TaxTMI 
TaxTMI 
2020 (11) TMI 268
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....ain Road, Pudukottai 622 003 (hereinafter referred as 'Applicant') is registered under the GST Act 2017 vide GSTIN No. 33AANPS2471E1ZO. The Applicant has sought Advance Ruling on Whether the "Nizam Pakku" bought and sold by the Applicant, the manufacturing process of which has been explained by them, is classifiable under Chapter heading 0802 8030 of the Customs Tariff and hence attract 2.5 % CGST as per SI. No. 28 of Schedule I of Notification 1/2017 Central Taxes (Rate) Dt- 28.06.2017 and equal rate of SGST? The applicant submitted a copy of challan evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that they are a Proprietary concern and is engaged in trading of Betel nut, under the name and style "Nizam Pakku" and the said brand name is owned and registered in favour of the Applicant. "Pakku" is a tamil word for "betel nut". The said "Nizam Pakku" is manufactured by M/s. Azam Laminators Pvt. Ltd. who sells the "Nizam Pakku" exclusively to the Applicant, which is marketed by them through Dealers and Distributors network. The manufacturing process of "Nizam P....
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....dition of sorbic acid or potassium sorbate) 5. Addition of menthol and spices Addition of small quantities of these items to add taste and aroma to the product, does not in any way dilute the character of the product, which remains and understood as "pakku", i.e. betel nut only. Further, they have submitted that they have been exporting the subject goods, viz., Nizam Pakku to various countries and in order to determine its correct classification, the Customs Department has drawn sample of the product and tested by the Chemical Examiner in the Customs House Laboratory which observed that "The sample is in the form of brown coloured small betel nut pieces together with sugar, menthol, cardamom; It is dried edible betel nut". Accordingly, the Applicant as well as other similar exporters has been classifying the same under Chapter 0802. Also, the Tamil Nadu Food Safety and Drug Administration Department has granted license to the Applicant to deal with the subject Nizam Pakku as Distributor, Wholesaler and Transporter. It may be observed from the license that the subject product, Nizam Betelnut is classified under HSN 0802 9013 (corresponding to 0802 8030 prior to the amend....
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....tain the character of dried nuts. This Chapter Note is present both prior to and post 07.07.2009. Hence, as per this note, even if moderate heat treatment, addition of vegetable oils, addition of glucose syrup are undertaken, the product will remain classified under Chapter 8, if the essential character of betel nut is retained. It was claimed that the product in question, which was nothing but betel nut, was recognized as such in the market and retains its essential character of being betel nut. The various process undertaken, as narrated above, did not at all dilute the essential character of the product and the product remains as betel nut and consumed as betel nut. Further, the processes undertaken by the applicant were the ones which are contemplated in Note 3 (b) of Chapter 8 only. With effect from the entry under Chapter 21, which read as "betel nut powder known as supari" has been changed to "Betel nut product known as supari" and both these phrases have been defined in same manner, which indicates that there is no difference between these phrases. It may be observed from the definition that "betel nut product known as supari" is first of all a preparation containing betel ....
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....b) of Chapter 8 is retained, according to which so long as the essential character of the betel nut is maintained, the same shall remain classified under Chapter 8 even if some minor processes like moderate heat treatment or addition of preservatives, sweeteners are undertaken. Further, a Chapter note has been introduced in Chapter 21, whereby certain specified processes undertaken on goods falling under Chapter 2106 9030 are deemed to be manufacturing processes. It was further argued that in order to apply Note 6 of Chapter 21, which lays down certain processes as amounting to manufacture, first of all the classification of the product has to be determined and only if the product can be classified under Chapter 2106 9030, the said Note 6 can be applied, Once the product is classifiable under Chapter 8, the said Note 6 in Chapter 21 is not at all relevant. The subject product is not a preparation containing betel but, but betel nut itself, which has been subjected only to processes envisaged in Note 3 (b) of Chapter 8 and retained its character as betel nut. The only ingredient present in the product was betel nut and addition of Vanaspati, glucose syrup, menthol, spices and saccha....
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....plicant has stated that the subject product, viz., "Nizam Pakku" dealt with by them merits classification under Chapter 0802 8030 of the Customs Tariff and applicable rate of GST is 5%. 3.1 The Applicant was given an opportunity to be personally heard on 06.11.2019. The authorized representative appeared before the authority and stated that they are trading the product which is manufactured by a related company. They stated that areca nut are crushed and then vegetable oil is added and heated, followed by menthol, glucose, cardamom to this to create fused product. They also stated that they sell only upto Rs. 2 pouches (25p, 50p, Re. 1) with the words "Nizam Pakku"/Nizam betelnut. They stated that the correct classification should be 0802 80 30 as they are permitted to do the above process as per the Chapter Note. They also submitted various Tribunal/ S.C. Judgments to support their stand. They submitted purchase and sale invoices. They undertook to submit detailed manufacturing process giving the proportion of all ingredients used to manufacture, latest test report, difference between "Supari" and their product within 3 weeks. 3.2 As undertook in the Personal hearing the app....
