TMI Blog2021 (3) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... TN/AAAR/03/2021(AR) - - - Dated:- 12-2-2021 - THIRU. G.V. KRISHNA RAO, AND THIRU. M.A. SIDDIQUE, MEMBER Represented by : G. Natarajan, M/s. Swamy Associates Preamble 1. In terms of Section 102 of the Central Goods Services Tax Act 2017/Tamilnadu Goods Services Tax Act 2017( the Act , in Short), this Order may be amended by the Appellate authority so as to rectify any error apparent on the face of the record, if such error is noticed by the Appellate authority on its own accord, or is brought to its notice by the concerned officer, the jurisdictional officer or the applicant within a period of six months from the date of the Order. Provided that no rectification which has the effect of enhancing the tax liability or reducing the amount of admissible input tax credit shall be made, unless the appellant has been given an opportunity of being heard. 2. Under Section 103(1) of the Act, this Advance ruling pronounced by the Appellate Authority under Chapter XVII of the Act shall be binding only (a) . On the applicant who had sought it in respect of any matter referred to in sub-section (2) of Section 97 for advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spati, so as to ensure that vanaspati is spread evenly on the surface of the betel nuts; Sugar, glucose syrup, menthol and spices, viz., cardamom and cloves are also added; the use of glucose syrup and sugar which contains moisture can form fungus and hence a meagre quantity of saccharin to the extent of 1000 Parts per million is added purely for preservation purposes; the resultant product is packed in small pouches under the name and style of NIZAM PAKKU. The Appellant made an application to ORIGINAL AUTHORITY on the following question: Whether the Nizam Pakku bought and sold by the Appellant, 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 S.No. 28 of Schedule I of Notification 1/2017 Central Taxes (Rate) Dt. 28.06.2017 and equal rate of SGST? 3. The Original Authority has ruled as follows: Nizam Pakku traded by the appellant merits classification under Chapter 0802 80 90 of the Customs Tariff and attracts 6 % CGST as per S.NO. 15 Of Schedule Il under Notification 1/2017-Central Tax (Rate) Dt. 28.06.2017 and 6 % SGST under Notification No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e SC in Plasmac Machine Mfg. co. Ltd. vs CCE - 1991 (51) ELT 161 SC = 1990 (11) TMI 142 - SUPREME COURT , wherein it has been held We find no justification for classifying those in the residuary Item 68. As was held in Dunlop India Ltd. vs UOI - 1983 (13) ELT 1566 SC = 1975 (10) TMI 94 - SUPREME COURT if an article is classifiable under a specific item, it would be against the very principle of classification to deny it the proper parentage and consign it to the residuary item . Issue of rate of Tax: GST has been introduced by subsuming various indirect tax levies, such as Central Excise duty, Service Tax, Value Added Tax, Central Sales Tax, etc. As a prelude to the introduction of GST, various provisions of the Constitution were amended through Constitution (One hundred and first amendment) Act, 2016. Article 279 A was introduced and it provides for the setting up of a GST Council and also lays down the composition of the council. In clause (4) of the Article, the issues in respect of which the Council can make recommendations to the Government are enumerated, which, inter alia includes, the rates including floor rates with bands of goods and services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erally cover goods which presently attract combined tax rate of Central Excise and VAT, including cascading on account of these two taxes between 15% and less than 21%); 28% (which would generally cover goods which presently attract combined tax rate of Central Excise and VAT, including cascading on account of these two taxes equal to or more than 21%). In line with the above policy decisions, a Fitment Committee comprising of the officers of the Central Government and State Governments was set up to recommend the rates of GST for various Goods and Services who recommended various rates of GST for various goods and services, in line with the above directions of the GST Council. These suggestions were placed before the 14th meeting of GST Council held on 18th and 19th May 2017 (Agenda Note No.9). Fitment Committee has inter alia recommended NIL rate for various goods mentioned in Annexure I, 5% rate for various goods mentioned in Annexure Il and 12% rate for various goods mentioned in Annexure III. The relevant entries are as below: Annexure I LIST OF GOODS AT NIL GST RATE Sl.No. Chapter Description ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which should not be called betel nut. Accordingly, it was proposed that dried areca nut, whether or not shelled or peeled might be kept at 5%. The GST Council agreed to this proposal. It may be observed from the relevant portion of the minutes of the meeting that the final decision of the council reads that the rates proposed by the Fitment Committee are approved with certain modifications, one of which being, (xvii) Areca nut : Dried Areca nuts, whether or not shelled or peeled, to be taxed at the rate of 5 %. In line with the decisions of the GST Council with regard to fixation of rate of GST for different goods and services, upon introduction of GST with effect from 01.07.2017, Notification No. 1/2017 Central Tax (Rate) dated 28.06.2017 has been issued prescribing the GST rate for various goods and Notification 