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TMI Blog2019 (10) TMI 1186X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.4.1 in the food category system in Appendix A to these regulations. The fruit juices are extracted from fresh, healthy and ripe fruits through various processes followed by filtration to remove solids, aeration, homogenization and sterlisation. Such fruit juices to be classified under CTH 2009 can have added sugar, standardizing agent, preservatives as long as they retain their original character. However, addition of water to normal fruit juice or to a concentrated juice of a greater quantity of water than is necessary to reconstitute the original fruit juice results in diluted products excludes such products from CTH 2009 and are to be classified as beverages of heading 2202 - In the instant case, water constitutes around 92% in all the products in question. The product is prepared by adding fruit juice, procured by the applicant (as per the input invoices submitted), to filter water. It is evident that this large quantity of water results in diluted products which as per the Explanatory Notes above get classified under CTH 2202. Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, and Other Non-alcoholic beverages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uling on the following Question: "Classification of goods manufactured - Whether Carbonated Fruit Juice falls under Fruit Juices or Aerated drinks?" The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of ₹ 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2. The applicant has stated that * they are manufacturers of Fruit juices and also Carbonated fruit juices. * The GST rate @28% and Cess @12 % are applicable only for the goods with description as all goods including Aerated water containing added sugar or other sweetening materials or flavoured. Hence nowhere fruit juices are mentioned. * Their product Carbonated fruit juices do not fall under the above description of Aerated water containing added sugar or sweetening materials. Nowhere in the description fruit juices are covered * Also Nowhere the percentage of fruit juices content are given for determination of tax rates whether falls under 28% or 12%. * In a similar issue during the VAT regime, the Honorable Supreme Court in the case of 'Appy Fizz' has given verdict saying that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assification of 'APPY FIZZ' in case of M/s. Parle Agro Ltd vs Commissioner of Commercial Taxes, Trivandrum = 2017 (5) TMI 592 - SUPREME COURT in the VAT regime where the Hon'ble Supreme court ruled on the classification as per Kerala VAT notifications. They stated that fruit pulp or fruit juice based drinks should be classified under HSN 22029920. Appy Fizz drink is being sold at 12 % GST and the same should be permitted for their drinks. They submitted invoices for purchasing 'Lime Clear Juice' and 'Kinnow Clear Juice' which is classified under HSN 2009. They submitted product specifications of these two inputs indicating that they are of fruit juice (sulphited) of lime and orange with no added sugar , water except KMS (potassium metabisulfite) 3.2 The Procedure for preparation of carbonated fruit juice submitted by the applicant is as follows: SUGAR SYRUP UNIT: Few liters of water boiled in sugar syrup kettle, when boiling temperature reached at 70°C, pouring the sugar from the sugar bags in the kettle, after few minutes sugar dissolves then Passes to PHE plate through the filer (PHE plates reduce the temperature of sugar syrup to 35-45°C), to sugar storage tank, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvatives- 0.15% • Sugar-14% Cola (Richyaaa Damer/Licta) • Reverse osmosis treated carbonated water-92.5% • Natural lime juice-2.5% • Sugar-13% • Sodium benzonate and potassium sorbate as pres 0.15% • Caramel colour as permitted natural color Phosphoric acid 85%food grade, citric acid and sodim citrate as acidity regulator -0.3% • Natural flavoring oils- substances of nutmeg, cinnamon, cassia, lime, lemon and orange oils as added flavours -0.3% • Less than 100 ppm caffeine-0.02% Jeera Soda masala (Richyaaa Damer/Licta) • Reverse osmosis treated carbonated water-92.5% • Natural lime juice-2.5% • Sugar-12% • Citric acid, sodium citrate and black salt as acidity Regulators-0.3% • Jeera, mint and tamarind as added natural flavours -0.3% • Sodium benzonate and potassium sorbate as preservatives- 0.15% • Caramel colour as permitted synthetic colour-0.05% 3.4 The process flow chart for preparation of carbonated fruit juice submitted by the applicant is given below: CARBONATED FRUITS JUICE PREPARATION CHART 3.5 They submitted copies of test reports of a testing laboratory indicating energy, carboh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25.10.2016 5.1 The Assistant Commissioner of State (ST), Rasipuram has furnished the comments on the questions raised by the applicant which is reproduced below: * The product sold is termed as Carbonated Beverage with Fruit Juice (as per FSSAI regulation cited by them), the question raised in the application form for advance ruling is "Whether Carbonated Fruits Juices Falls under Fruit Juices or Aerated Drinks?" The terms Carbonated Fruits Juices and Carbonated Beverage with Fruit Juice denote