdiction of the Authority for Advance Ruling, Uttar Pradesh.

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