TMI Blog2021 (12) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... r notes as specified under the Customs Tariff Act, 1975 are also applicable for classification of Goods under GST regime. However, once an item is classified in accordance with the Customs Tariff Act, 1975, the rate of tax applicable would be arrived at on the basis of notifications issued under GST by respective governments. From the ingredient of the product in question as submitted by the appellant, it is seen that the impugned product are manufactured from the wheat flour, superfine wheat flour, rice flour, starch, corn flour, cereal flour and all these products are covered under Chapter 10 and 11 of Customs Tariff Act. The said product can be categorized as crispy savoury food product as such it is made from the dough based on flour like wheat flour, rice flour, starch, corn flour and cereal flour. Therefore, the products of the appellant fall under the Chapter Heading 1905 - there is no mention of the product Papad in the Explanatory Notes of the HSN. The term Papad has neither been defined in the Customs Tariff Act, 1975 nor under the CGST Act, 2017 or the Notifications issued there under. It can be said that Fryums is brand name of a company and not the generic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nafter referred to as Appellant) against the Advance Ruling No. GUJ/GAAR/R/81/2018 dated 17.09.2020 . 3. The appellant has raised the following question for advance ruling in the application for Advance Ruling filed by it. Whether any tax is payable in respect of sale of Fryums manufactured by the applicant? And if answer is in affirmative, the rate of tax thereof ? 4. The appellant has submitted that they are engaged in the business of manufacturing and supply of Fryums and different type of Namkeen/Farsan. Fryums are Papad of different shapes and sizes in ready to eat form. Fryums prepared from maida, in unfried form, is purchased by the appellant from the market as raw material. The same is first fried and various masala powders are applied and packed in small packets for being sold in market. The aforesaid fryums are sold by the applicant in different shapes and sizes such as alphabets, rings, stars etc. 5. The appellant has submitted that it is a settled legal position that Fryums are papad and since Papad is tax free/exempt as per tariff item 19059040, the Fryums manufactured and sold by the applellant would also be exempt from payment of any tax. Entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts indicate that applicant s product in market are called as Fryums. Thus, Heading 2106 is an omnibus heading covering all kind of edible preparations, not elsewhere specified or included. Chapter Note 5 provides an inclusive definition of this heading and covers preparations for use either directly or after processing, for human consumption. Chapter Note 6 pertaining to Tariff Item 2106 90 99 also provides inclusive definition and products mentioned therein are illustrative only. In view of the foregoing, the GAAR ruled as follows :- Question : whether any tax is payable in respect of sale of Fryums manufactured by the applicant? And if the answer is in affirmative, the rate of tax thereof? Answer : The product fried Fryums manufactured and supplied by applicant is classifiable under Tariff Item 2106 90 99 of the First Schedule to the Customs Tariff Act, 1975. Goods and Services Tax rate of 18% (CGST 9% + GGST 9% or IGST 18%) is applicable to the product fried Fryums as per Sl. No. 23 of Schedule III of Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017, as amended, issued under the CGST Act, 2017 and Notification No. 1/2017-State Tax (Rate), dated 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame it is known, except when served for consumption 12. The appellant has further submitted that people in different parts of the country know Papad by different names and forms but irrespective of such names and forms a Papad remains papad and is exempted from payment of tax under the GST Act. The aforesaid entry does not make any distinction between fried or un-fried papad. The only category of papad excluded by Entry at Sr. No. 96 is when it is served for consumption. It is settled legal position that served for consumption means served in hotel, eating house and meant for consumption at the place itself which is not the case in present matter. [Reference of a determination order dated 20.08.2006 in the case of M/s. Gaylord Restaurant.] 13. The appellant has submitted that in GST regime, for determination of classification of goods, the Custom Tariff Act, 1975 is relevant and the classification in Customs is driven by the ingredients used in the products. Predominant content in the product helps in the determination of the classification of the products. In the case of Manilal Commodities Pvt. Ltd. Vs. Collector of Customs [1992-59-ELT-189-Tribunal], th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll advancement of commercial scenario. Hon ble Courts, including Honourable Supreme Court, have resorted to encouragement of development of principles of interpretation according to the changing scenario and placed reliance on the following judgments: In the case of State of Punjab Vs. Amritsar Beverages Ltd. [2006] 147 STC 657 (SC), Honourable Supreme Court observed that Creative interpretation had been resorted to by the court so as to achieve a balance between the age old and rigid laws on the one hand and the advanced technology, on the other. The judiciary always responds to the need of the changing scenario in regard to development of technologies. It uses its own interpretative principles to achieve a balance when Parliament has not responded to the need to amend the statute having regard to the developments in