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TMI Blog2020 (1) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... ) against the Advance Ruling No KAR ADRG 49/2019 dated 18.09.2019 = 2019 (10) TMI 1089 - AUTHORITY FOR ADVANCE RULING, KARNATAKA pronounced by the Karnataka Authority for Advance Ruling. Brief facts of the case: 1. The Appellant is a partnership firm and is a wholesale dealer in edible oil. The Appellant also manufactures Pooja Oil which is primarily a mixture of rice bran oil, sesame oil (gingelly oil), coconut oil. castor oil and mahua oil. A small quantity of fragrance is also mixed only for giving fragrance. 2. The GST rate Notification No. 1/2017-Central Tax (Rate) dated 28.07.2017 specifies two different entries for tariff heading 1518.Entry number 90 of Schedule-I of the said notification (GST rate of 5%) covers all types of vegetable fats and oils which have undergone processes like boiling, oxidization, dehydration etc. This entry specifically excludes those oils falling under tariff head 1516. The relevant entry reads as under: Schedule I - 2.5% SI. No. Chapter / Heading /Sub-heading / Tariff item Description of Goods 90. 1518 Vegetable fats and oils and their fractions, boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions, boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas form; * This entry further seeks to cover such vegetable oils and fats which are chemically modified; * It, however, excludes such oils which are falling under Chapter Heading 1516. 6.2 They submitted that this entry covers only vegetable fats and oils and that such oils could be chemically modified; that this entry does not make a distinction between edible grade and inedible grade oils. Therefore, any vegetable oil which is chemically modified even if inedible is covered under the said entry. 6.3 The Appellant submits that the product "Pooja Oil" is primarily made up of 5 edible oils, namely, rice bran oil, coconut oil, castor oil, mahua oil and gingelly oil, which are vegetable fats/oils and not animal fats/oils. Therefore, the product in question should be classified under the more specific entry, which is the entry under Schedule-I. 6.4. Chapter Heading 1518 of Schedule II covers animal fats and animal oils and their fractions, boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified, excluding tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this entry', provided the other criteria are fulfilled. 6.9. If the intention of the Government was to cover either edible oils or inedible oils, the same would have been mentioned specifically in the description, as can be observed in the description of other entries like 1517, wherein edible fats or oils has been categorically excluded. The Appellant submits that the product in question is inedible and meets the other conditions for qualifying classification under this entry. 6.10 In view of the above, the Appellant is of the view that the product, more appropriately, falls under tariff head 1518 mentioned under entry 90 of Schedule-I of the rate notification and therefore, taxable at 5%. 6.11. Without prejudice to the above argument that the pooja oil manufactured by the Appellant merits classification only under entry 90 of Schedule I of the rate notification, the Appellant submits that it is a settled principle of law that when a product qualifies classification under two or more different tariff heads, then, the classification which is more beneficial to the assessee can be adopted. Reliance is placed on the following judgements passed by the Supreme Court of India in sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tured out of vegetable oils and whether or not it is chemically modified, the same merits classification under Schedule-I under tariff heading 1518. The Appellant submits that the product manufactured by the Appellant which is known by the name "Pooja oil" is also a similar kind of product, which is manufactured by mixing various vegetable oils (like rice bran oil. sesame oil etc.) in appropriate quantities. The product "Pooja oil' does not contain any animal fats/oils in any quantity. 6.16. They contended that the impugned order has erred in concluding that, addition of fragrance (perfume) to the mixture of oil makes it inedible; that inedible mixture of vegetable oils is specifically covered under tariff heading 1518 under SI. No. 27 of Schedule-II of the Notification. The Appellant submits that the entry contained in Schedule II is a generic entry' and it seeks to cover primarily animal fats and oils. It also includes vegetable fats and oils which are inedible mixtures or preparations. However, Schedule I specifically covers all such vegetable oils, whether or not chemically modified. Since the entry contained in Schedule I is more specific and covers all kinds of vegetable oil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... processes mentioned in the said entry Sl.No 90, lacks merit; that a plain reading of the entry Sl.No 90 does not envisage any such restriction /condition in the said entry. 7.2. The submitted that the Customs Tariff entry 1518 has been split into two entries (at the 4-digit level). As a result, under GST, items constituting of vegetable fats and oils, which are classifiable under entry 1518 00 39 of the Customs Tariff can be classified under two different entries (Sl.No 90 of Schedule I and Sl.No 27 of Schedule II) which has resulted in an uncertainty in respect of the correct classification applicable to the product 'pooja oil'. 