TaxTMI 
TaxTMI 
2019 (10) TMI 796
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....I as "Fruit pulp or fruit juice based drinks", or under Chapter 2202 99 90 at Sl No. 24A under Schedule III as 'Other Non-alcoholic beverages" or under 2202 10 at Sl.No.12 under Schedule IV as Fall goods including aerated waters], containing added sugar or other sweetening matter or flavoured" under Notification No. 1/2017- Central Tax (Rate) dated 28.06.2017 (as amended)". 3. The applicant furnishes some facts relevant to the stated activity: a. The applicant states that he is in the business of manufacturing of aerated drinks and fruit pulp or fruit juice based drinks under different brand names, classifying the same under Chapter 22 of the First Schedule to the Customs Tariff Act, 1985. b. The applicant is proposing to commence manufacturing and supply of a new product "FANTA FRUITY ORANGE" in its factory located at Bidadi Hobli, Ramanagaram Taluka and District 562109. c. The major ingredients that will be used to manufacture "FANTA ORANGE" are Orange Juice (constituting 10.5% Of the total beverage), Sugar, Acidity Regulators, Preservatives, Stabilizers, Synthetic Food Colours, Carbon dioxide, and sweeteners, etc. The manufacturing process will start with procurement o....
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.... based drinks" for the reasons given hereunder. 5.2 It is submitted that the product in question is undisputedly covered under Chapter Heading No. 2202, which deals with non-alcoholic beverages, other than fruit or vegetable juices, classified under the Chapter Heading No. 2009. Chapter Heading 2202 is reproduced below for ease of reference: Tariff Item Description of goods Unit Rate of Duty 2202 Waters; including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, and other non-alcoholic beverages, not including fruit or vegetable juices of Heading 2009 2202 10 - Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured 2202 10 10 --- Aerated Waters 1 30% 2202 10 20 ---- Lemonade 1 30% 2202 10 90 ---- Other 1 30% 2202 99 - Other 220299 10 --- Soya milk drinks, whether or not sweetened or flavoured 1 30% 220299 20 --- Fruit pulp or fruit Juice based drinks 1 30% 220299 30 --- Beverages containing milk 1 30% 220299 90 --- Other 1 30% 5.3 From a perusa....
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....017 (as amended), the explanation to the said Notification specifies as follows: Explanation. - For the purposes of this notification - ".............. (iii) "Tariff item", "sub -heading" "heading" and "Chapter" shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) (iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification. 5.6 In view of the above explanation, for determination of correct classification of a product under Notification No. 1/2017 - Central Tax (Rate) dated 28.06.2017 and Notification No. 1/2017 -State Tax (Rate) dated 30.06.2017 (as amended), the "Tariff item", "sub-heading", "heading" and "Chapter" shall be looked into by reference to what has been specified in the First Schedule to the Customs Tariff Act, 1975. For interpretation of correct classification of a commodity under the said Notification, the Rules of Interpretation of Customs Tariff ....
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....bute to the food item. 5.13 The applicant submits that the product in question is proposed to be prepared with orange juice as its base, which will be added to the syrupy liquid consisting of water, sugar and other constituents. The percentage of orange juice is 10.5% of the total beverage. It is the active ingredient of the product in question, and imparts the basic attribute to the drink, including its taste and characteristics. Therefore, the product in question will be an 'orange juice based drink', qualifying as fruit juice based drink' under the Tariff Item No. 2202 99 20. 5.14 In support of the above interpretation, the applicant places reliance on D.Hicks (ed.), Production and Packaging of Non-carbonated Fruit Juices and Fruit Beverages, 1990, Van Nosttand Reinhold, New York, wherein it is stated that the most significant feature of a fruit beverage is not its fruit content but the function for which it is designed and marketed. The fruit is often a dominant ingredient providing its overall character to the drink which cannot be achieved in any other way. 5.15 The applicant submits that the above submission is further amplified on examination of the scope of sub-headings....