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....ies of sale invoices issued by M/s. Azam Laminators Pvt Ltd., in favour of the applicant for sale of "Nizam Pakku" vi. Copies of sales invoices issued by the applicant vii. Purchase invoices of M/s. Azam Laminators Pvt Ltd., for purchase of Arecanut and ingredients. 4.1 Effective 19.05.2020, there was change in the authority and Shri. B. SenthiIveIavan, Additional Commissioner was appointed as CGST Member of the Authority. In view of change in the Authority and due to the prevailing pandemic, the applicant was offered to be heard through Digital media and the applicant acceded to the same. The applicant was heard on 15.10.2020. The Authorised representative of the applicant participated in the hearing process. He reiterated the written submissions and stated that the classification issue of their product based on the Central Excise Tariff is settled by the Hon'ble Supreme Court in the case of Azam Laminators, who are their suppliers as falling under CETH 0802 They requested an early ruling. 5.1 The applicant is under the administrative Jurisdiction of State Tax Officer and the comments of the state jurisdictional officer on the issue raised by the applicant ....
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....only to refer the Customs Tariff Act, comparison of the relevant entry in the GST schedule with that of the Customs Tariff Act is necessitated. HSN Code number has been adopted as 0802 by the applicant in this case, narrating the name of the commodity as Nizam Betel Nut and the rate of tax has been adopted at 5%. HSN code as adopted in the GST Act is only aligned with the Customs Tariff Act, the purposed/ allowances which are narrated in Note No. 3 of Chapter 8 can squarely be applied under the GST Act also. • There is clear indication as narrated in the explanations given at the bottom of the rate of tax schedule which goes to say that the "Tariff item", "sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) only. • Moreover 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 the notification issued under the GST Act also. • The Honorable Supreme Court has decided in the case of Crane Be....
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....ti, so as to ensure that vanaspati is spread evenly on the surface of the betel nuts; Sugar, glucose syrup, menthol and spices, viz., cardamom and cloves are also added; packed in small pouches under the name and style of 'NIZAM PAKKU' and the same is used by people for chewing either along with betel leaves or as such. They claim that their product is classifiable under CTH 0802 8030 and the applicable rate of CGST is 2.5% as per S.No. 28 of schedule 1 of Notification No. 01/2017-C.T.(Rate) dated 28.06.2017. 7.2 From the submissions, it is seen that the product is marketed as 'NIZAM PAKKU'. From the Tax Invoice' furnished [Invoice No.783 cit. 12-Nov-2019,729 dated 24-0ct-2019,680 dated 29.10.20191, it is seen that the description is 'NIZAM BETELNUT GRADE II', 'BETELNUT GRADE 11 250 PCSX20PKTS, LOOSE BETELNUT 100X50, etc, the HSN code is specified as '0802' and the rate of tax charged is CGST @ 2.5% & SGST @ 2.5%. The product is said to be used for chewing with or without betel leaves. 7.3 Under GST, the applicable rates of CGST are notified by Notification No. 01/2017-C.T. (Rate) dated 28.06.2017 and explanation (iii) and (iv) to the said Notification, states as follows: ....
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....) nuts used chiefly as a masticatory, cola (kola) nuts used both as a masticatory and as a base in the manufacture of beverages, and an edible, nut-like, spiny-angled fruit of the species Trapa natans, sometimes referred to as a water chestnut. CTH 2106: 2106 9030 Supplementary Notes to Chapter 21 1. ....................... 2. In this Chapter "betel nut product known as Supari" means any preparation containing betel nuts, but not containing any one or more of the following ingredients, namely: lime, katha (catechu) and tobacco whether or not containing any other ingredients, such as cardamom, copra or menthol. 2106 FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR INCLUDED 21061000 - Protein concentrates and textured protein substances 210690 - Other : --- Soft drink concentrates : 21069011 ---- Sharbat 21069019 ---- Other 21069020 --- Pan masala 21069030 --- Betel nut product known as "Supari" From the above, it is evident that CTH 21069030 covers 'Betel nut product known as "Supari", while Areca (betel) nuts Whole, Split, Ground, Other are specifically mentioned as classified ....
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....zam Laminators (P) Ltd for the subsequent periods of 01/2015 to 06/2017 has been dropped by the Jurisdictional Commissioner who also held that the product is classifiable under CETH 08028090. The entries in Central Excise Tariff prevailed during the period of dispute for which the Hon'ble CESTAT has decided the classification and the entries in the prevailing Customs Tariff relating to the entries of Chapter 0802 08 are similar. Further, the applicant has not stated that the product for which clarification on classification is sought is different from the one for which the classification stands decided in the case of M/s. Azam Laminators, the manufacturer of the product and their supplier, Therefore, we hold that the product 'NIZAM PAKKU'; manufactured by Azam Laminators and traded by the applicant is classifiable under CTH '08028090-0ther' and not under CTH '08028030-Ground' as claimed by the applicant. 8.1 Having decided the classification of the applicant's product under CTH '0802 80 90-0ther', the applicable rate of GST is taken up for consideration. The rate of CGST is notified vide Notification No. 01/2017-C.T.(Rate) dated 28.06.2017 as amended in respect of goods and that....