9911796707
TMI Blog2025 (3) TMI 549X X X X Extracts X X X X X X X X Extracts X X X X ..... en up together for hearing and disposal. 2. The petitioner is in the business of manufacture and sale of carbonated fruit drinks and ready to serve fruit drinks. The petitioner is a partnership firm and is represented in the present proceedings by the Managing partner. It manufactures and sells as many as 10 different products which are described as under: Product 1 - XSS Orange Product 6 - Thirst Cola Product 2 - Thirst clear lemon Product 7 - Thirst Orange Product 3 - XSS Cola Product 8 - XSS Clear Lemon Product 4 - XSS NimbooPaani Product 9 - Thirst Nimboo Paani Product 5 - Thirst Mango Produce 10- XSS Mango Drink 3. According to the contentions of the writ petitioner, these products are classifiable under Tariff Item 2202 99 20 of the Customs Tariff Act, 1975 and are specified as serial No.48 under Schedule-II as "fruit pulp or fruit juice based drinks" in notification No.1 of 2017 - Integrated Tax (Rate) dated 28.06.2017 and are taxable at the rate of 12%. 4. According to the petitioner, carbonated beverages with fruit drinks should not have less than 10% fruit juice (5% in case of lime or lemon) and total soluble solids not less than 10% as per Regulation 2.3.30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the goods manufactured and supplied by the petitioner contains carbonated water as an ingredient and as such these items were classifiable under Tariff Sub-Heading 2202 10 90 and it attracts GST at the rate of 28% and compensation cess at the rate of 12%. In the said impugned order it was stated that from the label available on the goods manufactured and sold by the petitioner and that it transpires that carbonated water "was an essential ingredient in the manufacture of these goods" and from the report of the analysis of food samples conducted by the State Public Health Laboratory, it appears that carbonated water was used in thirst clear lemon, thirst Orange and thirst Cola. The impugned order also contained the minimum and maximum consumption of apple concentrate, lemon concentrate, orange juice concentrate, mango pulp (neelam) and mango concentrate as per the data extracted from the Tally Accounting System maintained by the petitioner. 7. By the said order, the petitioner was asked to explain the reasons for the mismatch between the declaration made in the label as compared to the actual products as significant difference in consumption of concentrates in manufacturing the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agro (P.) Ltd. Vs. Commissioner of Commercial Taxes, Trivandrum. It was submitted that the judgments rendered in these cases squarely cover the case projected by the petitioner and are applicable to the factual matrix and therefore the subject drinks are liable to be classified as fruit juice based drinks as had been done by the petitioner. Pursuant to the reply submitted a personal hearing was granted to the petitioner where the petitioner reiterated its submissions made in the reply. It was also brought to the notice of the respondent authorities that by notification issued by the Government of India, Ministry of Finance, Department of Revenue being Notification No.8 of 2021 - Central Tax (Rate) dated 30.09.2021 whereby a new entry was inserted as serial 12A in Schedule-IV making carbonated beverages of fruit drinks or carbonated drinks with fruit juice to be taxable at the rate of 14%. The said notification was brought in force from 01.10.2021. It was also submitted that by Notification No.1 of 2021 - Compensation Cess (Rate) dated 30.09.2021 issued by the Government of India, Ministry of Finance, Department of Revenue, in the schedule to the Goods and Services Tax (Compensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02 99 20 essentially means a drink based on fruit pulp or fruit juice (with or without additional flavors or sweeteners). It is further submitted that the products in question in present factual matrix of Petitioner, are prepared with base such as apple concentrate, lemon concentrate, orange concentrate, as its base, which will be added to the syrupy liquid consisting of water, sugar and other constituents. For instance, in the product XSS Cola, percentage of apple juice constitutes 5% of the total beverage. Similarly, in case of Thirst Cola, percentage of apple juice constitutes 10% of total beverage. This is also evident from the sample labels. Thus, apple juice is the active ingredient of the products in question, and imparts the basic attribute to the drink, including its taste and characteristics. However, carbonated water is added as a filler as well as preservative and the other substances are either flavours or regulators or preservatives etc. These products do not impart essential characteristic to the product. Similar is the situation in the other variants of the fruit drinks being sold by the Petitioner as well, wherein the fruit juice content is at least 5% in case of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice to an extent that it attributes the essential character to the beverage, not merely as a flavouring agent. It is the dominant nature of the product which determines the classification under the Sub-heading No. 2202 10 or 2202 99. 15. It is submitted that the distinction drawn above between fruit pulp or fruit juice based drinks' and mere 'flavoured beverages' is evident from the scheme of Chapter Heading 2202. If this distinction is ignored, it would render the specific Tariff Item No. 2202 99 20 redundant and otiose. Although Sub-heading 2202 99 is provided as a residuary entry, it has to be examined in the broader scheme of heading 2202. If Tariff Item 2202 10 90 is treated to include an apple juice-based drink, orange juice-based drink or lemon juice based drink, it would mean that any fruit juice- based drink would be susceptible to classification under Tariff Item No. 2202 10 90, as being flavoured water, irrespective of the composition, nature and common understanding of the market regarding the nature of the product. This is so because in a broader sense, juice or essence is a flavouring agent, and any beverage based on fruit juice would be classifiable as f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. V. State of Rajasthan (1980) 4 SCC 71. 16. HPL Chemicals Ltd. v. Commissioner of Central Excise, Chandigarh (2006) 5 SCC 208. 17. Hindustan Ferodo Ltd. v. CCE, Bombay (1997) 2 SCC 677. 