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TMI Blog2024 (2) TMI 1061X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 issued by the Authority for Advance Ruling, Andhra Pradesh. 1. Background of the case The Appellant/s M/s. Sri Venkateswara Cashew Chikky Manufacturers Manufactures is engaged in Manufacturing and supply of an edible product under the name "Crackle" with the following ingredients. S. No Particulars Proportion 1 Sugar 68% to 72% 2 Cashew Nuts 28% to 30% 3 Butter 1% to 2% 4 Glucose 1% to 2% The Appellant sought clarification with regard to the product is supplied as raw material to the manufacturer of ice creams i.e. Hindustan Unilever Limited, Dairy Classic lce Creams (P) Ltd etc., and is used as toppings in lce creams. The Applicant classified the product under Chapter 17049020 till date and discharged GST at the rate of 18% and approached the Authority for Advance Ruling on the following question: Question: Whether the product by name "Crackle", manufactured and supplied by the applicant containing the ingredients Sugar, Cashew Nuts, Butter, Liquid glucose and other permitted Flavours, should be classified under the Tariff Heading 1704 enumerated at Serial number 32AA of Schedule III of Notification No. 01/2017 as a Sugar boiled confectionery.? The Authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant portion of the judgement is extracted hereunder for ready reference "51 Summarising the above discussion thus court held : (1) Reasons in support of decision must be cogent, clear and succinct. A pretence of reasons or 'rubber stamp reasons' is not to be equated with a valid decision making process. ......" A.4 The Appellant also rely on the judgment of the Hon'ble Gujarat High Court in the case of Vadilal Gases Limited Vs. Union of India 2016 (332) ELT 625 (Guj.) wherein it has been held that the quasi-judicial authorities should give sufficient reasons to demonstrate that relevant factors having considered objectively which is a primary requirement. The relevant portion of the judgment is reproduced below for ready reference: "10. At this juncture, reference may be made to the decision of the Supreme Court in the case of Assistant Commissioner of Commercial Tax Department v. Shukla and Brothers, (2010) 4 SCC 785 - 2010 (254) E.L.T. 6 (S.C) - 2011 (22) S.T.R. 105 (S.C), on which reliance has been placed by the learned counsel for the petitioner wherein the court has held that the principles of natural justice has twin ingredients; firstly, the person who is l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Dictionary, Second Edition, Part III, where the word is defined as of the nature of confection, comfit or sweetmeat or pertaining to confections or confectioner's work. As per this Dictionary, the word 'confection' means to prepare for use with sugar, syrup, or the like; to make into a confection; to mix, make up as a condiment or seasoned delicacy. We find that in the same Dictionary, the words "confectionery preparation" are defined as a sweetmeat. The word 'sweetmeat' is defined in the Webster's Encyclopaedic Unbridged Dictionary as sweet delicacy, prepared with sugar, honey or the like, as preserves candy, or formerly cakes or pastry. In Fund All Wagnalls New Standard Dictionary confectionary is defined as- "Confectionary is defined as sweet meat. Collectively, that a confectionary makes or sells as candy or other articles made of sugar, sirup honey or the like" In "Word Origins and their Romantic Stories" by Wilfred Funk, on page 346, the Word 'Confetti' is given. We reproduce the relevant portion from the said book: "CONFETTI: was once candy Confetti is an Italian word for candies or sweetmeats; and the corresponding French word is bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncing its taste. It thus comprises essentially only these articles which are commonly called sweetmeats. Thus, it is clear that it Is food chiefly made of sugar. Normally it Is made by cooking process, other than baking. Impugned product manufactured by the Appellant contain substantial amount of sugar, and are not made out of the baking process. Therefore, the Impugned product primarily falls under the ambit of 'confectionery' products. Principles and Classification of Confectionery Products B.6 Confectionery is an important food item of great popularity among wide range of population. It has been enjoyed as a major