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TMI Blog2019 (11) TMI 1366X X X X Extracts X X X X X X X X Extracts X X X X ..... sumption. In the instant case, the product is made by adding fruit juices to large quantities of water along with other preservatives which then goes through a carbonation process. The juices are not meant for direct consumption here but are just one ingredient of the drinks - fruit juices and carbonated beverages with fruit drinks are distinct products in the FSSAI regulations and the product of the applicant is not thermally processed fruit juice but covered under Para 2.3.30 of the regulations and Category 14.1.4.1 in the food category system in Appendix A to these regulations. In the instant case, water constitutes around 76% in the products in question. The product is prepared by adding fruit juice, procured by the applicant (as per the letter addressed to the applicant by Food Systems Asia), to RO water. It is evident that this large quantity of water results in diluted product which as per the Explanatory Notes above gets classified under CTH 2202 - In the case at hand, the manufacturing process of the products involves addition of Grape juice (13%) to the filtered sugar solution (86%-76% RO water and 10% Sugar) in a blending tan which is subjected to Mild Thermal Treatment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under the GST Act? The applicant 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 stated that they are going to manufacture beverages with fruit juices and without milk. They understand from the industry that fruit pulp or fruit juice based drinks fall under HSN code 22029020 liable to be taxed at 12%. They state that fruit juice based drinks should be called as "Carbonated beverage with fruit juice" as per Para 3A definition in FSSAI Act. 3.1 The applicant was extended an opportunity to be heard in person on 28.08.2019 and was heard. They gave a written submission stating that their product is carbonated beverages with fruit juice and furnished a test report on the content. They stated that their product has fruit juice and been carbonated for preservation sake. They state the grape juice content will vary from 10-15%. They also referred to the Supreme Court case in APPY Fizz of Kerala VAT. They stated that the product is under development and the brand name has been finalized. They undertook to submit a detailed manufacturing process with quantit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be free from extraneous matter. As per FSSAI Clause 3A in case the quantity of fruit juice is below 10.00 percent, but not less than 5.0 percent. (2.5 percent, in case of lime or lemon), the product shall be called 'carbonated beverage with fruit juice and in such cases the requirement of TSS (Total soluble solids) shall not apply and the quantity of fruit juice shall be declared on the label. The applicant has contended that it could be evidenced from the above said definition both categories of carbonated beverages of fruit juice or fruit drink are treated as one and the same having the same meaning. 3.4 The applicant has also stated that as per the GST Act and its schedule, the rate of tax on the fruit pulp or fruit juice based drink alone classified under the HSN Code 2202 liable to be taxed at 12%.; That they had requested for expert opinion for classification under the FSSAI Act and request to clarify the classification of above these products.; the consultant also classified that the carbonated beverage with fruit juice and fruit based drink are grouped with some category, but according to the content of the total soluble solids (m/m as defined in chapter 2.2.30 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rting the name of their specific product for clarification. The manufacturing process with the quantities of each raw material is as follows: Product: Grape Based Carbonated Fruit Drink (200ml) Production Capacity: 10,000 liters Processing Flow Chart Prepare the sugar solution (10%) at 75-80 deg Celsius in blending tank (Minimum capacity: 1000 ltrs) ¯ Filter the sugar solution using to remove the unwanted impurities ¯ Transfer the sugar solution to the silo / tank and Mix pasteurized / aseptically packed, grape juice (13%) ¯ Blend it at 80 deg Celsius (15-20 sec) - Mild Thermal Treatment (Loss of water - 2 to 3%) ¯ Cool it to Room temperature. ¯ Weigh and add the additives (Acidity Regulator INS 330 & 331, Preservative INS 211) as per the formulation. ¯ Add Coloring agent & Flavoring agent. ¯ Mix it well (Circulation for 3 hrs.) ¯ Carbonation at 20 deg Celsius (Volume of Co2 - 3.1 & % of co2 - 0.61) ¯ Filling at 2-4 deg Celsius, Capping & Shrink wrapping Grape based Carbonated Fruit Drink Sl.No. Ingredients UOM % 10000 ltr 1 RO Water KG 75.88 7588 2 Grape Juice KG 13 1300 3 Sugar KG 10 1000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Determination of the liability to pay tax on any goods or services or both; (f) Whether applicant is required to be registered; (g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. The Act limits the Advance Ruling Authority to decide the issues earmarked for it under Section 97 (2) and no other issue can be decided by the Advance Ruling Authority. Of the above questions on which ruling is sought by the applicant, the question at (1) and (3) do not fall under any of the category specified under Section 97 (2) of the Act and therefore are not within the ambit of this authority. The ruling is offered on the second Question as the same is within the ambit of this authority. 