18. Colgate Palmolive (India) Ltd. v. UOI 1980 SCC Online Bom 384. 19. CCE V. Chemphar Drugs & Liniments, Hyderabad (1989) 2 SCC 127. 20. Anand Nishikawa Co. Ltd. v. Commissioner of Central Excise, Meerut (2005) 7 SCC 749. 21. Hindustan Steel Ltd. v. State of Orissa (1962) 2 SCC 627. 22. CCE Vs. H.M.M. LIMITED 1995 Supp (3) SCC 322. 23. CCE, Aurangabad v. Balakrishna Industries, Civil Appeal No. 3389-3390 of 2001, SC. 24. Goyal Tobacco Co Pvt. Ltd. v. CCE & ST, Jaipur-1, 2015 SCC Online CESTAT 979. 25. Commissioner of Central Excise, Bangalore Vs. Mysore Electricals Industries Ltd. (2006) 12 SCC 448. 18. It is submitted by the learned Senior Counsel for the petitioner that the impugned decision of the respondent authority is violative of judicial discipline. It is submitted that where the Tribunal had already decided the similar issue in favor of the SSE and the said decision was relied upon by the petitioner before the respondent authority, the said authority could not ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification issued under section 6(1)(d) was rejected. The Apex Court held that fruit based drinks were always covered under section 6(1)(a) and were never treated as "aerated branded soft drinks" as was sought to be done by the State while issuing notifications under section 6(1)(d). In support of his contentions he has further referred to the following judgments Godrej Foods Ltd. vs. CCE Indore reported in 2000 (121) ELT 231 (TRI) and Hamdard (Wakf) Laboratories vs. Collector of Central Excise, Meerut reported in 1999 6 SCC 617, Katrala Products Ltd. V. CCE, Meerut reported in (1999) SCC Online SC 701. It is submitted that any orders passed by higher authorities are required to be rigorously followed until and unless such order is stayed or set aside. It is submitted that the Tribunal in Parle Foods Pvt. Ltd. had rendered a finding rejecting the similar stand of the Revenue in favor of the SSE. This judgment ultimately came to be upheld by the Apex Court by dismissing the appeal filed by the Revenue Department. This aspect was urged before the adjudicating authority at the time of hearing. However, the respondent No.3, who was the adjudicating authority in the present proceedings r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at carbon-dioxide is added merely for preservation of the beverage and not for any other purpose. Rather, it is the fruit juice which gives the subject product its essential character and forms the base of the beverage. He submits that the carbon-dioxide in combination of other additives are added only for ensuring the safety of the beverage for consumption over its declared "best before date". The learned Senior Counsel places reliance on materials extracted from the "Carbonated Soft Drinks Formulation and Manufacture" edited by David P. Steen and Philip R. Ashurst, 2006 by Blackwell Publishing Ltd. He also places reliance on "Chemistry and Technology of Soft Drinks and Fruit Juices, Second Edition, edited by Philip R. Ashurst & Associates, Consulting Chemists for Food Industry, Hereford, UK, 2005 by Blackwell Publishing Ltd. Referring to these authorities by specialists in the fruit drinks and beverages industry across the world, the learned Senior Counsel submits that carbon-dioxide is a very effective preservative as it inhibits growth of microorganisms in the beverage. It is submitted that in respect of the subject goods, the presence of carbon-dioxide is only as a preservativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her preservatives as alleged by the Ld. Joint Commissioner in the impugned SCN. 25. Hence, the proposed classification of the subject products by Ld. Joint Commissioner, as carbonated water falling under CTH 2202 10 90 is factually incorrect and legally erroneous. 26. Thus, it is submitted that the goods manufactured by the petitioner are classifiable as fruit juice based drink since the essential component of the drink comprises of apple fruit juice and therefore the goods are classifiable under the tariff item 2202 99 20 as against the tariff sub-heading 2202 10 as proposed in the impugned SCN. Hence, the impugned SCN is liable to be dropped on this ground alone. 27. The learned Joint Commissioner of Taxes has applied the HSN Explanatory Notes of heading 2202 to propose that the subject products are classifiable under the tariff sub- heading 2202 10. In this regard, it is submitted that tariff heading 2202 of the Customs Tariff Act, 1975 is not fully aligned with the Harmonized System of Nomenclature ("HSN") issued by the World Customs Organization ("WCO") since the entry 2202 99 20, viz. 'fruit pulp or fruit juice based drink' is not there in the said HSN but is speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that the standards for 'thermally processed fruit beverages/ fruit drink/ ready to serve fruit beverages' have been laid down under Para 2.3.10 of the said Regulations. As per the said Para, thermally processed fruit beverages/ fruit drink/ ready to serve fruit beverages' means an unfermented but fermentable product which is prepared from juice or pulp/puree or concentrated juice or pulp of sound mature fruit. Further, the drink may also contain water, peel oil, fruit essences and flavours, salt, sugar, invert sugar, liquid glucose, milk and other ingredients. Similarly, the standards for 'carbonated fruit beverages or fruit drinks' have been laid down under Para 2.3.30 of the said Regulations. As per the aforesaid para, Carbonated Fruit Beverages or Fruit Drink means any beverage or drink which is purported to be prepared from fruit juice and water or carbonated water and containing sugar, dextrose, invert sugar or liquid glucose either singly or in combination. Further, he fruit drink made plod contain peel oil, fruit essences and any other ingredient appropriate to the product. 33. He refers to the Regulation 2.3.30 of the Regulation of 2011 to subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 48 of Schedule II to the IGST Rate Notification (for inter-state supply of goods made by Noticee). Even the learned CESTAT. Kolkata in Anutham Exim case (supra) held the same in its recent Final Order No. 75031/2021 dated 25.01.2021. 