food delicacy from ancient times. The term confectionery is ambiguous and describes a spectrum of sweet goods and takes on different meaning depending on the country in which it is used, for example in the United Kingdom the term applies to any sweet product including cakes. Globally, confectionery foods represent 50% by volume of foods produced and 60% by value. The Indian confectionery market is estimated to be 1,38,000 metric tonnes (in 2005) and is segmented into sugar-boiled confectionery, chocolates, mints and chewing gums. Sugar-boiled confectionery co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1704 are primarily covered under three schedules i.e. Schedule I, Schedule II and Schedule III with 5%, 12% and 18% rates of tax respectively. Items of HSN Code 1704 falling under Schedule I of GST Notification 01/2017: B.12 As per GST Notification 41/2017 dated 15.11.2017 read with GST Notification 01/2017, the following items pertaining to HSN Code 1704 are falling under serial number 92 of Schedule 1 of GST Notification 01/2017 with 5% rate of Tax. The relevant extract of serial number 92 is as under: Schedule I -2.5% S.No Chapter Heading/ Tariff Item Description of Goods (1) (2) (3) 92 1702 or 1704 Palmyra sugar, mishri, batasha, bura, sakar, khadi sakar, harda, sakariya, gatta, kuliya, elaichidana, lukumdana, chikkis like puffed rice chikki, peanut chikki, sesame chikki, til chikki, til patti, til revdi, sugar makhana, groundnut sweets, gajak, khaja, khajuli, anarsa Items of HSN Code 1704 falling under Schedule II of GST Notification 01/2017: B.13 Similarly, as per GST Notification 06/2018 dated 25.01.2018 read with GST Notification 01/2017, the following items pertaining to HSN Code 1704 are falling under serial number 32AA of Schedule II of GST Notification 01/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same was manufactured through boiling process. Types of Sugar Boiled Confectionery 1. Hard Boiled Sugar Confectionery means a supercooled solution with a combination of sucrose and liquid glucose or sucrose treated with an acid doctor such as cream of tartar (potassium acid tartrate) 2. Pan Goods Confectionery made by the panning process in revolving pans/drums by using either hot coating or cold coating and this process is assisted by blowing air. 3. Toffees or milk toffees are boiled sugar confectionery made out of sugar, edible fat, water and other ingredients. The impugned product "N.B.S. Crackle" is a Hard boiled Sugar Confectionery because after caramelization of sugar, the super-cooled solution was made by cooling down sugar mixture in S.S. Table after combination of doctoring agents butter and glucose. Physical form of Sugar Boiled Confectionery Sugar Boiled Confectionery may be in 1. Solid 2. Semi-Solid 3. Liquid With or without coating sugar or chocolate or both N.B.S. Crackle is in solid form Technical specification of sugar boiled confectionary As per FSSAI Regulations 2011 sugar boiled confectionary should confirm with following parameters Test Para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sugar Boiled Confectionery should confirm with following parameters: Sl.No Characteristic Requirement I Ash Sulphated, percent by mass, Max 15 ii Acid insoluble ash, percent by mass, Max 2 iii Sulphur dioxide, mg/kg, Max 350 iv Arsenic 10 v Lead , mg/kg, Max 20 vi Copper , mg/kg, Max 5 vii Zinc, mg/kg. Max 5 vii Tin, mg/kg. Max 5 B.17 As mentioned above, the N.B.S. Crackle manufactured by the Appellant is caramelized by boiling the sugar with the water. Subsequently, other edible products viz. cashew nuts and butter are coated and made into desired size and shape by N.B.S. Crackle machine. Therefore, the impugned product manufactured by the Appellant is "Sugar Boiled Confectionery" B.18 The Appellant has also obtained technical test report from Food Testing Laboratory, School of Food Technology, JNTU Kakinada, Andhra Pradesh wherein the impugned product N.B.S. Crackle manufactured by the Appellant has satisfied all the parameters laid down under Indian Standard IS 1008:2004 in the said technical test report. The relevant extract of Food testing report is extracted as under:- In light of the above submissions, we request your good office to kind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the term which should be taken into consideration for the purpose of determining the tax liability. A.3 The Apex Court in the