Jackfruit, banana, tapioca, potato chips retain fruit/vegetable character despite processing, classified under heading 2008 not namkeens

AAAR Kerala ruled that jackfruit chips, banana chips, tapioca chips, potato chips, chembu chips, and pavakka chips cannot be classified as namkeens under HSN 2106.90.90 attracting 5% GST. The authority held these products retain their essential character as fruits/vegetables despite processing through frying and salting. Applying tariff interpretation rules, particularly Rule 3(a), specific heading 2008 prevails over residuary heading 2106.90. All chip varieties are classifiable under heading 2008.19.40, while roasted/salted cashew nuts fall under 2008.19.10 and other nuts/seeds under 2008.19.20 of Customs Tariff Act, 1975.

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Issues Involved:

1. Classification of Jackfruit Chips, Banana Chips, and Banana Chips (masala) sold without a brand name.
2. Classification of Sharkaraivaratty and Halwa sold without a brand name.
3. Classification of roasted and salted/salted/roasted preparations of Ground nuts, Cashew nuts, and other seeds.
4. Classification of salted and masala chips of Potato and Tapioca.

Detailed Analysis:

1. Classification of Jackfruit Chips, Banana Chips, and Banana Chips (masala):

The appellant contended that these products should be classified as "Namkeens" under HSN Code 2106.90.99 and taxed under Entry 101A of Schedule I of Central Tax (Rate) Notification 1 of 2017, attracting a GST rate of 5%. They argued that these items are commonly understood as "Namkeens" based on Supplementary Note No. 6 of Chapter 21 of the Customs Tariff Act, which includes sweetmeats and namkeens irrespective of their ingredients.

However, the authority held that these products are classifiable under Customs Tariff Heading 2008.19.40, which covers "Fruits, nuts, and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included." The authority emphasized that the essential character of the fruits remains unchanged after processing, and thus, they fall under Chapter 20 rather than Chapter 21. Consequently, these items are liable to GST at the rate of 12% [6% CGST + 6% SGST] as per Entry No. 40 of Schedule II of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017.

2. Classification of Sharkaraivaratty and Halwa:

The appellant argued that Sharkaraivaratty and Halwa should be classified as "Sweetmeats" under HSN Code 2106.90.99 and taxed under Entry 101 of Schedule I of Central Tax (Rate) Notification 1 of 2017, attracting a GST rate of 5%. They relied on the common parlance test and Supplementary Note No. 6 of Chapter 21, which includes sweetmeats.

The authority held that Sharkaraivaratty is classifiable under Customs Tariff Heading 2008.19.40 and liable to GST at the rate of 12% [6% CGST + 6% SGST] as per Entry No. 40 of Schedule II of Notification No.01/2017 Central Tax (Rate) dated 28.06.2017. Halwa, on the other hand, is appropriately classifiable under Customs Tariff Heading 2106.90.99 and is liable to GST at the rate of 5% [2.5% CGST + 2.5% SGST] as per Entry No. 101 of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017.

3. Classification of roasted and salted/salted/roasted preparations of Ground nuts, Cashew nuts, and other seeds:

The appellant contended that these products should be classified as "Namkeens" under HSN Code 2106.90.99 and taxed under Entry 101A of Schedule I of Central Tax (Rate) Notification No. 1/2017, attracting a GST rate of 5%.

The authority held that roasted/salted/roasted and salted Cashew nuts are classifiable under Customs Tariff Heading 2008.19.10, and roasted/salted/roasted and salted Ground nuts and other nuts are classifiable under Customs Tariff Heading 2008.19.20. These items are liable to GST at the rate of 12% [6% CGST + 6% SGST] as per Entry No. 40 of Schedule II of Notification No.01/2017 Central Tax (Rate) dated 28.06.2017.

4. Classification of salted and masala chips of Potato and Tapioca:

The appellant argued that these products should be classified as "Namkeens" under HSN Code 2106.90.99 and taxed under Entry 101A of Schedule I of Central Tax (Rate) Notification No. 1 of 2017, attracting a GST rate of 5%.

The authority held that the salted and masala chips of Potato and Tapioca are classifiable under Customs Tariff Heading 2008.19.40. These items are liable to GST at the rate of 12% [6% CGST + 6% SGST] as per Entry No. 40 of Schedule II of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017.

Conclusion:

The Appellate Authority upheld the Advance Ruling Authority's decision with minor modifications. The impugned goods, including Jackfruit Chips, Banana Chips, Sharkaraivaratty, and various roasted/salted nuts, are classifiable under different Tariff Items of Heading 2008 of Chapter 20 of the Customs Tariff Act, 1975, attracting a GST rate of 12%. Halwa is classified under HSN 2106.90.99, attracting a GST rate of 5%. The appeal filed by the appellant was rejected.

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