different substances according to the very same FSSAI regulations. Thus, the question raised in the AAR pertains to a product different from that of the dealer's. * Are "Carbonated Beverage with Fruit Juice" same as "Juice"? Under the Food Safety and Standards (Food Safety & Standards and Food Additives) Regulations, 2011, Regulation 2.3.6 defines Fruit Juices as follows. Thermally Processed Fruits Juices: Thermally Processed Fruits Juices (Canned, Bottled, Flexible And/or Aseptically Packed) means unfermented but fermentable product, pulpy, turbid or clear, intended for direct consumption obtained by a mechanical process from sound, ripe fruit or the flesh thereof and processed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called a Fruit Beverage. * Thus, on a plain reading of regulations 2.3.6 and 2.3.10, the product cannot be considered as Fruits Juices or Fruit Beverages/Fruit Drink. In other words, fruit is not its primary, defining, unique quality. * Are "Carbonated Beverage with Fruit Juice" same as "Carbonated Fruit Beverages or Fruit Drinks"? Under the Food Safety and Standards (Food Safety & Standards and Food Additives) Regulations, 2011, Regulation 2.3.30 defines Carbonated Fruit Beverages or Fruit Drinks as follows. Carbonated Fruit Beverages or Fruit Drinks: Carbonated Fruit Beverages or Fruit Drink means any beverage or drink which is purported to be prepared from fruit juice and water or carbonated water and containing sugar, dextrose, invert sugar or liquid glucose either singly or in combination. It may contain peel oil and fruit essences. It may also contain any other ingredients appropriate to the products. It shall meet the following requirements (i) Total soluble solid(m/m) Not less than 10.0 percent (ii) Fruit content (a) Lime or Lemon Juice Not less than 5.0% (b) other Fruits Not less than 10.0% * Under the food Safety and Standards (Food Safety & Standards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sugar fructose, saccharine not exceeding 100 parts per million, fruit and vegetables extractives (less than 10% on weight to weight) Thus, it can be established that the FSSAI term "Carbonated Beverage with Fruit Juice" is best captured in the HSN Code as "Aerated Water" using the Fruit Products Order. * The Appy Fizz case: In M/s. Parle Agro Ltd vs Commissioner of Commercial Taxes, Trivandrum = 2017 (5) TMI 592 - SUPREME COURT, Trivandrum the issue was whether Appy Fizz is a fruit juice. However, it is to be noted that the juice content of Appy Fizz is 12.7% m/m and Total solids content is 13%, which satisfy the conditions set out in the FSSAI regulations to qualify as a fruit juice. This amounts to a case of comparing apples with oranges. Common Parlance Test: The common Parlance test has been used in various judgments like, Honorable Apex court in M/s. United offset process Ltd Vs Assistant Collector of Customs (1989) = 1988 (10) TMI 39 - SUPREME COURT. In the Diebolt system Pvt. Ltd Vs the commissioner of Commercial Tax = 2005 (1) TMI 652 - KARNATAKA HIGH COURT, the court held that if the goods are not technical in nature, the meaning associated to the goods in common pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ichyaa Darner ...Carbonated Beverage with Fruit Drink', Licta......Carbonated Beverage with Fruit Drink' with the fruit content varying slightly from the labels as indicated in Para 3.5 above. The inputs used for these products are 'Lime juice clear (sulphited) and Kinnow (orange juice clear (sulphited). The issue is whether the product is classifiable under 'CTH 2202 10 - Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured:' or under 'CTH 2202 90 20- Fruit pulp or fruit juice based drink'. 6.2 As per the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 DT 01.08.2011 as amended, Para 2.3.6 states, 2.3.6: Thermally Processed Fruits Juices 1. Thermally Processed Fruits Juices (Canned, Bottled, Flexible And/or Aseptically Packed) means unfermented but fermentable product, pulpy, turbid or clear, intended for direct consumption obtained by a mechanical process from sound, ripe fruit or the flesh thereof and processed by heat, in an appropriate manner, before or after being sealed in a container, so as to prevent spoilage. The juice may have been concentrated and later reconstitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sound, appropriately mature and fresh fruit or of fruit maintained in sound condition by suitable means. The juice is prepared by suitable processes, which maintain the essential physical, chemical, organoleptic and nutritional characteristics of the juices of the fruit from which it comes. The juice may be cloudy or clear, and may have restored (to the normal level attained in the same kind of fruit) aromatic substances and volatile flavour components, all of which must be obtained by suitable physical means, and all of which must have been recovered from the same kind of fruit. Pulp and cells obtained by suitable physical means from the same kind of fruit may be added. A single juice is obtained from one kind of fruit. A mixed juice is obtained by blending two or more juices or juices and purees, from different kinds of fruit. Fruit juice may be obtained, e.g. by directly expressing the juice by mechanical extraction processes, by reconstituting