2018 (10) TMI 1623 - AAR - GST

Classification of 'Militry Malai Mithai' as sweet meat under Chapter Heading 2106 90 99 for GST.

The product 'Militry Malai Mithai' has been classified under Chapter Heading 2106 90 99 as a sweet meat, attracting a GST rate of 5%. This classification ... Classification of an item - Militry Malai Mithai - whether classified under the Tariff Heading 2106 as Sweet Meats or under Tariff Heading 0404 as other dairy product consisting of natural milk constituents or under the Tariff Heading 1704 as a Sugar confectionery? Held that:- Applicant’s reservations against Chapter Head 1704 are driven, among other things, by financial grounds. Because, against Chapter Head 1704 they would have to cough up GST @18%. We also sense a similar but tacit approach from the department to maintain the status quo by placing the impugned product under Chapter 17 with an eye on higher rate of tax that is attracts - however, the endeavour of the department should be to decide appropriate classification irrespective of the rate of tax attached to it. Chapter 04 essentially covers dairy products and as per Chapter Note 4 of Chapter 04, the heading 0404 applies interalia to products consisting of natural milk constituents whether or not containing added sugar or other sweetening matter or flavoured or containing added fruit or cocoa. Now while chapter head 0401 to 0406 are meant for natural dairy products viz. Milk, Cheese, Butter Milk, Butter, Whey etc. and other products made out of such items, the product in question i.e. Militry Malai Mithai contains Skimmed Milk Powder, Whey Powder, Sugar, Emulsifiers etc. as predominant ingredients, which would not make it entitles to be classified as a product of natural milk constituents as has been pleaded by the Applicant. By no stretch of imagination, the product in question can be brought under the ambit of Chpater 04 of the HSN - classification of the impugned product under Chapter 04 of the I-ISN is ruled out. Fitment of impugned product under Chapter 1704 - Held that:- The product ‘Militry Malai Mithai’ cannot be terms as ‘Chewing Gum’ (1704 10 00) or Jelly Confectionery (1704 90 10) or Boiled Sweet (1704 90 20) or Toffee, caramel etc (1704 90 30). Clearly the product is neither a gum nor boiled sweet nor toffee or caramel. That leaves residual entry ‘Others’ (1704 90 90) if at all the impugned product is to brought under the purview of Chapter 17. In other words, there is no specific entry under Chapter 17 which would encompass the impugned product even by a remote chance. Moreover, the residual entry i.e ‘Others’ (1704 90 90) is to take care of other similar products of the same family viz. Sugar Confectionery which do not find specific mention against rest of the sub-headings. The impugned product i.e. ‘Militry Malai Mithai’ is made of Skimmed Milk Powder, Sugar, Whey Powder, Emulsifiers & flavours etc. mixed together in a semi-liquid form (neither semi-solid nor in the form of Jelly) and packed in elongated pouches/sachets and ready for consumption. The ingredients, process and final shape of the impugned product takes itself out of the family of Sugar Confectionery in any form - the impugned product cannot be termed and classified as Sugar Confectionery under Chapter 17 of the GST Tariff. The product in question i.e. ‘Militry Malai Mithai’ is a product made out of Skimmed Milk Powder, Sugar & Whey Powder as main ingredients with Emulsifiers etc. put up in small sachet/pouch in semi-liquid (paste) consistency, ready for consumption. The product cannot be termed as Dairy Product or Sugar Confectionery - there is no doubt that being edible preparation, manufactured under due license issued by concerned Government authorities, it would merit classification under Chapter 21 i.e. ‘Miscellaneous Edible Products’. Once the chapter is decided, a careful examination of different entries under Chapter 21, the quest for appropriate classification rests finally at 2106 90 99, the residual entry, as the product itself does not find specific place anywhere else in the Chapter 21 - the impugned product viz. ‘Militry Malai Mithai’ would merit classification as Miscellaneous Edible Product under Chapter Heading 2106 90 99, as ‘Sweetmeat’ and chargeable to GST as applicable. The impugned goods shall be aptly classifiable under Chapter Head 2106 90 99 as ‘Sweetmeats’ and shall be entitled to benefit of Notification No.01/2017-Central Tax (Rate) dtd.28.06.2017 (as amended) and corresponding notification under MPGST Act,2017 at present attracting GST @5% Adv. [(2.5% CGST + 2.5% SGST) or 5% IGST as the case may be) as envisaged under Serial Number 101 Schedule I to the said Notification. Ruling:- The product ‘Militry Malai Mithai’ as described in the Application will merit classification under Chapter Heading 2106 90 of the GST Tariff as ‘Sweetmeat’ and would be chargeable to GST at applicable rate under the said tariff entry, presently read with Notification No.01/2017-Central Tax (Rate) dtd.28.06.2017 (Sr. No. 101 to Schedule l) and corresponding notification under MPGST Act,2017. Issues Involved:1. Classification of the product 'Militry Malai Mithai' under the appropriate GST Tariff Heading.2. Determination of whether the product is a sweet meat, dairy product, or sugar confectionery.3. Examination of the applicant's arguments and the department's viewpoint on product classification.4. Analysis of applicable GST rates based on the classification.Detailed Analysis:1. Classification of 'Militry Malai Mithai':The applicant manufactures 'Militry Malai Mithai,' which contains sugar, vegetable fats, skimmed milk powder, whey powder, emulsifiers, and flavors. The product is packed in small sachets and marketed as a sweet meat.2. Determination of Product Type:- Sweet Meat Classification (Heading 2106):The applicant argues that the product should be classified as a sweet meat under Heading 21069099, citing that it is similar to traditional sweets like Rabdi and is recognized in the market as Mithai. The applicant references the CBEC FAQ, which includes similar products under HS Code 2106, attracting 5% GST.- Dairy Product Classification (Heading 0404):Alternatively, the applicant suggests that the product could be classified as a dairy product under Heading 04049000, as it contains natural milk constituents like skimmed milk powder and whey powder. However, the ruling finds that the product does not qualify as a natural milk constituent product and thus cannot be classified under Chapter 04.- Sugar Confectionery Classification (Heading 1704):The applicant currently classifies the product under Heading 1704 as sugar confectionery, attracting 18% GST. The ruling examines the product against various sub-headings under Chapter 17 and concludes that it does not fit any specific category such as chewing gum, jelly confectionery, boiled sweets, or toffees. The product is a semi-liquid preparation, not a solid or semi-solid confectionery, and thus cannot be classified under Chapter 17.3. Examination of Arguments and Department's Viewpoint:- The department's opinion aligns with the current classification under Heading 1704, but the ruling finds this insufficient and driven by the higher tax rate.- The ruling emphasizes that classification should be based on the product's nature and not the tax rate.4. Analysis of Applicable GST Rates:- The ruling concludes that the product should be classified under Chapter Heading 2106 90 99 as a miscellaneous edible product, specifically as a sweet meat.- The applicable GST rate for this classification is 5%, as per Notification No.01/2017-Central Tax (Rate) dated 28.06.2017.Conclusion:The product 'Militry Malai Mithai' is classified under Chapter Heading 2106 90 99 as a sweet meat, attracting a GST rate of 5%. This classification is effective prospectively and does not entitle the applicant to a refund of any previously paid tax.Ruling:- The product 'Militry Malai Mithai' will be classified under Chapter Heading 2106 90 of the GST Tariff as a sweet meat.- The ruling is subject to provisions under section 103(2) and remains valid unless declared void under Section 104(1) of the GST Act.