TaxTMI 
TaxTMI 
2020 (2) TMI 894
X X X X Extracts X X X X
X X X X Extracts X X X X
....19/B-10 dtd.23.01.2019 = 2019 (7) TMI 95 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA. Brief Facts of the Case A. M/s Sun Pharmaceutical Industries Limited (hereinafter referred to as 'Appellant') having its corporate head office at, "SUN HOUSE" Western Express Highway, Goregaon(E), Mumbai-400063 is engaged in the business of manufacturing and trading of pharmaceutical products, nutraceutical and allied products falling under Chapter 28 & 30 of the Customs Tariff Act,1975. B. The Appellant was registered under the erstwhile tax regime, and was discharging excise duty, service tax and Value Added Tax (VAT) on manufacture of pharmaceutical and nutraceutical products. C. Under the current regime, the Appellant is registered as per the GST laws, E. The Appellant is, inter alia, engaged in the manufacture and supply of medicaments and other related products. The Appellant is also engaged in business of marketing and supplying of a nutritional powder/food for special dietary use known as 'Prohance' and 'Prohance-D'. Introduction to "Prohance-D" F. Prohance-D is specially designed to serve as a nutritional benefit for people suffering from Diabetes as the name itself s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ellant and the department) regarding the correctness of the classification of Prohance-D - Vanilla variant under Tariff item No.2106 90 91 and the applicable rate of GST in respect of the same in terms of Sr No. 46A of Schedule II to Notification No. 1/2017-CT(R) dated 30.06.2017 & the corresponding Notification of relevant State GST Act. Application for Advance Ruling L. At this juncture it is pertinent to refer to the rate notification under GST for the possible classification of the product in question. Notification No.1/2017-Central Tax (Rate) dated 30.06.2017 provides for applicable rates of GST on the supply of goods. SI. No. 46A of Schedule - II to Notification No.1/2017- Central Tax (Rate) dated 30.06.2017 reads as under: Sch. SI. No. Chapter Heading/ Sub-Heading Description of Goods Rate of Tax (CGST) II 46A 2106 90 91 Diabetic foods 6% M. Corresponding notification of relevant State GST Act also provides rate of 6% on the aforesaid item. N. Therefore, "Diabetic Food" of Heading No. 2106 90 91 of the Customs Tariff Act, 1975 (hereinafter referred to as 'CTA') are covered by SI. No. 46A of Schedule II and attract effective GST @12%.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....06 90 91 of CTA on the ground that Prohance-D is advertised/marketed as providing other health benefits like providing energy, immune health, heart health, vitamins and minerals and maintains cholesterol levels. c) Relying on the information available on internet, it will not be proper/correct to treat / consider the Prohance-D - Chocolate variant as 'diabetic food' as it does not contain high amount of dietary fiber even though it contains gum Arabic and also Prohance-D - Chocolate variant does not contain slow digestion agents. d) Prohance-D - Chocolate variant is not classifiable as 'cocoa preparation' falling under Chapter 18 of the CTA on the ground that the chocolate flavor is used only to attract the end consumer. e) Prohance-D - Chocolate variant is also not classifiable under Chapter 19 of the CTA. e) Prohance - D - Chocolate variant is "Food preparation" classifiable under Chapter Heading No.21.06 as it is meant to be consumed by people by dissolving the same in water or milk. f) Since Prohance - D - Chocolate variant is a combination of various items and could clearly be treated as a 'compound preparation' being in powder form....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Diabetic foods. Kg 2106 90 92 ---- Sterilized or pasteurized millstone Kg 2106 90 99 ---- Other. Kg 2. It is clear that Tariff Item No. 21.06 90 91 specifically covers "Diabetic foods". 3. At this juncture it is first pertinent to refer to the ingredients of the product in question and the function played by the said ingredients. For ease of reference the ingredients as declared on the packaging of the product are extracted as follows: Maltodextrin - It is a polysaccharide that is used as a food ingredient. It is produced from starch by partial hydrolysis and is usually found as a white hygroscopic spray-dried powder. 4. Reliance is placed on HSN explanatory notes to Chapter 17.02 which provides the following explanation - Malto-dextrins (or dextri-maltoses), obtained by the same process as commercial glucose. They contain maltose and polysaccharines in variable proportions. However, they are less hydrolysed and therefore have a lower reducing sugar content than commercial glucose. The heading covers only such products with a reducing sugar content, expressed as dextrose on the dry substance, exceeding 10% (but less than 20%), Those wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e in blood glucose levels than do those manufactured with either sucrose or glucose. 