7.3. They submitted that Pooja Oil is classifiable under 1518 00 39 of the Customs Tariff. Under the entry for other vegetable oils and fats, there are two classification entries viz. edible grade and other; that items containing animal fats or other mixtures of vegetable oils and animal oils that are not classified elsewhere, arc covered under 1518 00 40; given that 1518 00 39 has specific entries for edible vegetable oils and fats and other, it is clear that inedible preparations of vegetable oils are classifiable under 1518 00 39. 7.4. They submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Headings 15.07 to 15.15 -Covers the single (i.e., not mixed with fats or oils of another nature), fixed vegetable fats and oils mentioned in the headings, together with their fractions, whether or not refined, but not chemically modified. * Chapter Heading 15.16 - Covers vegetable fats and oils and their fractions which have undergone a specific chemical transformation such as partly or wholly hydrogenated, inter-esterified, re-esterified or elaidinised, but not further prepared. * Chapter Heading 15.17 - This heading covers margarine and other edible mixtures or preparations of vegetable fats or oils or of fractions of different fats or oils of this Chapter, other than those of heading 15,16. * Chapter heading 15.18-This Heading covers the following: * Boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified vegetable oils and fats and their fractions. * Inedible mixtures or preparations of vegetable fats or oils or of fractions of different fats or oils of this chapter, not elsewhere specified or included. 12. Pooja Oil which is a mixture of 5 different vegetable oils will not be covered under C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The HSN Explanatory Notes with respect to the first category of products under Heading 15.18 states that: "This part covers animal or vegetable fats and oils and their fractions which have been subjected to processes which modify their chemical structure thereby improving their viscosity, drying power (i. e., the property of absorbing oxygen when exposed to the air and forming elastic films) or modifying their other properties, provided they retain their original fundamental structure and are not more specifically covered elsewhere. E.g (1) The Boiled or oxidised oils are obtained by heating oils, generally with the addition of small quantities of oxidising agents. These oils are used in the paint and varnish industry. (2) Blown oils are partially oxidised and polymerised oils produced by blowing air through the oil, with application of heat. They are used for the manufacture of insulating varnishes, imitation leather and, when mixed with mineral oils, lubricating preparations (compound oils). Linoxyn, a semi-solid rubbery product, which is a highly oxidised linseed oil used in the manufacture of linoleum is also included in this heading. (3) Dehydrated castor oil is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir chemical structure or other properties but at the same time retain their original fundamental character. The following sub-classifications would fall under this first category, viz: --- Lin seed oil 1518 00 11 ---- Edible grade 1518 00 19 ---- Other --- Castor oil, dehydrated 1518 0021 ---- Edible grade 1518 00 29 ---- Other --- Other vegetable oil and its fats 1518 00 31 ---- Edible grade 1518 00 39 ---- Other It is the claim of the Appellant that the Pooja Oil is classifiable under Chapter sub-heading 1518 00 39. The said sub-heading pertains to other than edible grade vegetable oils and fats (other than linseed oil and dehydrated castor oil) which have been obtained by any of the processes mentioned in the heading i.e., boiled, oxidized, dehydrated, sulphurised, blown, polymerized by heat in vacuum or in inert gas or otherwise chemically modified. The Appellant has not come forth with any evidence to prove that the Pooja Oil manufactured by them by mixing five different vegetable oils and blending with fragrance, brings about a modification in the chemical structure or any other properties of the oils while retaining the original fundamental structure. Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt fats or oils of this chapter, not elsewhere specified of included 19. The GST Rate Notification has divided the heading 15.18 of the Customs Tariff into two pans. Entry Sl.No 90 of Schedule I covers only boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified vegetable oils and fats and its fractions. In other words, the entry Sl.No 90 of Schedule I only pertains to vegetable oils which have been obtained by or subjected to the above processes. This entry includes both edible and other than edible grade of vegetable oils obtained by the above-mentioned processes. To this extent, we disagree with the findings of the AAR that the entry at Sl.No 90 of Schedule I applies to vegetable oils which have been subjected to processes and the resultant product remains edible despite undergoing the aforementioned processes. Drawing support from the HSN Explanatory Notes, in our considered opinion. Pooja oil is not a boiled or oxidised or blown or dehydrated or sulphurised or polymerised or otherwise chemically modified oil. Therefore, we hold that Pooja oil is not covered under entry Sl.No 90 of Schedule I. 20. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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