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TMI Blog2021 (11) TMI 886X X X X Extracts X X X X X X X X Extracts X X X X ..... s for intended supply under the scheme on mixing the FRK with the Rice in the given proportion. It is also seen that the supply is made based on the demand placed on them vide proceedings issued by the TNCSC and invoice is raised for each such period of supply. The product supplied by the applicant to the rice mills for blending with rice grains is Fortified Rice Kernel (FRK), which per-se is not a 'Food Preparation', in as much as the FRK cannot be consumed as such or after cooking, but FRK is 'goods'. Further the FRK is not directly supplied to the economically weaker sections, but only after blending with rice grains in designated rice mills. The Notification No. 39/2017-C.T.(Rate) dated 18.10.2017 provided the concessional rate to 'Food Preparation' subject to fulfillment of conditions at Column (4) before such amendment. Therefore, the concessional rate under Notification No.39/2017-C.T.(Rate) for the Period 18.10.2017 to 30.09.2021 is not available to the applicant for reasons, that;- (1) FRK is not a food preparation put up in unit containers for free distribution to economically weaker sections and; (2) Applicants are not involved in free di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istribution under the Public Distribution System project launched by the Central Government. 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. 2.1 The Applicant has stated that they are engaged in the business of manufacture and supply of nutrition products such as complementary weaning food, energy food, fortified rice kernel, etc., and is also engaged in trading of agricultural commodities. The Government of Tamil Nadu had invited tenders from eligible bidders for the supply of 164 MTs of Fortified Rice Kernels ( FRK ) per month with content of 3 micronutrients namely Iron, Folic Acid and Vitamin B12, to Trichy District of Tamil Nadu (for issue under public distribution system), vide E Tender Document dated 11.05.2020. Subsequently, the Applicant has been awarded the contract for supply of FRK. In terms of the tender document, the successful bidder has to supply 164 MTs of FRK to make Fortified Rice at the designated Rice Miller's locations as per the technical specifications ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06.2017 would be 18% (9% CGST + 9% SGST) it is pertinent to note that Notification 39/2017 CT(R) dated 18.10.2017 notified the central tax rate of 2.5%, and G.O.Ms.No. 140 dated 17.10.2017 issued by the Commercial Taxes and Registration Department, notified the State tax rate of 2.5% on the intra-state supply of the below mentioned description of goods falling within Chapters 19 or 20 of the Customs Tariff Act, 1975:- Food preparations put up in unit containers and intended for free distribution to economically weaker sections of the society under a programme duly approved by the Central Government or any State Government The 5% GST Rate (2.5% CGST+2.5% SGST) shall be subject to the following condition;- When the supplier of such food preparations produces a certificate from an officer not below the rank of the Deputy Secretary to the Government of India or the Deputy Secretary to the State Government or the Deputy Secretary in the Union Territory concerned to the effect that such food preparations have been distributed free to the economically weaker sections of the society under a programme duly approved by the Central Government or the State Government concerned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ored Pilot Scheme on Fortification of Rice its Distribution under the Public Distribution System for a period of 3 years beginning 2019 20 with a total budget outlay of ₹ 174.64 crores. The Press Information Bureau Chennai, on 25.09.2020, announced that the Fortified Rice Scheme would be implemented in Tiruchirapalli District from 01st October 2020, for all ration card holders in the district. Rice would be fortified with iron, folic acid and Vitamin B 12 to make it nutritious and will be distributed through 1224 ration shops in Trichy district. About 7.5 lakh card holders in Tricky district will benefit under this pilot scheme of supplying fortified rice. Moreover, the Tender Document itself calls for online electronic tenders for Supply of 164 Metric Tonnes of Fortified Rice Kernels (FRK) Per Month with Content of 3 Micronutrients to 'trichy District of Tamil Nadu for Issues under Public Distribution System (PDS) . Additionally, it is also pertinent to note that the Scheme is implemented by the Government of Tamil Nadu through the TNCSC which is a Government of Tamil Nadu undertaking. The Board of Directors of the TNCSC is appointed by Govt, of Tamilna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intended purposes, as noted by the Commissioner, does not arise. 2.6 In view of the aforesaid decision the applicant is of the view that Notification 39/2017-CT(R) read with G.O.Ms.No. 140 dated 17.10.2017 issued by the Commercial Taxes and Registration Department, nowhere mentions that the food preparations ought to be directly freely distributed to a weaker section of the society; it only uses the phrase intended for free distribution to economically weaker sections of the society . Hence, their supply is within the scope of the Pilot Scheme for Fortification of Rice its Distribution under the Public Distribution System and the applicant supplies the FRK to the identified Rice Mills, which then blends the FRK with the regular rice and ultimately supplies the blended rice mixture to PDS outlets for free consumption of ration card holders in the District of Tiruchirapalli. Further, they have stated that the pilot scheme is duly approved by the Central Government, funded by the Central Government as well as State; Government. They have also stated that in terms of invoice raised by them one of the terms and condition for applicability of GST @ 5% is submission of certifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce mill can produce the FRKs. Moreover, such facilities are mandated to comply with World Health Organization's Good Manufacturing Practices (GMP), and food safety guidelines as per FSSAI standard guidelines. o It is also pertinent to note that the language used in FSSAI guidelines, reinforces the fact that FRKs are the result of an extremely technical manufacturing process that cannot be carried out in an ordinary rice mill. Upon the manufacture of the FRKs, it is supplied to the rice mills specified in the Tender Document where the FRKs are blended with regular rice in the ratio of 1:100, i.e., 10 gms FRK is added to each kilogram of normal rice, which is