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TMI Blog2020 (10) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... al facts have been brought to their notice by the DGGI, Chennai Zonal Unit which implies that the lower Authority had been misled into admitting the application in as much as the applicant (now Appellant) had withheld information regarding the commencement of investigations against them on the issue of classification of the impugned products. The process of investigation in tax administration is such a step towards the action of issuing a show cause notice which culminates in a decision. Investigation is activated when there is enough predication to show that there is an alleged tax evasion. The essence of investigation is to carry out an in-depth review of the taxpayer s records and activities to ensure that the tax due to the government is not lost in evasion. Therefore, commencement of investigation in terms of Section 67 of the CGST Act, can be said to be the start of a proceeding to safeguard the government revenue - the usage of the words any proceeding in the proviso to Section 98(2) of the CGST Act will encompass within its fold the investigation launched by the agencies. Appellant has also argued that the issue of classification of the disputed products was not ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HELD THAT:- Section 100 of the CGST Act provides for an appeal to be filed by any party who is aggrieved by the advance ruling given by the lower Authority. In this case, the Department is not aggrieved by the ruling given by the lower Authority. It is also observed that there is no provision in the statute for a cross appeal/cross objection to be filed before the Appellate Authority in the appeal against the advance ruling. While Section 112(5) of the CGST Act explicitly provides that the party against whom an appeal has been filed before the GST Appellate Tribunal may file a cross objection/cross appeal notwithstanding that they may not have appealed against that order, there is no such similar provision for filing a cross appeal in the case of an appeal against an advance ruling. The Department has brought to our notice the fact that the advance ruling has been obtained by suppression of material facts and we are inclined to take cognisance of this information placed before us. It is trite law that when one comes for justice one should come with clean hands. This is not the case here. The Appellant is indeed guilty of having not revealed the fact of an investigation pending ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Edible vegetable oil (Sunflower) Edible vegetable oil (Sunflower) Edible hydrogenated vegetable fat Edible hydrogenated vegetable fat Iodized salt Iodized salt * These parotas do not contain any artificially added preservatives or flavours. The parotas need to be heated on a pan or tawa, before consumption, for improved taste and crispiness. In summary, the parotas are in ready to cook condition. The parotas have a shelf life ranging from 3-7 days. The Malabar parotas can be stored in a cool and dry place and have a shelf life of up to 4 days. The wheat parotas are recommended to be refrigerated for retaining the freshness up to 7 days. These products are not frozen products but only needs to be refrigerated to retain its freshness for its stated shelf life of 7 days. 4. In the GST rate Notification No. 1/2017-Central Tax (Rate) dated June 28, 2017, SL.No 99A was inserted in Schedule I vide Notification No 34/2017 -Central Tax (Rate) dated October 13, 2017 wherein goods described as Khakhra, plain chapatti or roti were chargeable to tax at 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wafers, empty cachets of a kind suitable for pharmaceutical use, Sealing wafers, rice paper and similar products . 7.2. The Appellant submitted that chapter 19 does not provide any clarification with respect to the terms Khakhra, Plain Chapatti or Roti in form of chapter notes, heading notes. Thus, the said terms would need to be understood as known in common parlance. Parathas are one of the most popular unleavened flatbreads in the Indian Subcontinent, made by baking or cooking whole wheat dough on a tava, and finishing off with shallow frying. Parota is described in Wikipedia as: A paratha is a flatbread native to the Indian subcontinent, prevalent throughout the modern-day nations of India, Sri Lanka, Pakistan, Nepal, Bangladesh, Maldives, and Myanmar, where wheat is the traditional staple. Paratha is an amalgamation of the words parat and atta, which literally means layers of cooked dough. They submitted that the Appellant follows similar processes while manufacturing parotas as is followed in the manufacture of chapattis and other unleavened flatbreads. The products are manufactured by the Appellant using various ingredients including wheat flour (atta)/ refined wheat f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s grossly erroneous and unlawful. 