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.... Pink Lemonade 9% grape juice concentrate, 7% apple juice concentrate, 1% lemon juice concentrate; 0.5% strawberry juice concentrate and 83% water 2202.90.9090 (Others) 3. Parkers Organic Ginger Beer Carbonated water, Organic Cane Sugar and Australian Organic Ginger 2202.10.0040 (Carbonated Soft Drink - Others) 4. Parkers Organic Lemonade Carbonated Water, Organic Cane Sugar, Organic Lemon juice and natural flavor 2202.10.0020 (Carbonated Soft Drink - Others) 5.19 The applicant argues that the aforesaid ruling clearly points to the fact that a beverage could be a fruit juice based drink (eg. Sl. 1 & 2 above) and it could be flavoured water (eg. Sl. 3 & 4 above). The classification, however is determined by the nature of the beverage, particularly the presence of the fruit juice to an extent that it attributes the essential character to the beverage, not merely as a flavouring agent, It is the dominant nature of the product which determines the classification under the sub-heading No. 2202 10 or 2202 99. 5.20 The applicant further submits that as per the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 (as amended), flavouring agen....
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....s the essential character of the beverage. Unlike, Tariff Item 2202 99 30 which used the word 'containing' instead of 'based' which would mean that beverages with any quantity of milk would be covered under Tariff Item No. 2202 99 30. 5.23 Thus the applicant submits that Sub-heading 2202 10 would cover-only those beverages which are prepared with flavours (eg. Soft drinks) and the beverages which are prepared from fruit juice would be classifiable under Tariff Item 2202 99 20. 6. Regarding the point Orange Juice forms the base of the beverage: Carbonation is only for preservation Of the beverage, the applicant states as under: 6.1 As per his understanding merely because the product in question, proposes to be manufactured by the applicant is aerated, it will not be classified under Tariff Item No. 2202 10 10. 6.2 From -a perusal of the manufacturing process of product in question, proposed to be manufactured by the applicant 'is aerated; it will not be classified under Tariff Item No. 2202 10 10. 6.3 From a perusal of the manufacturing process of product in question, it can be seen that apart from Orange Juice, the applicant is also using Carbon dioxide as one of the ingredien....
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....n the Instant case, Fanta Fruity Orange contains Carbon dioxide only to the extent of 0.5148% and that too for preservation purposes. Therefor, in no way, Fanta Fruity Orange be classified under the category "All goods (including aerated waters), containing added sugar or other sweetening matter or flavoured" falling under sub-heading 2202 10 (SI.No. 12 of Schedule IV) of Notification No.01/2017-Centra1 Tax (Rate) dated 28.062017 and Notification No. 01/2017 - State Tax (Rate) dated 29.06.2017 (as amended). Since, Fanta Fruity Orange is proposed to be manufactured from 10..5% Orange Juice; the same will form the base of the beverage drink and it ought to be classified as a "fruit juice based drink?. 6.7 The applicant has placed on record a test report from Microchem Silliker Pvt. Ltd, Whereby the sister unit of the applicant having factory at Goblej, Kheda, Gujarat manufactured the product Fanta Fruity Orange and got it tested for percentage of Carbon dioxide- From a perusal of the test report, it can be seen that Gas volume in Fanta Fruity Orange is 2.6. It is submitted that Gas Volume is defined as the number of times the total volume of dissolved gas can be divided by the volum....
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....everage or fruit drink must contain soluble solids not less than 10%, whereas their product contains 13.7% soluble solids, Rejecting the contention of the Department, the Hon'ble Tribunal, at para 6, held the product classifiable under tariff item 2202 90 20, which was affirmed by the Hon'ble Supreme Court by dismissing the appeal filed by the Department. PERSONAL HEARING PROCEEDINGS HELD ON 03.10.2018. 7. Sri. G. Shivadass, Advocate and duly authorised representative of the applicant appeared for personal hearing proceedings held on 03.10.2018 & reiterated the facts narrated in their application and also submitted copies of relevant documents and judgements that they intend to rely on. 8. FINDINGS & DISCUSSION: 8.1 We have considered the submissions made by the Applicant in their application for advance ruling as well as the submissions made by Sri. G. Shivadass, Advocate and authorised representative of the applicant during the personal hearing. We have also considered the issues involved, on which advance ruling is sought by the applicant, and relevant facts, 8.2 At the outset, we would like to state that the provisions of both the CGST Act and the KGST Act are the ....