TaxTMI 
TaxTMI 
TaxTMI 
2021 (12) TMI 269
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....estion for advance ruling in the application for Advance Ruling filed by it. "Whether any tax is payable in respect of sale of Fryums manufactured by the applicant? And if answer is in affirmative, the rate of tax thereof"? 4. The appellant has submitted that they are engaged in the business of manufacturing and supply of Fryums and different type of Namkeen/Farsan. Fryums are "Papad" of different shapes and sizes in ready to eat form. Fryums prepared from maida, in unfried form, is purchased by the appellant from the market as raw material. The same is first fried and various masala powders are applied and packed in small packets for being sold in market. The aforesaid fryums are sold by the applicant in different shapes and sizes such as alphabets, rings, stars etc. 5. The appellant has submitted that it is a settled legal position that Fryums are papad and since Papad is tax free/exempt as per tariff item 19059040, the Fryums manufactured and sold by the applellant would also be exempt from payment of any tax. Entry at S.No. 96 of the Notification No. 02/2017-Central Tax (Rate) dated 28.06.2017 speaks of 'Papad by whatever name called, except when served for consumption'; th....
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....specified or included. Chapter Note 5 provides an inclusive definition of this heading and covers preparations for use either directly or after processing, for human consumption. Chapter Note 6 pertaining to Tariff Item 2106 90 99 also provides inclusive definition and products mentioned therein are illustrative only. In view of the foregoing, the GAAR ruled as follows :- Question: whether any tax is payable in respect of sale of Fryums manufactured by the applicant? And if the answer is in affirmative, the rate of tax thereof? Answer: The product 'fried Fryums' manufactured and supplied by applicant is classifiable under Tariff Item 2106 90 99 of the First Schedule to the Customs Tariff Act, 1975. Goods and Services Tax rate of 18% (CGST 9% + GGST 9% or IGST 18%) is applicable to the product 'fried Fryums' as per Sl. No. 23 of Schedule III of Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017, as amended, issued under the CGST Act, 2017 and Notification No. 1/2017-State Tax (Rate), dated 30-6-2017, as amended, issued under the GGST Act, 2017 or IGST Act, 2017. 7. Aggrieved by the aforesaid advance ruling, the appellant has filed the present appeal. 8. During the cou....
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....xempted from payment of tax under the GST Act. The aforesaid entry does not make any distinction between fried or un-fried papad. The only category of papad excluded by Entry at Sr. No. 96 is when it is served for consumption. It is settled legal position that served for consumption means served in hotel, eating house and meant for consumption at the place itself which is not the case in present matter. [Reference of a determination order dated 20.08.2006 in the case of M/s. Gaylord Restaurant.] 13. The appellant has submitted that in GST regime, for determination of classification of goods, the Custom Tariff Act, 1975 is relevant and the classification in Customs is driven by the ingredients used in the products. Predominant content in the product helps in the determination of the classification of the products. In the case of Manilal Commodities Pvt. Ltd. Vs. Collector of Customs [1992-59-ELT-189-Tribunal], the Honourable Tribunal was of the view that the classification on the basis of predominant contents is generally accepted as proper test. Further, Honourable Allahabad High Court in the case of Commissioner of Customs, C.G.O. Vs. Sonam International [2012-275-ELT-326 ALL] up....
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....s. Amritsar Beverages Ltd. -[2006] 147 STC 657 (SC), Honourable Supreme Court observed that -Creative interpretation had been resorted to by the court so as to achieve a balance between the age old and rigid laws on the one hand and the advanced technology, on the other. The judiciary always responds to the need of the changing scenario in regard to development of technologies. It uses its own interpretative principles to achieve a balance when Parliament has not responded to the need to amend the statute having regard to the developments in the field of science. * In the case of M/s. J. K. Cotton Spinning and Weaving Mills Ltd. Vs. Union of India -[1988] 68 STC 421 (SC), relying upon the observation made by Apex Court itself in another judgment in the case of Senior Electric Inspector v. Laxminarayan Chopra [1962] 3 SCR 146, Honourable Supreme Court observed that - in a modern progressive society it would be unreasonable to confine the intention of a legislature to the meaning attributable to the word used at the time the law was made and, unless a contrary intention appears, an interpretation should be given to the words used to take in new facts and situations. * In the case....