7.4. The Appellant further contended that in the absence of a statutory definition, a word is to be interpreted by understanding its meaning. From a commercial parlance perspective, all such products like, rotis, chapattis, parotas, etc. are treated as unleavened flatbreads , which can be known by different names and can be of various types. Heading 1905 of Schedule-I of the notification deals with all such unleavened flatbreads. They submitted that another test of interpretation evolved by Courts is that of the end-user. Parota or paratha are staple food across the length and breadth of India and they are known by different names across the country such as parota, parantha, lachha parantha, etc; that people use plain chapatti, roti, parotas or variants of these type of breads as the staple underlying carrier in one s meal. It is usually accompanied by protein or vegetables and sauce/curry; that the term chapati or roti as appearing in the schedule does not refer to a single type of Indian bread but it covers all types of Indian breads as long as they are made of same or similar ingredients and in similar processes. Hence, it is the Appellant s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation does not hold good, as reference to residuary heading can be made only if a product is not classifiable under any other specific entry. They submitted that that 1905 is a more specific entry for the product Parotas than the heading 2106, as it covers various other forms of Indian breads like rotis, chapattis, etc. In this regard, in view of Rule 3(a) of the Principles of Interpretation for classification, the heading which provides the most specific description shall be preferred to headings providing a more general description. 7.7. They submitted that the Authority for Advance Ruling in the impugned order has mentioned that the parotas sold by the Appellant need to be processed for human consumption and has accordingly passed its decision based on this fact, among others. This is grossly incorrect, because the parottas sold by the Appellant is ready to cook and merely needs heating. Heating is a common requirement for all ready to cook food products. Even chapathis are required to be heated before consumption, so is the case with milk and various other products. The mere process of heating cannot be considered as further processing. They further submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consumed across millions of households (including, lower and middle class) daily; that reference is also made to entry number 99 of Schedule I of the notification, wherein the product pizza bread has been specified to be taxed at 5%; that if the rate of tax on pizza bread (which is not a product commonly consumed by a lower class or middle-class household in regular course) can be 5%, then, the GST rate of parotas should not be 18% by any stretch of imagination. Therefore, the entry no 99A covering term khakhra, plain chapatti roti should be interpreted in a wide manner to cover all types of Indian breads and mere nomenclature should not determine the classification, especially when all such bread are unleavened flatbreads and a daily source of consumption of a common man. 7.10 They argued that the impugned order has erred in concluding that non-inclusion of the word parota in HSN 1905, excludes it from being classified under 1905 and availing the benefit of entry No 99A; that that the authorities in the impugned order, has applied only the nomenclature test while classifying Parotas while it has not given any importance to the End User Test, which is also relevant in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) Classifiable under Tariff heading 1905; b) Fall within the description bread ; and c) Not be excluded i.e. served for consumption and pizza bread As discussed elaborately supra, the Tariff classification of Parotas is tariff item 1905 90 90 and by application of general explanatory notes to the rules of interpretation of Customs Tariff would be covered within the scope of 4-digit heading i.e. 1905. Thus, the first requirement is satisfied. They further submitted that the Product Parota would fall well within the description of Bread ; that Bread has not been per se defined under the Section Notes or Chapter Notes of the Customs Tariff; that when a term is not defined in the Section or Chapter notes, recourse may be had to the dictionary meaning of the term. The term Bread is defined in various dictionaries as under: The Chambers Dictionary Food made of a baked dough of flour or meal, usually with yeast or other raising agent. Chambers Dictionary Science and Technology The product of baking a dough made from cereal (usually wheat or rye) flour and water (unleavened bread) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dictionaries that bread means a baked dough made from flour which is usually leavened (with yeast or other raising agent). However, the term is also defined expansively to include all forms of bread - leavened or unleavened. The Concise Oxford Dictionary defines unleavened as made without yeast or other raising agent. The Merriam-Webster Dictionary defines unleavened as made without leaven (such as yeast or baking powder). Therefore, in terms of the dictionary meaning, Bread can be said to include all forms of bread whether leavened or unleavened . Indian breads fall within the category of unleavened bread and hence would be covered within the scope of Tariff heading 1905 and consequently under entry 97 of Exemption Notification ; that the HSN explanatory notes to heading 1905 itself specifically provides that the heading includes unleavened bread in addition to other types such as ordinary bread, ginger bread etc., thereby providing an expansive scope to Tariff heading 1905. 7.12. Finally, they submitted that the products do not fall within the exclusions contained in the entry. i.e., the products sold by the Appellant are not served for consumption. Rather ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e guidelines issued by the CBIC vide Instruction F.No 390/Misc/3/2019-JC dated 21 st August 2020. The Appellant was represented by Advocates Mr V. Lakshmikumaran, Mr Ravi Raghavan and Ms. Charanya Lakshmikumaran as authorised representatives. The Department was represented by Mr Saji Jacob, Superintendent of Central Tax, Bangalore East Commissionerate. 