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2025 (7) TMI 382 - AAR - GSTProcess amounting to manufacture - activity of peeling chopping packing of garlic - classification of peeled chopped packed garlic - falls under heading 07032000 or 20055900? - requirement to pay GST. Whether the activity of peeling chopping and packing of garlic amounts to manufacture? - HELD THAT - In terms of section 95(a) of the CGST Act 2017 advance ruling means a decision provided by the Authority for Advance Ruling to an applicant on matters or on questions specified in section 97(2) reproduced supra in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by an applicant. The question as to whether a particular process undertaken/proposed to be undertaken would amount to manufacture does not find a mention under the seven matters listed at 97(2)(a) ibid. We thus refrain from answering the said question. Whether classification of peeled chopped packed garlic could fall under tariff heading 07032000 or 20055900? - HELD THAT - Chapter heading 0703 relates to Onions shallots garlic leeks and other alliaceous vegetables fresh or chilled . However ongoing through the explanatory notes in respect of the said HSN it is forthcoming that the heading covers fresh or chilled alliaceous vegetables of which garlic is one amongst them. The general notes of the said chapter clearly states that vegetables of the chapter may be whole sliced chopped shredded pulped grated peeled or shelled wherein the term chilled means that the temperature has been reduced generally to around 0 c without the product being frozen. It further states that vegetables remain classified in the chapter even if put up in airtight containers. However the product put up in the packing have been prepared or preserved otherwise than as provided for in the headings of this chapter are excluded. No laboratory report has been submitted by the applicant to substantiate the averment that the garlic consequent to undergoing the process as shown in the flow diagram does not remain fresh. However contrary to the claim we find that the explanatory notes of chapter 07 states that the chapter covers vegetables whether fresh chilled frozen (uncooked or cooked by steaming or boiling in water) provisionally preserved or dried (including dehydrated evaporated or freeze dried); that the vegetables of this chapter may be whole sliced chopped shredded pulped grated peeled or shelled. The chapter note includes peeled chopped sliced vegetable. It is found that the product of the applicant which is peeled and chopped garlic consequent to undergoing the process would therefore fall in 0703 only. Peeled chopped packed garlic falls under HSN 07032000 - The applicant is not required to discharge GST since Peeled chopped packed garlic falls under HSN 07032000.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Authority for Advance Ruling (AAR) were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Whether peeling, chopping & packing garlic amounts to manufacture? Relevant legal framework and precedents: The applicant sought a ruling on whether the described process constitutes manufacture under GST law. However, the scope of advance ruling under Section 97(2) of the CGST Act does not explicitly include the question of whether a process amounts to manufacture. Court's interpretation and reasoning: The AAR noted that the definition or determination of "manufacture" is not among the specified matters on which advance ruling can be sought under Section 97(2) of the CGST Act. Therefore, the Authority refrained from providing a ruling on this question. Conclusion: The question of whether peeling, chopping, and packing garlic amounts to manufacture was not answered by the Authority. Issue 2: Classification of peeled, chopped & packed garlic under tariff headings 07032000 or 20055900? Relevant legal framework and precedents: The classification was to be determined in accordance with the Customs Tariff Act, 1975, as incorporated under GST law by notification No. 1/2017-Central Tax (Rate). The Authority applied the General Rules of Interpretation and relevant Chapter and Section Notes of the Customs Tariff Schedule. The relevant tariff headings were:
Court's interpretation and reasoning: The applicant argued that the garlic, after undergoing processes such as quality inspection, moisture removal, crushing, peeling, sorting, chopping, and packing, is no longer fresh and should be classified under Chapter 20 as a prepared vegetable. The Authority examined the explanatory notes of Chapter 07, which clarify that the chapter includes vegetables whether fresh, chilled, frozen, provisionally preserved, or dried, and explicitly states that vegetables may be "whole, sliced, chopped, shredded, pulped, grated, peeled or shelled" and still be classified under this chapter. The notes also clarify that packaging, including airtight containers or Modified Atmospheric Packaging, does not change classification if the product remains within the scope of the chapter. No laboratory report or scientific evidence was provided by the applicant to demonstrate that the garlic had undergone a change in character sufficient to remove it from Chapter 07. Therefore, the Authority concluded that peeled and chopped garlic remains classified under Heading 0703, specifically tariff item 07032000 for garlic. Key evidence and findings: The flow chart of the process, list of machinery, and wastage ratio (yield of 75-80%) were considered but did not establish a change in the essential character of the garlic. Application of law to facts: The process described (peeling, chopping, packing) is recognized within the scope of Chapter 07 as it does not amount to preparation or preservation methods that would shift classification to Chapter 20. Treatment of competing arguments: The applicant's contention that the garlic is processed and not fresh was rejected due to lack of supporting evidence and the authoritative explanatory notes. Conclusion: Peeled, chopped, and packed garlic falls under tariff heading 07032000. Issue 3: Whether the applicant is required to discharge GST on peeled, chopped & packed garlic? Relevant legal framework and precedents: The GST rates applicable were examined as per the notifications dated 28.6.2017, which incorporate the Customs Tariff Schedule into the GST regime. Court's interpretation and reasoning: The tariff heading 07032000 (garlic, fresh or chilled) attracts a nil GST rate as per the GST Tariff Schedule. Since the product falls under this heading, the supply of peeled, chopped, and packed garlic is exempt from GST. Key evidence and findings: The classification under 07032000 was determinative of the GST liability. Application of law to facts: Since the product is classified under a nil-rated tariff heading, the applicant is not liable to discharge GST on the supply. Treatment of competing arguments: The applicant's argument for classification under Chapter 20, which would attract GST at 12%, was rejected. Conclusion: The applicant is not required to discharge GST on peeled, chopped, and packed garlic. 3. SIGNIFICANT HOLDINGS The Authority ruled as follows: "(a) The ruling as to whether the activity of peeling, chopping & packing of garlic amounts to manufacture is not answered in terms of paragraph 13." "(b) Peeled, chopped & packed garlic falls under HSN 07032000." "(c) The applicant is not required to discharge GST since Peeled, chopped & packed garlic falls under HSN 07032000." Core principles established include:
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