9911796707
TMI Blog2019 (8) TMI 1805X X X X Extracts X X X X X X X X Extracts X X X X ..... APPELLATE AUTHORITY FOR ADVANCE RULING, UTTAR PRADESH] . In this case Appellate Authority for Advance Ruling, Uttar Pradesh has held that the product Breaded Cheese is classifiable under Heading 0406 - On going through the said case, it is found that cheese form the most important constituent (55% of total volume). Since the product in question in this case consisting predominantly cheese, hence the Authority has correctly classified the product under Heading 0406. However, in the present case, cheese is not the predominant constituent. Hence the case relied upon by the appellant is not at all applicable in the case. Thus, the impugned item pizza topping , is not covered under the Chapter Heading 0406 of the 1st schedule to the Customs Tariff Act, 1975, in the light of HSN explanatory notes, as discussed in preceding paras and accordingly, not covered by serial number S.No 13 of schedule II to Notification No 1/2017-Integrated Tax (Rate), Notification No.l/2017-Central Tax (Rate) and Notification no.35/ST-2 and chargeable to GST @ 12%. Applicability of Chapter 2106 - HELD THAT:- Chapter 21 essentially covers Miscellaneous Edible Products . Obviously, the term Miscella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on dated 04.06.2018. BRIEF FACTS OF THE CASE 2. The Appellant is inter alia engaged in the distribution of various dairy and non-dairy products and are registered with the jurisdictional GST authorities vide GSTIN 06AOEPK0998K1ZK. The goods Pizza Topping is sold by the appellant under the brand Goodrich is a proprietary food consisting of water, mozzarella cheese, vegetable oil and milk solids along with premixes of emulsifiers and stabilizers. It is ideal for use on pizza as a topping of cheese as it provides smooth 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n after addition of other ingredients. Accordingly, the pizza Topping is a type of cheese under Heading 0406 which covers cheese. 3. Based on the above submissions, the applicant raised the following question on which advance ruling was sought:- Whether the product pizza topping is classifiable under Chapter Heading 0406 [S. No. 13 of Schedule-1 of Notification No 1/2017-Integrated Tax (Rate) dated June 28, 2017, attracting IGST @ 5% /{SNo.89 of scheduled of Notification No 01/2017 Central Tax (Rate) dt.28.067 attracting CGST 2.5%}/ {S.No.89 of schedule-1 of Notification No 35/ ST-2 attracting SGST @2.5%} . Comments of the concerned officer U/S 98(1) OF THE CGST/HGST ACT, 2017 4. The Deputy Excise Taxation Commissioner (ST), Panipat, vide letter No 5339 dated 20.07.18, submitted the requisite comments on the above question raised by the applicant stating therein that after reading the above heading, it cannot be concluded that pizza topping falls under this head. There must be some different procedure adopted while preparation of cheese and pizza topping Heading 0406 clearly mentions cheese which is taxable @ 12%. Pizza Topping is not specified under chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iples of natural justice. Accordingly, the Impugned Ruling is liable to be set aside and classification adopted by the Appellant accepted. 7. Notification 1/2017-Integrated Tax and Notification 1/2017-Central Tax provide six Schedules which provide the serial number, the Chapter/ Heading / Sub-heading and Tariff item and the description of goods. The goods will have to satisfy the classification and description specified therein in order to be covered under a schedule. Each Schedule carries a rate at which central tax is levied on goods covered thereunder. Similarly, Notification 35/ST-2 provides six Schedules in a similar scheme. 7.1 It is noteworthy that Explanation (iii) appended to Notification 1/2017-Integrated Tax, Notification 1/2017-Central Tax, Notification 35/ST-2, imports Chapter, Heading, Sub-heading and Tariff item as specified in First Schedule of the Customs Tariff Act, 1975 ( Customs Tariff Act ) for the purpose of determining classification under Notifications. Similarly, Explanation (iv) adopts the general rules for interpretation, Section Notes and Chapter Notes as provided in Customs Tariff Act for interpreting the Notifications. 7.2 The First Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holic beverages 2106 90 60 --- Food flavouring material 21069070 --- Churna for pan 2106 90 80 --- Custard powder --- Other. 2106 90 91 ---- Diabetic foods 2106 90 92 ---- Sterilized or pasteurized millstone 21069099 ---- Other 7.4 The Appellant contends that impugned good merits classification under Tariff Item 0406 90 00 bearing description Other . It is a residuary entry which is provided under Heading 0406. Therefore, in order to classify impugned good under the aforesaid Tariff Item, the products must qualify under Heading 0406. 7.5 The Authority in the Impugned Ruling has held that impugned good are classifiable under Heading 2106. The Appellant submitted that the relevant Tariff item under heading 2106 is 2106 90 99 bearing description Other which is a four-dash entry covered under triple-dash entry Other . The triple-dash entry is further covered under Sub-he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... powder falling under Chapter 4 of HSN, also constitutes essential ingredients. Notable that even after addition of other ingredients, the topping maintains its basic cheesy character. Accordingly, the product is a type of cheese classifiable under Heading 0406 which covers cheese and curd. 8.6 The Appellant submitted that above view is supported by the Explanatory Notes appended to the HSN. 8.7 In the case of CCE vs. Wood Craft Products Limited, 1995 (77) ELT 23 (SC), the Apex Court observed that the HSN Explanatory Notes serve as a safe guide for ascertainment of meaning of a term used in the Tariff Schedule in case of doubt the relevant extract has been reproduced as under: We are of the view that the Tribunal as well as the High Court fell into the error of overlooking the fact that the structure of the Central Excise Tariff is based on the internationally accepted nomenclature found in the HSN and, therefore, any dispute relating to tariff classification must, as far as possible, be resolved with reference to the nomenclature indicated by the HSN unless there be an express different intention indicated by the Central Excise Tariff Act, 1985 itself. 