2023 (7) TMI 702 - AAR - GST

Kerala AAR classifies Dhathri Dahasamani herbal product under HSN 2103 90 40 attracting 12% GST

The Kerala AAR classified Dhathri Dahasamani, an herbal product, under HSN 2103 90 40 rather than HSN 0910 91 00 or HSN 2106 90 50. The ruling determined ... Classification of goods - rate of GST - Dhathri Dahasamani - classifiable under HSN 0910 91 00 or under HSN 2106 90 50 or under HSN 2103 90 40 - entry number 44 of schedule I prescribed by notification number 1/2017-CT(R) dated 28.06.2017 as amended - HELD THAT:- The rules for interpretation of the First Schedule of the Customs Tariff Act, 1975 including the Section and Chapter Notes and the General Explanatory Notes are applicable for interpretation of the GST Tariff / Rate Schedule. Accordingly the circulars issued by the CBIC and the ratio of various judgments of the Supreme Court, High Court and Tribunals regarding the classification of commodities under the Central Excise and Customs Tariff are equally applicable and have precedent value in relation to the classification of goods under the GST Tariff / Rate Schedule as the classification under the Central Excise and Customs Tariffs and the GST Tariff / Rate Schedule are aligned and based on the Harmonised System of Nomenclature Codes. [HSN Codes]. The classification of the subject product namely; 'Dhathri Dahasamini” has to be determined keeping in view the principles mentioned above Admittedly, the product is predominantly made of ingredients falling under Heading 1211 of the Customs Tariff Act. Heading 1211 covers plants and parts of plants of a kind used primarily in perfumery, in pharmacy or for insecticidal, fungicidal or similar purposes, fresh or chilled. As per the list of ingredients of the product given by the applicant, it is seen that there is only one ingredient; i.e; Chukku [Ginger: 0910 11 20 - Dried, unbleached] which falls under Chapter 9 of the First Schedule to the Customs Tariff Act; 1975 and all the other ingredients fall under Heading 1211 of Chapter 12 of the First Schedule to Customs Tariff Act, 1975. The subject product; “Dhathri Dahasamani” contains only one ingredient namely; Chukku [Ginger: 0910 11 20 - Dried, unbleached] that fall under Chapter 9 and the percentage of the ingredient is only 8%. The subject product is primarily a mixture of Karingali, Pathimukam and Ramacham falling under Heading 1211; which together constitute 80% of the ingredients. The above ingredients together with Naruneendi and Chandanam both falling under Heading 1211 constitute 92% of the ingredients. Therefore, 92 % of the ingredients of the subject product fall under Heading 1211 and hence it cannot be considered as a mixture of products; of Headings 0904 to 0910 with the addition of other substances; but having the essential character of the goods of Chapter 9. Therefore, the product cannot be classified under the CTH 0910 91 00 - Mixtures referred to in Note 1 (b) to Chapter 9 of the First Schedule to Customs Tariff Act, 1975. The product “Dhathri Dahasamini” is not capable of being used as a food preparation for human consumption in its own right; i.e., the product cannot be used as such either directly or indirectly or after processing (such as cooking, dissolving or boiling in water, milk or cither liquid etc.) for human consumption. Applying the principles of Rule 3 of the General Rules for Interpretation of the First Schedule to the Customs Tariff Act, 1975 - it is concluded that the product, “Dhathri Dahasamini' is appropriately classifiable under Heading 2103 90 40 of the First Schedule to the Customs Tariff Act, 1975 and liable to GST at the rate of 12% (6% - CGST + 6% SGST] as per entry at SI.No. 44 of Schedule II of Notification No, 01/2017 - Central Tax (Rate) dated 28.06.2017. Issues Involved:1. Classification of the product 'Dhathri Dahasamani' under HSN 0910 91 00.2. Classification of the product 'Dhathri Dahasamani' under HSN 2103 90 40.Issue 1: Classification under HSN 0910 91 00The applicant contended that 'Dhathri Dahasamani,' a mixture of dried herbs and spices used to enhance the flavor and taste of drinking water, should be classified under HSN 0910 91 00. They argued that the product retains the essential characteristics of spices as defined in Chapter 9 of the Customs Tariff Act, 1975, and cited a similar product, 'KP Namboothiri's Dahamukthi,' classified under HSN 0910 30 90 at 5% GST. They supported their claim by referring to the General Rule for Interpretation of the Schedules to the Customs Tariff, which states that goods should be classified under the heading to which they are most akin.Issue 2: Classification under HSN 2103 90 40The applicant alternatively argued that if the product is not classifiable under HSN 0910, it should be classified under HSN 2103 90 40, which pertains to mixed condiments and mixed seasoning. They emphasized that the product is not consumed as food but used as a condiment to enhance the flavor of water.Judgment:Discussion and Conclusion:The Authority examined the application and submissions, focusing on the classification of 'Dhathri Dahasamani.' The product is manufactured under a drug license and is a mixture of dried herbs and spices added to boiling water to enhance flavor. Currently, it is classified under CTH 2106 90 50 and taxed at 18% (CGST 9%, SGST 9%).The Authority referred to the rules for interpretation of the Customs Tariff Act, 1975, including Section and Chapter Notes and General Explanatory Notes, which apply to the interpretation of the GST Tariff/Rate Schedule. The classification principles from the Supreme Court judgment in COMMISSIONER OF CENTRAL EXCISE Vs M/s WOCKHARDT LIFE SCIENCES LTD were also considered.The product contains only one ingredient, Chukku (Ginger), from Chapter 9, constituting 8% of the mixture. The remaining ingredients fall under Heading 1211 of Chapter 12, making up 92% of the product. Therefore, it cannot be classified under CTH 0910 91 00 as it does not retain the essential character of goods in Chapter 9.The product is not used as a food preparation but for flavoring water, aligning with mixed condiments and seasoning under Heading 2103 90 40. The Authority concluded that 'Dhathri Dahasamani' is appropriately classifiable under Heading 2103 90 40 and liable to GST at 12% (6% CGST + 6% SGST).Ruling:Question 1: Is the product 'Dhathri Dahasamani' rightfully classifiable under HSN 0910 91 00Rs.Ruling: No.Question 2: If not classifiable as above, is the product classifiable under HSN 2103 90 40Rs.Ruling: Yes, the product 'Dhathri Dahasamani' is classifiable under Heading 2103 90 40 and liable to GST at 12% (6% CGST + 6% SGST).