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TMI Blog2019 (8) TMI 1805X X X X Extracts X X X X X X X X Extracts X X X X ..... h lasting taste and stringiness to pizza. 2.1 The impugned good comprises of 14.5 percent mozzarella cheese to which other milk products such as skimmed milk powder and rennet casein are added. The milk ingredients constitute another 15 percent. The composition of impugned good is tabulated as under; Name of Ingredient/additive Ratio Water 44 kg Vegetable Fat 22kg Mozzarella Cheese 14.5 kg Rennet Casein (milk solid) 11 kg Skimmed milk powder 4 kg Premix (emulsifier, stabilizer, acidity regulator and preservative) 4.5 kg Total 100 kg 2.2 Manufacturing process:- 1) The ingredients above are poured and mixed together in a Stephens cooker 2) The above mixture is heated at 75-80degre C.for about.5- 10 minute 3) After heating, the materiel is transferred to a mould of requisite capacity for packing the product into pouches containing smaller quantities (1 kg and 200 grm). These pouches are sealed and packed in an outer carton. 4) The pizza topping comprises of 14.5 percent 'Mozzarella cheese to which other milk products such as skilled milk powder and rennet casein are added The proportion of the milk products and other Ingredients constituting 41.5 percent are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and pizza topping Heading 0406 clearly mentions cheese which is taxable @ 12%. Pizza Topping is not specified under chapter 4 and hence requires to be subjected to 18% being unclassified in any schedule. Decision of Authority for Advance Ruling Haryana: 5. Advance Ruling under Section 98 of the CGST/ HGST Act, 2017 was pronounced as under: The impugned item, i.e., "pizza topping" being manufactured by the applicant cannot be classified as "process cheese" under chapter heading 0406, rather it merits classification under chapter heading 2106 of the schedule to the Customs Tariff Act, 1975, as "Food Preparations not elsewhere specified or included" and chargeable to IGST @ 18%, CGST @ 9% and SGST @ 9%, as specified under S.No.23 of Schedule-Ill of Notification No. 1/2017. Integrated Tax (Rate) dated June 28, 2017, Notification No.01/2017-Central Tax (Rate) dated 28.06.17 and of Notification No.35/ST-2 Submissions made in the Appeal, by the Appellant: 6. The Appellant made the following written submissions in the Appeal: 6.1 At the outset, it is pertinent to highlight that the Authority in its impugned Ruling has failed to take note of the additional submissions furnished and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ariff Act for interpreting the Notifications. 7.2 The First Schedule to the Customs Tariff Act is divided into XXI Sections which are in turn divided into 98 Chapters. The dominant constituent in impugned good is cheese topping. Hence, Chapter 4 and Chapter 21 covering 'Dairy produce; birds eggs; natural honey; edible products of animal' arise for consideration in the present instance. 7.3 In the present case, the Appellant seeks to classify impugned good under Heading 0406 whereas the Authority vide its Impugned Ruling has classified the same under Heading 2106. It is pertinent to extract each of the above headings for ascertaining their scope and determining the classification of impugned good. Chapter 4 Dairy produce, birds' eggs, natural honey, edible products of animal 0406 Cheese and Curd 040610 00 Fresh (unripened or uncured) cheese, including whey cheese and curd 0406 00 20 Grated or powdered cheese, of all kinds 0406 00 30 Processed cheese not grated or powdered 0406 00 40 Blue-veined cheese and other cheese containing veins produced by Penicillium roqueforti 0406 00 90 Other cheese Chapter 21 Miscellaneous edible preparations 2106 Food preparat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - * Cheese is a solid food made from milk. It is usually white or yellow; * Food made from milk, that can be either firm or soft; and * Food consisting of the coagulated, compressed, and usually ripened curd of milk separated from the whey. 8.2 A perusal of the above definitions reveals that the term 'cheese' refers to a product made from the milk, by application of the process of coagulation 8.3 The Appellant submitted that the Product contains mozzarella cheese constituting almost 15 percent of the total product. It forms the main ingredient to which other ingredients are added in small quantities. The product contains 15 percent of other milk products such as milk solids and skimmed milk powder. Thus, almost 30 percent {14.5% (mozzarella cheese) + 15% (milk solids and skimmed milk powder)} of product is comprised of cheese and other milk derivatives. 8.4 In addition to above, the Product also contain vegetable fat constituting almost 22 percent of the product. The Appellant submitted that vegetable fat is added only for the purposes of adding texture and providing flavour to the product. The cost of vegetable fat is quite less, hence this results in bringing down the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so known as process cheese. It is manufactured by comminuting, mixing, melting, emulsifying, with the aid of heat and emulsifying or acidifying agents (including melting salts), one or more varieties of cheese and one or more of the following: cream or other dairy products, salt, spices, flavouring, colouring and water. (4) Blue-veined cheese and other cheese containing veins produced by Penicillium roqueforti; (5) Soft cheese (e.g. Camembert, Brie); (6) Medium-hard cheese and hard cheese (e.g. Cheddar, Gouda, Gruyere, Parmesan). The presence of meat, fish, crustaceans, herbs, spices, vegetables, fruits, nuts, vitamins, skimmed milk powder etc. does not affect classification provided that goods retain the character of cheese. Cheeses which have been coated with batter or bread crumbs remain classified in this heading whether or not they have been pre-cooked, provided that the goods retain the character of cheese." 