TMI Blog2019 (10) TMI 1186X X X X Extracts X X X X X X X X Extracts X X X X ..... h, healthy and ripe fruits through various processes followed by filtration to remove solids, aeration, homogenization and sterlisation. Such fruit juices to be classified under CTH 2009 can have added sugar, standardizing agent, preservatives as long as they retain their original character. However, addition of water to normal fruit juice or to a concentrated juice of a greater quantity of water than is necessary to reconstitute the original fruit juice results in diluted products excludes such products from CTH 2009 and are to be classified as beverages of heading 2202 - In the instant case, water constitutes around 92% in all the products in question. The product is prepared by adding fruit juice, procured by the applicant (as per the input invoices submitted), to filter water. It is evident that this large quantity of water results in diluted products which as per the Explanatory Notes above get classified under CTH 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’ are covered under CTH 2202. Further, The Explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sification of goods manufactured - Whether Carbonated Fruit Juice falls under Fruit Juices or Aerated drinks? 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. The applicant has stated that they are manufacturers of Fruit juices and also Carbonated fruit juices. The GST rate @28% and Cess @12 % are applicable only for the goods with description as all goods including Aerated water containing added sugar or other sweetening materials or flavoured. Hence nowhere fruit juices are mentioned. Their product Carbonated fruit juices do not fall under the above description of Aerated water containing added sugar or sweetening materials. Nowhere in the description fruit juices are covered Also Nowhere the percentage of fruit juices content are given for determination of tax rates whether falls under 28% or 12%. In a similar issue during the VAT regime, the Honorable Supreme Court in the case of Appy Fizz has given verdict saying that Appy Fizz belongs to fruit j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... APPY FIZZ in case of M/s. Parle Agro Ltd vs Commissioner of Commercial Taxes, Trivandrum = 2017 (5) TMI 592 - SUPREME COURT in the VAT regime where the Hon ble Supreme court ruled on the classification as per Kerala VAT notifications. They stated that fruit pulp or fruit juice based drinks should be classified under HSN 22029920. Appy Fizz drink is being sold at 12 % GST and the same should be permitted for their drinks. They submitted invoices for purchasing Lime Clear Juice and Kinnow Clear Juice which is classified under HSN 2009. They submitted product specifications of these two inputs indicating that they are of fruit juice (sulphited) of lime and orange with no added sugar , water except KMS (potassium metabisulfite) 3.2 The Procedure for preparation of carbonated fruit juice submitted by the applicant is as follows: SUGAR SYRUP UNIT: Few liters of water boiled in sugar syrup kettle, when boiling temperature reached at 70 C, pouring the sugar from the sugar bags in the kettle, after few minutes sugar dissolves then Passes to PHE plate through the filer (PHE plates reduce the temperature of sugar syrup to 35-45 C), to sugar storage tank, when pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Citric acid or Sodium citrate as acidity regulators 0.3% Lime as natural identical and artificial flavouring substance 0.3% Sodium benzonate and potassium sorbate as preservatives- 0.15% Sugar-14% Cola (Richyaaa Damer/Licta) Reverse osmosis treated carbonated water-92.5% Natural lime juice-2.5% Sugar-13% Sodium benzonate and potassium sorbate as pres 0.15% Caramel colour as permitted natural color Phosphoric acid 85%food grade, citric acid and sodim citrate as acidity regulator -0.3% Natural flavoring oils- substances of nutmeg, cinnamon, cassia, lime, lemon and orange oils as added flavours -0.3% Less than 100 ppm caffeine-0.02% Jeera Soda masala (Richyaaa Damer/Licta) Reverse osmosis treated carbonated water-92.5% Natural lime juice-2.5% Sugar-12% Citric acid, sodium citrate and black salt as acidity Regulators-0.3% Jeera, mint and tamarind as added natural flavours -0.3% Sodium benzonate and potassium sorbate as preservatives- 0.15% Caramel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - having Lime/Lemon Juice (2.5%) Licta Jeera Masala (200/300/600/1500 ml) - having Lime /Lemon Juice (2.5%) c. Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 dt.1.8.2011 effective from 5.08.2011 d. Food Safety Standards (Food Product and Food Additives) Eleventh Amendment Regulations, 2016 dt 25.10.2016 5.1 The Assistant Commissioner of State (ST), Rasipuram has furnished the comments on the questions raised by the applicant which is reproduced below: The product sold is termed as Carbonated Beverage with Fruit Juice (as per FSSAI regulation cited by them), the question raised in the application form for advance ruling is Whether Carbonated Fruits Juices Falls under Fruit Juices or Aerated Drinks? The terms Carbonated Fruits Juices and Carbonated Beverage with Fruit Juice denote different substances according to the very same FSSAI regulations. Thus, the question raised in the AAR pertains to a product different from that of the dealer s. Are Carbonated Beverage with Fruit Juice same as Juice ? Under the Food Safety and Standards (Food Safety Standards and Food Additives) Regulations, 2011, Regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fruit Juice same as Fruit Beverages ? Under the Food Safety and Standards (Food Safety Standards and Food Additives) Regulations, 2011, Regulation 2.3.10 defines Fruit beverages as follows. Thermally Processed Fruit Beverages/Fruit Drink/ Ready to Serve Fruit Beverages: Thermally Processed Fruit Beverages/Fruit Drink/ Ready to serve fruit beverage (canned, Bottled, Flexible Pack And /Or Packed) means an unfermented but fermentable product which is prepared from juice or Pulp/Puree or concentrated juice or pulp or sound mature fruit. The substances that may be added to fruit juice or pulp are water, peel oil, fruit essences and flavors, salt, sugar, invert sugar, liquid, glucose, milk and other ingredients appropriate to the product and processed by heat, in an appropriate manner, before or after being sealed in a container so as to prevent spoilage. The product shall meet the following requirements: (i) Total soluble solid(m/m) Not less than 10.0 percent (ii) Fruit juice content (a) Lime/Lemon ready to save beverage Not less than 5.0% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he product being that it is a Carbonated Beverage with miniscule quantity of fruit juice. As it has been already established that the primary quality of the product is it being that of a beverage, the HSN code 2202 90 20 which corresponds to that a fruit juice based drink wouldn t be appropriate as it would amount to defining the product with its secondary character ignoring its primary character of it being a Carbonated Beverage, Why 2202 10 10 is the most appropriate? - Chapter 22 deals with Beverage, sprits and vinegar. 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 The Fruit Products Order, 1955 in Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re taxed at 28% plus the imposition of cess. The logic and the spirit behind this classification is incentivizing healthy items must be taxed less while unhealthy products are discouraged with heavy taxation. Thus, providing the benefit of lower taxation to a product that contains as little as 5.0 percent of fruit (2.5 percent in case of lime or lemon) defeats the purpose. Hence, the product is to be classified under HSN 22021010 as Aerated Water and taxed accordingly. 5.2 The applicant is under the administrative jurisdiction of Commissioner of GST, Salem Commissionerate and no comments has been offered on the issue by them. 6. We have carefully examined the oral and written submissions of the Applicant and also comments furnished by the Assistant Commissioner, Rasipuram Assessment Circle (ST). We find that the question raised seeking ruling is: Whether Carbonated Fruit Juice falls under Fruit Juices or Aerated drinks? 6.1 From the submissions made by the applicant it is seen that the products manufactured by the applicant for which the classification is sought are having the names and labeling as listed in Para 4 (b) above with the ingredients as listed in Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom concentrate). It is seen from the above that as per the classification of FSSAI, Fruit juices are unfermented but fermentable product obtained by a mechanical process from sound, ripe fruit or the flesh thereof and processed by heat, in an appropriate manner, before or after being sealed in a container, so as to prevent spoilage and are intended for direct consumption. In the instant case, the product is made by adding fruit juices to large quantities of water along with other preservatives which then goes through a carbonation process. The juices are not meant for direct consumption here but are just one ingredient of the drinks. Para 2.3.30 of the above Regulations states 2.3.30 Carbonated Fruit Beverages or Fruit Drinks: 1. 