ADVANCE RULING ON CLASSIFICATION OF AND GST ON GOODS (POOJA OIL) (POOJA OIL)

[Dr. Sanjiv Agarwal]

What should be the appropriate classification of ‘oil’ we use in ‘pooja’ and at what rate it should be taxed to GST, this issue was examined by Authority of Advance Ruling, Karnataka in S.K. Aagrotechh’s case which was also confirmed by Appellate Authority for Advance Ruling, Karnataka. In the case on hand, the applicant was a partnership firm engaged as a dealer inedible oils. The applicant was manufacturing “Pooja Oil”, which was primarily a mixture of rice bran sesame oil (gingelly oil), coconut oil and mahua oil. A small quantity of fragrance also was mixed only for giving fragrance. The applicant was of the view that the applicant’s product “pooja oil” was classifiable under tariff heading 1518, gets covered under Schedule-I of Notification No. 01/2017-CT (R) dated 28.06.2017 and taxable at 5% GST.

The Authority for Advance Ruling, vide Order dated 18.09.2019, ruled that the “Pooja Oil”, classified under tariff heading 1518, being inedible mixture gets covered under entry number 27 of Schedule - II of the Notification No.01/2017-CT (R) dated 28.06.2017, as amended, and hence is taxable at 6% under CGST Act, 6% under KGST Act and 12% under the IGST Act. [ IN RE: M/S. S.K. AAGROTECHH - 2019 (10) TMI 1089 - AUTHORITY FOR ADVANCE RULING, KARNATAKA].

Being aggrieved, assessee preferred an appeal u/s 100 of the CGST Act, 2017 before AAAR, Karnataka on the grounds as enumerated in para 6 of the Appellate Order, which inter alia, included the following grounds:

1. Chapter Heading 1518 covers vegetable fats and oils and their fractions, boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 1516.
2. Entry covers only vegetable fats and oils and that such oils could be chemically modified; that this entry does not make a distinction between edible grade and inedible grade oils. Therefore, any vegetable oil which is chemically modified, even if inedible is covered under the said entry.
3. The product “Pooja Oil” is primarily made up of 5 edible oils, namely, rice bran oil, coconut oil, castor oil, mahua oil and gingelly oil, which are vegetable fats/oils and not animal fats/oils. Therefore, the product in question should be classified under the more specific entry, which is the entry under Schedule-I.
4. The entry contained in Schedule-II is a generic entry and it seeks to cover primarily animal fats and oils. It also includes vegetable fats and oils which are inedible mixtures or preparations. However, Schedule-I specifically covers all such vegetable oils, whether or not chemically modified.
5. As per Rule 3(a) of the GIR, if a product can be classified under two or more different HSN codes, then the same should be classified under the HSN code which is more specific to the product and not under the code containing a general description.
6. The entry under Schedule-I does not specifically mention about the vegetable fats or oils being edible or inedible, which means that both edible and inedible oils are covered under this entry’, provided the other criteria are fulfilled.
7. The product in question is inedible and meets the other conditions for qualifying classification under this entry.
8. If the intention of the Government was to cover either edible oils or inedible oils, the same would have been mentioned specifically in the description, as can be observed in the description of other entries like 1517, wherein edible fats or oils has been categorically excluded.

The AAAR, Karnataka observed that Pooja oil, which is a mixture of 5 different vegetable oils will not be covered under Chapter headings 15.01 to 15.15 as the said headings pertain to either animal fats and oils or vegetable oils and its fractions obtained from a single plant source. Further, pooja oil manufactured by the Appellant does not undergo any chemical modification processes such as hydrogenation, inter-esterification, re-esterification or elaidinization and therefore, the Pooja Oil is not classifiable under Heading 15.16. The Heading 15.17 is also not applicable to Pooja Oil as it covers margarine and other edible mixtures of vegetable oils and fats and their fractions other than those which have been obtained by the processes mentioned in Heading 15.16.

The first part of Heading 15.18 pertains to products which are obtained by subjecting them to processes which modify their chemical structure or other properties but at the same time retain their original fundamental character. The second category in Heading 15.18 covers inedible mixtures or preparations of vegetable fats or oils or of fractions of different fats or oils of this Chapter, not elsewhere specified or included - thus, Pooja Oil being an inedible mixture of five different vegetable oils which is blended with a fragrance and not included anywhere else in Chapter 15, is more appropriately classifiable under the subheading 1518 00 40 of the Customs Tariff.

Thus, Pooja oil is classifiable under sub-heading 1518 00 40 of the Customs Tariff as inedible mixtures or preparations of vegetable fats or oils or of fractions of different fats or oils of this Chapter, not elsewhere specified or included.

The AAAR did not considered the relied upon rulings in absence of persuasive value.

The AAAR therefore, upheld the impugned ruling and dismissed the appeal, confirming the GST to be levied @ 12% (6% CGST, 6% SGST) on ‘pooja oil’. [IN RE: M/S. S.K. AAGROTECHH - 2020 (1) TMI 65 - APPELLATE AUTHORITY FOR ADVANCE RULING, KARNATAKA].