37. Hence, it is submitted that the products in question are fruit juice-based drinks, wherein fruit juice (having percentage content in excess of 5%, as provided under the regulation) is used to provide the essential characteristic of the drink and the related features of appearance and mouth- feel. Thus, the subject products, in present SCN, are correctly classifiable under tariff item 2202 90 20 as "fruit pulp or fruit juice-based drink" 38. It is thus, submitted that the products manufactured and supplied by the petitioner are classifiable as fruit juice- based drink since the essential component of the drink comprises of apple/ orange/ lemon fruit juice and therefore the goods are classifiable under the tariff item 2202 99 20 and not under the tariff sub-heading 2202 10, as proposed in the impugned SCN. 39. It is also submitted that Rule 3(a) of the General Rules for Interpretation of the Customs Tariff Act, 1975 provides that the heading whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en there is specific Tariff Entry No. 2202 99 20 for 'fruit pulp and fruit juice-based drinks', there is no need to place reliance on the residuary entry for classification of a product if such entry is self-sufficient to classify a particular product. 44. Reliance is placed on the case of Hindustan Poles Corporation v. CCE, Calcutta, 2006 (196) E.L.T. 400 (SC) wherein it was held that the residuary entry is meant only for those categories of goods, which falls outside the ambit of specified entries. Further, the Hon'ble Tribunal of Chennai, in the case of CC, Chennai v. Associated Cement Companies Ltd., 2001 (133) E.L.T. 400 (Tri.- Chennai) held that a residuary heading cannot be resorted to for classification when specific entry is available. 45. Reliance is also placed on the Judgments of the Apex Court rendered in CCE, Bhubaneswar-I Vs. Champdany Industries Ltd., reported in 2009 (241) ELT 481 (SC). Referring to the Judgment, the learned Senior counsel submits that the products in question clearly satisfy the description of this entry and accordingly, should be classifiable under the Tariff Item No. 2022 99 20, by application of rules 3(a) of the GIR. 46. The nex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derstood in the trade, by the dealer and the consumer. 48. Referring to the said Judgment, the learned Senior counsel submits that from ratio laid down by the Apex Court it is abundantly clear that the ordinary meaning of a product must be considered over the technical meaning for classification purpose. 49. It is submitted that the subject products in the present case, clearly indicates that such beverage is a fruit juice and not as merely flavoured water. The label of each of the product labels (e.g. XSS Apple Fruit Drink, XSS clear lemon, XSS cola, Thirst Cola, XSS Orange etc.) clearly depict in the centre that it 'CONTAINS FRUIT', photograph of fruits, phrase 'fruit drink' etc. This clearly indicates the intent of the petitioner in labelling the product in this manner in order to depict the fact that the product will be marketed to the customers as fruit juice-based beverage and not as flavoured water. Copy of the labels of the said products are already enclosed as Annexure-2. 50. Thus, the subject products are not understood in common parlance at par with the aerated carbonated soft drinks, which are classifiable under the tariff sub- heading 2202 10. The cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re should be material to enter appropriate finding in that regard and the material may either be oral or documentary. The taxing authority therefore must lay evidence in that regard even before the first adjudicating authority. 54. Reliance is also placed on the Judgment of the Apex Court rendered in HPL Chemicals Ltd. Vs. CCE, Chandigarh, reported in (2006) SCC 208; Hidustan Ferodo Ltd. Vs. CCE, Bombay, reported in (1997) 2 SCC 677; Colgate Palmolive (India) Ltd. Vs. Union of India & Ors, reported in 1980 SCC OnLine Bom 384. 55. In view of the elaborate submissions made above by the learned Senior counsel representing the petitioner it is vehemently urged that the subject products were correctly classified by the petitioner and the taxes due have been appropriately paid and the classifications in turn made by the Revenue Authorities in respect of the subject products rejecting the claims of the petitioner being contrary to the law as discussed above, the invocation of provisions under Section 74 of the CGST Act are not at all applicable. It is submitted that these provisions can only be invoked when there is any fraud or wilful suppression. In the facts of the present proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suppression can now be alleged against the petitioner. The question, thus, of evading the liability to pay tax cannot arise. 60. Further, the petitioner humbly submits that the impugned SCN has not brought on record any evidence to show that suppression of any fact from the Department. 61. It also submitted that the present issue involves interpretation of complex and technical question of determining classification of goods manufactured and supplied by the petitioner. The position adopted by the petitioner is in line with the settled principles of law and various judicial precedents as referred to above. Thus, there cannot be said to be any malafide intent on the part of the petitioner. Therefore, the provisions of Section 74 are not invokable. 62. The petitioner was and is still under the bonafide belief that subject products are classifiable under tariff item 2202 99 20. The bonafide belief is based on the submissions made above. Thus, in cases of bonafide belief, the Joint Commissioner has erred in invoking the provisions of Section 74 of the AGST/ CGST Act in the present case of the petitioner. 63. The learned Senior counsel therefore submits that the penalty sought to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, in such cases, where the issue is complex and requires technical understanding of the product, no penalty can be imposed on the petitioner. It is settled law that the imposition of penalty on the petitioner cannot be sustained when the issue is one of pure interpretation. Therefore, proposal to impose penalty under Section 122(2)(b) of the CGST Act is invalid and unsustainable in law. It is therefore submitted that the proposal for imposition of penalty on the petitioner is not sustainable in law. 71. The further contention of the petitioner is that the interest under Section 50 of the CGST is also not recoverable in the instant case. It is submitted that the charging of interest under the provisions of Section 50 of the AGST Act is not sustainable since the demand is itself not payable. The purpose of levying interest is to ensure that the Department is not at a loss due to any late payment of duty or tax. Therefore, what emerges is that interest is payable when there exists a liability to pay tax and the same has not been paid within the prescribed time limit. 