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TMI Blog2020 (2) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... hat has specially formulated for people suffering from diabetics. In the present case, the impugned product though generally contributes to the well being of patient is specially formulated for diabetic patients as is evident from the fact that it contains certain sugar replacements which are not found in the normal Prohance. It is therefore specially directed for diabetics. In such a scenario, whether a normal person not suffering from Diabetes would opt for the Prohance-D variant as a meal replacement? The answer is no. Such a person would opt for Prohance and not for Prohance-D as it can be normally expected that only a diabetic patient would go for the Prohance-D variant. This makes it very clear that that the product is formulated for diabetic patients, is targeted at that particular segment and therefore, can be termed as a diabetic food . It is true that the heading 2106 also covers Compound preparation for making nonalcoholic beverages under which heading is the product classified by the AAR. Heading 2106 covers both the descriptions and the Explanatory Notes to the HSN do not make it clear as to which product category the explanatory note given above applies. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se A. M/s Sun Pharmaceutical Industries Limited (hereinafter referred to as Appellant ) having its corporate head office at, SUN HOUSE Western Express Highway, Goregaon(E), Mumbai-400063 is engaged in the business of manufacturing and trading of pharmaceutical products, nutraceutical and allied products falling under Chapter 28 30 of the Customs Tariff Act,1975. B. The Appellant was registered under the erstwhile tax regime, and was discharging excise duty, service tax and Value Added Tax (VAT) on manufacture of pharmaceutical and nutraceutical products. C. Under the current regime, the Appellant is registered as per the GST laws, E. The Appellant is, inter alia, engaged in the manufacture and supply of medicaments and other related products. The Appellant is also engaged in business of marketing and supplying of a nutritional powder/food for special dietary use known as Prohance and Prohance-D . Introduction to Prohance-D F. Prohance-D is specially designed to serve as a nutritional benefit for people suffering from Diabetes as the name itself suggest that D stands for Diabetes . Prohance-D is sold in powder form which is required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illa variant under Tariff item No.2106 90 91 and the applicable rate of GST in respect of the same in terms of Sr No. 46A of Schedule II to Notification No. 1/2017-CT(R) dated 30.06.2017 the corresponding Notification of relevant State GST Act. Application for Advance Ruling L. At this juncture it is pertinent to refer to the rate notification under GST for the possible classification of the product in question. Notification No.1/2017-Central Tax (Rate) dated 30.06.2017 provides for applicable rates of GST on the supply of goods. SI. No. 46A of Schedule - II to Notification No.1/2017- Central Tax (Rate) dated 30.06.2017 reads as under: Sch. SI. No. Chapter Heading/ Sub-Heading Description of Goods Rate of Tax (CGST) II 46A 2106 90 91 Diabetic foods 6% M. Corresponding notification of relevant State GST Act also provides rate of 6% on the aforesaid item. N. Therefore, Diabetic Food of Heading No. 2106 90 91 of the Customs Tariff Act, 1975 (hereinafter re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , fats, proteins, essential minerals and vitamins and can be ingested and digested and provides nutrition to the human body. b) Even though the Prohance-D is categorized as food , the same cannot be treated/considered as diabetic food classifiable under Tariff Item No.2106 90 91 of CTA on the ground that Prohance-D is advertised/marketed as providing other health benefits like providing energy, immune health, heart health, vitamins and minerals and maintains cholesterol levels. c) Relying on the information available on internet, it will not be proper/correct to treat / consider the Prohance-D - Chocolate variant as diabetic food as it does not contain high amount of dietary fiber even though it contains gum Arabic and also Prohance-D - Chocolate variant does not contain slow digestion agents. d) Prohance-D - Chocolate variant is not classifiable as cocoa preparation falling under Chapter 18 of the CTA on the ground that the chocolate flavor is used only to attract the end consumer. e) Prohance-D - Chocolate variant is also not classifiable under Chapter 19 of the CTA. e) Prohance - D - Chocolate variant is Food preparation classifiable under Chapt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---- Sharbat. Kg 2106 90 19 --- Other Kg 2106 90 20 - -- Pan masala Kg 2106 90 30 --- Betel nut product known as Supari . Kg 2106 90 40 --- Sugar-syrups containing added flavouring or colouring matter, not elsewhere