2021 (10) TMI 56 - AAAR - GST

Papad of different shapes classified under CTH 1905 qualifies for NIL GST rate despite varying forms

In Re: M/s. Jayant Snacks and Beverages Pvt. Ltd.,

The AAAR Gujarat held that papad of different shapes and sizes manufactured by the appellant merits classification under CTH No. 1905 of the Customs ... Classification of goods - HSN Code - PAPAD of different shapes and sizes manufactured / supplied by the appellant - merit classification under CTH No. 1905 of Custom Tariff Act, 1975 or otherwise? - HELD THAT:- Traditionally PAPAD is round shaped but the PAPAD is ready to cook product and can be consumed after roasting or frying in oil and consumed as snacks with the Indian meal or soup. Similarly, the product in question of different shape and size is a ready to cook product and can be consumed after roasting or frying in oil and consumed as snack. Further cereal flour of Chapter 10 and 11 of Customs Tariff Act, 1975 are the ingredients of both the product. Both the products i.e. “PAPAD” and product in question are same except they are known by different name in general public i.e. as “PAPAD” and “Fryums”. The manufacturing process of the products under consideration has been submitted 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. The product of the appellant, thus prepared, is thin and wafer like product. At this stage, the product is not ready 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. The products of the appellant has found its use as an alternative to regular round shaped Papad or as an additional variety of Papad in the Indian meal, especially the meals served during the community functions. The caterers, who prepare the meals for the community functions, as well as the people in general, consider such products as a different type or variety of Papad only - the applicant’s products of different shapes and sizes of papad, whose pictures are reproduced above, are nothing but Papad, classifiable under Tariff Item 1905 90 40 of the Customs Tariff Act, 1975. 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 #21 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 - in the case at hand, the product “different shapes and sizes Papad” is “Papad” of different shapes and size and find specific entry at CTH No. 19059040, therefore as per rule of interpretation, the product is to be classified under CTH No. 19059040 only and not under CTH No. 21069099 of the Customs Tariff Act, 1975 as classified by the GAAR. The product ‘different shapes and sizes Papad’ involved in the present case merit classification under Tariff heading No. 19059040 of the Customs Tariff Act, 1975 - the product in question is classifiable under CTH No. 1905 of the Customs Tariff Act, 1975, the said CTH No. 1905 is covered under entry No. 96 of Notification No. 02/20178-CT (Rate) dated 28.06.2017 and accordingly chargeable to NIL rate of Goods and Services Tax. Issues Involved:1. Classification of the product 'different shapes and sizes Papad.'2. Applicable Goods and Services Tax (GST) rate on the product.Detailed Analysis:Classification of the Product:The appellant, engaged in manufacturing and trading 'Papad' of different shapes and sizes, argued that their product is essentially 'Papad' and should be classified under Chapter Tariff Heading 1905 of the Customs Tariff Act, 1975. They contended that the product, although not fully cooked or ready to eat, is similar in ingredients and manufacturing process to traditional round-shaped Papad. The GAAR had previously classified the product under Tariff Item 2106 90 99, treating it as 'Unfried Fryums.'Ingredients and Manufacturing Process:The appellant provided a detailed description of the ingredients and manufacturing process, emphasizing that their product uses similar ingredients to traditional Papad, such as wheat flour, rice flour, starch, and other cereals. The manufacturing process involves mixing ingredients, forming dough, shaping it using dies, drying, and packaging. The appellant argued that the product remains uncooked and requires frying or roasting before consumption, similar to traditional Papad.Common Parlance Test:The GAAR's ruling was based on the common parlance test, stating that in the market, 'Fryums' and 'Papad' are distinct products. However, the appellant argued that 'Fryums' is a brand name and not a generic term for their product. They contended that their product, despite being known by different names in various regions, is still recognized as Papad in the market.Judicial Precedents:The appellant cited several judicial precedents supporting their classification under Heading 1905:- Shiv Shakti Gold Finger Vs. Assistant Commissioner, Commercial Tax, Jaipur: The Supreme Court held that irrespective of shape and ingredients, Papad remains Papad.- State of Karnataka Vs. Vasavamba Stores: The Karnataka High Court ruled that uncooked Fryums qualify as Papad.- M/s. Avadh Food Products Vs. State of Gujarat: The Gujarat Tribunal held that Fryums are Papad under the GVAT Act.Interpretation and Classification:The appellate authority emphasized the importance of ingredients, manufacturing process, and common parlance in determining classification. They noted that the product's ingredients and manufacturing process are similar to traditional Papad. The product is also consumed similarly, after frying or roasting, and is used as an accompaniment to Indian meals.Specific vs. General Entry:The authority referred to Rule 3(a) of the General Rules of Interpretation, which states that a specific description should be preferred over a general one. They concluded that the product fits more specifically under Tariff Heading 1905 90 40 as 'Papad' rather than the general heading 2106 90 99.Conclusion:The appellate authority modified the GAAR's ruling, holding that the product 'different shapes and sizes Papad' merits classification under Tariff Heading 1905 90 40 of the Customs Tariff Act, 1975. Consequently, the product is chargeable to NIL rate of GST as per Sl. No. 96 of Notification No. 02/2017-CT (Rate) dated 28.06.2017.Final Judgment:1. The product 'different shapes and sizes Papad' is classified under Tariff Heading 1905 90 40.2. The product is chargeable to NIL rate of GST as per the relevant notifications.