8.2. Shri. Lakshmikumaran, explained the gist of the reasoning given by the lower Authority regarding the classification of the impugned product i.e Parotta . He also explained in great detail the nature of the items figuring under entry 99A of the rate Notification and the Chapter Headings 1905 and 2106. He stressed on the fact that the finding of the lower Authority that the impugned product is not classifiable under 1905 because it has to be heated before eating is incorrect. He submitted that the impugned product is pre-cooked and merely because the product is heated before consuming will not render the product uncooked. He emphasised the fact that in order to classify a product under Chapter Heading 2106, as held by the lower Authority, it should not be classifiable under any other heading; that 2106 is a residuary heading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by the Authority of Advance Ruling, Kerala in the matter of In Re: Modern Food Enterprises Private Limited = 2018 (11) TMI 279 - AUTHORITY FOR ADVANCE RULINGS, KERALA , supra wherein the authority had classified Classic Malabar Parota and Whole Wheat Malabar Parota under the Head 2106 as Food preparations not elsewhere specified or included and taxed the same at 18%. 8.5. In his rebuttal, the authorised representative for the Appellant submitted that the provisions of the proviso to Section 98(2) of the CGST Act will be attracted only when a show cause notice has been issued or when an order is already passed on the question on which a ruling is sought; that in their case, the matter was only under investigation and no show cause notice was issued; that matters under investigation will not attract the provision of the proviso to Section 98(2). 8.6. In the written submissions made in rebuttal to the objection raised by the Department representative, the Authorised representative contended that the investigation initiated by the DGGI is not within the ambit of the term proceedings for the purpose of Section 98(2) of the CGST Act; that the proviso to Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Show Cause Notice, Adjudication and Recovery (Circular No. 1053/02/2017-CX dated 10.03.2017) issued by the CBIC wherein it has been clearly stated that the Show Cause Notice is the starting point of any proceedings against the party; that show cause notice has not been issued in the present case relating to the issue of classification of disputed products.. 8.8. They further submitted that the sequence of events in the present case indicates that the investigation initiated against the Appellant in June, 2019 was at a preliminary stage at the time of filing the application before the AAR. The Senior Intelligence Officer had issued summons on 21.06.2019 and 09.07.2019 merely calling for details and documents such as returns, audited financials, audit reports and HSN wise details of clearances along with duty paid. The reason for such investigation, the issue proposed to be covered therein etc. were not even made known in any of the correspondences by the DGGI. The issue of classification of disputed products was also not raised specifically by DGGI in the summons or any allegation made that the classification adopted by the Appellant was incorrect; that the investigation init ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant. They also contended that there is no appeal filed by the department against the order of the Hon ble AAR. In such a situation the issue of jurisdiction raised by the Government Representative at the time of personal hearing is ex-facie perverse and cannot be entertained. Reference can be drawn to the decision of Jaipur Udhyog Limited v. Commissioner of Income Tax reported at [19921 198 ITR 282 (Raj.) = 1989 (10) TMI 3 - RAJASTHAN HIGH COURT wherein the Hon ble High Court observed that it is well-settled that a person who does not raise an objection with regard to jurisdiction of a Tribunal and permits the Tribunal to adjudicate under the hope that the decision may be in his favour cannot be permitted to assail the said decision when it goes against him. 8.10. It is also submitted by the Appellant, that the present appeal has been filed by the assessee, i.e. the Appellant against the impugned ruling and hence, any point raised by the Department in the absence of an appeal of their own, cannot be entertained by the Hon ble Appellate Authority. They relied on the decision of the Apex Court in the matter of State of Kerala v. Vijaya Stores reported at (1978) 42 S.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Advance Ruling vide its ruling dated 22nd May 2020 held that the impugned products are classifiable under Chapter Heading 2106 and are not eligible for GST rate at 5% in terms of entry Sl.No 99A of Schedule I to the Notification No.1/2017-Central Tax (Rate) dated 28.06.2017, as amended vide Notification No.34/2017-Central Tax (Rate) dated 13.10.2017. 