2024 (6) TMI 105 - AAR - GST

Honey bee feed with refined sugar classified as artificial honey under HSN 1702.90 instead of animal feed

AAR Karnataka classified honey bee feeds under HSN 1702.90 as artificial honey rather than HSN 2309.9090. The product BEE-PRIME FEED, marketed as premium ... Classification of goods - Honey bee Feeds - to be classified under HSN 2309 9090 or not - rate of tax - HELD THAT:- The description of the impugned product 'BEE-PRIME FEED' specifies hat it is a premium nutritional supplement exclusively for bees and the same is a mixed supplementary feed. Further the Label specifies that the impugned product contains the ingredients of Vitamin C, niacin, vitamin B6 hydrochloride, vitamin B12, L-arginine, L-threonine, L-alcohol, L-alanine, L-histidine, L-serine, L-valine, Sodium chloride, potassium chloride, fructo-oligosaccharide, glucose, mixed with refined sugar. Therefore it is clearly evident from the said label that the predominant ingredient is refined sugar - the product, though is not a natural honey but is similar to it and hence it qualifies to be an artificial honey. In the instant case, it is an admitted fact that the impugned product has composition similar to that of the honey and thus the impugned product plays a role comparable to flower honey (natural honey) when water is added to the feed powder. Thus the impugned product merits classification under heading 1702.90, on the basis of specific description. Rate of tax - HELD THAT:- In the instant case the impugned product merits classification under heading 1702 as artificial honey and thus attract GST rate of 18%. ISSUES PRESENTED AND CONSIDERED 1. Whether the product described as a powdered 'premium nutritional supplement exclusively for bees' (converted to syrup by addition of water) is classifiable under Chapter/heading 17 (other sugars; artificial honey) or under Chapter/heading 23 (residues, waste and prepared animal fodder) of the Customs Tariff (i.e., whether it is artificial honey under heading 1702.90 or animal feed under heading 2309). 2. If classifiable under heading 1702 or 2309, what is the applicable GST rate (determination of liability to pay tax) under the Notification prescribing rates (i.e., whether 18% applies as per the entry for heading 1702). 3. Whether the question(s) raised fall within the jurisdiction/admissibility of the Advance Ruling Authority under the relevant provisions governing classification and determination of tax liability (Sections 97(2)(a) and 97(2)(e) of the CGST Act as applied). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Classification: artificial honey (heading 1702.90) v. prepared animal fodder/animal feed (heading 2309) Legal framework: Interpretation rules for classification in the Notification (Explanations (iii) & (iv)) adopting the First Schedule to the Customs Tariff Act, 1975 and the rules for interpretation of the First Schedule, including Section and Chapter Notes and WCO Harmonised System Explanatory Notes; HSN Chapter/heading notes for Chapter 17 (heading 1702) and Chapter 23 (heading 2309); General Rules for the Interpretation of the Harmonized System (notably Rule 3(a)). Precedent treatment: No judicial authorities were cited by the parties or the Authority. The Authority applied statutory/administrative interpretative instruments (Customs Tariff Section/Chapter Notes, WCO Explanatory Notes) and the General Rules for interpretation of the Harmonised System. Interpretation and reasoning: The product label and composition show predominant ingredient is chemically pure glucose/dextrose (˜95%) and refined sugar mixed with vitamins, amino acids, minerals and pollen; the product when mixed with water 'plays a role comparable to flower honey' and imitates natural honey. Chapter Note and Explanatory Note to heading 1702 expressly include 'artificial honey' defined as mixtures based on sucrose, glucose or invert sugar prepared to imitate natural honey. Chapter 23 (heading 2309) covers prepared animal fodder and products obtained by processing materials so they lose essential characteristics, but the product also has a specific constituent (chemically pure glucose / refined sugar) which has its own specific entry in the tariff. Applying Rule 3(a) (preference to the most specific description), a specific description for artificial honey in heading 1702 takes precedence over the more general animal feed description in heading 2309. The Authority further found refined sugar to be an essential ingredient, not merely a carrier. Ratio vs. Obiter: Ratio - the product satisfies the definitional elements of 'artificial honey' under heading 1702 (mixture based on glucose/sucrose prepared to imitate natural honey); application of Rule 3(a) leads to preference for heading 1702 over 2309. Obiter - observations on Chapter 23's scope and on the common practice of using sugar with supplements as bee feed serve explanatory purposes but are not independent bases for classification. Conclusion: The product is classifiable under heading 1702 as artificial honey and is not to be classified under heading 2309 as animal feed. Issue 2 - Tax rate applicable upon classification under heading 1702 Legal framework: Notification prescribing GST rates (Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017) - Schedule III entry for 'Other sugars ... artificial honey' specifying rate (entry No. 11 as amended). Precedent treatment: The Authority relied on the Notification's schedule and its descriptive links to tariff headings; no case law applied. Interpretation and reasoning: Having classified the product under heading 1702 as artificial honey, the Authority referred to the specific entry in the rate Notification covering artificial honey and similar products. Entry No. 11 to Schedule III includes 'artificial honey, whether or not mixed with natural honey' under heading 1702 and prescribes the applicable GST rate. Ratio vs. Obiter: Ratio - classification under heading 1702 mandates application of the rate specified in the Notification for that heading (18%); there is no alternative rate-ruling in the text. Obiter - none material to the tax-rate conclusion. Conclusion: The product attracts GST at 18% as per the Notification entry applicable to heading 1702 (artificial honey). Issue 3 - Admissibility and jurisdiction of Advance Ruling Authority Legal framework: Provisions permitting Advance Ruling requests on classification of goods and determination of tax liability (Sections 97(2)(a) & 97(2)(e) of the CGST Act as mirrored in the State Act); Rules governing admissibility and interpretation references. Precedent treatment: The Authority observed that the CGST and corresponding State GST Acts are pari materia and applied relevant statutory provisions and interpretative notes; no external judicial precedent was cited. Interpretation and reasoning: The applicant sought an advance ruling on classification and rate of tax - matters expressly covered by the specified subclauses of Section 97(2). The Authority accepted admissibility for those questions. However, the final ruling contains a statement that 'The question is not in respect of the issues covered under Section 97 (2) of the CGST Act 2017 and thus is beyond the jurisdiction of this authority.' This appears limited/confined to any ancillary question(s) not actually raised under Section 97(2) and does not affect the principal holdings on classification and rate, which the Authority adjudicated. (Cross-reference: admissibility paragraph and the ruling paragraphs that dispose of classification and rate.) Ratio vs. Obiter: Ratio - the Authority had jurisdiction to rule on classification and tax liability and did so; Obiter - the peripheral statement regarding certain unspecified question(s) being beyond jurisdiction is not further elaborated and does not detract from the operative ruling on the issues properly before the Authority. Conclusion: The application was admissible with respect to classification and tax-rate questions under Sections 97(2)(a) and 97(2)(e); the Authority exercised jurisdiction to classify the product under heading 1702 and to determine the applicable GST rate. Any other question not falling within Section 97(2) is beyond the Authority's jurisdiction (as noted by the Authority).