12. Reliance is placed on HSN explanatory notes to Chapter 17.02 which provides the following explanation - 13. Fructose (C6H1206) which is present in large quantities, with glucose, in sweet fruits and in honey. Commercially it is produced from commercial glucose (e.g., corn syrup), from sucrose or by hydrolysis of inulin, a substance found mainly in the tubers of the dahlia and the Jerusalem artichoke. It occurs in the form of a whitish, crystalline powder or as a viscous syrup (sec Part (B)); it is sweeter than ordinary sugar (sucrose) and is especially suitable for use by diabetics. This heading covers both commercial and chemically pure fructose. 14. Reliance is placed on Kirk-Othmer Encyclopaedia of Chemical Technology Volume 23 at page 556-557, which provides the following - Sweeteners ...... Although naturally occurring and yielding ca 4 kcal/g (16.7 kJ/g), the same as sugar, fructose does not cause a fluctuation in blood sugar, ie, glucose levels after ingestion, making fructose a better choice for diabetics (2) Fructose is also more potent than sugar (ca 1.5 tim....
X X X X Extracts X X X X
X X X X Extracts X X X X
....- It is an amino sulfonic acid, but it is often referred to as an amino acid, a chemical that is a required building block of protein. 24. Artificial sweetener (Sucralose) - It is a zero-caloric artificial sweetener and is made from sugar in a multi-step chemical process in which 3 hydrogen-oxygen groups are replaced with chlorine atoms. Sucralose is commonly used as a sugar substitute in both cooking and baking and is calorie-free. Sucralose is 400-700 times sweeter than sugar and does not have a bitter aftertaste. Sucralose is said to have little or no effects on blood sugar and insulin levels. Sucralose may raise blood sugar and insulin levels in people who do not consume artificial sweeteners regularly. However, it probably has no effect on people who regularly use artificial sweeteners. 25. Reliance is placed on HSN explanatory notes to Chapter 29.32 which provides the following explanation - Sucralose (1,6-Dichloro-1,6-dideoxy-b-D-fructofuranosy 1-4-chloro-4-deoxy-a-D-galactopyranoside). Odorless, white to almost white crystalline powder. Artificial sweetener mainly used for medicine and food, especially for the treatment and diet of diabetic patients. 26. A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct is an eligible substance consisting of nourishing and nutritive components such as carbohydrates, fats, proteins, essential minerals and vitamins and can be ingested and digested and provides nutrition to the human body. Hence we have no doubt that the subject product can be categorized as food." ..................(Emphasis supplied) 35. Once it is clear that Prohance-D - Chocolate variant is 'food' in itself, it is to be seen whether the same would be covered within the meaning of the term "Diabetic foods" as mentioned under Tariff Item No.2106 9091 of the CTA. MEANING OF TERM "DIABETIC FOODS" 36. The term 'Diabetic Food' is not defined under the GST provisions as well as under Harmonized Commodity Description of Coding System (for short referred to as HSN). Further the term 'Diabetic Food' is also neither defined under Chapter notes of any Chapters of CTA nor under the allied law namely Customs Act and Rules made thereunder. In order to understand the ordinary meaning of the term 'Diabetic Food', reference has to be made to the dictionary meanings. 37. The Oxford Dictionary of Food & Nutrition by David A. Bender defines "diabetic foods" as under: "Diabe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al foods, nutraceuticals, health supplements, proprietary foods and such other articles of food which the Central Government may notify in this behalf. Explanation - For the purposes of this section, - (1) "foods for special dietary uses or functional foods or nutraceuticals or health supplements" means: (a) foods which are specially processed or formulated to satisfy particular dietary requirements which exist because of a particular physical or physiological condition or specific diseases and disorders and which are presented as such, wherein the composition of these foodstuffs must differ significantly from the composition of ordinary foods of comparable nature, if such ordinary foods exist, and may contain one or more of the following ingredients, namely: - (i) plants or botanicals or their parts in the form of powder, concentrate or extract in water, ethyl alcohol or hydro alcoholic extract, single or in combination; (ii) minerals or vitamins or proteins or metals or their compounds or amino acids (in amounts not exceeding the Recommended Daily Allowance for Indians) or enzymes (within permissible limits); (iii) substances ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll manufacture, formulate or process an article of food for special dietary use unless- (i) specially processed or formulated to satisfy particular dietary requirements which may exist or arise because of certain physiological or specific health conditions, namely: - (a) low weight, obesity, diabetes, high blood pressure; (b) pregnant and lactating women; and (c) geriatric population and celiac disease and other health conditions. (ii) The food business operator shall clearly indicate on the label whether or not the food for special dietary use is to be taken under medical advice; (iii) A food business operator may manufacture or sell an article of food for special dietary use in single use packaging or in dosage form, namely, granules, capsules, tablets, pills, jelly, semi-solid and other similar forms, sachets of powder, or any other similar forms of liquids and powders designed to be taken in measured unit quantities with a nutritional or physiological effect; (iv) A food business operator may formulate an article of food for special dietary use in formats meant for oral feeding through a enteral tubes but shall not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cial dietary uses". 52. In view of the above, it is submitted that the product in question is a specially designed nutritional powder to meet the special dietary requirements of Diabetic people. It is pertinent to note that the ingredients like Isomaltulose, FOS - Fructo- oligosaccharides and Inulin are covered under Schedule - VIII of the Notification dated 23.12.2016 as prescribed by FSSAI. Thus, the product in question is treated as a 'food for special dietary uses" under FSSAI as is registered as the same. This fact is also not in dispute and admitted by the Ld. AAR in its Ruling dated 23.1.2019. 53. The product in question also has other features also like it being sugar (sucrose) free, having low GI, having high fiber, being rich in MUFA. Thus, in this respect, it can be concluded that the product in question is a 'diabetic food' to meet the special dietary requirements of Diabetic people. The Ld. AAR has not disputed the said facts and the conclusion that the product is food which is meant for diabetic persons. 54. In light of the aforesaid submissions, the fact that the product in question is a food product which answers the description of product designed for a pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....glucosuria). Prolonged hyperglycaemia may damage nerves, blood vessels, and kidneys, and lead to development of cataracts, so effective control of blood glucose level is important. Type I diabetes mellitus develops in childhood (juvenile onset diabetes) and is due to failure to secrete insulin and hence is called insulin dependent diabetes. Treatment is by injection of insulin (originally purified from beef or pig pancreas, now biosynthetic human insulin), together with restriction of the intake of sugars. Type II diabetes mellitus generally arises in middle age (maturity onset diabetes) and is due to resistance of the tissues to insulin action; secretion of insulin by the pancreas may be normal or higher than normal. It is referred to as non-insulin dependent diabetes and can sometimes be treated by restricting the consumption of sugars and reducing weight, or by the use of oral drugs which stimulate insulin secretion and/ or enhance the insulin responsiveness of tissues (sulphonylureas and biguandies). It is also treated by injection of insulin to supplement secretion from the pancreas and overcome the resistance. Impairment of glucose tolerance similar to that seen in d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fits such as providing Energy, Immune health, Heart health, Vitamins and Minerals and maintains cholesterol levels, as mentioned on the label. 61. It is submitted that the above allegation / finding of the Ld. AAR is totally incorrect and perverse. The Ld. AAR has in fact failed to understand the manufacturing process of Prohance - D - Chocolate variant and its chemical composition to arrive at the conclusion that the Prohance - D - Chocolate variant will not be specifically covered under Tariff Item No.2106 9091 of the CTA as 'Diabetic Foods'. 62. It is submitted that merely mentioning the other health benefits on the label of the product in question does not exclude it/take it away from the product in question to be considered / treated as a 'diabetic food'. In reality, the other health benefits mentioned on the label are actually for the patients who are suffering from diabetics only. 63. The above submission can be explained better by dealing with each and every consequences/effect which can be caused to a diabetic person: Diabetes and coronary heart disease are closely related. Diabetes contributes to high blood pressure and is linked with high cholesterol wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd rely on Rule 106 of the Drugs and Cosmetics Rules, 1945 which reads as under: 106. Diseases which a drug may not purport to prevent or cure.