specified or included; lactose syrup; glucose syrup and malto dextrine syrup Kg 2106 90 50 --- Compound preparations for making non-alcoholic beverage. Kg 2106 90 60 --- Food flavoring material. Kg 2106 90 70 --- Churna for pan. Kg 2106 90 80 --- Custard powder. Kg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of pure protein which can be pure enough to be virtually lactose free, carbohydrate free, fat free, and cholesterol free. They are highly bioavailable, are very quickly absorbed into the body, and have a high concentration of branched-chain amino acids which are highly concentrated in muscle tissue, and are used to fuel working muscles and stimulate protein synthesis 8. Soy protein isolate - It is a highly refined or purified form of soy protein with a minimum protein content of 90% on a moisture-free basis. It is made from defatted soy flour which has had most of the nonprotein components, fats and carbohydrates removed. It is mainly used to increase protein content, to enhance moisture retention, and as an emulsifier. 9. Isomaltulose (6.1%) - It is a disaccharide carbohydrate composed of glucose and fructose. Isomaltulose is a slowly digested carbohydrate which provides energy for a longer period and avoiding blood sugar spikes. 10. Rapeseed oil - low erucic acid - It is Alpha linolenic acid (omega 3 fatty acid) rich oil. It correct imbalances in modern diets that lead to health problems and help lower the risk of chronic diseases. 11. Fructose - Fructose also know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an enzymes, making them unavailable for glucose release into the blood stream, ensuring that their consumption does not raise blood glucose levels. It is a preferred sugar substitute for diabetics because it does not cause spikes in blood sugar associated with common sweeteners and can be used to replace sugar, fat, and flour. 19. Antioxidants (Soya lecithin, L-Ascorbic acid, TBHQ) - Antioxidants are said to help neutralize free radicals in our bodies, and this is thought to boost overall health. They protect against the cell damage that free radicals cause, known as oxidative stress. 20. Myo-inositol - It is a carbocyclic sugar and a sugar alcohol with half the sweetness of sucrose (table sugar) and helps to promote proper utilization of the hormone insulin. 21. Choline bitartrate - It is similar to a B vitamin. It is used in many chemical reactions in the body. It is used to prevent liver diseases caused by excessive feeding by vein (by IV). 22. Vitamins, L-Carnitine - L-carnitine is an amino acid (a building block for proteins) that is naturally produced in the body. L-carnitine supplements are used to increase its levels in people whose natural level is too low beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the body: whatever sustains or promotes growth. 30. The Merriam-Webster online dictionary defines food as: 1 a: material consisting essentially of protein, carbohydrate, and fat used in the body of an organism to sustain growth, repair, and vital processes and to furnish energy; also; such food together with supplementary substances as minerals, vitamins, and condiments) b: inorganic substances absorbed by plants in gaseous form or in water solution 2: nutriment in solid form 31. It is also a settled legal position that in ordinary and commercial parlance in India, the term food is considered as nutritive material absorbed or taken in the body of an organization for the purpose of growth work or repair and for the maintenance of vital processes and not as a refreshment. 32. In light of the aforesaid legal position and having regard to facts that the ingredients of the product in question (i.e. Whey protein isolate, Maltodextine, Soy protein isolate, etc.) as mentioned in paragraph A.3 above and that the product in question is used for nourishment purposes, the same has to be treated/considered as food only. 33. Thus, it is submitted that Proha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the above submissions, it is submitted that the product in question shall be considered as a Diabetic Food as it satisfies the definition of diabetic food as mentioned above. 40. At this stage, it is pertinent to refer to The Food Safety and Standards Act, 2006 (FSSAI) wherein the Third-Party manufacturer is granted the license under the category of foods for special dietary purposes . The product in question being food for Diabetic people as also declared in the packing label of the product and the same having been certified by the FSSAI. It is pertinent to refer to the relevant provision under FSSAI Act and regulations therein. Further, it is submitted that the Ld. AAR in its ruling dated 23.1.2019 has also relied on the FSSAI Rules to determine the correctness of category declared on the label of the product in question. 41. Relevant provisions under Food Safety and Standards Act, 2006 for the purpose of present appeal. 