TaxTMI 
TaxTMI 
2020 (10) TMI 149
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....ID Fresh Food (India) Pvt. Ltd., # 37, Doddenakundi Industrial Area, Whitefield Road, Mahadevapura, Bengaluru-560 048 (herein after referred to as Appellant) against the advance Ruling No. KAR/ADRG 38/2020 dated: 22^nd May 2020 = 2020 (6) TMI 183 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA. Brief Facts of the case: 3. The Applicant is a food products company involved in preparation & supply of wide range of ready to cook, fresh foods including idli & dosa batter, Parotas, Chapatis, curd, paneer, whole wheat parota and Malabar parota. The Appellant manufactures Parotas using natural ingredients as tabulated below: Ingredients of Wheat Parota Ingredients of Malabar Parota Wheat flour (Atta) Refined wheat flour (Maida) RO-purified water RO-purified water Edible vegetable oil (Sunflower) Edible vegetable oil (Sunflower) Edible hydrogenated vegetable fat Edible hydrogenated vegetable fat Iodized salt Iodized salt * These parotas do not contain any artificially added preservatives or flavours. The parotas need to be heated on a pan or tawa, before consumption, for improved taste and crispiness. In summary, the parotas are in ready to cook co....
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....ction heading that merits consideration is - Section IV- "Prepared Food Stuffs, Beverages, Spirits and Vinegar, Tobacco and Manufactured Tobacco substitutes". The Appellant submits that, on analysing the various description of the Chapters along with the explanatory notes, the Chapter that merits consideration is "Chapter 19: Preparations of cereal, flour, starch or milk; pastrycooks' products". Further, on a combined reading of general rules of interpretation and the explanatory notes with respect to Chapter 19, the relevant Chapter heading that merits classification would be "1905 - Bread, pastry, cakes, biscuits and other baker's wares, whether or not containing Cocoa; communion wafers, empty cachets of a kind suitable for pharmaceutical use, Sealing wafers, rice paper and similar products". 7.2. The Appellant submitted that chapter 19 does not provide any clarification with respect to the terms 'Khakhra, Plain Chapatti or Roti' in form of chapter notes, heading notes. Thus, the said terms would need to be understood as known in common parlance. Parathas are one of the most popular unleavened flatbreads in the Indian Subcontinent, made by baking or cooking whole wheat dough o....
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.... SHAKTHI GOLD FINGER v/s ASSISTANT COMMISSIONER, COMMERCIAL TAXES, JAIPUR [(1996) 9 SCC 514] = 1996 (5) TMI 419 - SUPREME COURT and the Hon'ble Karnataka High Court in the case of State of Karnataka vs. M/s. Vasavamba Stores [(2013) 60 VST 19 (Karn)] = 2012 (10) TMI 977 - KARNATAKA HIGH COURT, wherein the Courts have held that while classifying any products, the ingredients tests is very important and the shape, size, etc. cannot be a basis for determining the correct classification of a product. In view of the above, the Appellant submits that the conclusion made by the authority, purely based on nomenclature and without appreciating the ingredients of the product, is grossly erroneous and unlawful. 7.4. The Appellant further contended that in the absence of a statutory definition, a word is to be interpreted by understanding its meaning. From a commercial parlance perspective, all such products like, rotis, chapattis, parotas, etc. are treated as "unleavened flatbreads", which can be known by different names and can be of various types. Heading 1905 of Schedule-I of the notification deals with all such unleavened flatbreads. They submitted that another test of interpretation e....