-(1) No drug may purport or claim to prevent or cure or may convey to the intending user thereof any idea that it may prevent or cure, one or more of the diseases or ailments specified in Schedule J. (2) No drug may purport or claim to procure or assist to procure, or may convey to the intending user thereof any idea that it may procure or assist to procure, miscarriage in women. 73. Further, attention is invited to Schedule -J of the Drug and Cosmetics Rules, 1945 (as mentioned in Rule 106) which lists out certain diseases and ailments which a drug may not purport to prevent or cure or make claims to prevent or cure. Out of all the diseases and ailments, it is submitted that Diabetes is one of the diseases or ailments which alone cannot be cured by drug or medicine and hence the same required to be cured or prevented by taking adequate nutritional supplements. The relevant portion of the Schedule J is extracted as under: SCHEDULE J [See Rule 106] DISEASES AND AILMENTS (BY WHATEVER NAME DESCRIBED) WHICH A DRUG M....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to say that product in question is marketed to treat or prevent the other health related benefits and hence the same cannot be treated as suitable for people suffering from diabetes alone. In other words, the Ld. AAR is totally incorrect to held that presence of essential ingredients in Prohance-D which can also treat the other health related problems will not be considered as "diabetic food" only, when precisely the benefits as mentioned on the label is very much essential and required for treatment and prevention of other connected health symptoms for patients suffering from diabetes. It is submitted that the diabetic person cannot be forced to buy different products for controlling or preventing various consequences/effect of diabetes. In fact, the product in question is ONE STOP SHOP for a diabetic person. 76. On this count alone, it is submitted that the portion of the Ld. AAR ruling dated 23.1.2019 mentioning of other health benefits on the label of the product will make the product of general use and not exclusive for 'diabetic people' is totally incorrect and perverse. Thus, it is submitted that the portion of the Ruling dated 23.1.2019 passed by Ld. AAR which is against....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e wherever required in relation to the respective products. It is submitted that the Custom Tariff is generally based on the tariff classification adopted by World Customs Organization in its HSN. Hence, wherever a Chapter of Custom Tariff is fully aligned with the corresponding Chapter of HSN, the HSN explanatory notes explaining the scope of headings of that Chapter would have persuasive value in the determination of scope of headings of correspondence Chapter of Customs Tariff. The aforesaid position has been laid down by the Hon'ble Supreme Court in the following decisions: (a) Coen Bharat Limited Vs. CCE - 2007 (217) ELT 165 (SC) = 2007 (9) TMI 29 - SUPREME COURT (b) CCE Vs. Bakelite Hylam Limited - 1997 (91) ELT 13 (SC) = 1997 (3) TMI 598 - SUPREME COURT 83. Accordingly, the Ld. AAR should have placed reliance on Explanatory notes to HSN in order to understand and ascertain the correct classification of the products in question. 84. On this count alone, it is submitted that the portion of the Ruling dated 23.1.2019 passed by the Ld. AAR to the extent of rejecting the classification of the product in question under Tariff Item No. 2106 90 91 as 'Diabeti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nger ale and root beer, and alcoholic beverages, including wine, made by a fermentation process, and distilled liquor, requiring both fermentation and distillation." 92. It submitted that for determination whether a product is a 'beverage' or 'food', the crucial deciding factor should be the "principal purpose" for which it is intended to be used. If the product is used for the purpose of quenching one's thirst or refreshment purpose, then the same would be classifiable as a 'beverage'. However, if the product has nutritional value assigned to it and the principle function of the product is to provide nutrition, then it shall rightly be qualified as a 'food' product and not as a 'beverage'. 93. It is submitted that the mixing of any food product with water or milk cannot be the criteria to conclude that the resultant product will looses its original identity and become beverage or non-alcoholic beverage. This portion of the submission is supported by the umpteen decisions wherein the judicial forums clearly held that if the product is used for the purpose of quenching one's thirst or refreshment purpose then only the same would be classifiable as a 'beverage'. Further the afo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uding cocoa. 