42. Section 22 of the said Food Safety and Standards Act, 2006 is reproduced below for ready reference: 22. Genetically modified foods, organic foods, functional foods, proprietary foods, etc. Save as otherwise provided under this Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not include a narcotic drug or a psychotropic substance as defined in the Schedule of the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985) and rules made thereunder and substances listed in Schedules E and El of the Drugs and Cosmetics Rules, 1945; (2) genetically engineered or modified food means food and food ingredients composed of or containing genetically modified or engineered organisms obtained through modern biotechnology, or food and food ingredients produced from but not containing genetically modified or engineered organisms obtained through modern biotechnology; (3) organic food means food products that have been produced in accordance with specified organic production standards; (4) proprietary and novel food means an article of food for which standards have not been specified but is not unsafe: Provided that such food does not contain any of the foods and ingredients proh ibited under this Act and regulations made thereunder. 43. Further, the Notification dated 23rd December 2016 (Annexure - 5) issued by the Food Safety and Standards Authority of India (hereinafter referred to as FSSAI ) Regulation No.8 states that: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated above is extracted below for ready reference: Schedule - VIII [See regulations 3,(13), 6.(2)(i), 7.(2)(i), 8.(2)(i), 9.(2)(i) and 11.(1)(i)] List of prebiotic compounds Sr. No. Prebiotic Compounds 1. Polydextrose 2. Soybean oligosaccharides 3. Isomalto-oligosaccharides 4. Fructo-oligosaccharides 5. Gluco-oligosaccharides 6. Xylo-oligosaccharides 7. Inulin 8. Isomaltulose 9. Gentio-ologsaccharides 10. Lactulose 11. Lactoferrin 12. Sugar alcohols such as lactitol, sorbitol, maltitol, inositol, isomalt 13. Galacto-oligosaccharides Note:- The Food Authority may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, ingredients which along with the other regular ingredients may assist diabetic in replacing a meal or part of it. 55. On this count alone, it is submitted that the portion of the Ruling dated 23.1.2019 passed by Ld. AAR by which the product is classified as preparation for making beverage is incorrect and is liable to be set aside. MERELY MENTIONING / DECLARING OTHER HEALTH BENEFITS ON THE LABEL OF PROHANCE-D WILL NOT EXCLUDE/TAKE AWAY THE PRODUCT IN QUESTION FROM BEING A DIABETIC FOOD . 56. Before going into the discussion as to whether the product in question is suitable for diabetic person or not, we will first discuss the meaning and symptoms of diabetes which the root cause of the entire issue. 57. The term diabetes has not been defined under the GST laws, Explanatory Notes to HSN and under the CTA and rules made thereunder. Thus, we have to take recourse of dictionary meanings of term diabetes . 58. The Oxford Dictionary of Food Nutrition by David A. Bender described diabetes as: there are two distinct conditions: diabetes insipidus and diabetes mellitus. The later condition is more common and is generally referred to simply as diabetes o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibes a metabolic disorder of multiple aetiology characterized by chronic hyperglycaemia with disturbances of carbohydrate, fat and protein metabolism resulting from defects in insulin secretion, insulin action, or both. The effects of diabetes mellitus include long-term damage, dysfunction and failure of various organs. Diabetes mellitus may present with characteristic symptoms such as thirst, polyuria, blurring of vision, and weight loss. In its most severe forms, ketoacidosis or a non-ketotic hyperosmolar state may develop. and lead to stupor, coma and, in absence of effective treatment, death. Often symptoms are not severe, or may be absent, and consequently hyperglycaemia sufficient to cause pathological and functional changes may be present for a long time before the diagnosis is made. The long-term effects of diabetes mellitus include progressive development of the specific complications of retinopathy with potential blindness, nephropathy that may lead to renal failure, and/or neuropathy with risk of foot ulcers, amputation, Charcot joints, and features of autonomic dysfunction, including sexual dysfunction. People With. diabetes are at increased risk of cardiovascular, peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the risk of high blood pressure and damage to large and small blood vessels. 66. High blood pressure is a risk factor for heart disease. According to the Centers for Disease Control and Prevention (CDC), 74 percent of adults with diabetes have hypertension. 67. Damage to large blood vessels is known as macrovascular disease, while microvascular disease refers to damage to small blood vessels. Complications from macrovascular disease include: a. heart attack b. stroke c. peripheral arterial disease Microvascular disease can lead to problems with the: a. Eyes b. Kidneys c. nervous system 68. Diabetes may also result in tiredness. The tiredness is the result of having an imbalance between one s level of blood glucose and the amount or effectiveness of circulating insulin. 