72. In the present case, since the proposed demand of duty has been established to be legally unsustainable in prec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the items concerned were always included under Section 6(1)(a) and therefore, there was no occasion of the subordinate authority to include the products in the Notification under Section 6(1)(d). 77. Similarly, in the present case if the aforesaid product would have been covered by 2202 10 10, there would have been no occasion to issue the aforesaid Notifications by inserting new items making it effected from 01.10.2021. In view of the aforesaid, it is very clear that earlier the items in question were covered by Tariff Item 2022 90 20 and only after issue of the aforesaid Notification, the same are made taxable at a higher rate. 78. It is therefore submitted that in the absence of any concrete evidence, the allegation of the Department fails entirely. Further, it is important to note that the minimum consumption percentage has been arrived at by comparing concentrate in kgs with finished goods (viz. Apple Drink, Mango Drink in milli - litre (ml), which is grossly erroneous. Comparison if any must be made in same units to ensure accurate results. 79. With regard to the allegations that there were 2 negative stock during certain periods, the Petitioner submits that manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing the ingredients, the respondent counsel submits that from the label available on the products manufactured by the petitioner, which has been listed as above, it transpires that Carbonated Water, is used as an essential ingredient in some of the products manufactured by him. 86. It is further submitted that from the "Report of Analysis of Food Samples" conducted by the State Public Health Laboratory, Govt. of Assam, it is clear that Carbonated Water (i.e. aerated water) has been used in case of thrist Clear Lemon, Thrist Orange and Thrist Cola. However, in case of Thrist Mango Drink and Thrist Namboo Pani Drink, carbonated water has not been used. 87. Based on the ingredients of the products, as seen from the label of the products, and which has been duly described above and the list of ingredients as found in the factory premises, it is seen that the products are manufactured by adding fruit concentrate to large quantities of water along with other flavours, sweetener, preservatives etc. which then goes through a carbonation process. The fruit juice concentrate is just one of the many ingredients of the drink. 88. It is submitted that the petitioner has used fruit concentra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de 2202 only with tax rate of 12% (6% SGST + 6% CGST) without any cess. 94. It is therefore submitted that the petitioner has deliberately misclassified his products in lower tax rate category with the sole intention of minimizing his tax liability. 95. With regard to the submissions of the petitioner placing reliance on the Food Safety and Standard (Food Products and Food additives) Regulation, 2011 for the purpose of determining the classification of the subject matter, it is submitted that the classification of the product is well placed in accordance with the Customs Tariff Act, 1975 and GST Law, and as such by adhering to the well settled principle the Statutes having common object may provide aid to each other. But different statutes seeking to achieve different objects rule out interpretation of expressions used in one statute with reference to their use in another statute and decisions rendered with reference to construction of one Act cannot be applied with reference to the provisions of another Act, when the two Acts are not in parimateria. 96. Relying on the Judgment of the Apex Court rendered in Ram Narayan Vs. State of Uttar Pradesh, reported in 1956 (9) TMI 54-Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose and scheme cannot be applied mechanically to another statute. 101. It is also submitted that based on findings about the nature of products, ingredients used, manufacturing process it can be clearly seen that the product was misclassified by the petitioner to wrongly avail the benefit of incorrect classification into goods which are taxed at lower rate. 102. The further submission of the Revenue is that the GST being a progressive tax regime it encourages self- policing by the taxpayers and generally undertakes enforcement activities in cases where there is a strong suspicion of tax evasion. Hence, the contention of the tax payer that the GST department didn't raise any dispute or objection does not signify anything. 103. The Revenue contends that the classification of the finished products under Assam GST Act must be done as per the HSN Code and not by borrowing any other standard like from FSSAI which is codified for a different purpose. 104. The Revenue submits that the product is manufactured by adding fruit concentrate to large quantities of water along with other flavours, sweetener, preservatives etc. which then goes through a carbonation process. The fruit juice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the petitioner has indulged itself into misclassification of the said product under HSN 2202 99 20 instead of HSN 2202 10 90. It is submitted that the petitioner has been using concentrate for manufacturing of the said product along with Carbonated Water and other ingredients. It is submitted that the HSN Classification Heading 2202 10 specifically provides for "Water including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured" 111. The contention of the petitioner that applying common parlance tests, the subject products are known in the markets as "fruit pulp" or "fruit juice based drink" is disputed by the Revenue. It is submitted that the Label of the said products provides for "Fruit Based Carbonated Beverage" and/or "Carbonated Fruit Beverage" and/or "Ready to Serve Fruit Drink". The Revenue therefore submits that while taking reliance on the label of the products along with taking the contention of the petitioner into account, it becomes imperative to note. The Revenue further disputes the contention of the petitioner that the two Notifications have been ignored while issuing the Show Case notice and the consequential dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heard. Pleadings available on record carefully perused. The Judgments and authorities placed before the Court have been carefully perused. 