97. It is submitted that the product in question either in the current state (powder form) or in the form after adding the water to it would not fall under any of the category of 'non-alcoholic beverages' listed above. 98. It is submitted that the product in question cannot be consumed for refreshment purpose or recreational purposes, hence the same shall not be classifiable as a 'beverage' at all. 99. It is further submitted that the license for manufacture of the product in question as granted by FSSAI is under the heading 'Food for special dietary use' and not under the heading 'Non-alcoholic Beverage'. Hence the product in the question is a food preparation and not a beverage or a preparation for making of a potential beverage, as per the regulation of FSSAI. Had the intention of FSSAI to categorize the product as similar to product in question under 'Non-alcoholic Beverage', in such case, FSSAI should have clearly mentioned the said product under Para No.14.0 of The Food Safety and Standards (Food Products and Food Additives) Regulations, 2011. 100. It is submitted that the product in question is a nutritional product/food replacement which needs to be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he goods are food cannot contradictorily classify the product in question as a preparation for beverage, since it would amount to blowing hot and cold. RELEVANT GUIDELINES ISSUED BY FDA SUPPORTS THE APPELLANT'S SUBMISSION. 105. It is submitted that the product in question is admittedly being marketed as a "partial meal replacement/supplement for diabetic patients" containing additional ingredients for the special dietary needs of the diabetic patients. The product in question being "food for diabetic" as per the FSSAI standards and is to be consumed in specified dosage. It is submitted that the product in question clearly fulfills all the conditions prescribed by the guidance material for classification as a "dietary supplement product" and not a beverage. 106. To support the above submission, reference is invited to the "Guidance for industry: Distinguishing Liquid Dietary Supplements from Beverages" issued by the Food and Drug Administration (FDA) to help dietary supplement and beverage manufacturers and distributors determine whether a "product in liquid form" is properly classified as a 'dietary supplement' or as a 'beverage'. The guidance provides certain basis for di....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat favorably compare the product to a category of beverages (e.g., sodas), market the product as an accompaniment to a meal, or market the product based on typical beverage criteria like taste, refreshment, and thirst-quenching ability; the use of metatags that result in the product's appearing in the results of an electronic search for sodas, juices, or other beverages; and paying for the product to be displayed in the beverage section of retail stores. However, simply recommending that a liquid product be taken with a meal would not generally be considered to represent the product as a conventional food, as many dietary supplements should be taken with food for best absorption. Moreover, promoting a product as a substitute for a beverage would not always represent the product as a conventional food. Composition - FDA recognizes that there are areas of overlap between the ingredients of some dietary supplements and conventional foods. However, in light of Congress's findings in the Dietary Supplement Health and Education Act of 1994 (DSHEA), which focused on the value of dietary supplements in improving nutrition, promoting long-term health and quality of life, and reduc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted that the product in question is rightly classifiable as 'Diabetic foods' being a "dietary supplement" for diabetic patients and not a "beverage". Thus, it is submitted that once it is clear that the product in question is not a beverage at all, then the question of categorizing the product in question as "compound preparation for making of non-alcoholic beverage" will not arise at all. IN COMMERCIAL/MARKET PARLANCE TOO THE PRODUCT IN QUESTION IS IDENTIFIABLE AS "DIABETIC FOOD" AND NOT AS A PREMIX FOR A BEVERAGE. 109. In the alternative, it is submitted that the product in commercial/market parlance is identified as a food for diabetic patients and not as a beverage. Further the same is also highlighted by the packaging label of the product which reads as 'FOOD FOR SPECIAL DIETARY USE' and 'Food for people with Diabetes'. 110. In common parlance if a customer were to ask the shopkeeper for a premix for a beverage, the shopkeeper would not give the customer the product in question. However, the customer if approaches the shopkeeper to buy food products for a diabetic patient, then only would the shopkeeper provide the customer with the product in question. 