69. People with diabetes are more prone to having unhealthy high cholesterol levels, which contributes to cardiovascular disease (CVD). By taking steps to manage cholesterol, individuals can reduce their chance of cardiovascular disease and premature death. 70. Diabetes tends to lower good cholesterol levels and raise triglyceride and bad cholesterol le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Cataracts 10. Change in colour of the hair and growth of new hair 11. Change of foetal sex by drugs 12. Congenital malformations 13. Deafness 14. Diabetes 15. Diseases and disorders of uterus 16. Epileptic fits and psychiatric disorders 17. Encephalitis 18. Fairness of the skin 19. Form, structure of breast 20. Gangrene 21. Genetic disorders 22. Glaucoma 23. Goitre 24. Hernia 25. High/Low Blood Pressure 26. Hydrocele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gar spikes of a diabetic person to meet his / her special dietary requirements. 75. The finding of the Ld. AAR is totally incorrect and perverse to say that product in question is marketed to treat or prevent the other health related benefits and hence the same cannot be treated as suitable for people suffering from diabetes alone. In other words, the Ld. AAR is totally incorrect to held that presence of essential ingredients in Prohance-D which can also treat the other health related problems will not be considered as diabetic food only, when precisely the benefits as mentioned on the label is very much essential and required for treatment and prevention of other connected health symptoms for patients suffering from diabetes. It is submitted that the diabetic person cannot be forced to buy different products for controlling or preventing various consequences/effect of diabetes. In fact, the product in question is ONE STOP SHOP for a diabetic person. 76. On this count alone, it is submitted that the portion of the Ld. AAR ruling dated 23.1.2019 mentioning of other health benefits on the label of the product will make the product of general use and not exclusive for diabeti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law specially when the issue involved is regarding the classification of the goods under GST regime. The reference to Explanatory notes would be made wherever required in relation to the respective products. It is submitted that the Custom Tariff is generally based on the tariff classification adopted by World Customs Organization in its HSN. Hence, wherever a Chapter of Custom Tariff is fully aligned with the corresponding Chapter of HSN, the HSN explanatory notes explaining the scope of headings of that Chapter would have persuasive value in the determination of scope of headings of correspondence Chapter of Customs Tariff. The aforesaid position has been laid down by the Hon ble Supreme Court in the following decisions: (a) Coen Bharat Limited Vs. CCE - 2007 (217) ELT 165 (SC) = 2007 (9) TMI 29 - SUPREME COURT (b) CCE Vs. Bakelite Hylam Limited - 1997 (91) ELT 13 (SC) = 1997 (3) TMI 598 - SUPREME COURT 83. Accordingly, the Ld. AAR should have placed reliance on Explanatory notes to HSN in order to understand and ascertain the correct classification of the products in question. 84. On this count alone, it is submitted that the portion of the Ruling dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsumption including types made by an infusion such as tea and coffee, fruit juices and other juices extracted from plants, such carbonated drinks as ginger ale and root beer, and alcoholic beverages, including wine, made by a fermentation process, and distilled liquor, requiring both fermentation and distillation. 92. It submitted that for determination whether a product is a beverage or food , the crucial deciding factor should be the principal purpose for which it is intended to be used. If the product is used for the purpose of quenching one s thirst or refreshment purpose, then the same would be classifiable as a beverage . However, if the product has nutritional value assigned to it and the principle function of the product is to provide nutrition, then it shall rightly be qualified as a food product and not as a beverage . 93. It is submitted that the mixing of any food product with water or milk cannot be the criteria to conclude that the resultant product will looses its original identity and become beverage or non-alcoholic beverage. This portion of the submission is supported by the umpteen decisions wherein the judicial forums clearly held that if the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, herbal infusions, and other hot cereal and grain beverages, excluding cocoa. 