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....WHETHER OR NOT CONTAINING COCOA; COMMUNION WAFERS, EMPTY CACHETS OF A KIND SUITABLE FOR PHARMACEUTICAL USE, SEALING WAFERS, RICE PAPER AND SIMILAR' as it is a kind of Indian bread. In this regard, they relied on the ruling passed by the Hon'ble Andhra Pradesh High Court in the case of Kayani & Co. v/s Commissioner of Sales Tax = 1953 (3) TMI 17 - HYDERABAD, HIGH COURT wherein it was stated that a parota fairly falls under the definition of bread and should be classified under the heading 1905. As parota is fairly classifiable under heading 1905, contention of Authority of Advance Ruling classifying the same under heading 2106 of Schedule-III of the notification does not hold good, as reference to residuary heading can be made only if a product is not classifiable under any other specific entry. They submitted that that 1905 is a more specific entry for the product "Parotas" than the heading 2106, as it covers various other forms of Indian breads like rotis, chapattis, etc. In this regard, in view of Rule 3(a) of the Principles of Interpretation for classification, "the heading which provides the most specific description shall be preferred to headings providing a more general descr....
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....luenced by the tax rates prevalent under the erstwhile tax regime; that the applicable tax rates of 5%, 12%, 18%, 28% etc. under GST have been calculated considering the rates of Central excise, VAT and service tax as applicable on a particular product or service under the earlier tax laws and the GST rate have been computed accordingly. In this regard, they submitted that the VAT rate on parotas was ranging from 4% to 6% in most of the states and therefore, considering the same, the rate of GST applicable on the product should also be 5%. 7.9. They submitted that parotas being a food item is available for mass consumption in common understanding and consumed across millions of households (including, lower and middle class) daily; that reference is also made to entry number 99 of Schedule I of the notification, wherein the product "pizza bread" has been specified to be taxed at 5%; that if the rate of tax on pizza bread (which is not a product commonly consumed by a lower class or middle-class household in regular course) can be 5%, then, the GST rate of "parotas" should not be 18% by any stretch of imagination. Therefore, the entry no 99A covering term 'khakhra, plain chapatti ....
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....lant also put forth the argument that 'Roti'/'Parota' are species of 'Bread' and hence fall under Entry 97 of the Exemption Notification and eligible for full exemption from payment of tax. The relevant entry of the Exemption Notification reads as under: S. No. Chapter, Section, Heading, Tariff Description of goods 97 1905 Bread (branded or otherwise), except when served for consumption and pizza bread They submitted that to fall within the scope of the aforesaid entry, the Product 'Parota' would have to be: a) Classifiable under Tariff heading 1905; b) Fall within the description 'bread'; and c) Not be excluded i.e. served for consumption and pizza bread As discussed elaborately supra, the Tariff classification of 'Parotas' is tariff item 1905 90 90 and by application of general explanatory notes to the rules of interpretation of Customs Tariff would be covered within the scope of 4-digit heading i.e. 1905. Thus, the first requirement is satisfied. They further submitted that the Product Parota' would fall well within the description of 'Bread' ; that 'Bread' has not been per se defined under the Section Notes or Chapter Notes of ....
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....iate or more temperate regions A-Z Vegetarian Food, Harper Collins, 1993, 1996 Any of a great variety of foods made from flour dough It is evident from the dictionaries that 'bread' means a baked dough made from flour which is usually leavened (with yeast or other raising agent). However, the term is also defined expansively to include all forms of bread - leavened or unleavened. The Concise Oxford Dictionary defines 'unleavened' as made without yeast or other raising agent. The Merriam-Webster Dictionary defines 'unleavened' as made without leaven (such as yeast or baking powder). Therefore, in terms of the dictionary meaning, 'Bread' can be said to include all forms of 'bread' whether leavened or unleavened. Indian breads fall within the category of unleavened bread and hence would be covered within the scope of Tariff heading 1905 and consequently under entry 97 of Exemption Notification; that the HSN explanatory notes to heading 1905 itself specifically provides that the heading includes unleavened bread in addition to other types such as ordinary bread, ginger bread etc., thereby providing an expansive scope to Tariff heading 1905. 7.12. Finally, they submit....