116. In order to understand the issues raised in the present proceedings, it is necessary to refer to the Show Cause Notice which was issued on 17.02.2022. The Show cause Notice was issued by the Revenue on the following grounds: "1) The products manufactured by the Taxpayer have been misclassified. Based on the ingredients of the products as seen from the label of the products, and which has been duly described in the SCN and the list of ingredients as found in the factory premises it is seen that the product is manufactured by adding fruit concentrate to large quantities of water along with other flavours, sweetener, preservatives etc. which then goes through a carbonation process, The fruit juice concentrate is one of the ingredients of the drink and are not meant for direct consumption. 2) As per the contents of the products, the said products are sweetened (with Sugar and/or Sweetener) and flavoured (with Juice Concentrate and added flavours natural and nature-identical flavouring substances). The same is also aerated. The product are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02 only with tax rate of 12% (6% SGST + 6% CGST) without any cess. It appears that the taxpayer have misclassified to minimize his tax liability. This implies that tax has been short paid on such products. 10) There appears to be significant difference in the consumption of concentrates in manufacturing the finished products." 117. In the said Show case notice, the raw materials in the subject products are extracted in a tabular form indicating the minimum percentage consumption and the maximum percentage of the concentrate. The Revenue found significant difference in the consumption of concentrates in the manufacturing products and therefore called upon the assessee to explain the reason for such mismatch between the declaration made and thereby affecting the quality of the products actually supplied versus the actual product. 118. Further on the basis of the date extracted from the assessee's computerised accounting software "Tally", the Revenue noticed "Negative Stock" during certain period that is raw materials/stock consumed even without having stock/raw materials present along with the assessee on various occasions as per their books of accounts. The assessee was therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration the facts and circumstances involved in the present case. Hence, it would not be appropriate to drop the proceeding as has been prayed by the taxpayer. The prayer for classifying the subject products under tariff item 2202 99 20 and accordingly praying for no-conforming the demand raised is rejected to the fact: that the actual classification of the subject product is under HSN 2202 10 90, the reasons for which has been rightly provided under the SCN issued on 17/02/2022 and even provided in the aforesaid paragraphs. Further, considering the fact that the subject products has to be rightly classified under HSN 2202 10 50 and not under 2202 99 20 (as provided by the taxpayer), the necessity of allowing the prayer for not-confirming the demand gets nullified. The prayer for holding that the interest on the proposed differential GST and Cess is not recoverable u/s. 50(1) of AGST Act is not tenable considering the fact that the taxpayer has not paid any amount against the demand raised and further the fact that there exists a liability to pay tax and the same has not been paid by the taxpayer till date. The prayer for dropping the imposition of penalty u/s. 122 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased on the classification adopted by the Petitioner, the GST returns were being filed regularly on payment of appropriate taxes i.e. 12%. The classification of the products were also disclosed in the invoices raised and the returns filed by the Petitioner. There is no dispute that there was no objection raised by the GST Department with regard to the classification of fruit juice-based drinks under Tariff Item 2202 99 20 until August, 2021. In the month of September, 2021, the Department initiated an investigation with respect to classification of the aforesaid goods manufactured and sold by the Petitioner. On 03.09.2021, Inspection was undertaken by a team of officers of State Tax, Zone - A, Guwahati at the principal place of business of the Petitioner under Section 67 of the Assam Goods and Service Tax Act. During such investigation, certain documents such as sales registers, purchase registers, purchase files, loose slips file, long registers, sales bills file, loose slips folder, miscellaneous file were seized. Further, CPU cum monitor, pen drive, mobile phone and CCTV DVR were seized. Accordingly an order of Seizure in Form GST INS - 02 was issued to the Petitioner. The sampl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Rate Notification. The same is extracted below: Tariff Item Description of goods (1) (2) 2202 Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, and other non-alcoholic beverages, not Including fruit or vegetable juices of Heading 2009 2202 10 Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured: 2202 10 10 Aerated Waters 2202 10 20 Lemonade 2202 10 90 Other 2202 99 Other 2202 99 10 Soya milk drinks, whether or not sweetened or flavoured 2202 99 20 Fruit pulp or fruit juice based drinks 2202 99 30 Beverages containing milk 2202 99 90 other 130. From a perusal of the above. It is evident that Chapter Heading No. 2202 has been divided into two sub- headings, viz. Sub-heading 2202 10 which covers "waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured", and Sub-heading 2202 99 which covers "other" non- alcoholic beverages. Fruit pulp or fruit juice-based drinks are specifically covered under Tariff Item No. 2202 99 20 under the Sub-heading No. 2202 99 as 'other no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding its overall character to the drink which cannot be achieved in any other way. 137. The US Customs Ruling No. N122815 in the matter of Ms. Michele Peplinski Parker's Organic Fruit Juice, which deals with the issue regarding the classification of certain beverages containing concentrates of fruit juices as well as other ingredients. The ruling entailed classification of four such products, which could be summarised in the following table: Sl. Product Name Ingredients Classification 1. Parkers Organic Sparkling Apple with a Twist of Lime 50 percent organic apple, 5 percent organic grape and organic lime juices from concentrate. Carbonated water has been added to bring the final Brix value of this product to a Brix of 13. 