11. Being aggrieved by the said ruling, the Appellant is before us in appeal. The Appellant had argued at great length as to why the impugned products should be more appropriately classified under Chapter Heading 1905 attracting 5% GST in terms of entry Sl.No 99A of Schedule Ito Notf No 01/2017 CT (R) dt 28-06-2017 as amended by Notf No 34/2017 CT (R) dt 13-10-2017. However, before we approach the issue of classification, we must first address the objection raised by the Department. It has been brought to our notice by the Department that the impugned advance ruling has been obtained by the Appellant by suppressing the fact of an investigation by the DGGI against them on the very same issue of classification of Whole Wheat Parota and Malabar Parota. It has been urged by the Department that the ruling of the lower Authority is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the requisite steps by which a judicial action is invoked. The process of investigation in tax administration is such a step towards the action of issuing a show cause notice which culminates in a decision. Investigation is activated when there is enough predication to show that there is an alleged tax evasion. The essence of investigation is to carry out an in-depth review of the taxpayer s records and activities to ensure that the tax due to the government is not lost in evasion. Therefore, commencement of investigation in terms of Section 67 of the CGST Act, can be said to be the start of a proceeding to safeguard the government revenue. We are therefore of the view that the usage of the words any proceeding in the proviso to Section 98(2) of the CGST Act will encompass within its fold the investigation launched by the agencies. 15. The Appellant has also argued that the issue of classification of the disputed products was not raised specifically by DGGI in the summons. We find from the records that the DGGI, Chennai Zonal Unit had issued a summons dated 21St June 2019 under Section 70 of the CGST Act, to the Appellant calling for certain details/documents in connection wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t since the Assessing Officer had issued a scrutiny notice and the main issue before the Assessing Officer in the scrutiny proceedings is the same as before the Authority for Advance Rulings. The AAR in the said case had not agreed with the objections raised by the Income Tax Department and had proceeded to give a ruling. The ruling was challenged by the Income Tax Department by filing a writ petition before the Delhi High Court. In this background the Hon ble High Court had observed from the records that the revised return has been selected for scrutiny under computer aided selection system (CASS) and a notice dated 16th August, 2018 under Section 143(2) of the Act had been issued by the petitioners. The admitted reason for selection of respondent s case for scrutiny is taxable income shown in revised return is less than the taxable income shown in the original return and large refund has been claimed . In contrast the question admitted for Ruling is Whether on the facts and circumstances of the case and in law, the Royalty receivable by the Applicant from Crocs India Private Limited ( Crocs India ) for use of intellectual property rights ( IPR ) relating to design, development, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chose to keep this fact away from the Authority for Advance Ruling at the time of filing the application. We find that the application for advance ruling could not have been made in this case as it is hit by the provisions of Section 98 (2) of the CGST Act in as much as an investigation was already initiated against them by DGGI on the very same issue that was raised before the Authority for Advance Ruling. We therefore hold that the order of the lower Authority is void ab initio as it was vitiated by the provisions of Section 98(2) of the CGST Act. 18. The Appellant has also argued that the issue of jurisdiction cannot be raised at a belated stage before the Appellate Authority. The view of the Appellant that the issue of jurisdiction could only have been raised before the lower Authority and not having been raised before it, the Department had waived its rights to raise the same is not entirely correct. We find that the proceedings before the lower Authority had been conducted without any participation of the jurisdictional officer. The jurisdictional officer was not asked to furnish comments nor was the jurisdictional officer present at the time of the personal hearing. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen one comes for justice one should come with clean hands. This is not the case here. The Appellant is indeed guilty of having not revealed the fact of an investigation pending against them by the DGGI, Chennai Zonal Unit on the issue of classification of Parota at the time of applying for an advance ruling. We, therefore, invoke the provisions of Section 104 of the CGST Act, and declare the advance ruling order dated 22 May 2020 as void ab initio. 20. Having held that the order of the lower Authority is void ab initio, the question of addressing Whether the preparation of Whole Wheat parota and Malabar parota be classified under Chapter heading 1905, attracting GST at the rate of 5%? does not arise. 21. In view of the above discussion, we pass the following order ORDER We dismiss the appeal filed by M/s ID Fresh Foods (India) Pvt Ltd on all counts. The order No KAR ADRG 38/2020 dated 22.05.2020 = 2020 (6) TMI 183 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA passed by the Authority for Advance Ruling is declared void ab initio as it is vitiated by the process of suppression of material facts. We, however, do not give a ruling on the question Whether the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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