Jackfruit chips, banana chips, potato chips classified under Chapter 2008, attract 12% GST rate

The AAAR Kerala ruled that various food products including jackfruit chips, banana chips, potato chips, tapioca chips, and roasted/salted nuts are classifiable under Chapter 2008 of the Customs Tariff Act rather than the residuary heading 2106.90. The authority held that these products, despite undergoing processes like frying and salting, retain their essential character as fruits, vegetables, or nuts. Specific tariff headings under Chapter 2008 take precedence over residuary classifications. Consequently, all products falling under Chapter 2008 attract GST at 12% rate instead of higher rates under other classifications.

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Issues Involved:
1. Classification and tax rate of Jackfruit Chips, Banana Chips (salted and masala), Sharkaraivaratty, and other similar products.
2. Classification and tax rate of roasted/salted preparations of ground nuts, cashew nuts, and other seeds.
3. Applicability of HSN Code 2106.90.99 and Entry 101A of Schedule I of Notification No. 1/2017-CT(rate).
4. Interpretation of Chapter 20 and Chapter 21 of the Customs Tariff Act.

Issue-wise Detailed Analysis:

1. Classification and Tax Rate of Jackfruit Chips, Banana Chips (salted and masala), Sharkaraivaratty, and Other Similar Products:
The appellant argued that these products should be classified as "Namkeens" under HSN Code 2106.90.99 and taxed at 5% GST as per Entry 101A of Schedule I to Notification No. 1/2017-CT(rate). However, the Authority for Advance Ruling (AAR) held these products under heading 2008.19 of the Customs Tariff and taxable at 12% GST as per Entry 40 of Schedule II to Notification No. 1/2017-CT(rate). The Appellate Authority upheld this classification, stating that these items remain as fruits and vegetables even after processing and frying, and thus fall under heading 2008, not 2106.

2. Classification and Tax Rate of Roasted/Salted Preparations of Ground Nuts, Cashew Nuts, and Other Seeds:
The appellant sought classification of these items as "Namkeens" under HSN Code 2106.90.99. The AAR classified roasted/salted cashew nuts under heading 2008.19.10 and other nuts under 2008.19.20, both attracting 12% GST. The Appellate Authority upheld this decision, emphasizing that these items are specifically covered under Chapter 20, and heading 2106.90 being a residuary heading, cannot override a specific heading.

3. Applicability of HSN Code 2106.90.99 and Entry 101A of Schedule I of Notification No. 1/2017-CT(rate):
The appellant contended that Supplementary Note No. 6 of Chapter 21, which includes "Namkeens" and "Sweetmeats" under HSN 2106.90.99, should apply. However, the Appellate Authority noted that Chapter 21 is a residuary entry for miscellaneous edible preparations not specified elsewhere. Since Chapter 20 specifically covers preparations of vegetables, fruits, nuts, etc., the products in question fall under Chapter 20, not 21.

4. Interpretation of Chapter 20 and Chapter 21 of the Customs Tariff Act:
The Appellate Authority clarified that Chapter 20 covers preparations of vegetables, fruits, nuts, and other parts of plants, while Chapter 21 is a residuary category for food preparations not specified elsewhere. The essential character of the products (fruits, nuts, vegetables) remains unchanged after processing, thus they are appropriately classified under Chapter 20. The rules of interpretation of the Customs Tariff Act, including the specific versus general rule, support this classification.

Conclusion:
The Appellate Authority upheld the AAR’s classification of the products under Chapter 20, specifically heading 2008, attracting 12% GST, and rejected the appellant’s contention for classification under HSN 2106.90.99 with 5% GST. The appeal was rejected, and the AAR’s decision was affirmed with modifications.

Order:
1. Jackfruit Chips and Banana Chips (salted and masala) are classifiable under heading 2008.19.40, taxable at 12% GST.
2. Sharkaraivaratty is classifiable under heading 2008.19.40, taxable at 12% GST.
3. Roasted/salted cashew nuts are classifiable under heading 2008.19.10, and other roasted/salted nuts under 2008.19.20, both taxable at 12% GST.
4. Salted and masala chips of Potato and Tapioca are classifiable under heading 2008.19.40, taxable at 12% GST.

The appeal was dismissed, and the AAR’s decision was upheld.

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