97. It is submitted that the product in question either in the current state (powder form) or in the form after adding the water to it would not fall under any of the category of non-alcoholic beverages listed above. 98. It is submitted that the product in question cannot be consumed for refreshment purpose or recreational purposes, hence the same shall not be classifiable as a beverage at all. 99. It is further submitted that the license for manufacture of the product in question as granted by FSSAI is under the heading Food for special dietary use and not under the heading Non-alcoholic Beverage . Hence the product in the question is a food preparation and not a beverage or a preparation for making of a potential beverage, as per the regulation of FSSAI. Had the intention of FSSAI to categorize the product as similar to product in question under Non-alcoholic Beverage , in such case, FSSAI should have clearly mentioned the said product under Para No.14.0 of The Food Safety and Standards (Food Products and Food Additives) Regulations, 2011. 100. It is submitted that the product in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a beverage and cannot be both. The Ld. AAR having observed that the goods are food cannot contradictorily classify the product in question as a preparation for beverage, since it would amount to blowing hot and cold. RELEVANT GUIDELINES ISSUED BY FDA SUPPORTS THE APPELLANT S SUBMISSION. 105. It is submitted that the product in question is admittedly being marketed as a partial meal replacement/supplement for diabetic patients containing additional ingredients for the special dietary needs of the diabetic patients. The product in question being food for diabetic as per the FSSAI standards and is to be consumed in specified dosage. It is submitted that the product in question clearly fulfills all the conditions prescribed by the guidance material for classification as a dietary supplement product and not a beverage. 106. To support the above submission, reference is invited to the Guidance for industry: Distinguishing Liquid Dietary Supplements from Beverages issued by the Food and Drug Administration (FDA) to help dietary supplement and beverage manufacturers and distributors determine whether a product in liquid form is properly classified as a diet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d form as a conventional food include labeling, advertising, or other promotional activities that favorably compare the product to a category of beverages (e.g., sodas), market the product as an accompaniment to a meal, or market the product based on typical beverage criteria like taste, refreshment, and thirst-quenching ability; the use of metatags that result in the product s appearing in the results of an electronic search for sodas, juices, or other beverages; and paying for the product to be displayed in the beverage section of retail stores. However, simply recommending that a liquid product be taken with a meal would not generally be considered to represent the product as a conventional food, as many dietary supplements should be taken with food for best absorption. Moreover, promoting a product as a substitute for a beverage would not always represent the product as a conventional food. Composition - FDA recognizes that there are areas of overlap between the ingredients of some dietary supplements and conventional foods. However, in light of Congress s findings in the Dietary Supplement Health and Education Act of 1994 (DSHEA), which focused on the value of dieta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al food because lemonade is a beverage. 108. In view of the above submissions, it is submitted that the product in question is rightly classifiable as Diabetic foods being a dietary supplement for diabetic patients and not a beverage . Thus, it is submitted that once it is clear that the product in question is not a beverage at all, then the question of categorizing the product in question as compound preparation for making of non-alcoholic beverage will not arise at all. IN COMMERCIAL/MARKET PARLANCE TOO THE PRODUCT IN QUESTION IS IDENTIFIABLE AS DIABETIC FOOD AND NOT AS A PREMIX FOR A BEVERAGE. 109. In the alternative, it is submitted that the product in commercial/market parlance is identified as a food for diabetic patients and not as a beverage. Further the same is also highlighted by the packaging label of the product which reads as FOOD FOR SPECIAL DIETARY USE and Food for people with Diabetes . 110. In common parlance if a customer were to ask the shopkeeper for a premix for a beverage, the shopkeeper would not give the customer the product in question. However, the customer if approaches the shopkeeper to buy food products for a diabetic patien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecific entry is available the next attempt should be to find the nearest entry where the goods can be classified. in case both the attempts turn to be futile then the attempt should be made to consider the end uses, the inclusion and exclusion clauses provided in the section notes, the chapter notes and the explanatory notes given the HSN. While doing so the interpretation of the said Note will depend upon the context in which the entries have been worded. If an entry is clearly worded and is broad in character, the some would lead to the conclusion. An entry is to be given its ordinary meaning. If any goods fit in within one entry, the same for any purpose would not be held to be included in the other and in particular the residuary. 