2/2017 Central tax (Rate) Dt. 28.06.2017 has been issued granting exemption from payment of GST for various goods. While considering the applicable rate of tax for the subject goods, the original authority has come to the conclusion that only those dried areca nut, not called as betel nut is subjected to 5% GST as per Serial No. 28 of Schedule I of Notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es as well as the common parlance test would reveal neither the terms Areca Nut and Betel Nut refer to different commodities; nor one of them a genus and the other being its species; but both these terms are always used interchangeably. This common fact has to be kept in mind while interpreting the discussion of the 14th Meeting of the GST Council. It may be observed that while fixing the GST rate for different Goods and Services, the GST Council has followed the basic guideline that the GST Rates for any goods should more or less be, near to the sum total of different taxes leviable on such good prior to introduction of GST and the cascading effect thereof. As the multitudes of rates under the erstwhile regime are done away with and the rates of GST are finalized at 0%, 5%, 12%, 18% and 28%, it was decided that the goods attracting a cumulative tax rate between 3% to 8% under erstwhile regimes are to be placed in 5% under GST and so on. In this connection it is relevant to note that under Central Excise, the tariff rate for Chapter 8 itself is NIL and hence the subject product is not liable to any excise duty. The subject product was subjected to VAT by the State Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dried areca nut-sold by the farmers. They have also stated that, in the 14th Meeting of GST Council there has never been any discussion as to the rate of GST applicable for subject products, which have been subjected to certain processes permitted under Note 3 to Chapter 8 and not beyond, which hitherto attracted only 4 to 5 % VAT. The appellant has submitted that if the exclusion under S.No.15 of Schedule II of Notification 1/2017, i.e. Other than dried areca nuts was not inserted, the subject product would very much be covered under the said S.No. 15 of Schedule Il and not anywhere else. But, once, dried areca nut is excluded from the ambit of said S.No.15 and placed specifically under S.No.28 of Schedule I, there is no reason as to why the subject, which is also dried areca nut is not entitled for 5 %. Further the exclusion under S.No. 15 of Schedule II is for dried areca nuts without any further qualification. Heading 0801 reads as Coconuts, Brazil Nuts and Cashew Nuts, Fresh or dried whether or not shelled or peeled ; and Heading 0802 reads as Other nuts, fresh or dried whether or not shelled or peeled . It may be further observed that heading 0802 is furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/2017. The said S.No.15 specifically excludes Dried areca nuts . Thus, from a plain reading of the relevant entries in the notification, it is very clear that the subject product, which is not fresh, is not entitled for exemption but, being dried areca nut, is taxable only @ 5%. To further elaborate, as per Serial No. 28 of Schedule I of Notification No. 01/2017, the rate of 5% shall apply in respect of Dried Arced Nuts, whether or not shelled or peeled falling under Heading No 0802. As per Serial No.15 of Schedule Il of Notification No. 01/2017, the rate of 12% shall apply in respect of Other nuts, dried, whether or not shelled or peeled, such as Almonds, Hazelnuts or filberts (Coryius spp.), walnuts, Chestnuts (Castanea spp.), Pistachios, Macadamia nuts, Kola nuts (Cola spp.) other than dried areca nuts . Thus, the short question to be answered now is, as to whether, the subject product Nizam Pakku supplied by them can be covered in the expression Dried Areca Nut or not. It is relevant to recall the manufacturing process from the stage of raw areca nut, till the stage of obtaining the final product, viz Nizam Pakku, which involves, applying vegetable oil to bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax all edible fruits and nuts under Chapter 8 @ 5 %, and prescribed 12% rate for all dry fruits failing under Chapter 8. It was represented that dried areca nut, which was hitherto attracting 5% tax under the erstwhile regime should be placed under 5% under GST also, more specifically. They submitted that in the absence of any justification in support of placing the subject product under 12%, in deviation of the general guidelines framed by the GST Council that all goods attracting taxes between 3% to 8% under the erstwhile regime shall be kept under 5% rate, the above said discussions of the 14th Meeting of GST Council cannot be used against the appellant to deny the 5% rate for the subject goods. The conclusion of the discussions of the 14th meeting of the GST Council, is reflected in the sentence Accordingly, it was proposed that dried areca nuts, whether or not shelled or peeled might be kept at 5 % . This conclusion has been put into effect by suitably wording the relevant entries in Notification 1/2017. The fact that in the minutes it has also been observed that the said 5% rate shall not be applicable for the products known as betel nuts do not have any signi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the original authority, holding that the subject goods, viz., Nizam Pakku would merit classification under Chapter 0802 8090 and attract 6 % CGST as per S.No. 15 of Schedule II of Notification 1/2017 and same rate of SGST under relevant State Notification is not at all sustainable in law. The appellant requested to set aside/modify the ruling of the lower authority and hold that the subject goods are classifiable under CTH 08028030 and attract total 5% GST as per SI.No. 28 of Schedule I of Notification No. 01/2017-C.T.