8.10 Heading 0406 covers different types of cheese such as fresh cheese, powdered cheese, processed cheese, blue-veined cheese, soft cheese, medium-hard cheese and hard cheese. 8.11 It is submitted that the HSN Explanatory Notes clarify that processed cheese i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Product primarily comprises of mozzarella cheese and other ingredients such as skimmed milk powder, rennet casein, water, stabilizers, emulsifiers, etc. which are specifically permitted under the HSN Explanatory Notes. In addition to this, impugned .good also contains vegetable fat which is added to reduce the cost of the product. Even after addition of the above ingredients, impugned good does not lose its character of cheese and maintains the same taste, flavour, appearance and consistency. It is used for the purpose same as mozzarella cheese. 8.18 In view of the above, the appellant submitted that since the Product has the character of cheese and satisfies all the criteria laid down under the HSN Explanatory Notes, it merits classification under Heading 0406. 9. The Appellant submits that impugned good is known and sold in the market like cheese. It is used as a topping over pizza in the same way as mozzarella and Cheddar cheese are used. Thus, impugned good is understood as cheese in common parlance. 9.2 In the case of CCE vs Connaught Plaza Restaurant Private Limited, 2012 (286) ELT 321 (SC) wherein the classification of soft serve was disputed, the Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e product is as under: Ingredient Percentage Cheese 17% to 23% Breading 44% to 53% Others 24% to 39% It was held that even though the percentage of bread was 44 to 53 percent, i.e. almost twice the amount of cheese, yet the product was classifiable as 'Cheese and Curd' as the essential character of the product is cheese and the same was retained even after addition of breading. Hence, the product was classifiable under HTS 0406. 10.1 In the US Customs Cross Ruling HQ 9631.75, the classification of battered cheddar cheese balls was under consideration. The composition of the product was as under: Ingredient Percentage Batter 55.6% Cheedar Cheese 44.4% It was held that even though the percentage of batter (55.6 percent) was greater than that of cheese (44.4 percent), the product was classifiable as Cheese and Curd' under HTS 0406 as the essential character of the product was imparted by cheese. 10.2 In the US Customs Cross Ruling 1(86747, the classification of Assorti Processed Cheese was under consideration. The composition of the product is as under: Ingredient Percentage Rennet Cheese 20.6% Cheese curd 10.3% Sugar 25.7% Water 18.9% Batter 13.7% Cocoa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product was included under Heading 2008, hence Heading 2106 automatically became inapplicable. 11.5 In the case of CC v. Abott Healthcare Private Limited, 2015 (328) ELT 129 (Tr-Mum.), the product under consideration was 'Mama's Best Premium Chocolate', a nutritional powder. The importer classified under tariff item 1901 90 90 bearing description 'Other' as against revenue's classification under tariff item 2106 90 00 bearing description 'Other'. The Tribunal after considering the nature of goods and HSN Explanatory Notes, noted that the imported goods were classifiable under Heading 1901. It further held that Heading 2106 is a residuary entry. Thus, once goods are classifiable under a particular Heading, the same cannot be classified under Heading 2106 11.6 In the case of Agrotech Foods Limited v. CC, 2.017 (337) ELT 436 (Tr-Mum.), the product under consideration was "Act-TI Microwave Popcorn" which was ready-to use popcorn mixed with butter, required to be microwaved before consumption. The assessee claimed classification under Heading 2008 as 'Edible parts of plants, otherwise prepared or preserved', whereas the revenue sought to classify it under Tariff item 2106 90 00. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of processed cheese does not disallow addition of vegetable oil. 12.3 In addition to above, the Authority has failed to appreciate the Explanatory Notes as appended to Heading 0406 in its entirety. The Explanatory Notes read as under: The presence of meat, fish, crustaceans, herbs, spices, vegetables, fruits, nuts, vitamins, skimmed milk powder etc. does not affect classification provided that goods retain the character of cheese. Cheeses which have been coated with batter, or bread crumbs remain classified in this heading whether or not they have been pre-cooked, provided that the goods retain the character of cheese." 12.4 From a perusal of the above, it is clear that Heading 0406 is wide enough to allow addition of meat, fish etc. to cheese and still be classified under Heading 0406 as long as the basic character of cheese is retained. 12.5 In the above backdrop, it is noteworthy that Explanatory Notes whilst providing the scope of expression 'processed cheese' expressly covers 'any kind of addition to cheese as long as the basic character is retained'. 