the field of science. In the case of M/s. J. K. Cotton Spinning and Weaving Mills Ltd. Vs. Union of India [1988] 68 STC 421 (SC), relying upon the observation made by Apex Court itself in another judgment in the case of Senior Electric Inspector v. Laxminarayan Chopra [1962] 3 SCR 146 , Honourable Supreme Court observed that - in a modern progressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealt with the issue whether Fryums in an uncooked / un-fried form sold would qualify as PAPAD and it has been held by Honourable Karnataka High Court that FRYUMS fall under the entry of PAPAD irrespective of their shapes and sizes and irrespective of the ingredients used. In this matter, M/s. TTK Healthcare Ltd. was also one of the petitioners. In the said judgment, the Hon ble Karnataka High Court relied upon the judgment of Hon ble Supreme Court in the case of Shiv Shakti Gold Finger v/s Assistant Commissioner, Commercial Tax [1996] 9 SCC 514 whereas the judgment of Hon ble Supreme Court in the case of Commissioner of Commercial Tax v/s TTK Health Care Ltd. [2007] 7VST 1 (SC) came to be distinguished. The applicant has submitted that the Hon ble Supreme Court in the case of TTK Health Care Ltd. (Supra) has held that Fryums are not cooked food. The said decision is not applicable to the present case as the issue herein is not as whether Fryums are cooked food or not but is as to whether Fryums are papad or not. 19. In the case of M /s. Avadh Food Products Vs. State of Gujarat First Appeal No.1/2015 read with Rectification Application No. 31/2015 in First Appeal No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :-04/08/2016. 22. The appellant has further submitted that in the present case, PAPAD is a generic expression which would include different types of PAPAD irrespective of its form, shape, size and ingredients. Even the commercial market which deals with the products in question recognizes it as PAPAD. So, the common parlance test as well as the user test leads to the conclusion that the products in question are nothing but PAPAD of different shapes and sizes. In this regard refer to the decision of Honourable Supreme Court in the case of Commissioner of Commercial Tax, UP Vs. A. R. Thermosets (P) Ltd. AIR 2016 SC 321 : (2016) 94 VST 258 (SC). 23. The appellant has submitted that a particular classification once accepted and adopted for years in a particular law cannot be change merely on account of repeal of said Act and replaced by new Law unless there is material and substantial change in the entry to depart from the previous classification which was adopted earlier. In the present case, the products in question have been classified as PAPAD since many years and there is no substantial change in the entry under the GST Law as compared to erstwhile Gujarat Value Added ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PAPAD or whether FRYUMS can be considered or classified as PAPAD because there is no such product with the name of FRYUMS and hence there remains only one product i.e. PAPAD. 27. The appellant has submitted that Honourable Authority for Advance Ruling (AAR) has passed an order in the case of M/s. Sonal Products on 22/02/2019 wherein it has been held that un-fried Fryums falls under Tariff Heading 21069099 and taxable at 18%. In the said order it has been recorded that thus, the appellant themselves have submitted that fried, salted or spiced Fryums are commonly known and used as Namkin . The appellant has submitted that in their case, this is neither their case nor submission. 28. Further, the appellant has submitted that the ruling of Hon ble AAR given in the case of M/s. Sonal Product cannot be applied in the appellant s case due the reasons and grounds as stated below : (i) AAR has referred and relied upon the judgment of Honourable Customs Excise and Gold Appellate Tribunal (CEGAT) in the case of M/s. T.T.K. Pharma Ltd. Vs. Collector of Central Excise 1993 (63) ELT 446 (Tribunal). The said judgment cannot be relied upon as a precedent in order to classi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the specific heading cannot cover the goods in question. It is well settled that if there are two entries-one general and the other special, the special entry should be applied for the purpose of levying tax. The general entry should give way to the special entry. The ratio decidendi in the case of Mauri Yeast India Pvt. Ltd. Vs. State of UP 2008 (225) ELT 321 (SC) is that If there is conflict between two entries one leading to an opinion that it comes within the purview of the tariff entry and another the residuary entry, the former should be preferred. (vi) The another principle of rule of interpretation and classification is noscitur a sociis which means that meaning of a word is to be judged by the company it keeps. Applying the said principle while classifying the product of the present appellant, by no means it can be said that it is eligible to be classified under heading 2106 because by no stretch of imagination the product of the appellant can be equated with either Misthan or Mithai or Namkeen or Chabena or Bhujia . Thus, heading 2106 90 99 even as general entry is not capable of including the product of the appellant and 1905 90 40 is the only entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , submitted that the observation of AAR that when a customer asked for PAPAD shopkeeper gives traditional round shape PAPAD but it is equally true that when asked FANCY Papad shopkeeper gives appellant like product. Therefore, it cannot be said that products of the appellant do not pass the common parlance test. Further, applicant has submitted that one of the common parlance test is that in the marriage functions and social functions products similar to that of appellant are served