2025 (4) TMI 485 - AAR - GST

Classification of goods - CGST/ SGST rate applicable for outward supply of Maida Pappad whose manufacturing purpose is sheeting the dough and cutting the sheet with knife - HELD THAT - The impugned product referred to as Maida Pappad by the applicant are nothing but un-cooked/un-fried snack pellets obtained through the process of extrusion and as such they merit classification under chapter sub-heading 1905 90 30 of the Tariff. Further by virtue of insertion of entry S.No.99B to Schedule I to Notification No. 01/2017-CT (Rate) dated 28.06.2017 through the amendment Notification No. 09/2023-Central Tax (Rate) dated 26.07.2023 they become liable to tax at the rate of 5% under GST with effect from 27.07.2023 onwards. The applicant has stated during the personal hearing that the ruling passed by the AAR Tamilnadu on a similar issue in the case of M/s. Subramani Sumathi 2019 (3) TMI 926 - AUTHORITY FOR ADVANCE RULING TAMILNADU supports their contention. In this regard it is brought to the notice of the applicant that depending upon the nature of presentation of the facts of the case the nature of product the process involved etc. which differs from one case to another the advance rulings are always pronounced keeping in mind the facts and circumstances of the respective cases. Conclusion - The product Maida Pappad as referred to by the applicant in the instant case are nothing but un-cooked/un-fried snack pellets obtained through the process of extrusion and that the same is liable to tax at the rate of 5% under GST with effect from 27.07.2023 onwards in view of entry S.No.99B of Schedule I to N/N. 01/2017-CT (Rate) dated 28.06.2017.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal question addressed in this judgment is the classification of the product "Maida Pappad" under the Goods and Services Tax (GST) framework. Specifically, the issue revolves around determining the applicable GST rate for the outward supply of "Maida Pappad," which involves understanding whether the product should be classified as a "Papad" or as "un-cooked/un-fried snack pellets" manufactured through extrusion. This classification impacts the applicable GST rate, either exempt or taxed at 5%.

ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The legal framework involves the interpretation of the GST Act, particularly the classification of goods under the Harmonized System of Nomenclature (HSN) codes and relevant notifications. The key notifications include Notification No. 2/2017-CT (Rate) which exempts "Papad" from GST, and Notification No. 1/2017-CT (Rate) as amended by Notification No. 09/2023-CT (Rate), which imposes a 5% GST on "un-cooked/un-fried snack pellets" manufactured through extrusion.

Court's interpretation and reasoning:

The Authority for Advance Ruling (AAR) analyzed the manufacturing process of "Maida Pappad" and compared it with the characteristics of "Papad" and "snack pellets." The AAR emphasized that "Papad" is generally understood as a thin, crisp item made from lentils, whereas the applicant's product is made from "Maida" and appears bloated and biscuit-like. The AAR concluded that the product does not fit the common understanding of "Papad" and is more akin to "snack pellets" due to its manufacturing process involving extrusion.

Key evidence and findings:

The AAR considered the applicant's description of the manufacturing process, which involves creating a dough sheet and cutting it into shapes, followed by drying. The applicant argued that this process is "Sheeting and Shaping" rather than "Extrusion." However, the AAR found that the process results in a product that expands and changes texture, characteristics typical of extrusion.

Application of law to facts:

The AAR applied the legal definitions and common parlance understanding to conclude that the product is not "Papad" but rather "snack pellets." The classification under HSN 1905 90 30 for extruded or expanded products, savory or salted, was deemed appropriate, attracting a 5% GST rate as per the updated notification.

Treatment of competing arguments:

The applicant's argument that their product should be classified as "Papad" was countered by the AAR's reliance on the product's characteristics and manufacturing process. The AAR also addressed the applicant's reference to a previous ruling, clarifying that advance rulings are specific to the facts and circumstances of each case.

Conclusions:

The AAR concluded that the product "Maida Pappad" is classified as "un-cooked/un-fried snack pellets" manufactured through extrusion, subject to a 5% GST rate under the amended notification.

SIGNIFICANT HOLDINGS

The AAR held that "Maida Pappad" is not exempt as "Papad" but is taxable as "snack pellets." The ruling emphasized that advance rulings are specific to the applicant and the facts presented, and cannot be generalized across different cases.

Core principles established:

The judgment reinforces the principle that product classification under GST relies on the common understanding of terms and the specific manufacturing processes involved. It also highlights the importance of adhering to the definitions and classifications provided in GST notifications and circulars.

Final determinations on each issue:

The AAR determined that "Maida Pappad" is classified under HSN 1905 90 30 as "un-cooked/un-fried snack pellets" manufactured through extrusion, attracting a 5% GST rate. This classification is effective from July 27, 2023, following the amendment to the GST notification.