12.6 The Appellant, in preceding paragraphs and the Application had advanced detailed submissions which prove that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Commissioner of Central Excise , New Delhi vs Connaught Plaza Restaurant (P) Ltd reported as 2012 (286) ELT 321 (SC) has held that: ''Time and again, the principle of common parlance as the standard for interpreting terms in the taxing statutes, albeit subject to certain exceptions, where the statutory context runs to the contrary, has been reiterated. The application of the common parlance test is an extension of the general principle of interpretation of statutes for deciphering the mind of the law maker; "it is an attempt to discover the intention of the Legislature from the language used by it, keeping always in mind, that the language is at best an imperfect instrument for the expression of actual human thoughts." "Therefore, what flows from a reading of the aforementioned decisions is that in the absence of a statutory definition in precise terms; words, entries and items in taxing statutes must be construed in terms of their commercial or trade understanding, or according to their popular meaning. In other words they have to be constructed in the sense that the people conversant with the subject-matter of the statute, would attribute to it. Resort to rigid i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppealed against. 16. We now proceed to record our discussions and findings. 16.1 The appellant has contended that the Product "pizza topping" containing 14.5 percent Mozzarella cheese and 15 per cent of other milk products such as milk solids and skimmed milk powder along with other ingredients forms a type of cheese; that topping maintains its basic cheesy character even after addition of other ingredients. Thus, it is classifiable under Chapter Heading 0406 (SI. No. 13 of Schedule -Il to Notification No. 1/2017 Integrated Tax/Notification No. 1/2017-Central Tax and Notification No 35/ST-2 as "cheese" and chargeable to GST@ 12%. 16.2 The question for determination in this appeal is whether the product "Pizza Topping" manufactured/ supplied by the appellant merit classification under Heading 0406 as claimed by the appellant or classifiable under Heading 2106 as determined by the Authority for Advance Ruling, Haryana. 16.3. We found that for any given product, the name, character and use are three important ingredients which decide the classification of any given product. Hence we proceed to examine the classification of impugned item, keeping in mind the above guiding factors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance (for example, oleic fats) (heading 1901 or 2106); or" (c) albumins (including concentrates of two or more whey proteins, containing by weight more than 80% whey proteins, calculated on the dry matter) (heading 3502) or globulin (heading 3504). SUB-HEADING NOTES : 1. For the purposes of sub-heading 0404 10, the expression "modified whey" means products consisting of whey constituents, that is, whey from which all or part of the lactose, proteins or minerals have been removed, whey to which natural whey constituents have been added, and products obtained by mixing natural whey constituents. 2. For the purposes of sub-heading 0405 10, the term "butter" does not include dehydrated butter or ghee (sub-heading 0405 90). The above notes categorically state that this heading covers all kind of cheese, viz:- "(3) Processed cheese, also known as process cheese. It is manufactured by comminuting, mixing, melting and emulsifying, with the aid of heat and emulsifying a: acidifying agents (including meltinsalts), one or more varieties of cheese and one or more of the following: cream or other dairy products, salt, spices, flavouring and water." 16 .6 In the instant case, the 'P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant constituent. Hence the case relied upon by the appellant is not at all applicable in the case before us. 18.2 The appellant also contended that the impugned product is a type of cheese and relied upon the case of CCE vs. Wood Craft Products Limited, 1995 (77) ELT 23 (SC). In this case the Apex Court has observed that the HSN Explanatory Notes serve as a safe guide for ascertainment of meaning of a term used in the Tariff Schedule. We find that it is a well settled principle that HSN Explanatory Notes serve as a safe guide for ascertainment of meaning of term used in Tariff Schedule. However, as discussed herein above, the HSN explanatory notes to chapter heading 0406 under clause (3) has clearly defined the product 'processed cheese'. As per the said definition vegetable fat is not an ingredient of processed cheese. We find that in the impugned product vegetable fat is the major constituent (22%) and the cheese, as per appellants own submissions, constitutes only 14.5%. Hence the impugned product cannot be considered to be a type of cheese. Thus the product "Pizza Topping" do not qualify to be classified under Heading 0406. 18.3 As regards case of CCE vs Connaught Plaza Resta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduct in question i.e. ''Pizza Topping' is a product made out of mozzarella cheese, vegetable oil and milk solids as main ingredients with premixes of emulsifiers and stabilizers. The mozzarella cheese is blended with other ingredients and heated upto a required degree. After heating, the materiel is transferred to a mould of requisite capacity for packing the product into pouches containing smaller quantities (1 kg and 200 grm). These pouches are sealed and packed in an outer carton. The product cannot be termed as 'Processed Cheese' as already discussed above. However, there is no doubt that being edible preparation for human consumption, it would merit classification under Chapter 21 i.e. 'Miscellaneous Edible Preparations'. Once the chapter is decided, a careful examination of different entries under Chapter 21, the quest for appropriate classification rests finally at 2106 90 99, the residual entry, as the product itself does not find specific place anywhere else in the Chapter 21. We thus conclude that the impugned product viz. "Pizza Topping' would merit classification as 'Food preparations not elsewhere specified or included' under Chapter Heading 2106 of the schedule to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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