case of Mukesh Kumar Aggarwal & Co. v. State of Madhya Pradesh (1988) 68 STC 324 (SC) observed that in a taxing statute words which are not technical expressions or words of art, but are words of everyday use, must be understood and given a meaning, not in their technical or scientific sense, but in a sense as understood in common parlance, i.e., 'that sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it'. Such words must be understood in their 'popular sense'. The particular terms used by the Legislature in the denomination of articles are to be understood according to the common, commercial understanding of those terms used and not in their scientific and technical sense 'for the Legislature does not suppose our merchants to be naturalists or geologists or botanists'. A.4 The Apex Court in the Mauri Yeast India Pvt. Ltd. v. State of Uttar Pradesh (2008) 14 VST 259 (SC) while answering the question of classification of 'yeast' observed that the trade or commerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customers are enclosed as Annexure-8 and Annexure-9 respectively. It is also not out of place to mention that any levy of 18% rate of GST on the impugned product hinders our business and may result in the closure of our business as our competitors are levying lower rate of taxes i.e. 5% or 12% respectively. 4. Virtual Hearing: The proceedings of hearing were conducted through video conference on 22.11.2023. The authorized representative Sri. T. Bhanu Purdhviraj, C.A attended and reiterated the submissions already made. 5. Discussion and Findings: We have gone through the submissions made by the appellant in light of the ruling pronounced by the Authority for Advance Ruling. On perusal of the elaborate submissions made by the appellant at the time of hearing and taking into consideration the facts of the case, we make the following observations. 5.1 The short question posed to this Authority is whether the product "Crackle" manufactured and supplied by the appellant containing the ingredients sugar, cashew nuts, butter, liquid glucose and other permitted flavours would be classified under SI. No. 32AA of Schedule -III (sic) of Notification No. 1/2017-Central Tax (Rate) as Sugar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 12% (CGST 6% & SGST 6%). The relevant extract of serial number 32AA is as under: S.No Chapter Heading/ Tariff Item Description of Goods (1) (2) (3) 12 1704 Sugar confectionery [other than mishri, batasha, bura, sakar, khadi sakar, harda, sakariya, gatta, kuliya, elaichidana, lukumdana, chikkis like puffed rice chikki, peanut chikki, sesame chikki, til chikki, til patti, til revdi, sugar makhana, groundnut sweets, gajak and sugar boiled confectionery] (iii) Schedule III -9% Notification No. 01/2017-Central Tax (Rate) dated 28-06-2017 was amended by GST Notification 41/2017 dated 14-11-2017 and GST Notification No. 06/2018-Central Tax (Rate) dated 25-01-2018, to include the following entry pertaining to HSN Code 1704 under serial number 12 of Schedule III of the said GST Notification 01/2017 with a tax rate of 18% (CGST 9% & SGST 9%). The relevant extract of serial number 12 is as under: S.No Chapter Heading/ Tariff Item Description of Goods (1) (2) (3) 12 1704 Sugar confectionery [other than mishri, batasha, bura, sakar, khadi sakar, harda, sakariya, gatta, kuliya, elaichidana, lukumdana, chikkis like puffed rice chikki, peanut chikki, sesame chikki, til chik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by them is a "Sugar Boiled Confectionery". It must be stated that this Authority is basing its findings on the submissions and literature regarding the manufacturing process of "Crackle" as provided by the Appellant. Any suppression, misrepresentation of facts would be dealt with in terms of Section 104 of the CGST / SGST Act 2017. 5.7 As per clause (IV) of the "Explanation" in Notification No. 01/2017-CT(Rate) dated 28-6-2017 "The rules for the interpretation of the First Schedule to the Customs Tariff 6 2017, 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." Accordingly, Rule 3 of the General Rules of Interpretation of the Customs Tariff Act 1975 as made applicable to GST Matters vide Notification No. 1/2017-CT(Rate) reads as follows: Rule 3: When by application of Rule 2 (b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general desc ..... 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