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TMI Blog2020 (11) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... inafter referred as 'Applicant') is registered under the GST Act 2017 vide GSTIN No. 33AANPS2471E1ZO. The Applicant has sought Advance Ruling on Whether the "Nizam Pakku" bought and sold by the Applicant, the manufacturing process of which has been explained by them, is classifiable under Chapter heading 0802 8030 of the Customs Tariff and hence attract 2.5 % CGST as per SI. No. 28 of Schedule I of Notification 1/2017 Central Taxes (Rate) Dt- 28.06.2017 and equal rate of SGST? The applicant submitted a copy of challan evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that they are a Proprietary concern and is engaged in trading of Betel nut, under the name and style "Nizam Pakku" and the said brand name is owned and registered in favour of the Applicant. "Pakku" is a tamil word for "betel nut". The said "Nizam Pakku" is manufactured by M/s. Azam Laminators Pvt. Ltd. who sells the "Nizam Pakku" exclusively to the Applicant, which is marketed by them through Dealers and Distributors network. The manufacturing process of "Nizam Pakku" submitted by the applicant is as below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of small quantities of these items to add taste and aroma to the product, does not in any way dilute the character of the product, which remains and understood as "pakku", i.e. betel nut only. Further, they have submitted that they have been exporting the subject goods, viz., Nizam Pakku to various countries and in order to determine its correct classification, the Customs Department has drawn sample of the product and tested by the Chemical Examiner in the Customs House Laboratory which observed that "The sample is in the form of brown coloured small betel nut pieces together with sugar, menthol, cardamom; It is dried edible betel nut". Accordingly, the Applicant as well as other similar exporters has been classifying the same under Chapter 0802. Also, the Tamil Nadu Food Safety and Drug Administration Department has granted license to the Applicant to deal with the subject Nizam Pakku as Distributor, Wholesaler and Transporter. It may be observed from the license that the subject product, Nizam Betelnut is classified under HSN 0802 9013 (corresponding to 0802 8030 prior to the amendments with effect from 2011). 2.3. Further, the Applicant submitted that the issue of classif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is note, even if moderate heat treatment, addition of vegetable oils, addition of glucose syrup are undertaken, the product will remain classified under Chapter 8, if the essential character of betel nut is retained. It was claimed that the product in question, which was nothing but betel nut, was recognized as such in the market and retains its essential character of being betel nut. The various process undertaken, as narrated above, did not at all dilute the essential character of the product and the product remains as betel nut and consumed as betel nut. Further, the processes undertaken by the applicant were the ones which are contemplated in Note 3 (b) of Chapter 8 only. With effect from the entry under Chapter 21, which read as "betel nut powder known as supari" has been changed to "Betel nut product known as supari" and both these phrases have been defined in same manner, which indicates that there is no difference between these phrases. It may be observed from the definition that "betel nut product known as supari" is first of all a preparation containing betel nut, i.e. apart from betel nut, there would be further ingredients in the preparation. Further, the said preparati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Chapter 8 even if some minor processes like moderate heat treatment or addition of preservatives, sweeteners are undertaken. Further, a Chapter note has been introduced in Chapter 21, whereby certain specified processes undertaken on goods falling under Chapter 2106 9030 are deemed to be manufacturing processes. It was further argued that in order to apply Note 6 of Chapter 21, which lays down certain processes as amounting to manufacture, first of all the classification of the product has to be determined and only if the product can be classified under Chapter 2106 9030, the said Note 6 can be applied, Once the product is classifiable under Chapter 8, the said Note 6 in Chapter 21 is not at all relevant. The subject product is not a preparation containing betel but, but betel nut itself, which has been subjected only to processes envisaged in Note 3 (b) of Chapter 8 and retained its character as betel nut. The only ingredient present in the product was betel nut and addition of Vanaspati, glucose syrup, menthol, spices and saccharin were only for purposes of preservation, sweetening and perfumery. It was not a preparation containing betel nut and other products. In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative appeared before the authority and stated that they are trading the product which is manufactured by a related company. They stated that areca nut are crushed and then vegetable oil is added and heated, followed by menthol, glucose, cardamom to this to create fused product. They also stated that they sell only upto Rs. 2 pouches (25p, 50p, Re. 1) with the words "Nizam Pakku"/Nizam betelnut. They stated that the correct classification should be 0802 80 30 as they are permitted to do the above process as per the Chapter Note. They also submitted various Tribunal/ S.C. Judgments to support their stand. They submitted purchase and sale invoices. They undertook to submit detailed manufacturing process giving the proportion of all ingredients used to manufacture, latest test report, difference between "Supari" and their product within 3 weeks. 