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2025 (5) TMI 982 - AAR - GSTClassification of groundnuts - mere heating of Ground-Nuts with shell to reduce its water content to make it suitable for storage and transportation makes it in-eligible to be classified under HSN 1202 or not - HELD THAT - It is observed that heating holds close proximity with roasting. Further it is found that the applicant has not mentioned the details of the heating process to be adopted by him. He has not mentioned details of equipments etc. that will be used to heat ground nuts in order to remove moisture in a controlled way by maintaining adequate temperature. It is also found that the applicant has not submitted any details of the infrastructure set up or intended to be set up by him in this regard. Heating at sufficient degree becomes roasting and roasted groundnuts is not classified under HSN - 1202 by legislature. Further it is noteworthy that heat-drying or heating can also bring change in physical appearance structure and composition to subjected goods. Thus it is observed that mere heating of Ground-Nuts with shell to reduce its water content is squarely covered under roasting process and therefore the product so obtained is not covered under HSN 1202. Conclusion - Heating of Ground-Nuts with shell to reduce its water content to make it suitable for storage and transportation makes it in-eligible to be classified under HSN 1202.
1. ISSUES PRESENTED and CONSIDERED
The core legal question considered by the Authority for Advance Ruling (AAR) was whether the process of mere heating of groundnuts with shell, intended solely to reduce moisture content for the purpose of storage and transportation, renders the groundnuts ineligible for classification under HSN Code 1202, which covers "Ground Nuts, Not Roasted or Otherwise Cooked, Whether or Not Shelled or Broken." The issue involved the interpretation of the terms "heating," "drying," "roasting," and "cooking" within the GST Tariff Act, 2017, and whether the mild heating process adopted by the applicant constituted roasting or cooking, thereby excluding the product from HSN 1202. 2. ISSUE-WISE DETAILED ANALYSIS Issue: Whether mild heating of groundnuts to reduce moisture content for storage and transportation amounts to roasting or cooking, thus making the product ineligible for classification under HSN 1202. Relevant Legal Framework and Precedents: The GST Tariff Act, 2017, specifically Chapter 12, HSN Code 1202, covers groundnuts that are "not roasted or otherwise cooked." The interpretation of "roasted" and "cooked" is critical. The applicant relied on precedents and clarifications distinguishing drying (mild heat treatment) from roasting (severe heat treatment causing fundamental chemical and physical changes). Key precedents cited include:
Court's Interpretation and Reasoning: The AAR examined the applicant's submissions that the heating process was intended only to reduce moisture content without causing fundamental chemical or physical changes in the groundnuts. The applicant argued that drying involves heat treatment at 10-90^0C, whereas roasting involves higher temperatures exceeding 100^0C, causing charring and compositional change. The applicant contended that their process was mild heating, akin to drying, and thus the product remained raw groundnuts eligible under HSN 1202 attracting 5% GST. The jurisdictional officer, however, opined that heating, whether mild or harsh, is proximate to roasting and that roasted groundnuts are excluded from HSN 1202 by legislative intent. The officer noted that the applicant had not provided details of the heating process, equipment, or temperature controls, making it difficult to distinguish mild heating from roasting. The officer emphasized that drying, heating, roasting, and cooking form a continuum of increasing heat intensity and that heating sufficient to reduce moisture content could amount to roasting. The AAR analyzed the terminology and precedents, noting that drying is commonly understood as removal of moisture by sun or air drying, or mild artificial heat, without altering the product's fundamental nature. Roasting, in contrast, involves severe heat producing chemical and physical changes and a charred appearance. The AAR observed that the applicant had not demonstrated that the heating was controlled to avoid such changes. Without clear evidence of the process parameters, the AAR found that the heating process fell within the ambit of roasting. Key Evidence and Findings: The applicant's factual submissions highlighted the necessity of moisture reduction to prevent mold growth and aflatoxin contamination, ensuring safe storage and transportation. The applicant stressed that the heating process would not alter the raw nature of groundnuts. However, the absence of technical details about the heating method, temperature, duration, and equipment was a significant gap. The jurisdictional officer's comments and reliance on precedents supported the view that heating sufficient to reduce moisture content is akin to roasting. Application of Law to Facts: Applying the legal definitions and precedents, the AAR concluded that the applicant's heating process, aimed at moisture reduction, constitutes roasting under the GST Tariff Act. Since HSN 1202 explicitly excludes roasted or otherwise cooked groundnuts, the product after heating is not classifiable under this heading. The legislative intent to exclude roasted nuts from the concessional tax rate under HSN 1202 was given primacy. Treatment of Competing Arguments: The applicant's argument that mild heating is distinct from roasting and does not alter the product fundamentally was carefully considered. However, the lack of detailed process information weakened this position. The jurisdictional officer's argument that heating and roasting are closely related and that roasting excludes the product from HSN 1202 was supported by authoritative rulings and tariff notes. The AAR favored the latter view, emphasizing the legislative language and the need for clear evidence to distinguish mild heating from roasting. Conclusions: The AAR ruled that mere heating of groundnuts with shell to reduce moisture content for storage and transportation renders the product ineligible for classification under HSN 1202. The process amounts to roasting, which is excluded from the concessional GST tariff applicable to raw groundnuts under this heading. 3. SIGNIFICANT HOLDINGS "Heating holds close proximity with roasting. Further, we find that the applicant has not mentioned the details of the heating process to be adopted by him. He has not mentioned details of equipments etc. that will be used to heat ground nuts in order to remove moisture in a controlled way by maintaining adequate temperature. Heating at sufficient degree becomes roasting and roasted groundnuts is not classified under HSN - 1202 by legislature." "Drying, heating, roasting and cooking are gradually more intense than former. Heating at sufficient degree becomes roasting and roasted groundnuts is not classified under HSN 1202 by legislature." "Mere heating of Ground-Nuts with shell to reduce its water content is squarely covered under roasting process and therefore, the product so obtained is not covered under HSN 1202." "Yes, heating of Ground-Nuts with shell to reduce its water content to make it suitable for storage and transportation makes it in-eligible to be classified under HSN 1202." Core principles established include the interpretation that the GST Tariff's exclusion of "roasted or otherwise cooked" groundnuts from HSN 1202 encompasses heating processes that effectuate moisture reduction through heat sufficient to cause changes akin to roasting. The ruling underscores the necessity of clear, specific evidence to distinguish mild heating or drying from roasting, and the legislative intent to tax roasted nuts differently.
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