TMI Blog2019 (10) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... dvance Ruling. Therefore the instant application is liable for rejection. Application rejected. - KAR ADRG 117/2019 - - - Dated:- 30-9-2019 - Sri Harish Dharnia and Dr. Ravi Prasad M.P. Member Represented by: Sri G. Shivadas, Advocate ORDER UNDER SECTION 98(4) OF THE CGST ACT, 2017 UNDER SECTION 98(4) OF THE KGST ACT, 2017 1. M/s. Hindustan Coca-Cola Beverages Pvt. Ltd., (called as the applicant hereinafter), having GSTIN number 29AAACH3005M1ZN, have filed an application for Advance Ruling under Section 97 of the CGST Act, 2017 KGST Act 2017 read with Rule 104 of CGST Rules 2017 KGST Rules 2017, in FORM GST ARA-01, discharging the fee of ₹ 5,000/- each under the CGST Act and the KGST Act. 2. The Applicant is a Private Limited Company and is registered under the Goods and Services Act, 2017. The applicant has sought advance ruling in respect of the following question: Whether FANTA FRUITY ORANGE product proposed to be manufactured is classified under Chapter Heading 2202 99 20 at SI. No. 48 under Schedule II as Fruit pulp or fruit juice based drinks , or under Chapter 2202 99 90 at Sl No. 24A under Schedule III as Other Non-alcoholic b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... added to sugar syrup to prepare final syrup. 4) The treatment water and final syrup are mixed, carbonated using Proportioner just before filling. 5) Filling and Packaging- a. Finished product is transferred on site blown PET bottles using Automatic filling machines and caped immediately. b. These filled bottles are coded with manufacturing date, time, and MRP using on line coding machine. c. These filled bottles are labelled using automatic labelling machine, these labels contain all declaration of ingredients and Juice contents. d. Filled, labelled bottles are shrink wrapping and palletized using automatic machines. e. These pallets are stretch wrapped and stored in the warehouse. f. Products are released to market after confirming to all Release Product and Package Quality parameters. 5. Regarding the question before advance ruling, the applicant states as under: 5.1 In the understanding of the applicant, the product FANTA FRUITY ORANGE with 10.5% Orange Juice, would be classifiable under Tariff Item No. 2202 99 20 as Fruit pulp or fruit juice based drinks for the reasons given hereunder. 5.2 It is submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that under the erstwhile Customs Tariff regime, Chapter Heading No, 2202 was similarly structured with some slight variations. With effect from 1st July, 2017 the products manufactured by the applicant are covered under the new GST regime and the goods manufactured and supplied by the applicants are now covered under Notification No. 1/2017- Central Tax (Rate) dated 28.062017 and Notification No. 1/2017 - State Tax (Rate) dated 30.06.2017 (as amended) which has been issued under Section 9(1) of the CGST Act and KGST Act respectively. The classification and the applicable rate of GST on products supplied are determined under the said Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 read with Notification No. 1/2017 -State Tax (Rate) dated 30-06.2017 (as amended). The items manufactured and supplied under Chapter Heading No.2202 which are covered under the said Notification No. 1/2017 -Central Tax (Rate) dated 2806.2017 and Notification No. 1/2017 - State Tax (Rate) dated 30-06.2017 (as amended), are specified under Schedule - II, III and IV, are as follows: Schedule II 6% 47 2202 90 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.7 It is submitted that the Organisation and scheme of Customs Chapter Heading No. 2202 demonstrates that tariff Sub-heading No. 2202 10 covers drinks which are predominantly made up of water, including mineral water and aerated water and are either sweetened or flavoured or both. Tariff item No. 2202 99 covers other non-alcoholic beverages. The drinks covered under this sub-heading would be imparted their essential character by another substance. 5.8 A mere perusal of the nomenclature of the Tariff item No. 2202 99 10 to 2202 99 30 clearly shows that these drinks would be known by the dominant ingredient present therein, like soya milk, fruit pulp, fruit juice, milk, etc. These drinks would be characterised by the strong presence of such ingredients, rather than only as a flavouring agent, as in the case of the drinks falling under Tariff Item No. 2202 10. 5.9 In the background of the scope of Chapter heading No. 2202, as explained above, the applicant submits that goods falling under Tariff Item 2202 10 90 will cover within its ambit those drinks which are made up of water and contain orange flavour added thereto. 5.10 It is further submitted that the expression fruit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs waters, including aerated waters, which are either sweetened or flavoured or both. Thus, a flavoured water-based beverage is covered by sub-heading NO. 2202 10. Flavour means the odour and taster of a food item. Douglas M. Considine (Ed.), Foods Food Production Encyclopedia, Van Nostrand Reinhold Company, explains that the flavour of a food substance is the combined sensation of taste and odour as perceived by the eater/ drinker of that substance. 