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....alled for another virtual hearing on 21st September 2020. 8.1. The hearing on 21st September 2020 was conducted on the Webex platform following the guidelines issued by the CBIC vide Instruction F.No 390/Misc/3/2019-JC dated 21^st August 2020. The Appellant was represented by Advocates Mr V. Lakshmikumaran, Mr Ravi Raghavan and Ms. Charanya Lakshmikumaran as authorised representatives. The Department was represented by Mr Saji Jacob, Superintendent of Central Tax, Bangalore East Commissionerate. 8.2. Shri. Lakshmikumaran, explained the gist of the reasoning given by the lower Authority regarding the classification of the impugned product i.e "Parotta". He also explained in great detail the nature of the items figuring under entry 99A of the rate Notification and the Chapter Headings 1905 and 2106. He stressed on the fact that the finding of the lower Authority that the impugned product is not classifiable under 1905 because it has to be heated before eating is incorrect. He submitted that the impugned product is pre-cooked and merely because the product is heated before consuming will not render the product uncooked. He emphasised the fact that in order to classify a product ....
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....as much as the ruling has been obtained by suppressing facts. The Department's representative also brought to the notice of the Members, the ruling passed by the Authority of Advance Ruling, Kerala in the matter of In Re: Modern Food Enterprises Private Limited = 2018 (11) TMI 279 - AUTHORITY FOR ADVANCE RULINGS, KERALA, supra wherein the authority had classified 'Classic Malabar Parota' and 'Whole Wheat Malabar Parota' under the Head 2106 as 'Food preparations not elsewhere specified or included' and taxed the same at 18%. 8.5. In his rebuttal, the authorised representative for the Appellant submitted that the provisions of the proviso to Section 98(2) of the CGST Act will be attracted only when a show cause notice has been issued or when an order is already passed on the question on which a ruling is sought; that in their case, the matter was only under investigation and no show cause notice was issued; that matters under investigation will not attract the provision of the proviso to Section 98(2). 8.6. In the written submissions made in rebuttal to the objection raised by the Department representative, the Authorised representative contended that the investigation initiate....
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....igations; that that show cause notice is the point of commencement of any proceeding is fortified by the Master Circular on Show Cause Notice, Adjudication and Recovery (Circular No. 1053/02/2017-CX dated 10.03.2017) issued by the CBIC wherein it has been clearly stated that the Show Cause Notice is the starting point of any proceedings against the party; that show cause notice has not been issued in the present case relating to the issue of classification of disputed products.. 8.8. They further submitted that the sequence of events in the present case indicates that the investigation initiated against the Appellant in June, 2019 was at a preliminary stage at the time of filing the application before the AAR. The Senior Intelligence Officer had issued summons on 21.06.2019 and 09.07.2019 merely calling for details and documents such as returns, audited financials, audit reports and HSN wise details of clearances along with duty paid. The reason for such investigation, the issue proposed to be covered therein etc. were not even made known in any of the correspondences by the DGGI. The issue of classification of disputed products was also not raised specifically by DGGI in the su....
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....ey are estopped from raising the said issue at the appellate stage, more so in the appeal filed by the appellant. They also contended that there is no appeal filed by the department against the order of the Hon'ble AAR. In such a situation the issue of jurisdiction raised by the Government Representative at the time of personal hearing is ex-facie perverse and cannot be entertained. Reference can be drawn to the decision of Jaipur Udhyog Limited v. Commissioner of Income Tax reported at [19921 198 ITR 282 (Raj.) = 1989 (10) TMI 3 - RAJASTHAN HIGH COURT wherein the Hon'ble High Court observed that it is well-settled that a person who does not raise an objection with regard to jurisdiction of a Tribunal and permits the Tribunal to adjudicate under the hope that the decision may be in his favour cannot be permitted to assail the said decision when it goes against him. 8.10. It is also submitted by the Appellant, that the present appeal has been filed by the assessee, i.e. the Appellant against the impugned ruling and hence, any point raised by the Department in the absence of an appeal of their own, cannot be entertained by the Hon'ble Appellate Authority. They relied on the decisi....