111. Furthe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....both the attempts turn to be futile then the attempt should be made to consider the end uses, the inclusion and exclusion clauses provided in the section notes, the chapter notes and the explanatory notes given the HSN. While doing so the interpretation of the said Note will depend upon the context in which the entries have been worded. If an entry is clearly worded and is broad in character, the some would lead to the conclusion. An entry is to be given its ordinary meaning. If any goods fit in within one entry, the same for any purpose would not be held to be included in the other and in particular the residuary." 116. The same position was re-iterated in the case of Rajdhani Seeds Corporation v. Commr. Of Cus. Nava Sheva 2006 (198) E.L.T. 449 (Tri. - Del.) = 2005 (12) TMI 376 - CESTAT, NEW DELHI in which the six-digit specific entry was preferred over general entry for the classification of "cloves". 117. In order to determine the specific entry between Tariff Item No. 21.06 9050 and Tariff Item No. 21.06 9091, it is pertinent to refer to the HSN Explanatory notes. 118. As discussed above, the relevant extract of the HSN explanatory note to Chapter Heading 21.06 is extr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Indian Carbon Limited v. S. Taxes reported at AIR 1972 SC 154 = 1971 (8) TMI 184 - SUPREME COURT that a "goods in all its forms" are classifiable under the Chapter Heading under which the principal good is classifiable. In the present matter, "Diabetic Foods" is classifiable under Tariff Item No.2106 9091 of the CTA. Applying the principal in the said judgment to the present facts, it can be concluded that "Diabetic Foods" in all forms shall be classifiable under Tariff Item no. 2106 9091 of CTA. 125. Thus, even if there existed two competing entries for the classification of the product: (i) Tariff Item No. 2106 9050 of the CTA which is a "general entry" for Compound preparations for making non-alcoholic beverages. (ii) Tariff Item no. 2106 9091 of the CTA which a "specific entry" for "Diabetic Foods" in all forms. 126. As per Rule 3(a) of the General Rules of Interpretation, the heading which provides the most specific description and provides for the essential characteristic of the product shall be preferred to headings providing a more general description. 127. In light of the same, it is humbly submitted that Tariff Item no. 2106 9091 provides the mo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s that when classification cannot be determined by applying Rule 3(a) & 3(b) of the General Rules of Interpretation, then the product under question shall be classifiable under the heading which occurs last in numerical order among those which equally merit consideration. 131. The same principal was upheld in the case of Union of India v. Pesticides MFG. & Formulators Association of India reported at 2002 (146) E.L.T. 19 (S.C.) = 2002 (10) TMI 95 - SUPREME COURT. 132. Applying the said principal in the present matter, the latter of the competing headings is Tariff Item No.21.06 9091 should be applied in the present case. 133. In view of the same, it is humbly submitted that the product is classifiable under Tariff Item No.2106 9091 of CTA. WHEN THERE ARE TWO COMPETING ENTRIES, THE HEADING BENEFICIAL TO THE ASSESSEE IS TO BE ADOPTED - "PROHANCE - D (CHOCOLATE)" IS CLASSIFIABLE UNDER TARIFF ITEM NO. 2106 9091 OF CTA 134. In furtherance to the above stated arguments, cognizance must be placed on the landmark judgment in the case of Commissioner of Central Excise vs. Minwool Rock Fibres Ltd. reported at 2012 (278) ELT 581 (S.C.) = 2012 (2) TMI 289 - SUPREME COURT. In the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....olic beverages" covered under Tariff Item No. 2106 9050 attracts GST at the rate of 18%. Sch. SI. No. Chapter Heading/Sub-Heading Description of Goods Rate of Tax (CGST) II 46A 2106 90 91 Diabetic foods 6% III 23 2106 Food preparations not elsewhere specified or included [other than roasted gram, sweetmeats, batters including idli/dosa batter, namkeens, bhujia, mixture, chabena and similar edible preparations in ready for consumption form, khakhra, chutney powder, diabetic foods] 9% 139. It is further noted that the specific entry with respect to "Diabetic Food" was introduced in CTA in the year of 2005 in Central Excise Tariff Act, 1975 & 2003 in the Customs Tariff Act, 1975 and the preferential lower rate of GST was attributed to the same in November 2017. 140. Applying the principle laid down in the above stated judgment, when there are two competing entries, and there is a classification dispute, the entry which is beneficial to the assessee is required to be applied, which in this case is Tariff Item no. 2106 9091. 