them ultimately provided to all ration card holders in the district of Tiruchirapalli. Therefore, it is apparent that the milling industry comes into picture only after the FRKs have been manufactured. As a corollary, the FRKs cannot be said to be a product of the milling industry. o The applicant has referred to the decision of Advance Ruling Tamilnadu, in the case of In re: Chellasamy Nadar Deivarajan [2020 (33) GSTL 442] while having to decide classification of vegetables and cereal flours, made the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their product will be classifiable under chapter 19. The test report furnished by them has been already taken on record. Shri. V.V. Ramkumar, the State Jurisdictional officer appeared and stated that the Notification is applicable only to the final supplier who supplies to the economically weaker sections (EWS) of the society but in this case the applicant is not supplying to EWS. The Authorised representative in this connection relied on the decision of CESTAT Delhi in the case of caterpillar and stated that the notification says only intended for free distribution, and therefore their product being definitely intended for free distribution the benefit of notification is applicable to them. 4.2 The applicant vide their email dated 11.08.2021 furnished the following additional submissions. The applicant has relied on the CBEC letter F.No.315/17/86 TRU dated 12.12.1986(Copy furnished) issued in response to representations received from Hindustan Lever Limited, in the context of Central Excise Duty. They have stated that the CBEC letter was in the nature of a clarification to Notification 81/75 dated 22.03.75 which provided exemption to Sulphuric acid which is intended for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal submissions clarifying the above. They were also asked to furnish the FSSAI materials relied upon by them to explain the pulverization and extrusion of kernels. 4.4 In furtherance to the hearing held on 22.09.2021, the applicant submitted the following documents:- 1. Copies of monthly indents issued by the TNCSC along with details of mills to which supplies to be made.; 2. Copy of certificate issued by MD, TNCSC along with corresponding invoice; 3. Copy of Technical handout on Fortification of Rice issued by the Food Safety and Standards Authority of India, explaining the manufacturing process of FRK in detail. The applicant has also stated that the sample submitted before the Authority for Advance Ruling was drawn at the destination rice mill. Also, in terms of clause 18(b) of the tender document the FRKs received at the destination are subject to quality check by the purchaser, i.e the TNCSC. 5.1 The State Jurisdictional authority who has the administrative jurisdiction over the applicant stated that the applicant is not eligible to avail the benefit of the concession notification as they are intermediaries to the supply done by a different party wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble rate would be 5% (2.5%CGST + 2.5% SGST) on account of Notification no.39/2017 -CT(R) dt. 18.10.20 17 and G.O.Ms No.140 dt. 17.10.2017 issued by the Commercial Taxes and Registration Department. With respect to classification under Chapter 19, applicant has submitted that FRK falls under Chapter heading 1903, which reads as under:- Prepared foods obtained by the swelling or roasting of cereals or cereal products (for example, corn flakes); cereals (other than maize (corn)) in grain form or in the form of flakes or other worked grains (except flour, groats and meal), pre-cooked or otherwise prepared, not elsewhere specified or included Applicant has produced a test report from Nawal Analytical Laboratories certifying the ash and starch content in the FRK and they have stated that the sample was drawn at the receivers end. They have submitted that Notes to Chapter 11 provides that in an event of rice having less than 45% starch and more than 1.6% ash content would result in classification of such product under 23, which deals with 'Residues and wastes from the food industries; prepared animal fodder' and that it is irrelevant to the FRKs under issue in the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d intended for free distribution to economically weaker sections of the society under a programme duly approved by the Central Government or any State Government; subject to the condition that the supplier of such food preparations produces a certificate from an officer not below the rank of the Deputy Secretary to the Government of India or the Deputy Secretary to the State Government or the Deputy Secretary in the Union Territory concerned to the effect that such food preparations have been distributed free to the economically weaker sections of the society under a programme duly approved by the Central Government or the State Government concerned, within a period of five months from the date of supply of such goods. 8.2 The above notification stands amended vide Notification No. 11/2021-C.T.(Rate) dated 30th September 2021, effective from 01st October 2021. The operative portion of the said Notification is as under: In the said notification, in the Table, against S. No. 1, (i) in column (3), for the entry, the entry (a) Food preparations put up in unit containers and intended for free distribution to economically weaker sections of the society under a programm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication no. 39/2017-C.T. (Rate) until the said notification is amended. 9. In the case at hand, the applicability of the Notification was raised before us for the FRK(Premix) supplied by the applicant to the Designated Rice Mills for mixing with the Rice in a fixed proportion and distributing the same under the Scheme duly approved by the Government. As per the submissions, it has been established by the applicant, that the product satisfies the conditions for classifying under CTH 19 basis the Laboratory report furnished by them. It is also established that they undertake supply of FRK as per the tender conditions and supplies the same to the Designated Rice Mills for intended supply under the scheme on mixing the FRK with the Rice in the given proportion. It is also seen that the supply is made based on the demand placed on them vide proceedings issued by the TNCSC and invoice is raised for each such period of supply. The product supplied by the applicant to the rice mills for blending with rice grains is Fortified Rice Kernel (FRK), which per-se is not a 'Food Preparation', in as much as the FRK cannot be consumed as such or after cooking, but FRK is 'goods'. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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