116. The same position was re-iterated in the case of Rajdhani Seeds Corporation v. Commr. Of Cus. Nava Sheva 2006 (198) E.L.T. 449 (Tri. - Del.) = 2005 (12) TMI 376 - CESTAT, NEW DELHI in which the six-digit specific entry was preferred over general entry for the classification of cloves . 117. In order to determine the specific entry between Tariff Item No. 21.06 9050 and Tariff Item No. 21.06 9091, it is pertinent to refer to the HSN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm shall also remain to be classifiable under the said Heading. 124. It has already been established in the case of Indian Carbon Limited v. S. Taxes reported at AIR 1972 SC 154 = 1971 (8) TMI 184 - SUPREME COURT that a goods in all its forms are classifiable under the Chapter Heading under which the principal good is classifiable. In the present matter, Diabetic Foods is classifiable under Tariff Item No.2106 9091 of the CTA. Applying the principal in the said judgment to the present facts, it can be concluded that Diabetic Foods in all forms shall be classifiable under Tariff Item no. 2106 9091 of CTA. 125. Thus, even if there existed two competing entries for the classification of the product: (i) Tariff Item No. 2106 9050 of the CTA which is a general entry for Compound preparations for making non-alcoholic beverages. (ii) Tariff Item no. 2106 9091 of the CTA which a specific entry for Diabetic Foods in all forms. 126. As per Rule 3(a) of the General Rules of Interpretation, the heading which provides the most specific description and provides for the essential characteristic of the product shall be preferred to headings providing a more g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me cannot be used to determine the classification of the product. 130. Rule 3(c) on the other hand states that when classification cannot be determined by applying Rule 3(a) 3(b) of the General Rules of Interpretation, then the product under question shall be classifiable under the heading which occurs last in numerical order among those which equally merit consideration. 131. The same principal was upheld in the case of Union of India v. Pesticides MFG. Formulators Association of India reported at 2002 (146) E.L.T. 19 (S.C.) = 2002 (10) TMI 95 - SUPREME COURT . 132. Applying the said principal in the present matter, the latter of the competing headings is Tariff Item No.21.06 9091 should be applied in the present case. 133. In view of the same, it is humbly submitted that the product is classifiable under Tariff Item No.2106 9091 of CTA. WHEN THERE ARE TWO COMPETING ENTRIES, THE HEADING BENEFICIAL TO THE ASSESSEE IS TO BE ADOPTED - PROHANCE - D (CHOCOLATE) IS CLASSIFIABLE UNDER TARIFF ITEM NO. 2106 9091 OF CTA 134. In furtherance to the above stated arguments, cognizance must be placed on the landmark judgment in the case of Commissioner of Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ood covered under Tariff Item no. 2106 9091 attracts GST at the rate of 12% and Compound preparation for making non-alcoholic beverages covered under Tariff Item No. 2106 9050 attracts GST at the rate of 18%. Sch. SI. No. Chapter Heading/Sub-Heading Description of Goods Rate of Tax (CGST) II 46A 2106 90 91 Diabetic foods 6% III 23 2106 Food preparations not elsewhere specified or included [other than roasted gram, sweetmeats, batters including idli/dosa batter, namkeens, bhujia, mixture, chabena and similar edible preparations in ready for consumption form, khakhra, chutney powder, diabetic foods] 9% 139. It is further noted that the specific entry with respect to Diabetic Food was introduced in CTA in the year of 2005 in Central Excise Tariff Act, 1975 2003 in the Customs Tariff Act, 1975 and the preferential lower rate of GST was attributed to the same in November 2017. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er storage in connection with raising of construction or mixing construction materials. It is not disputed that the goods manufactured by the respondent are tanks and vats. The description and usage of tanks and vats manufactured by the respondent tallies with the description of goods given in Note 11 (a) of Chapter 39 of the Act. We, therefore, find relationship between the goods manufactured by the respondent with the Heading 39.25. Once it is established that the description of the goods manufactured by the respondent ore akin to description of goods given under Heading 39.25 and sub-heading 3925.10, there is no difficulty in holding that the tanks and vats manufactured by the respondent would fall under Heading 39.25 of the Tariff. We accordingly hold that tanks and vats manufactured by the respondent are classifiable as builders ware of plastics and the view taken by the Tribunal that the classification of goods, i.e., tanks and vats would be appropriate under sub-heading 3926.90 of the classification list, and are exempt from excise duty, is erroneous. 