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....s also one of the petitioners. In the said judgment, the Hon'ble Karnataka High Court relied upon the judgment of Hon'ble Supreme Court in the case of Shiv Shakti Gold Finger v/s Assistant Commissioner, Commercial Tax [1996] 9 SCC 514 whereas the judgment of Hon'ble Supreme Court in the case of Commissioner of Commercial Tax v/s TTK Health Care Ltd. [2007] 7VST 1 (SC) came to be distinguished. The applicant has submitted that the Hon'ble Supreme Court in the case of TTK Health Care Ltd. (Supra) has held that Fryums are not cooked food. The said decision is not applicable to the present case as the issue herein is not as whether Fryums are cooked food or not but is as to whether Fryums are papad or not. 19. In the case of M/s. Avadh Food Products Vs. State of Gujarat -First Appeal No.1/2015 read with Rectification Application No. 31/2015 in First Appeal No. 1/2015 Dt;-03/07/2015 reported in 2015 GSTB -II -405 and in M/s. Swethin Food Products Vs. State of Gujarat -2016 GSTB -I 296, Honourable Tribunal has considered the issue about classification of PAPAD of different shapes and sizes and clearly held that Fryums are nothing but PAPAD falling under entry 9(2) in schedule I to the G....
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.... test leads to the conclusion that the products in question are nothing but PAPAD of different shapes and sizes. In this regard refer to the decision of Honourable Supreme Court in the case of Commissioner of Commercial Tax, UP Vs. A. R. Thermosets (P) Ltd. -AIR 2016 SC 321 : (2016) 94 VST 258 (SC). 23. The appellant has submitted that a particular classification once accepted and adopted for years in a particular law cannot be change merely on account of repeal of said Act and replaced by new Law unless there is material and substantial change in the entry to depart from the previous classification which was adopted earlier. In the present case, the products in question have been classified as PAPAD since many years and there is no substantial change in the entry under the GST Law as compared to erstwhile Gujarat Value Added Tax Act, 2003. So, there appears to be no valid reason for departing from the classification adopted, accepted and followed for years. Ponds India Ltd. Vs. Commissioner of Trade Tax, Lucknow -(2008) 15 VST 256 (SC). 24. The appellant has submitted that there has to be consistency in law and if the same issue of classification is dealt with in different manne....
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....s under Tariff Heading 21069099 and taxable at 18%. In the said order it has been recorded that "thus, the appellant themselves have submitted that fried, salted or spiced Fryums are commonly known and used as Namkin". The appellant has submitted that in their case, this is neither their case nor submission. 28. Further, the appellant has submitted that the ruling of Hon'ble AAR given in the case of M/s. Sonal Product cannot be applied in the appellant's case due the reasons and grounds as stated below : (i) AAR has referred and relied upon the judgment of Honourable Customs Excise and Gold Appellate Tribunal (CEGAT) in the case of M/s. T.T.K. Pharma Ltd. Vs. Collector of Central Excise - 1993 (63) ELT 446 (Tribunal). The said judgment cannot be relied upon as a precedent in order to classify PAPAD sold by them because in the said judgment the entry for consideration before Honourable CEGAT was "Papad, Idli-Mix, Vada-Mix, Dosa Mix, Jalebi-Mix, Gulabjamun-Mix or Namkeens such as Bhujia, Chabena". Hence at the relevant time, PAPAD and NAMKEEN were in same entry. So, there was no occasion for Honourable CEGAT to consider and differentiate between PAPAD and NAMKEEN. Subsequently, th....
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....o entries one leading to an opinion that it comes within the purview of the tariff entry and another the residuary entry, the former should be preferred. (vi) The another principle of rule of interpretation and classification is noscitur a sociis which means that meaning of a word is to be judged by the company it keeps. Applying the said principle while classifying the product of the present appellant, by no means it can be said that it is eligible to be classified under heading 2106 because by no stretch of imagination the product of the appellant can be equated with either "Misthan" or "Mithai" or "Namkeen" or "Chabena" or "Bhujia". Thus, heading 2106 90 99 even as general entry is not capable of including the product of the appellant and 1905 90 40 is the only entry and most specific entry where the product manufactured by the appellant would fall. 29. The appellant has submitted that they would like to counter the observations, findings and conclusions arrived at by the learned AAR in the case of the present appellant on the following grounds: (i) The appellant has never referred to its products as FRYUMS but mentioned its product as either PAPAD or PAPAD product. They ha....