3.2 As undertook in the Personal hearing the applicant filed the following on 21.11.2019. i. Detailed manufacturing process followed in Areca/betel nuts by 'Nizam Pakku' - The ripened areca/ betel nuts are harvested and cut into two equal halves and boiled in the water and then sun dried for many days to make them edible by farmers/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eIavan, Additional Commissioner was appointed as CGST Member of the Authority. In view of change in the Authority and due to the prevailing pandemic, the applicant was offered to be heard through Digital media and the applicant acceded to the same. The applicant was heard on 15.10.2020. The Authorised representative of the applicant participated in the hearing process. He reiterated the written submissions and stated that the classification issue of their product based on the Central Excise Tariff is settled by the Hon'ble Supreme Court in the case of Azam Laminators, who are their suppliers as falling under CETH 0802 They requested an early ruling. 5.1 The applicant is under the administrative Jurisdiction of State Tax Officer and the comments of the state jurisdictional officer on the issue raised by the applicant in the Advance ruling Application is given below: * The applicant is engaged in making scented betel nut. Dried betel nut is procured and broken into pieces, pulverized and heated with vanaspathi, added with sugar, glucose syrup, menthol and spices like cardamom and cloves and then packed in small pouches as per market requirement. * The scented betel nut under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of Chapter 8 can squarely be applied under the GST Act also. * There is clear indication as narrated in the explanations given at the bottom of the rate of tax schedule which goes to say that the "Tariff item", "sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) only. * Moreover the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 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 the notification issued under the GST Act also. * The Honorable Supreme Court has decided in the case of Crane Betel Nut Powder Works Vs. CCE - reported in 6 VST 532 (S.C.) = 2007 (3) TMI 6 - SUPREME COURT that the end product would fall under 0801. * In the dealer's own case also the same product "Nizam Pakku" manufactured by them, in their earlier name of A.R.S Company Ltd., and also by Azam Laminators (p) Ltd., on appeal, the Hon'ble Supreme Court has confirmed the relevant HSN as 0802 vide its order in Civil Appeal No. 4915/2006 dated 8-9-2015 = 2015 (10) TMI 354 - SC ORDER in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the submissions, it is seen that the product is marketed as 'NIZAM PAKKU'. From the Tax Invoice' furnished [Invoice No.783 cit. 12-Nov-2019,729 dated 24-0ct-2019,680 dated 29.10.20191, it is seen that the description is 'NIZAM BETELNUT GRADE II', 'BETELNUT GRADE 11 250 PCSX20PKTS, LOOSE BETELNUT 100X50, etc, the HSN code is specified as '0802' and the rate of tax charged is CGST @ 2.5% & SGST @ 2.5%. The product is said to be used for chewing with or without betel leaves. 7.3 Under GST, the applicable rates of CGST are notified by Notification No. 01/2017-C.T. (Rate) dated 28.06.2017 and explanation (iii) and (iv) to the said Notification, states as follows: (iii) "Tariff item", "sub-heading" "heading" and "Chapter" shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). (iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 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 this notification. Thus for the purposes of classific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... INCLUDED 21061000 - Protein concentrates and textured protein substances 210690 - Other : --- Soft drink concentrates : 21069011 ---- Sharbat 21069019 ---- Other 21069020 --- Pan masala 21069030 --- Betel nut product known as "Supari" From the above, it is evident that CTH 21069030 covers 'Betel nut product known as "Supari", while Areca (betel) nuts Whole, Split, Ground, Other are specifically mentioned as classified under sub-heading 08028010, 08028020, 08028030 and 08028040 of Chapter head 0802. 7.5 In the case at hand, the applicant's product is marketed as 'Nizam Pakku'. The betelnut/ arecanut(broken/pulverised) is heated with Vegetable oil, menthol for the purpose of preserving and Sugar, glucose syrup, menthol and spices, viz., cardamom and cloves are added. As per the test reports furnished by the applicant, (from the excellence Laboratory dated 13.11.2019) the percentage content of betel nut is 92% & the other ingredients are cardamom(0.9%),Sugar(Betel Nut)-1.9%; Vanaspati/EdibIe Oil-4.7%, which are the admissible ingredients as per Chapter Note 3 of Chapter 08 of the Customs Tariff. Also, the test report of 'Bureau Veritas India Pvt Ltd' st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufactured by Azam Laminators and traded by the applicant is classifiable under CTH '08028090-0ther' and not under CTH '08028030-Ground' as claimed by the applicant. 8.1 Having decided the classification of the applicant's product under CTH '0802 80 90-0ther', the applicable rate of GST is taken up for consideration. The rate of CGST is notified vide Notification No. 01/2017-C.T.(Rate) dated 28.06.2017 as amended in respect of goods and that of SGST is notified vide Notification No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017 as amended. The rate pertaining to Chapter Head 0802 are available at Sl.No 28, 29 of Schedule I- 2.5% of the Notifications, and Sl.no.15 of Schedule 11-6% of the Notifications. The relevant entries are as follows: Schedule I-2.5% Sl.No. Chapter / Heading /Sub-heading/ Tariff Item Description of Goods 28. 0802 Dried areca nuts, whether or not shelled or peeled 29 0802 Dried chestnuts (singhada), whether or not shelled or peeled Schedule II-6% Sl.No. Chapter/ Heading /Sub-heading /Tariff item Description of Goods 15 0802 Other nuts, dried, whether or not shelled or peeled, such as Almonds, Hazelnuts or filberts (Coryius spp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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