2022 (2) TMI 1156 - AAAR - GST

Tamil Nadu AAAR upholds 18% GST on food mixes like dosai and idly under CTH 2106

The Tamil Nadu AAAR dismissed an appeal regarding GST classification of food mixes including dosai, idly, and health mixes. The appellant sought ... Classification under HSN 2106 (food preparations not elsewhere specified) - Classification under HSN 1106 (flour, meal and powder of dried leguminous vegetables) - Applicability of Circular No.80 regarding mixture of flours (Chhatua / Sattu) - Taxability at 18% under Schedule-III entry No.23 - Advance Ruling - limited bindingness and persuasive value of other AARs - Remarks of jurisdictional officer not binding on the Appellate Authority for Advance RulingClassification under HSN 1106 (flour, meal and powder of dried leguminous vegetables) - Applicability of Circular No.80 regarding mixture of flours (Chhatua / Sattu) - Classification under HSN 2106 (food preparations not elsewhere specified) - The products manufactured and sold by the appellant are not classifiable as mere flour mixtures under HSN 1106 but as food preparations under HSN 2106. - HELD THAT: - The Appellate Authority examined the composition of the appellant's products (dosai, idly, tiffin, health and porridge mixes) and found that they contain significant value-addition and taste/characteristic-imparting ingredients beyond a mere mixture of flours. While Circular No.80 treats a plain mixture of ground pulses and cereals (Chhatua/Sattu) as remaining within HSN 1106 where only very small additives are present, the appellant's declared formulations demonstrate substantial processing aimed at creating ready-to-cook food preparations with distinguishing characteristics. The explanatory notes to HSN 1106 show that heading 1106 covers flour/meal used as such, whereas heading 2106 expressly covers preparations for use after processing (such as cooking) and mixtures intended as food preparations or to improve characteristics of food. Because the appellant's products are prepared and marketed as specific ready-to-cook mixes (not sold as plain flours) and are not covered expressly by heading 1106 or 0713, they fall within HSN 2106 and are not within the scope of the circular's example of mere flour mixtures. [Paras 7]Products are classifiable under HSN 2106 and not under HSN 1106.Taxability at 18% under Schedule-III entry No.23 - Classification under HSN 2106 (food preparations not elsewhere specified) - The applicable GST rate on the appellant's products is 18% (9% CGST + 9% SGST) as they fall under Schedule-III entry No.23 applicable to HSN 2106. - HELD THAT: - Having classified the products under HSN 2106 (food preparations not elsewhere specified), the Appellate Authority applied the entries in Notification No.1/2017-Central Tax (Rate) and observed that such items are covered by Schedule-III entry No.23 attracting the 18% rate. The Authority noted that the products are not enumerated in exempt or lower-rate entries applicable to plain flours or specific ready-for-consumption items, and therefore the Schedule-III rate for food preparations not elsewhere specified governs. [Paras 7, 8]GST at 18% (9% CGST + 9% SGST) applies to the appellant's products under Schedule-III entry No.23.Advance Ruling - limited bindingness and persuasive value of other AARs - Decisions of other Advance Ruling Authorities (including the Gujarat AAR relied upon by the appellant) are not binding on this Appellate Authority; their persuasive value is limited and must be considered in context. - HELD THAT: - The Authority observed that earlier AAR decisions are binding only on the parties before those AARs and the concerned officers in those matters. The appellant's reliance on other AARs was noted, but the Appellate Authority recorded that the Gujarat AAR decision cited by the appellant had itself been appealed and that the Gujarat Appellate Authority had come to a contrary conclusion in appeal. Consequently, prior AAR rulings do not determine the classification in this case and may be considered only for guidance where factually identical. [Paras 7]Prior AAR decisions do not bind this Authority and do not alter the classification reached.Remarks of jurisdictional officer not binding on the Appellate Authority for Advance Ruling - Comments or written submissions of the jurisdictional officer are not binding on the Appellate Authority and do not substitute for an independent examination of facts and law. - HELD THAT: - The Authority noted the appellant's contention that the jurisdictional officer had stated the products fall under a different notification. The Appellate Authority held that such remarks are unsubstantiated opinions and that advance rulings are issued after independent examination of facts and law. The appellant could have sought provisional assessment under Section 60 but did not, and the jurisdictional officer's views do not constrain the Authority's decision. [Paras 7]Remarks of the jurisdictional officer are not binding and do not affect the Authority's independent ruling.Final Conclusion: The Appellate Authority affirmed the Authority for Advance Ruling: the appellant's ready-to-cook/instant mix products are classifiable under HSN 2106 (food preparations not elsewhere specified) and are taxable at 18% (9% CGST + 9% SGST); the appeal is dismissed. Issues Involved:1. Classification of products under HSN codes.2. Applicable GST rate for the products.3. Interpretation of circulars and notifications regarding GST rates.4. Consideration of previous rulings and their applicability.Detailed Analysis:1. Classification of Products under HSN Codes:The appellant, a manufacturer of various ready-to-cook food products, argued that their products should be classified under HSN codes 0713 and 1106, which pertain to dried leguminous vegetables and their flours. They cited Circular No. 80 dated 31.12.2018, which clarifies that mixtures of flour of ground pulses and cereals fall under HSN 1106. The appellant contended that their products are similar to those described in the circular and should thus be classified under HSN 1106, attracting a lower GST rate.However, the judgment emphasized that the products contain significant value additions beyond mere flour mixtures, such as spices and other ingredients to enhance taste and appeal. These additions distinguish the products from simple flour mixtures and align them more closely with food preparations not elsewhere specified, as described under HSN 2106.2. Applicable GST Rate for the Products:The appellant sought clarification on the applicable GST rate for their products, arguing for a 5% rate based on their classification under HSN 1106. The Lower Authority ruled that the products fall under HSN 2106, attracting an 18% GST rate (9% CGST + 9% SGST).The judgment upheld this classification, stating that the products are food preparations requiring further cooking, thus fitting the description under HSN 2106. The products are not simple flour mixtures but are enhanced with additional ingredients, making them distinct from the items covered under HSN 1106.3. Interpretation of Circulars and Notifications Regarding GST Rates:The appellant relied heavily on Circular No. 80 and other notifications to support their classification under HSN 1106. They argued that their products, being mixtures of flour with minor additives, should fall under the lower GST rate category.The judgment clarified that while the circular provides guidance, the specific nature and composition of the appellant's products, which include significant value additions, align more with the descriptions under HSN 2106. The products are intended for human consumption after further cooking, fitting the criteria for food preparations not elsewhere specified.4. Consideration of Previous Rulings and Their Applicability:The appellant referenced previous rulings, including those from the Gujarat Authority for Advance Ruling, which classified similar products under HSN 1106. However, the judgment noted that these rulings are specific to the applicants who sought them and are not universally applicable.The judgment also highlighted that the Gujarat Appellate Authority had subsequently classified similar instant mixes under HSN 2106, supporting the Lower Authority's decision in this case.Conclusion:The judgment concluded that the appellant's products, being enhanced mixtures requiring further cooking, are correctly classified under HSN 2106. This classification attracts an 18% GST rate. The appeal was dismissed, upholding the Lower Authority's ruling.