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....s products similar to that of appellant are served along with traditional round shape PAPAD. Thus, the persons using this product do not differentiate between the products similar to appellant and traditional round shape PAPAD because both the products are known, understood, recognized and used as PAPAD. (v) The observation of GAAR that looking to the photograph provided by the appellant it is evident that the shape of products of appellant and shape of PAPAD is different and hence both are distinct commodities. The appellant has submitted that they fail to understand as to how can the shape of a product be determining factor for the purpose of classification or whether it has to be its basic ingredients, characteristics and use to be taken into consideration for classification. If for classification of product the shape of the product is accepted then the basic principle of classification would be required to be rewritten and majority of the items will be required to be reclassified. Therefore, basis adopted by the learned GAAR is unjustifiable and most importantly far from the basic principles of classification. (vi) The observation of GAAR that the judgment of Honourable Sup....
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....able on the ground that they belong to earlier laws i.e. VAT Act and also they are not in relation to First Schedule of Customs Tariff and on the other hand the learned AAR places reliance upon the judgments which are under the Sales Tax Act which was prior even to VAT Act and on the Tariff entries prior to 2005 i.e. old entries. (xi) The observation of the learned GAAR that the judgment of Honourable Supreme Court in the case of Commissioner of Commercial Tax, UP Vs. A. R. Thermosets (P) Ltd. -AIR 2016 SC 321 is not applicable because the commodity in the said judgment is different from commodity of appellant. The appellant has submitted that the judgment of Hon'ble Supreme Court was relied upon by them on the principle of interpretation laid down by Hon'ble Supreme Court and not on the commodity. In this case Hon'ble Supreme Court held that narrow interpretation as sought by Revenue could not be done because bitumen is a generic expression which would include different types of bitumen in any form. Similarly, in the present case of the appellant, PAPAD is a generic expression which would include different types of PAPAD irrespective of its form, shape, size and ingredients. (....
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....90 99 even as general entry is not capable of including the product of the appellant and 1905 90 40 is the only entry and most specific entry where the product manufactured by the appellant would fall. (xv) The various issues and decisions relied upon by the appellant have neither been controverted nor distinguished nor dealt with and no reasons have been advanced for the same. As such the learned AAR is completely silent on the issue regarding creative interpretation in light of advancement of technology and advancement of market trends, not considered the decision of Advance Ruling Authority of Tamilnadu in the case of Subramani Sumathi Order No. 07/AAR/2019 dated 21/01/2019 which was relied upon by the appellant; the decision of Hon'ble Supreme Court in the case of Commissioner of Central Excise, Bhopal Vs Minwool Rock Fibres Ltd. -2012 (278) ELT 581 and decision of CESTAT in the case of Commissioner of Central Excise, Banglore Vs. T.T.K. Pharma Ltd. -2005 (190) ELT 214 (Tribunal) relied upon by the appellant was not discuss. 30. The appellant has submitted that Considering the overall facts and circumstances of the case vis-à-vis the entries in question and the settle....
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.... PAPAD of different shapes and sizes in ready to eat form, it would be prudent to know what PAPAD is, what the main ingredients of PAPAD are and how it is manufactured. The term PAPAD has not been defined in the CGST Act, 2017, therefore we resort to the common sense and meaning that sense by which the people are conversant. It is observed that traditionally when we talk about the PAPAD, in the first instance an image of thin round shape flatbread appeared in mind. Traditionally PAPAD is thin Indian wafer and served as an accompaniment to Indian meal or as a snack. The appellant has submitted that due to advancement of technology, PAPAD does not resemble the same age old traditional round shaped papad anymore but now PAPAD can be in any desired shape and size. We agree with the said argument of the appellant that it is not necessary that to call or considered a product "PAPAD" the shape should only be "Round". In the old era, usually PAPAD was manufactured manually, therefore it was easy for them to manufacture the Round Shape PAPAD. In the modern era, by advent of technology, the product is being manufactured by machines and dies of different shape and size is used in the machine.....