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. It may non fain peel oil and fruit essences. It, may also contain any other ingredients appropriule to the products. ................ 3A. in case the quantity of fruit juice is below 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ypes, root beer, lemon-lime, and citrus types, both diet/light and regular types. These beverages may be clear, cloudy, or may contain particulate matter (e.g. fruit pieces). Includes so-called energy drinks that are carbonated and contain high levels of nutrients and other ingredients. Therefore, it is seen from above that fruit juices and carbonated beverages with fruit drinks are distinct products in the FSSAI regulations and the products of the applicant axe covered under Para 2.3.30 of the regulations and Category 14.1.4.1 in the food category system in Appendix A to these regulations. 6.3 In terms of explanation (iii) and (iv) to Notification No. 1/2017 - Central Tax (Rate) dt. 28-06-2017, tariff heading, sub-heading, heading and chapter shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 and the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975, including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall be applied for the interpretation and classification of goods. 6.4 The relevant entries of the Custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Provided they retain their original character, the fruit or vegetable juices of this heading may contain substances of the kinds listed below, whether these result from the manufacturing process or have been added separately : (1) Sugar. (2) Other sweetening agents, natural or synthetic, provided that the quantity added does not exceed that necessary for normal sweetening purposes and that the Juices otherwise qualify for this heading, in particular, as regards the balance of the different constituents (see Item (4) below). (3) Products added to preserve the juice or to prevent fermentation (e.g., sulphur dioxide, carbon dioxide, enzymes). (4) Standardising agents (e.g., citric acid, tartaric acid) and products added to restore constituents destroyed or damaged during the manufacturing process (e.g., vitamins, colouring matter), or to fix the flavour (e.g., sorbitol added to powdered or crystalline citrus fruit juices). However, the heading excludes fruit juices in which one of the constituents (citric acid, essential oil extracted from the fruit, etc.) has been added in such quantity that the balance of the different constituents as found in the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2202 10 90 --- Other 2202 91 00 --Non alcoholic beer 2202 99 Other: 2202 99 10 ---Soya milk drinks, whether or not sweetened or flavoured 2202 99 20 --- Fruit pulp or fruit juice based drink 2202 99 30 --- Beverages containing milk 2202 99 90 ---Other HSN Explanatory Notes to Chapter 2009 states 22.02- Waters, including mineral wafers and aerated waters, containing added sugar or other sweetening matter or flavoured, and other non-alcoholic beverages, not including trim or vegetable juces of heading 20.09. 2202.10 - Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured - Other: 2202.91 -- Non alcoholic beer 2202.99 - - Other This heading covers non-alcoholic beverages, as defined in Note 3 to this Chapter, not classified under other headings, particularly heading 20.09 or 22.01. (A) Waters, includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ariff, CTH 22021010 covers Aerated waters . CTH 22021020 covers Lemonade and CTH 22021090 covers Others . To further classify them, we may resort to the FSSAI regulations above to understand what aerated waters are. Para 2.10.6 BEVERAGES NON-ALCOHOLIC - CARBONATED 1. CARBONATED WATER means water conforming to the standards prescribed for Packaged Drinking Water under Food Safety and Standard Act, 2006 impregnated with carbon dioxide under pressure and may contain any of the following singly or in combination: 1. Sugar, liquid glucose, dextrose monohydrate, invert sugar, fructose, honey, fruits and vegetables extractives and permitted flavouring, colouring matter, preservatives, emulsifying and stabilising agents, citric acid, numeric acid and sorbitol, tartaric acid, phosphoric acid, lactic acid, ascorbic acid, malic acid, edible gums such as guar, karaka, carobean, furcellaran, tragacanth, gum ghatti, edible gelatin, albumin, licorice and its derivatives, salts of sodium, calcium and magnesium, vitamins, Caffeine not exceeding 145 parts per million, Estergum (Glycerol ester of wood resin) not exceeding 100 parts per million, Gellan Gum at GMP level and quinine sal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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