TMI BlogCLASSIFICATION AND RATE OF DUTY WHEN GOODS NOT IN TARIFFX X X X Extracts X X X X X X X X Extracts X X X X ..... CLASSIFICATION AND RATE OF DUTY WHEN GOODS NOT IN TARIFF - By: - Dr. Sanjiv Agarwal - Goods and Services Tax - GST - Dated:- 11-5-2019 - - In one of the recent advance rulings in GST before the Authority for Advance Ruling, Kerala, an issue came up for deciding the classification of goods and rate of GST on goods called Ada which does not find a specific mention in any Tariff heading. This is also perhaps the first case where because of difference of opinion between the two members of AAR, the matter was referred to Appellate Authority for Advance Ruling (AAAR). Advance Ruling: Difference of Opinion In Re: Ramachandran Bror (2018) 10 TMI 1312 (AAAR, Kerala) , the applicant was a wholesale distributor of Ada which is us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as seviyan (vermicelli) i.e., to make sweet kheer or palada payasam or ada pradhaman. Ada is one of the grocery goods, mainly used by Keralites to prepare a sweet kheer or payasam otherwise called pradhaman. The ada is produced from rice flour or maida and no other ingredients are added. Further, in Meenakshi Cottage Industries v. State Tamilnadu, vide Order dated 23.04.1987 of Tamilnadu Sale Tax Appellate Tribunal, Madurai bench, it was held that Ada and Vermicelli are one and the same. The AAR could not decide the issue as both the members differed in their opinion. The Member, CGST was of the view that the commodity ada is appropriately classifiable under HSN 1902 of the 1st Schedule [Sl No. 97 - Seviyan (Vermicelli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )] of Notification No. 01/2017 - Central Tax (Rate) dated 28.06.2017 and the State Government Notification No. 360/2017 attracting 5% GST. However, the Member, SGST was of the opinion that since the commodity ada is not specifically mentioned in any of the Tariff heads, it would be taxable under the residual entry at Sl.No. 453 of the Third Schedule of Central Government Notification No. 1/2017 and the concomitant State Government Notification No. 360/2017 at the rate of 18%. Need for Appellate Ruling According to section 98(5) of the CGST Act, 2017 , if the AAR differs in opinion, the ruling cannot be given and the matter has to be referred to AAAR. Accordingly, the matter was referred to AAAR for its ruling. Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late Ruling So far as to product Ada is concerned, it was observed that Seviyan (Vermicelli) is a commodity produced from maida and is used for the purpose of giving richness to Kheer / Payasam. Ada is also a commodity produced from maida or rice flour or a mixture of maida and rice flour and is used for the purpose of giving richness to some regional varieties of payasams; Known as Ada Pradhaman and Palada Pradhaman . In other words, Seviyan (Vermicelli) and Ada are produced from maida or rice flour and are essentially used for giving richness to different varieties of Kheer / Payasams. The only difference is that Seviyan (Vermicelli) is prepared in the form of sticks and Ada is prepared in the form of thin pieces, making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use of different dies. In payasams, where Vermicelli is used Ada is not used. Hence, essentially Ada is a substitute for Vermiclll used for giving richness to certain regional varieties of payasams called Ada Pradhaman and Palada Pradhaman , which are popular in Kerala and some parts of Tamil Nadu. Both Vermicelli and Ada are made of similar ingredients and serve the same purpose namely; giving richness to different varieties of payasams. The question before AAAR was therefore, that whether the commodity Ada should be classified under the HSN Code 1902 along with Seviyan (Vemicelli) attracting GST at the rate of 5% or should be classified under residual entry at Sl No. 453 of the Third Schedule of Notification No. 01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2017 - Central Tax (Rate) dated 28.06.2017 and State Government Notification No. 360/2017 attracting 18% GST. The AAAR observed that S.No. 453 of Third Schedule reads as follows; Any Chapter - Goods which are not specified in Schedule I, II, IV, V or VI. Therefore, it is evident that the entry is a residuary entry to classify commodities that are not classifiable under any of the other entries. Further, explanation to Notification No. 1/2017-CT (Rate) dated 28.06.2017 provides that: (1) In this Schedule, tariff item, heading, sub-heading and Chapter shall mean respectively a tariff item, heading, sub-heading and Chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) . (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The rules for the interpretation of the First Schedule to the said Customs Tariff Act, 1975, including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of above table. Thus, the rules for interpretation of the First Schedule of the Customs Tariff Act, 1975 including the Section and Chapter Notes and the General Explanatory Notes are applicable for interpretation of the GST Tariff / Rate Schedule. It observed that it is well settled that the ratio of various judgments of the Supreme Court, High Court and Tribunals regarding classification of commodities under the Customs Tariff and Central Excise Tariff are equally applicable and ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve precedent value in relation to the classification of goods under the GST Tariff/ Rate Schedule as the classification under the Customs and Central Excise Tariffs and the GST Tariff/Rate Schedule are aligned and based on the Harmonised System of Nomenclature Codes [HSN Codes]. According to Rules 4 of General Rules for interpretation of Schedule-I to Customs Tariff Act, 1975 , goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin. Thus, 'Ada' is to be classified under the heading appropriate to the goods to which it is most similar in character. The AAR also relied on following judgments COMMISSIONER OF CENTR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AL EXCISE Versus M/s WOCKHARDT LIFE SCIENCES LTD - 2012 (3) TMI 40 - Supreme Court WESTERN INDIA PLYWOODS LTD. Versus COLLECTOR OF CUSTOMS, COCHIN - 2005 (10) TMI 90 - Supreme Court BHARAT FORGE PRESS INDUSTRIES (P) LTD. Versus COLLECTOR OF C. EX. - 1990 (1) TMI 70 - Supreme Court COLLECTOR OF C. EX. Versus JAYANT OIL MILLS PVT. LTD. - 1989 (3) TMI 132 - Supreme Court DUNLOP INDIA LTD. MADRAS RUBBER FACTORY LTD. Versus UNION OF INDIA AND OTHERS - 1975 (10) TMI 94 - Supreme Court Based on above, AAAR thus concluded that Ada , in sum and substance, is something akin, i.e., similar in character to Vermicelli . Both are made from 'maida or rice flour' or 'maida and rice flo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur' and are manufactured through an identical process and ada is used for giving richness to certain regional varieties of payasams called Ada Pradhaman and Palada Pradhaman , which are popular in Kerala and certain parts of Tamil Nadu. There is indeed nothing to differentiate ada from vermicelli except for the dies that are used in the manufacturing process which gives it a different shape. Hence, Ada is rightly classifiable under HSN 1902 of the 1st Schedule [S. No. 97-Seviyan (Vermicelli)] of Notification No. 01/2017-CentraI Tax (Rate) dated 28.06.2017 and State Government Notification No. 360/2017 dated 30.06.2017 attracting 5% GST. - - Scholarly articles for knowledge sharing authors experts professionals Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... 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