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....r they are classifiable under Chapter Heading 1905 attracting GST at 5%. The Authority for Advance Ruling vide its ruling dated 22nd May 2020 held that the impugned products are classifiable under Chapter Heading 2106 and are not eligible for GST rate at 5% in terms of entry Sl.No 99A of Schedule I to the Notification No.1/2017-Central Tax (Rate) dated 28.06.2017, as amended vide Notification No.34/2017-Central Tax (Rate) dated 13.10.2017. 11. Being aggrieved by the said ruling, the Appellant is before us in appeal. The Appellant had argued at great length as to why the impugned products should be more appropriately classified under Chapter Heading 1905 attracting 5% GST in terms of entry Sl.No 99A of Schedule Ito Notf No 01/2017 CT (R) dt 28-06-2017 as amended by Notf No 34/2017 CT (R) dt 13-10-2017. However, before we approach the issue of classification, we must first address the objection raised by the Department. It has been brought to our notice by the Department that the impugned advance ruling has been obtained by the Appellant by suppressing the fact of an investigation by the DGGI against them on the very same issue of classification of Whole Wheat Parota and Malabar P....
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....g means a prescribed course of action for enforcing a legal right and hence it necessarily embraces the requisite steps by which a judicial action is invoked. The process of investigation in tax administration is such a step towards the action of issuing a show cause notice which culminates in a decision. Investigation is activated when there is enough predication to show that there is an alleged tax evasion. The essence of investigation is to carry out an in-depth review of the taxpayer's records and activities to ensure that the tax due to the government is not lost in evasion. Therefore, commencement of investigation in terms of Section 67 of the CGST Act, can be said to be the start of a proceeding to safeguard the government revenue. We are therefore of the view that the usage of the words "any proceeding" in the proviso to Section 98(2) of the CGST Act will encompass within its fold the investigation launched by the agencies. 15. The Appellant has also argued that the issue of classification of the disputed products was not raised specifically by DGGI in the summons. We find from the records that the DGGI, Chennai Zonal Unit had issued a summons dated 21St June 2019 under ....
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....espondent AAR had no jurisdiction to deal with the case of the respondent Applicant since the Assessing Officer had issued a scrutiny notice and the main issue before the Assessing Officer in the scrutiny proceedings is the same as before the Authority for Advance Rulings. The AAR in the said case had not agreed with the objections raised by the Income Tax Department and had proceeded to give a ruling. The ruling was challenged by the Income Tax Department by filing a writ petition before the Delhi High Court. In this background the Hon'ble High Court had observed from the records that the revised return has been selected for scrutiny under computer aided selection system (CASS) and a notice dated 16th August, 2018 under Section 143(2) of the Act had been issued by the petitioners. The admitted reason for selection of respondent's case for scrutiny is "taxable income shown in revised return is less than the taxable income shown in the original return and large refund has been claimed". In contrast the question admitted for Ruling is "Whether on the facts and circumstances of the case and in law, the Royalty receivable by the Applicant from Crocs India Private Limited ("Crocs India"....
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....gation being conducted against them by the DGGI, Chennai Zonal Unit. The Appellant chose to keep this fact away from the Authority for Advance Ruling at the time of filing the application. We find that the application for advance ruling could not have been made in this case as it is hit by the provisions of Section 98 (2) of the CGST Act in as much as an investigation was already initiated against them by DGGI on the very same issue that was raised before the Authority for Advance Ruling. We therefore hold that the order of the lower Authority is void ab initio as it was vitiated by the provisions of Section 98(2) of the CGST Act. 18. The Appellant has also argued that the issue of jurisdiction cannot be raised at a belated stage before the Appellate Authority. The view of the Appellant that the issue of jurisdiction could only have been raised before the lower Authority and not having been raised before it, the Department had waived its rights to raise the same is not entirely correct. We find that the proceedings before the lower Authority had been conducted without any participation of the jurisdictional officer. The jurisdictional officer was not asked to furnish comments no....