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....sp; --- Pastries and cakes 1905 90 20 --- Biscuits not elsewhere specified or included 1905 90 30 --- Extruded or expanded products, savoury or salted 1905 90 40 --- Papad 1905 90 90 --- Other The General NOTES of HSN of Ch. 19 are as under : This chapter covers a number of preparations, generally used for food, which are made either directly from the cerelars of chapter 10, from the products of chapter 11 or from food flour, meal and powder of vegetables origin of other chapters (Cereal flour, groats and meal, starch, fruit vegetables flour, meal and powder) or from the goods headings 04.01 to 04.04. The chapter also covers pastrycooks products and biscuits wven when not containing flour, starch or other cereal products. CTH No. 1905 of HSN are as under: 1905 BREAD, PASTRY, CAKES, BISCUITS AND OTHER BAKERS' WARES, WHETHER OR NOT CONTAINING COCOA; COMMUNION WAFERS, EMPTY CACHETS OF A KIND SUITABLE FOR PHARMACEUTICAL USE, SEALING W....
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....ms, C.G.O. Vs. Sonam International [2012-275ELT-326-ALL] upheld that assessment of goods with regard to payment of customs duty is to be made based on contents involved. The main ingredients of the appellant's product are flour, like wheat flour, rice flour, starch, corn flour and cereal flour and in the Ch. 19 of the Custom tariff Act 1975 all the product which are made of either directly from the cereals of chapter 10, from the products of chapter 11 or from food flour are covered. 42.1 As we have already discussed in the above para that term "Papad" has not been defined in GST Act, 2017, therefore, we take the recourse of trade/common parlance test so that Papad can be defined. In the matters of classification of goods under taxation statutes, all the judicial forums, including the Apex Court, have stressed upon the importance of the identity of the goods in common parlance and there is a plethora of case laws which hold that for classification of goods under statutes for taxation of commercial supplies thereof, the primary test is their identity in the market, or in other words, their common parlance in the market. The Hon'ble Supreme Court in the case of CCE, New Delhi v. Con....
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.... be equated with the Fryums. We have visited the website of M/s. TTK Foods (http://ttkfoods.com/products) and found that the company manufactures ready to fry extruded products (papads) and sells under the brand name Fryum's. Therefore, it can be said that "Fryums" is brand name of a company and not the generic name of the impugned product, therefore it would not be logical to hold that the appellant's product is "Fryums". However, in general public, "Fryums" is popular word for different shapes and sizes like round, square, semi-circle, hollow circle with bars in between or square with bars in between intersecting each other or shape of any instrument, equipment, vehicle, aircraft, animal type Papad. Similarly, calling product in question of different shapes and sizes by Fryums does not change the basic character of the product and the product in question remains papad. We accept that traditionally PAPAD is round shaped but the PAPAD is ready to cook product and can be consumed after roasting or frying in oil and consumed as snacks with the Indian meal or soup. Similarly, the product in question of different shape and size is a ready to cook product and can be consumed after r....
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.... eat the said products of the appellant, the said products can be eaten or consumed immediately as it is fried with masala. Thus, these products are meant to be eaten as it is fried. 43.5 The products under consideration is crispy as such these products are fried. 43.6 The products of the appellant has found its use as an alternative to regular round shaped Papad or as an additional variety of Papad in the Indian meal, especially the meals served during the community functions. The caterers, who prepare the meals for the community functions, as well as the people in general, consider such products as a different type or variety of Papad only. 43.7 Therefore, we are of the view that applicant's products of different shapes and sizes of papad, are nothing but Papad, classifiable under Tariff Item 1905 90 40 of the Customs Tariff Act, 1975. 44. Now, the question which arises is, would it be judicious to consider that the product which are having Round shape, manufactured by using ingredient of cereal flour only are PAPAD and the products having the same characteristic and uses but shape and size is different cannot be termed as "PAPAD". We find that for classification of product, ....
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....ing" because these are already fried with masala and can be served for consumption immediately. Therefore, the appellant's product i.e. different shapes and sizes Papad in ready to eat form do not fall under the said entry. 47.2 The appellant has contended that only category of papad excluded by Entry at Sr. No. 96 is when it is served for consumption and it is settled legal position that served for consumption means served in hotel, eating house and meant for consumption at the place itself which is not the case in present matter. We have examined this contention and observe that the appellant's contention is not supported by any authority, as such in the Notification any condition or explanation for the said entry has not been provided wherein it is mentioned that "served for consumption" means served in hotel, eating house etc. The term "served for consumption" is not followed by like places hotels and eating house but it refers to the products ready to consumption and it means that under the said entry only those products are covered which cannot be served without applying any process like papad i.e. ready to cook and not ready to eat. The appellant's impugned product is fried....