(Rate) dated 28.06.2017. PERSONAL HEARING: 5.1 Due to the prevailing PANDEMIC situation, the appellant was addressed through the Email Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital mode. The appellant provided their consent to be heard through virtual mode. Accordingly, the hearing was held virtually on 18th December 2020. Shri. G.Natarajan, Advocate and the authorized representative appeared for Virtual hearing. The Authorized Representative reiterated the written submission made along with the appeal application. He stated that areca nut betel nut refers the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions is that the product marketed by the appellant, Nizam Pakku is manufactured by M/S. Azam Laminators Pvt Ltd who sell the product exclusively to the appellant and the appellant markets the product through Dealers and Distributors network. On the issue of classification of the product, we find that the said issue has been raised in the case of the manufacturer of the product, M/s. Azam Laminators Pvt Ltd (A.R.S.Company (earlier name of Azam Laminators)) under Central Excise and stands decided by the Hon ble Supreme Court that the said product merits classification under Chapter 0802 of Central Excise as against the competing CETH 2106. After long drawn litigation, the classification of the product has attained finality under CETH 0602 8090 in the case of M/s. Azam Laminators (P) Ltd, vide Final Order No. 40455-40456/2019 dated 12th March 2019 of Hon ble CESTAT Chennai = 2019 (3) TMI 782 - CESTAT CHENNAI , who has concluded the classification relying on the decision of the Apex Court in their own case and in the case of Crane Betel Nut Powder Works Vs Commissioner 2007 (210) ELT 171 SC = 2007 (3) TMI 6 - SUPREME COURT . The Central Excise Tariff based on which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % (Central Excise-Nil; VAT- 4 to 5%). In the absence of any justification in support of placing the subject product under 12%, in deviation of the general guidelines framed by the GST Council that all goods attracting taxes between 3% to 8% under the erstwhile regime shall be kept under 5% rate, the discussions of the 14th Meeting of GST Council relied by the LA, cannot be used against them to deny the 5% rate for the subject goods. When the wordings of the notification are clear and unambiguous, no external guides for interpretation such as Finance Minister s speech or Parliamentary proceedings could be resorted to. Areca nut and Betel nut indicates the same product and are used interchangeably. 8.2 We find that the Lower Authority relying on the Minutes of the 14th GST Council Meeting has decided that the product being betel nut, the applicable GST rate is @12% as per SI.No. 15 of Schedule-II of the rate notifications. The relevant minutes of the 4th GST Council meeting, 14th GST Council Meeting and the entries of the Notifications are as under: 4th GST Council Meeting: Agenda Item 3: Finalisation of the bands of tax rates under GST regime (Outsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Meeting Discussion on GST rate for Goods 15.9. Starting the discussion on the proposed rates of GST on goods, the Secretary stated that discussion would be limited to those goods in each Annexure where an Hon'ble Member wanted the proposed rates to be revisited. He stated that except for such goods, the proposed rates for the rest of the goods in various Annexures could be deemed to be approved by the Council. The Hon'ble Chairperson stated that any suggested modification in rates should be discussed in terms of five criteria, namely, (i) revenue impact; (ii) impact on domestic manufacturing; (iii) the existing combined rate of tax; (iv) the relevance of the product for consumers; and (v) optical perception of GST. The following goods were mentioned Annexure-wise by the Hon'ble Members for discussion: - Annexure I (List of goods at nil GST rate): ............................................................... xxxviii) Areca nut: Hon ble Minister from Karnataka stated that fresh areca nut harvested from trees was proposed to be tax at Nil rate, the dry and processed areca nut was proposed to be taxed at rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority as is seen in Para 5.1 of the ruling of the lower authority has stated that the scented betel nut under the erstwhile TNVAT Act 2006 was taxable at 5% vide Serial No.6 of Part B of I Schedule to TNVAT Act 2006. The Central Excise Duty on the said product under CETH 0802 was NIL . Thus, the cumulative tax incidence of the said product in the Pre-GST regime is 5% only. Further, on perusal of the recommendation of the Fitment committee and considered by the 14th GST Council Meeting, it is seen that the Fitment Committee has proposed 3 slabs of rates for the products under Chapter 8 which are as below: List of Goods at Nil GST rate: Annexure 1 LIST OF GOODS AT NIL GST RATE Sl.No. Chapter Description 8 8-Edible fruits and nuts, peel of citrus fruits or melons Fresh Fruits other than in frozen state or preserved LIST OF GOODS AT 5% GST RATE Sl.No Chapter Description 4 8-Edible fruits and nuts, peel of citrus fruits or melons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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