2202.90.9090 (Others) 2. Parkers Organic Sparkling Pink Lemonade 9 percent grape juice concentrate, 7 percent apple juice concentrate, 1 percent lemon juice concentrate, 0.5 percent strawberry juice concentrate and 83 percent water. 2202.90.0040 3. Parkers Organic Ginger Beer Carbonated water, organic cane sugar, and Australian organic ginger. 2202.10.0040 (Carbonated Soft drinkothers) 4. Parkers Organic Lemonade arbonated wate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... According to The Shorter Oxford English Dictionary, 1973, Clarendon Press, Oxford 'flavour' is "1. A smell or odour. In mod. Use: A trace of a particular odour." 141. From these Technical Literatures referred to above, what is seen is that a substance or an ingredient of a food item can be called its base it's when such substance or ingredient forms the main or fundamental ingredient and imparts the essential attribute to the food item. The most significant feature of a food beverage is not it's food content but the function for which it is designed and marketed. The fruit is often a dominant ingredient providing its overall character to the subject product which cannot be achieved in any other way. This view is also found in the US Customs Ruling No. N122815 in the matter of Ms. Michele Peplinski Parker's Organic Fruit Juice. The said authority had classified the beverages by the presence of the fruit juice to the extent it attributes the essential character to the beverage. 142. Having noticed, the authorities placed before the Court as discussed above, it will now be apposite to refer to the various Judgments and the Rulings referred to by the parties before this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Department, as reported in 2010 (254) ELT A13 (SC). 145. The Hon'ble Supreme court in the case of Parle Agro (P) Ltd. v. Commissioner of Commercial Taxes, Trivandrum, (2017) 7 SCC 740 also held that 'Appy Fizz' containing more than 10% fruit juice (viz. 12.7%) was a fruit juice-based drink in terms of the provisions of Kerala VAT Act, 2003. 146. In Parle Agro Private Limited Vs. Commissioner of Commercial Taxes Trivandrum, reported in (2017) 7 SCC 540 the Apex Court at paragraph 20 of the said judgment observed that Section 6 of the Kerala Value Added Tax Act, 2003 provides for levy of tax on sale or purchase of goods. The said Section 6(1)(a) 6(1)(a) read as under: "20. Before we proceed to consider the submissions of the learned counsel for the parties, it is necessary to look into the statutory scheme and the relevant entries prior to amendment by SRO No. 119 of 2008. Section 6 of the Kerala Value Added Tax Act, 2003 provides for levy of tax on sale or purchase of goods. Section 6(1)(a) which is relevant for the present case as existed before 1-4-2007, was as follows: "6. (1)(a) in the case of goods specified in the Second and Third Schedules at the rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) soft drinks other than aerated branded soft drinks; (4) health drinks of all varieties; (5) 'similar other products not specifically mentioned under any other entry in this List or any other Schedule'." 147. In this connection, the Apex Court observed as under: "31. The aerated branded soft drinks, excluding soda were always covered under Section 6(1)(a) and prior to 1-4-2007 it bears HSN Code 2201.10.10. Entry 71 Item 4 also reads as "fruit pulp or fruit juice based drinks with HSN Code 2202.90.20". When fruit juice based drinks were covered under Entry 71 the State Government knew that fruit juice based drinks were not covered by Section 6(1)(a). Applicability of the power of State to issue notification under Section 6(1)(d) arises only when goods were not covered by Section 6(1)(a). Fruit juice based drinks, thus, were never treated as "aerated branded soft drinks" which was the understanding of the State of Kerala while issuing notification under Section 6(1)(d). Had fruit juice based drinks were also to be covered by aerated branded soft drinks, there was no occasion for subordinate legislative authority i.e. the State Government, to include such products in noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom Heading 22.02. Only beverages that contain fruit or vegetable juices that fall under Heading 20.01 are excluded from Heading 22.02." 151. In the case of Katrala Products Ltd. v. CCE, Meerut, reported in (1999) SCC Online SC 701, the Apex Court was examining the question as to whether synthetic squash or concentrate which can be consumed as a table drink after dilution with water. Even so, it has not been classified as a beverage. The Apex Court following the judgment of Hamdard (Wakf) Laboratories, allowed the appeal of the appellant. 152. The final order No. 75031/2021 dated 25.01.2021 passed by the Tribunal, Kolkata in the case of Anutham Exim Pvt. Ltd. also returned similar findings that the items before the Tribunal are classifiable under item head 2202 99 20. 153. In the facts of that case for the period under consideration, the assessee therein had filed Bills of Entry, for the import of the goods, viz. Big Cola, Big Jeera etc., which were carbonated beverages with fruit juice, having the fruit juice content of atleast 5% (2.5% in case of lime/ lemon), classifying the same under the tariff item 2202 99 20 (as fruit juice-based drinks) and applying appropriate IGST at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks and not the fruit juices. In our view both components are important. As carbonated beverages, they can be classified under 2202 10 20/22021090 (as claimed by the Revenue). As fruit juice based drinks, they could as well be classified under 2202 99 20 (as claimed by the assessee). In our view neither carbonated beverage alone nor fruit juice alone gives the essential character of theproducts in question; both contribute to its essential character. The issue cannot be resolved as per Rule 3(a) and 3(b) of the Rules of Interpretation and therefore we need to resort to Rule 3(c) which reads as follows: "3 (c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. Since Customs tariff heading 22029920 comes last in the order, it prevails and the goods are classifiable under this heading." 