8.8 In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or more varieties of cheese and one or more of the following: cream or other dairy products, salt, spices, flavourings, colouring and water. 8.12 In the present instance, the product is manufactured by processing (melting, emulsifying and comminuting) mozzarella cheese in a STEPHAN s cooker and then adding milk derivatives, premixes etc. to the same for the purposes of preservation and adding nutritious value. Thus, the nature and texture of impugned good, the ingredients added to it and the method of its manufacture are in consonance with HSN Explanatory Notes to Heading 0406. 8.13 The appellant submitted that it is pertinent to refer to the meaning of the term process. The term process has been defined in various dictionaries as under: The Concise Oxford English Dictionary [12th Edition (2011), Oxford University Press, refer at page 1143] defines the term as series of actions or steps; and Prem Saharay s Judicial Dictionary of Words and Phrases, [2nd Edition (2016), Thomson Reuters, refer at page 3832] defines the term is a mode of treatment of certain materials in order to produce a particular result. 8.14 A perusal of the above meaning reveals that proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eam, on the basis that it contains only 5 per cent milk. Hence, it was classifiable as ice cream. 9.3 In the case of Travancore Rayons Limited v. UOI and Others, 1985 (19) ELT 354 (Del.), the classification of nitrocellulose lacquer was disputed. The product was composed of paraffin wax, volatile matter and nitrocellulose contents. The percentage of volatile matter was 85.2per cent whereas the percentage of paraffin wax and nitrocellulose content was only 14.8 per cent. The revenue alleged that the product could not be classified as nitrocellulose lacquer as the presence of nitrocellulose contents was low. The Tribunal held that traders and consumers know this product as nitrocellulose lacquer and generally do not know the exact materials used in preparing it. The product is known as nitrocellulose lacquer in common parlance. Thus, merely based on lower percentage of nitrocellulose contents, it cannot be disregarded as nitrocellulose lacquer. 9.4 In the case of Akbar Badruddin Jiwani v. CC, 1990 ( 47) ELT 161 (SC), the Apex Court observed that express words of the Tariff Headings and relevant Section and Chapter Notes would take precedence over the commercial or trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 powder 4.7% Whole milk powder 4.1% Sodium orthophosphate 2% In this case, it was held that the product was classifiable under HTS 0406 as the same was obtained after processing of cheese. 10.3 In view of the above, the Appellant submitted that impugned good is correctly classifiable under Heading 0406 as a type of cheese. 11. The Authority in its impugned ruling has observed that impugned goods are classifiable under Heading 2106. In order to appreciate the fallacy of such classification, it is important to first venture into the scope of Heading 2106. 11.1 Heading 2106 is the last He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Tribunal opined that the goods are classifiable under Heading 2008. HSN Explanatory Notes as well as Chapter Notes under Customs Tariff Act to Chapter 21 talk primarily about products which are preparations not elsewhere specified or included. Therefore, if the goods are classifiable under Heading 2008, it will automatically cancel any considerations in favour of Heading 2106. 11.7 In the light of above analysis, it is clear that impugned good squarely qualify under Heading 0406. This understanding has been internationally validated by various rulings of Customs authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the impugned goods is a processed form of cheese which even after addition of various ingredients retain the basic character of cheese. Evidently, the Authority failed to consider or counter any of the submissions advanced vide the Application in respect of the same. Accordingly, the Impugned Ruling is liable to be discharged and classification as adopted by the Appellant be accepted on this ground alone. 12.7 From the above discussion, it is clear, that the Impugned Ruling passed by Authority suffers from the above-mentioned defects. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 interpretation in terms of scientific and technical meanings should be avoided in such circumstances. This, however, is by no means an absolute rule. When the Legislature has expressed a contrary intention, such as by providing a statutory definition of the particular entry, word or item in specific, scientific or technical terms, then, interpretation ought to be in accordance with the scientific and technical meaning and not according to common parlance understanding. 14.4 Shri Puneet Bansal, Advocate for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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. 16.4 The impugned item is being sold by the appellant as Pizza Topping which contains water, mozzarella cheese, milk solids, skimmed milk powder and vegetable oil along with premix of emulsifiers, stabilizers, acidity regulators and preservatives, chesses fall under chapter heading 0406, which reads as under:- Chapter 4 Dairy produce, birds eggs, natural honey, edible products of animal 0406 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht 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 Pizza Topping (impugned item), has been manufactured from, mozzarella cheese, vegetable oil and milk solids along with premix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this case consisting predominantly cheese, hence the Authority has correctly classified the product under Heading 0406. However, in the case before us cheese is not the predominant 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 prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... monly known as Namkeens , mixtures , Bhujia , Chabena or called by any other name. Such products remain classified in these sub-headings irrespective of the nature of their ingredients. 19.2 We find that the product 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 els ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