along with traditional round shape PAPAD. Thus, the persons using this product do not differentiate between the products similar to appellant and traditional round shape PAPAD because both the products are known, understood, recognized and used as PAPAD. (v) The observation of GAAR that looking to the photograph provided by the appellant it is evident that the shape of products of appellant and shape of PAPAD is different and hence both are distinct commodities. The appellant has submitted that they fail to understand as to how can the shape of a product be determining factor for the purpose of classification or whether it has to be its basic ingredients, characteristics and use to be taken into co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Thus the judgments and determination orders passed under the GVAT Act and relied upon by the appellant, being on the same products and being in relation to similar entry, are required to be followed. The AAR has not referred the judgement of Hon ble High Court of Gujarat in the case of West Coast Waterbase Pvt. Ltd. Vs State of Gujarat- 2016 (95) VST 370(Guj.). (x) The learned AAR has held that the judgment relied upon by the appellant are inapplicable on the ground that they belong to earlier laws i.e. VAT Act and also they are not in relation to First Schedule of Customs Tariff and on the other hand the learned AAR places reliance upon the judgments which are under the Sales Tax Act which was prior even to VAT Act and on the Tariff entries prior to 2005 i.e. old entries. (xi) The observation of the learned GAAR that the judgment of Honourable Supreme Court in the case of Commissioner of Commercial Tax, UP Vs. A. R. Thermosets (P) Ltd. AIR 2016 SC 321 is not applicable because the commodity in the said judgment is different from commodity of appellant. The appellant has submitted that the judgment of Hon ble Supreme Court was relied upon by them on the principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as submitted that another principle of rule of interpretation and classification is noscitur a sociis which means that meaning of a word is to be judged by the company it keeps. Applying the said principle by no means it can be said that appellant s product is eligible to be classified under heading 2106 because by no stretch of imagination the product of the appellant can be equated with either Misthan or Mithai or Namkeen or Chabena or Bhujia . Thus, heading 2106 90 99 even as general entry is not capable of including the product of the appellant and 1905 90 40 is the only entry and most specific entry where the product manufactured by the appellant would fall. (xv) The various issues and decisions relied upon by the appellant have neither been controverted nor distinguished nor dealt with and no reasons have been advanced for the same. As such the learned AAR is completely silent on the issue regarding creative interpretation in light of advancement of technology and advancement of market trends, not considered the decision of Advance Ruling Authority of Tamilnadu in the case of Subramani Sumathi Order No. 07/AAR/2019 dated 21/01/2019 which was relied upon by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proportion of ingredients, the composition and the recipe remains similar, if not exactly the same. The said product Papad of different shapes and sizes that are ready to eat condition eligible to be classified under Chapter Tariff Heading - 1905 of Customs Tariff Act, 1975 accordingly, vide entry at Sr. No. 96 under Not. No. 02/2017-CT (Rate) dated 28.06.2017 product in question is exempted from the levy of Goods and Services Tax. 35. To decide the classification of the product in question i.e. PAPAD of different shapes and sizes in ready to eat form, it would be prudent to know what PAPAD is, what the main ingredients of PAPAD are and how it is manufactured. The term PAPAD has not been defined in the CGST Act, 2017, therefore we resort to the common sense and meaning that sense by which the people are conversant. It is observed that traditionally when we talk about the PAPAD, in the first instance an image of thin round shape flatbread appeared in mind. Traditionally PAPAD is thin Indian wafer and served as an accompaniment to Indian meal or as a snack. The appellant has submitted that due to advancement of technology, PAPAD does not resemble the same age old traditional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oducts which are prepared of cereals, flour, starch or milk and pastrycook s product. CTH No. 1905 of the Custom Tariff Act, 1975 is as: 1905 BREAD, PASTRY, CAKES, BISCUITS AND OTHER BAKERS WARES, WHETHER OR NOT CONTAINING COCOA; COMMUNION WAFERS, EMPTY CACHETS OF A KIND SUITABLE FOR PHARMACEUTICAL USE, SEALING WAFERS, RICE PAPER AND SIMILAR PRODUCTS 1905 90 Other : 1905 90 10 --- Pastries and cakes 1905 90 20 --- Biscuits not elsewhere specified or included 1905 90 30 --- Extruded or expanded products, savoury or salted 1905 90 40 --- Papad 1905 90 90 --- Other The General NOTES of HSN of Ch. 19 are as under : This chapter covers a number of preparations, generally used for food, which are made either directly from the cerelars of chapter 10, from the products of chapter 11 or from food flour, meal and powder of vegetables origin of other chapters (Cereal flour, groats and meal, starch, fruit vegetables flour, meal and powder) or from the goods headings 04.01 to 04.04. The chapter also covers pastrycooks products and biscuits wven when not containing flour, starch o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inated and mainly consumed in India. Therefore, there is no mention of the product Papad in the Explanatory Notes of the HSN. The term Papad has neither been defined in the Customs Tariff Act, 1975 nor under the CGST Act, 2017 or the Notifications issued there under. 