26. We find that the Hon'ble Supreme Court in the case of Parle Agro (supra) examined the classification of appy fizz which was a drink containing apple juice as well as carbonated water and held that the product is correctly classifiable under 22029920. While d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove, a plain reading of the schedule under Chapter 22 reveals that the Tariff item 2202 is to be applied in respect of "Waters including mineral waters and aerated waters containing added sugar and other sweetening matter or flavoured, and other non- alcoholic beverages not including food or vegetable juices under heading 2009". This Tariff head is divided into two parts namely; 2202 10- Waters including mineral water, aerated water containing added sugar or other sweetening matter or flavoured. And the other sub-head 2202 99- "Others" 158. The chemical examination of the sample products undertaken by the petitioner company which are available as Annexure-2 series in the writ petition reveals amongst others the following: The total soluble solids more than 10% and food juice content is found to be present. Sugar is also found to be more than 10% in most of the products is also found to be present. The results also reflects that as per the standard prescribed under the Food Safety and Standard Regulations, total soluble solids should not be less than 10%. The opinion of the Food Analyst show that the sample confirms to the prescribed standards as per food safety and stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of sections and Chapters are provided for ease of reference only; for legal purpose, classification shall be determined according to the terms of the headings and any relative section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the provisions hereinafter contained. 2. (a) Any reference in a heading to goods shall be taken to include a reference to that goods incomplete or unfinished, provided that, the incomplete or unfinished goods have the essential character of the complete or finished goods. It shall also be taken to include a reference to that goods complete or finished (or falling to be classified as complete or finished by virtue of this rule), removed unassembled or disassembled. (b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chedule in relation to the rate duty indicates that duty on the goods to which the entry relates shall be charged on the basis of the value of the goods as defined in Section 4 or the tariff value fixed under Section 3 of the Central Excises and Salt Act, 1944 (Act 1 of 1944), the duty being equal to such percentage of the value or tariff value as is indicted in that column." 165. From a perusal of these Rules, it is seen that while interpreting the Tariff heads/sub-heads that where the goods cannot be classified in accordance with the above Rules, they shall be classified under the heading appropriate to the goods to which they are most akin. 166. Coming to the facts of the present case, the chapter 22 does not specifically define the items manufactured and sold by the petitioner . Therefore, under the Rules of interpretation provided under the 1st schedule to the Customs Tariff Act, 1975, these items will have to be classified under the heading appropriate to the goods to which they are most akin. The tests conducted under the Food Safety Act quite clearly reveal that they are within the permissible limits prescribed under the Food Safety Act and except lime based products wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed by the respondent No. 3, it is clear that the Revenue never proceeded to treat the subject products to be "Water" or products which are akin to water and have accordingly therefore proceeded to levy GST under Sub-head 2202 10. 169. The sole basis for rejecting the assessee's classification under Sub-head 2202 99 is that these subject products contained carbonated water. However, such conclusions by the Revenue that merely because it contains carbonated water, the subject products are to be treated under classification 'water' or 'aerated water' is completely fallacious. The Laboratory Reports as well as the Labels on the fruit products which were placed before the Revenue Authorities clearly reveal the contents of the subject product. These products being sold as drinks and not as powders to be solved in water or in any other solid or semi solid form, must necessarily contained an element of water or carbonated or aerated water. That by itself cannot classify the subject product under the sub-head as have been sought to be done by the Revenue. 170. Even if the classification of the subject items are to be based on the Doctrine of common perlance then also the classi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 173. In Parle Agro Pvt. Ltd (Supra) before the Tribunal also the Food Standards laid down under the prevention of Food Adulteration Rules, 1955 were referred to and relied upon to classify the product in question. The order of Tribunal in favour of the assessee therein has also been upheld by the Apex Court. There is no finding that placing reliance on Food Adulteration Rules or FSSAI in order to determine the appropriate classification of the product in question is contrary to the provisions of Customs Tariff Act or the same would be unreliable for the purposes of classification of the items under the Customs Tariff Act. It is therefore held that the reliance placed by the assessee on the Food Standard Regulation and the tests results from the State Laboratory cannot be set to be unreliable. Rather its supports the contention of the petitioner that the items in question cannot be classified under the Sub Head "Water or Carbonated Water". Therefore, this Court does not find any infirmity in the petitioner placing reliance on Food Safety and Standards (Food Products Standards and Food Additives) Regulation, 2011 as well as the test results by the State Laboratory for the purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssify the subject items under water or carbonated water. Therefore, the classification sought to be made by the Revenue cannot be accepted. The classifications by the petitioner of the items under the subject head Fruit Pulp or Fruit Based Drink appear to be correct to this Court. 