Appellate Authority upholds classification of Fortified Rice Kernels under GST with 18% rate

The Appellate Authority upheld the classification of Fortified Rice Kernels (FRK) under Chapter sub-heading 19049000, subject to an 18% GST rate. The delay in filing the appeal was condoned due to technical glitches, allowing the appeal to proceed for final disposal on merits. The jurisdiction of the Advance Ruling Authority (AAR) was confirmed regarding the classification of goods, not the rate of duty, distinguishing FRK from natural rice under GST Tariff provisions. The relevance of GST Council's Circular and other case laws was deemed inapplicable to the appeal's outcome.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Jurisdiction of the Advance Ruling Authority (AAR).
3. Classification of Fortified Rice Kernels (FRK) under GST Tariff.
4. Applicability of Chapter 10 vs. Chapter 19 of the GST Tariff.
5. Relevance of GST Council's Circular and other case laws.

Condonation of Delay:
The first issue pertains to the delay in filing the appeal under Section 100(2) of the CGST Act. The appellant received the Advance Ruling on 03.12.2019, and the prescribed 30-day period ended on 01.01.2020. The appeal was filed electronically on 06.01.2020, with a delay of 5 days, and physically on 13.01.2020. The appellant attributed the delay to technical glitches on the portal. The Appellate Authority, considering the circumstances, condoned the delay and admitted the appeal for final disposal on merits.

Jurisdiction of the AAR:
The appellant contended that the AAR lacked jurisdiction to decide the rate of duty on particular goods, as this is a policy decision of the Government/GST Council. However, the Appellate Authority clarified that the AAR's decision was on the classification of the goods, not on the rate of duty, thus falling within its jurisdiction.

Classification of FRK:
The appellant argued that FRK should be classified under Chapter Heading 1006 as Rice, attracting a lower GST rate. The AAR had classified FRK under HSN 19049090, attracting an 18% GST rate. The Appellate Authority examined the manufacturing process, noting that natural rice is converted into flour, mixed with vitamins and minerals, and then reshaped into granules. This process changes the essential characteristics of rice, making it a different product.

Applicability of Chapter 10 vs. Chapter 19:
Chapter 10 covers rice in its natural form, including processed rice like husked, milled, polished, glazed, parboiled, or broken rice. The Appellate Authority found that FRK, being made from rice flour, does not retain the essential characteristics of rice grains and thus cannot be classified under Chapter 10. Instead, Chapter 1904 covers prepared foods obtained by working cereals beyond the processes mentioned in Chapter 10. Since FRK is a product made from rice flour and requires blending with traditional rice for consumption, it falls under Chapter 1904.

Relevance of GST Council's Circular and Other Case Laws:
The appellant referenced a GST Council Circular on Fortified Toned Milk, arguing that fortified products should be classified under their base category. However, the Appellate Authority distinguished between fortified milk, a final consumable product, and FRK, which requires further blending. The appellant also cited a High Court judgment questioning the constitutional validity of Section 96(2) pertaining to the AAAR authority, but the Appellate Authority found this irrelevant to the present appeal.

Conclusion:
The Appellate Authority concluded that FRK does not have the essential character of natural rice and is appropriately classifiable under Chapter sub-heading 19049000, attracting an 18% GST rate. The appeal was disposed of accordingly.

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