6.1 From the submissions made it is seen that the applicant seeks the classification of the product, "K juice Grape", intended to be marketed in future by them. The clarification sought is whether the said product fall under the category of fruit beverages or fruit based drinks. The label of the product have the description "Carbonated Fruit Beverage". As per the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbonated 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. ………… 3A. in case the quantity of fruit juice is below 10.0 per cent. But not less than 5.0 per Cent. (2.5 per cent. In case of lime or lemon), the product shall be called 'carbonated Beverages with fruit juice' and in such cases the requirement of TSS (Total Soluble Solids) shall not apply and the quantity of fruit juice shall be declared on the label. Further, as per Appendix A to these Regulations where there is a food category system, it is seen that fruit juices are classified under 14.1.2.1 as 14.1.2.1 Fruit juices Fruit juice is the unfermented but fermentable liquid obtained from the edible part 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection and Chapter Notes and the General Explanatory Notes of the First Schedule shall be applied for the interpretation and classification of goods. 6.4 The relevant entries of the Customs Tariff is given under for ease of reference: Chapter 2009 of Customs Tariff covers fruit juices (including grape must) and vegetable juices, unfermented and not containing added spirit, whether or not containing added sugar or other sweetening matter. Chapter Note 6 of Chapter 20 states "For the purposes of heading 2009, the expression "juices, unfermented and not containing added spirit" means juices of an alcoholic strength by volume (see Note 2 to Chapter 22) not exceeding 0.5% volume." HSN Explanatory Notes to Chapter 2009 states The fruit and vegetable juices of this heading are generally obtained by pressing fresh, healthy and ripe fruit or vegetables. This may be done (as in the case of citrus fruits) by means of mechanical "extractors" operating on the same principle as the household lemon-squeezer, or by pressing which may or may 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, blackc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extracted from the fruit, etc.) has been added in such quantity that the balance of the different constituents as found in the natural juice is clearly upset; in such case the product has lost its original character. The vegetable juices of this heading may also contain added salt (sodium chloride), spices or flavouring substances. However, the addition of water to a normal fruit or vegetable juice, or the addition to a concentrated juice of a greater quantity of water than is necessary to reconstitute the original natural juice, results in diluted products which have the character of beverages of heading 22.02. Fruit or vegetable juices containing a greater quantity of carbon dioxide than is normally present in juices treated with that product (aerated fruit juices), and also lemonades and aerated water flavoured with fruit juice are also excluded (heading 22.02). It is seen from the above that 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 lon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with fruit juices or essences, or compound extracts, to which citric acid or tartaric acid are sometimes added. They are often aerated with carbon dioxide gas, and arc generally presented in bottles or other airtight containers. (B) Other non-alcoholic beverages, not including fruit or vegetable juices of heading 20.09. This group includes, inter alia : (1) Tamarind nectar rendered ready for consumption as a beverage by the addition of water and sugar and straining. (2) Certain other beverages ready for consumption. such as those with a basis of milk and cocoa. From the above, it is seen that, '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' are covered under CTH 2202. Further, The Explanatory Notes classifies 'Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured' under CTH 220210. As per the explanatory notes, this group includes (1) Sweetened or flavoured mineral waters (natural or artificial) (2) Beverages such as lemonade, Orangeade, cola, con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also contain Saccharin Sodium not exceeding 100 ppm or Acesulfame-K not exceeding 300 ppm or Aspertame (methyl ester) not exceeding 700 ppm. Or sucralose not exceeding 300 ppm or Neotame not exceeding 33 ppm. Category 14.1.1 of Appendix A to the regulations states 14.1.1 Waters Includes natural waters (14.1.1.1) and other bottled waters (14.1.1.2), each of which may be non-carbonated or carbonated. 14.1.1.2 Table waters and soda waters Includes waters other than natural source waters that may be carbonated by addition of carbon dioxide and may be processed by filtration, disinfection, or other suitable means. These waters may contain added mineral salts such as table water, bottled water with or without added minerals, purified water, seltzer water, club soda, and sparkling water. Carbonated and non-carbonated waters containing flavours are found in category 14.1.4 It is seen from the above that waters with added carbon dioxide which may contain added preservatives and flavoring, sugars are separately classified under Para 2.10.6 as 'Carbonated Water' and Category 14.1.1.2 as 'table waters and soda waters' which are different from 'Carbonated Fruit Beverages or Fruit Dri ..... 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