concentrated fruit juice (food category 14.1.2.3) with water, or in limited situations by water extraction of the whole fruit. Examples include orange juice, apple juice, black currant juice, lemon juice, and orange mango juice and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay not be preceded either by crushing or grinding (for apples in particular) or by treatment with cold or hot water or with steam (e.g., tomatoes, blackcurrants and certain vegetables such as carrots and celery). The liquids thus obtained are then generally submitted to the following processes : (a) Clarification, to separate the juice from most of the solids, by means of clarifying substances (gelatin, albumin, infusorial earth, etc.) or of enzymes, or by centrifuging. (b) Filtration, often by means of filter plates faced with kieselguhr, asbestos, cellulose, etc. (c) De-aeration, to eliminate oxygen which would spoil the colour and flavour. (d) Homogenisation, in the case of certain juices obtained from very fleshy fruits (tomatoes, peaches, etc.). (e) Sterilisation, to prevent fermentation. Various methods may be employed, for example, pasteurisation prolonged or "flash"), electric sterilisation in machines fitted with electrodes, sterilisation by filtration, preservation under pressure using carbon dioxide, refrigeration, chemical sterilisation (e.g., by means of sulphur dioxide, sodium benzoate), treatment with ultra-violet rays or ion exchangers. As a result of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, homogenization and sterlisation. Such fruit juices to be classified under CTH 2009 can have added sugar, standardizing agent, preservatives as long as they retain their original character. However, addition of water to normal fruit juice or to a concentrated juice of a greater quantity of water than is necessary to reconstitute the original fruit juice results in diluted products excludes such products from CTH 2009 and are to be classified as beverages of heading 2202, In the instant case, water constitutes around 92% in all the products in question. The product is prepared by adding fruit juice, procured by the applicant (as per the input invoices submitted), to filter water. It is evident that this large quantity of water results in diluted products which as per the Explanatory Notes above get classified under CTH 2202. Chapter 2202 of Customs Tariff covers 2202 WATERS, INCLUDING MINERAL WATERS AND AERATED WATERS, CONTAINING ADDED SUGAR OR OTHER SWEETENING MATTER OR FLAVOURED, AND OTHER NON-ALCOHOLIC BEVERAGES, NOT INCLUDING FRUIT OR VEGETABLE JUICES OF HEADING 2009 2202 10 - Waters, including mineral waters and aerated waters, containing added sugar or other sweetenin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d mineral waters (natural or artificial) (2) Beverages such as lemonade, Orangeade, cola, consisting of ordinary drinking water, sweetened, flavoured with fruit juices/ compound extracts and often aerated with Carbon-di-oxide gas and presented in bottles or other airtight containers. In the case at hand, the manufacturing process of the products involves addition of fruit juice (Lime/ Orange), sugar, ingredients, flavours to filtered water in a blending tank, which is chilled at 5°C in the Chilling Tank and then passed through Juice& CO2 Mixing Unit after which the same is bottled for supply in various quantities such as 200 ml, 300 ml, 600 ml, 1500 ml, etc. and are sold as 'Carbonated Beverage with fruit juice'. These beverages fall squarely under the category mentioned in the Para (A) (2) of the Explanatory Notes above. That is they are classifiable under CTH 220210. 6.5 As per the First Schedule to Customs Tariff, CTH 22021010 covers 'Aerated waters'. CTH 22021020 covers 'Lemonade' and CTH 22021090 covers 'Others'. To further classify them, we may resort to the FSSAI regulations above to understand what aerated waters are. Para 2.10.6 BEVERAGES NON-ALCOHOLIC - CARBONATE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the 'carbonated water' described in Para 2.1.0.6 of FSSAI regulations are the 'Aerated Waters' covered under CTH 22021010. Therefore, the applicant's products are not classifiable as 'Aerated Waters' under CTH 22021010. Therefore, the products are either classifiable under CTH 22021020 or CTH 22021090 depending on the flavours. The various flavours added by the applicant depend on the fruit juice orange or lemon and added natural and artificial flavours such as 'orange', 'lemon/lime', 'cola', 'jeer soda' under various brand names of 'Richyaa Darner' and 'Licta'. 'Richyaa Darner Lemon' and 'Licta Lemon are classifiable under CTH 22021020 as they are lemonade and all others i.e. Richyaa Darner Cola', 'Licta Cola', 'Richyaa Darner Jeera Soda', 'Licta Jeera Masala, Richyaa Darner Orange' and 'Licta Orange' are classifiable as 'Other' under CTH 22021090. 6.6 The Applicant has relied on the decision of Hon'ble Supreme Court in classification of 'APPY FIZZ' in case of M/s Parle Agro Ltd vs. Commissioner of Commercial Taxes, Trivandrum in the VAT regime. However, that ruling is not relevant here as the products are different and that ruling was based on the classification as per the K ..... X X X X Extracts X X X X X X X X Extracts X X X X
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