141. In light of the same, it is humbly submitted that the product is classifiable under Tariff Item no. 2106 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e goods manufactured by the respondent with the Heading 39.25. Once it is established that the description of the goods manufactured by the respondent ore akin to description of goods given under Heading 39.25 and sub-heading 3925.10, there is no difficulty in holding that the tanks and vats manufactured by the respondent would fall under Heading 39.25 of the Tariff. We accordingly hold that tanks and vats manufactured by the respondent are classifiable as "builders ware of plastics" and the view taken by the Tribunal that the classification of goods, i.e., tanks and vats would be appropriate under sub-heading 3926.90 of the classification list, and are exempt from excise duty, is erroneous." 144. It being an admitted fact that the product in dispute is meant primarily for diabetic persons as a partial meal replacement. Further the Ld AAR also having acknowledged the fact that the product is meant for diabetics as a partial meal replacement. The product in question is most akin to 'diabetic food' in terms of the usage. 145. The product in question being not bought and sold as a premix for a beverage to be consumable by the public at large is in no way synonymous or akin to a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, it is submitted that the ruling dated 23.01.2019 is only for the product Prohance-D (Chocolate Flavour). The said submission being supported by the Ld. AAR's observation in the 2nd para of page 20 of the ruling, which is extracted as under: They are classifying the vanilla variant of their product as diabetic food and their query is regarding classification only in respect of the chocolate variant of their product where chocolate flavor is used in order to make the said product appealing to the end consumer, without altering the diabetic nature of the same. 152. It is accordingly submitted that the classification of the vanilla variant of the product in question was never a point of dispute. Hence the ruling dated 23.01.2019 shall be only applicable to the product in question and not the vanilla variant supplied by the appellant. THE LD. AAR HAS FAILED TO PERUSE THE DECLARATION ON THE LABEL OF PROHANCE-D (CHOCOLATE FLAVOR) THAT IT IS "FOOD FOR PEOPLE WITH DIABETES''. 153. It is further submitted that the appellant is already supplying another food product for general dietary supplement namely 'Prohance'. Hence if 'Prohance - D' was meant to be a general d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hance-D - Vanilla flavor and Prohance-D Chocolate flavor. The issue in the present case is regarding the determination of the correct classification and applicable rate of GST on Prohance-D Chocolate variant. The appellant has stated that Prohance-D is a nutritional powder -special dietary use for people with Diabetics. The said product is sold in powder form and is required to be mixed with drinking water and used as partial meal replacement/breakfast replacement/evening snack/healthy bedtime snack or as directed by Physician/Dietician for diabetics. Though the appellant proposes to manufacture two variants of the product, the application is filed with AAR to issue a ruling on the classification of the Chocolate variant. 159. Notification No.1/2017-Central Tax (Rate) dated 30.06.2017 provides for applicable rate of GST on the supply of goods. Sr. No.46A of Schedule-11 to Notification No.1/2017- Central Tax (Rate) dated 30.06.2017 reads as under: - Schedule SI. No. Chapter Heading/Sub-Heading Description of goods Rate of tax (CGST) II 46A 21069091 Diabetic foods 6% The issue before the AAR was whether the subject product is a 'diabetic food' or n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ALS SUNFLOWER SEED OIL SUNFLOWER SEED OIL ANTO OXIDANTS (SOYA LECITHIN, L- ASCORBIC ACID, TBHQ) ANTO OXIDANTS (SOYA LECITHIN, L-ASCORBIC ACID, TBHQ) CHOLINE BITARTRATE CHOLINE BITARTRATE VITAMINS VITAMINS TAURINE TAURINE L-CARNITINE L-CARNITINE ACIDITY REGULATOR (CITRIC ACID) ACIDITY REGULATOR (CITRIC ACID) SUGAR ISOMALTULOSE GUM ARABIC INULIN MYO-INOSITOL SUCRALOSE Fructose 161. It is seen from the above table that Prohance-D Chocolate contains some extra special ingredients which differentiate from the normal Prohance. All the ingredients in it especially Isomaltulose, Gum Arabic, Inulins, Myo-Innositol, Sucralose, Fructose are sugar replacements or sugar substitute. Gum Arabic is used as a 'soluble dietary fiber'. The fact that these products are used in the Prohance-D shows that it is specially meant for people suffering from diabetes and is also marketed as meal replacement for diabetics. 162. As per the definition of 'Diabetic food' in the 'Dictionary of Food and Nutrition' by David Bander, it covers foods that has specially formulated for people suffering fr....