41. We find that for determination of the correct classification of any product ingredient used in the manufacture of the said product are decisive factor. In the case of Manilal Commodities Pvt. Ltd. Vs. Collector of Customs [1992-59-ELT-189-Tribunal], the Honourable Tribunal was of the view that the classification on the basis of predominant contents is generally accepted as proper test. Further, Honourable Allahabad High Court in the case of Commissioner of Customs, C.G.O. Vs. Sonam International [2012-275ELT-326-ALL] upheld that assessment of goods with regard to payment of customs duty is to be made based on contents involved. The main ingredients of the appellant s product are flour, like wheat flour, rice flour, starch, corn flour and cereal flour and in the Ch. 19 of the Custom tariff Act 1975 all the product which are made of either directly from the cereals of chapter 10, from the products of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong factor in determination of classification of the products . 42.3 We find that the appellant has submitted that the impugned product of different shapes and sizes PAPAD are known by different nomenclature in different parts of the country whereby more common nomenclature used is FRYUMS though FRYUMS is a registered brand name of TTK Healthcare Ltd. and not the name of any of product of PAPAD. Whereas the GAAR in its ruling has held that the different shapes and sizes like round, square, semi-circle, hollow circle with bars in between or square with bars in between intersecting each other or shape of any instrument, equipment, vehicle, aircraft, animal type Papad are known in the market as Fryums and not PAPAD ; that Papad is a distinct commodity and it cannot be equated with the Fryums. We have visited the website of M/s. TTK Foods (http://ttkfoods.com/products) and found that the company manufactures ready to fry extruded products (papads) and sells under the brand name Fryum's. Therefore, it can be said that Fryums is brand name of a company and not the generic name of the impugned product, therefore it would not be logical to hold that the appellant s product is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted by the appellant. It has been submitted that ingredients are mixed in machine with water and oil, dough is prepared and passed through die of different shapes and size to manufacture different shapes and size of papad and then dried through various stages. Thereafter, the appellant product is fried and masala powder is applied. The product of the appellant, thus prepared, is thin and wafer like product. At this stage, the product is ready to eat for consumption. Though, traditionally Papad has been prepared manually, in round shape. However, when ingredients and process are similar in case of PAPAD and impugned product, then the product in question is nothing but a kind of PAPAD irrespective of their shape and sizes. 43.4 As submitted by the appellant, when the consumer desires to eat the said products of the appellant, the said products can be eaten or consumed immediately as it is fried with masala. Thus, these products are meant to be eaten as it is fried. 43.5 The products under consideration is crispy as such these products are fried. 43.6 The products of the appellant has found its use as an alternative to regular round shaped Papad or as an additional varie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 46. The appellant has contended that their product covers under Entry number 96 of Notification No.2/2017 Central Tax (Rate) Dt:-28/06/2017 which exempts the supplies from the levy of tax, reads as under:- 96. 1905 Papad, by whatever name it is known, except when served for consumption 47.1 We find that the entry No. 96 of the Notification No. 02/2017-CT (Rate) dated 28.06.2017 covers only such type of Papad products which are supplied in ready to cook condition because such type of un-cooked Papad cannot be served for consumption without applying the process either of Roasting or Frying . Whereas the appellant s product is different shapes and sizes of Papad are available in ready to eat i.e. fried Fryums with masala, packed in small packet and do not require any further process of Roasting or Frying because these are already fried with masala and can be served for consumption immediately. Therefore, the appellant s product i.e. different shapes and sizes Papad in ready to eat form do not fall under the said entry. 47.2 The appellant has contended that only category of papad exclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different shapes and sizes of Papad is not Papad but is fried Fryums . In the aforementioned paras, we have already discussed that the Fryums is a brand name and not a generic name of the product, therefore, impugned product different shapes and size of papad , known as Fryums, is nothing but Papad. 49. We find that CTH No. 2106 of Customs Tariff Act, 1975 covers the Food preparations not elsewhere specified or included means under this heading all types of foods preparation are covered which are not covered under the specific heading of tariff. It is important to refer to Chapter Notes of Heading 2106 wherein under clause 5 (b) it is stated that Heading 2106 includes preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption and under clause 6 it has been stated that Tariff item 2106 90 99 includes sweet meats commonly known as Misthans or Mithai or called by any other name. They also include products commonly known as Namkeens , mixtures , Bhujia , Chabena or called by any other name. Such products remain classified in these subheadings irrespective of the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X
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