5.16 The Random House Compact Unabridged Dictionary, 1996, Random House, New York defines flavour thus: 1. Taste, esp. the distinctive taste of something as it is experienced in the mouth. According to The Shorter Oxford English Dictionary, 1973, Clarendon Press, Oxford, Flavour is 1. A smell or odour, In mode use: A trace of a particular odour. 5.17 The applicant, therefore submits that flavour is a trace (extremely small amount of a component) of a particular odour or taste in a food substance. Thus flavoured waters contemplated under Sub-heading No. 2202 10 are beverages or preparations which contain flavouring agents which impart the sensation of a particular taste or odour, It does nothing more. It d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product which determines the classification under the sub-heading No. 2202 10 or 2202 99. 5.20 The applicant further submits that as per the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 (as amended), flavouring agents can be natural, nature-identical or artificial. Thus, a flavoured beverage could be imparted the flavour by natural, nature-identical or synthetic substances. Fruit juice or essence can be said to be a natural flavouring agent. In that sense, any beverage made of fruit juice flavour would be a flavoured water, and would be liable for classification under sub-heading No. 2202 10. However, a closer examination of the scheme of classification under Chapter Heading No. 2202 would reveal that such an interpretation is not what is contemplated in Chapter Heading 2202 and that flavoured water is not the same as a fruit-juice based drink. As already stated above, fruit juice based drink is specifically classified under Tariff Item No. 2202 99 20. 5.21. The applicant submits further that the above interpretation is in consonance with the scheme of classification as envisaged under Chapter Heading 2202. The distinction drawn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the applicant is aerated; it will not be classified under Tariff Item No. 2202 10 10. 6.3 From a perusal of the manufacturing process of product in question, it can be seen that apart from Orange Juice, the applicant is also using Carbon dioxide as one of the ingredients to manufacture Fanta Fruity Orange, However, it is clarified that Carbon dioxide to the extent of 0.5148% of the total beverage (5.148 grams per litre) is added merely for preservation of the beverage and not for any purpose. It is 10.5% Orange Juice which gives the beverage its essential character and forms the base of the beverage. On the other hand, Carbon dioxide in combination with other additives (namely citric acid and potassium sorbate) is added for ensuring the safety of the beverage for consumption over its declared best before date . 6.4 To substantiate this point further, reliance is placed by the applicant on the Carbonated Soft Drinks: Formulation and Manufacture. edited by David P.Steen and Philip R.Ashurst 2006 by Blackwell Publishing Ltd. wherein, it has been held that: Carbon dioxide is a colourlesss non-toxic, inert gas that is virtually tasteless and is readily available at g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nta Fruity Orange and got it tested for percentage of Carbon dioxide- From a perusal of the test report, it can be seen that Gas volume in Fanta Fruity Orange is 2.6. It is submitted that Gas Volume is defined as the number of times the total volume of dissolved gas can be divided by the volume of the liquid in the container. To ascertain the weight of Carbon dioxide dissolved in Fanta Fruity Orange, the following formula is used: Formula : Weight of CO 2 = CO 2 s Gas Volume in beverage X Density of CO 2 X Volume of the container. Weight of CO 2 in gms in 1 Litre = 2.6 X 1.98 X 1 = 5.148 grams 6.8 The applicant, in order to substantiate the submissions made above, has enclosed an affidavit of Sri Rajesh Nair, clearly Stating that Fanta Fruity Orange would be manufactured from Orange Juice which constitutes 10.5% of the total beverage and the same will form the base of the beverage. Further, it has also been stated that the purpose of adding Carbon dioxide to the final product is only for preservation and not for any other purpose. 6.9 Further, the applicant has placed on record a certificate from Dr. Lambert Rodrigues, Former Reader in Food Technology ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons made by Sri. G. Shivadass, Advocate and authorised representative of the applicant during the personal hearing. We have also considered the issues involved, on which advance ruling is sought by the applicant, and relevant facts, 8.2 At the outset, we would like to state that the provisions of both the CGST Act and the KGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the KGST Act. 8.3 The applicant seeks advance ruling in respect of the following question. Whether FANTA FRUITY ORANGE product proposed to be manufactured is classified under Chapter Heading 2202 99 20 at Sl.No. 48 under Schedule 11 as Fruit pulp or fruit juice based drinks , or under Chapter 2202 99 90 at SI.No. 24A under Schedule III as Other Non-alcoholic beverages or under 2202 10 at Sl.No.12 under Schedule IV as all goods (including aerated waters], containing added sugar or other sweetening matter or flavoured under Notification No. 1/2017- Central Tax (Rate) dated 28.06.2017 (as amended) . 8.4 The applicant vide their le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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