178. As have been discussed above, the burden is on the department to prove the classification of the subject items. Although, the results of the State Food Laboratory have been discarded by the Revenue, no alternative test reports or methods for appropriate classification of the subject products have been placed before the Court. Where an established laboratory for food testing under the FSSAI has in it's test reports indicated presence of food content and soluble solids in the report, and these reports not having been contradicted by the Revenue by referring or relying on other reliable test reports, the contention of the Revenue that these reports cannot be reliable, therefore cannot be accepted as the same are not supported by any sufficient reason. 179. In Union of India Vs Garware nylons Ltd, reported in 1996 (87) ELT 12 (SC), the dispute before the Apex Court was regarding the classification of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-heading different from that claimed by the assesse, the Department has to adduce proper evidence and discharge the burden of proof. In the present case the said burden has not been discharged at all by the revenue. 181. In Hindustan Ferodo Ltd. v. CCE, Bombay, reported in (1997) 2 SCC 677, the Apex Court held that the onus of establishing that the said rings fell within Item 22-F lay upon the Revenue. The Revenue led no evidence. The onus was not discharged. Assuming therefore, that the CEGAT was right in rejecting the evidence that was produced on behalf of the appellants, the appeal should, nonetheless, have been allowed. 182. The ratio in the above judgments can be squarely applied to the facts of the present proceedings. As such, it is held that the burden is on the Revenue to establish with cogent materials that the classification of the subject items have been wrongly classified under the sub Heads by the assessee rather it has to be classified under the sub Heads as projected by the Revenue. 183. In so far the arguments of the petitioner that Section 74 of the CGST Act is not applicable in the present case in the absence of any fraud or wilful suppression on the part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, shall not serve any notice under sub-section (1), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder. (7) Where the proper officer is of the opinion that the amount paid under sub-section (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable. (8) Where any person chargeable with tax under sub-section (1) pays the said tax along with interest payable under section 50 and a penalty equivalent to twenty-five per cent. of such tax within thirty days of issue of the notice, all proceedings in respect of the said notice shall be deemed to be concluded. (9) The proper officer shall, after considering the representation, if any, made by the person chargeable with tax, determine the amount of tax, interest and penalty due from such person and issue an order. (10) The proper officer shall issue the order under sub-section (9) within a period of five years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ambit of wilful suppression. 188. From the Judgments above, it is seen that for arriving at the conclusion that there was a suppression of facts, it must be evident that the correct information was deliberately not disclosed by the petitioner or that there was a conscious withholding of information with malafide intention by the petitioner/assessee. Mere failure due to inadvertence will not amount to suppression for invoking the powers under Section 74. 189. In the impugned show cause notice or in the impugned order, there is no finding by the Revenue that the petitioner evaded from furnishing his returns regularly. The returns which were furnished by the petitioner were on the basis of the classification made by the petitioner. These returns filed by the petitioner under the Tariff Head were known to the Revenue all along. There was no occasion earlier to raise objections to these returns filed under the concerned Tariff Head by the petitioner. Therefore, it cannot be said that there was wilful suppression or concealment with malafide intention on the part of the petitioner which will lead to the ultimate conclusion that there was suppression on the part of the petitioner/assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or wilful mis- statement of the facts. 194. It is apparent that the ingredients for imposition of penalty under Section 122(2)(b) are identical to the ingredients for invocation of the provisions of Section 74 of the CGST Act. 195. From the elaborate discussions above, this Court has concluded that there was no suppression of facts or wilful mis-statement on part of the petitioner assessee as alleged by the department and consequently provision of Section 74 of the CGST cannot be invoked in the instant case. 196. It should also be noted that penal provisions are only a tool to safeguard against contravention of the Rules. Reference to the Judgment of the Apex Court in Hidustan Steel Ltd. Vs. The State of Orissa, reported in AIR 1970 (SC) 253 is relevant for the purpose. The Apex Court held that liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out e statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective only from the date it is notified. 201. In Commissioner of Central Excise, Bangalore Vs. Mysore electricals industries Ltd., reported in (2006) 12 SCC 448, the Apex Court held that the classifications of a item can take effect only prospectively. The Apex Court held that the assessee therein had filed a classification list effective from 1-3- 1993, classifying the single panel circuit-breakers under Heading 85.35 and claiming concessional rate of duty at 5% under Notification No. 52/93 dated 28-2-1993. The said classification list was approved by the jurisdictional Assistant Commissioner on 10-6-1993. Thereafter, the assessee cleared the said goods in accordance with the approved classification list. When this approved classification was proposed to be revised to reclassify the single panel circuit-breakers under Heading 85.37 of the Tariff Act, such reclassification can take effect only prospectively from the date of communication of the show-cause notice proposing reclassification. It was held by the Apex Court that the show-cause notice was communicated to the assessee only on 31-12-1993, therefore, as rightly urged by the learned counsel for the respondent, the reclassi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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