144. It being an admitted fact that the product in dispute is meant primarily for diabetic persons as a partial meal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50. The product in question not answering the description under Tariff Item No. 2106 9050 as Compound preparation for making non-alcoholic beverages , should rightly be classified as other as Diabetic foods under Tariff Item No. 2106 9091. THE RULING SHALL ONLY BE APPLICABLE TO THE PRODUCT PROHANCE-D (CHOCOLATE FLAVOUR). 151. Without prejudice to the above submissions, it is submitted that the ruling dated 23.01.2019 is only for the product Prohance-D (Chocolate Flavour). The said submission being supported by the Ld. AAR s observation in the 2nd para of page 20 of the ruling, which is extracted as under: They are classifying the vanilla variant of their product as diabetic food and their query is regarding classification only in respect of the chocolate variant of their product where chocolate flavor is used in order to make the said product appealing to the end consumer, without altering the diabetic nature of the same. 152. It is accordingly submitted that the classification of the vanilla variant of the product in question was never a point of dispute. Hence the ruling dated 23.01.2019 shall be only applicable to the product in question and not the vanill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Authority. Discussions and Findings 158. We have gone through the facts of the case, documents on record and submission made by both the appellant as well as jurisdictional officer. The appellant is engaged in the production and making of nutritional powder for special dietary use called Prohance-D. The appellant is dealing with two variants of Prohance-D - namely Prohance-D - Vanilla flavor and Prohance-D Chocolate flavor. The issue in the present case is regarding the determination of the correct classification and applicable rate of GST on Prohance-D Chocolate variant. The appellant has stated that Prohance-D is a nutritional powder -special dietary use for people with Diabetics. The said product is sold in powder form and is required to be mixed with drinking water and used as partial meal replacement/breakfast replacement/evening snack/healthy bedtime snack or as directed by Physician/Dietician for diabetics. Though the appellant proposes to manufacture two variants of the product, the application is filed with AAR to issue a ruling on the classification of the Chocolate variant. 159. Notification No.1/2017-Central Tax (Rate) dated 30.06.2017 provides for appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Prohance which is a marketed as a normal food supplement and not as a diabetic food . PROHANCE INGREDIENTS PROHANCE-D INGREDIENTS MALTODEXTRIN MALTODEXTRIN SUNFLOWER SEED OIL (HIGH OLEIC ACID) SUNFLOWER SEED OIL (HIGH OLEIC ACID) CALCIUM CASEINATE CALCIUM CASEINATE WHEY PROTEIN ISOLATE WHEY PROTEIN ISOLATE SOY PROTEIN ISOLATE SOY PROTEIN ISOLATE RAPESEED OIL (LOW ERUCIC ACID FRUCTO-OLIGOSACCHARIDES RAPESEED OIL (LOW ERUCIC ACID FRUCTO-OLIGOSACCHARIDES COCOA POWDER 3% COCOA POWDER 3% MINERALS MINERALS SUNFLOWER SEED OIL SUNFLOWER SEED OIL ANTO OXIDANTS (SOYA LECITHIN, L- ASCORBIC ACID, TBHQ) ANTO OXIDANTS (SOYA LECITHIN, L-ASCORBIC ACID, TBHQ) CHOLINE BITARTRATE CHOLINE BITART ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tic sweetening agents (e.g. Sorbitol) instead of sugar. This heading 2106 does cover food intended for diabetic patients. It is true that the heading 2106 also covers Compound preparation for making nonalcoholic beverages under which heading is the product classified by the AAR. Heading 2106 covers both the descriptions and the Explanatory Notes to the HSN do not make it clear as to which product category the explanatory note given above applies. It is only under Customs Tariff Act that the category for diabetic foods is carved out under the Heading 2106. But the very fact that the explanatory note explains what a diabetic food gives an indication as to what is intended to be covered by it. The intention is that foods which contains sugar replacement or sugar substitutes are meant to be covered by heading 2106 and such food may be products like sweets and gums also. In the instant case, the impugned product also contains sugar substitutes and therefore it will be covered by the term diabetic food . 164. The AAR has also observed that the product is not a diabetic food because it does not contain high amount of dietary fiber and although the fact that it contains Gum Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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