TaxTMI 
TaxTMI 
2025 (3) TMI 549
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....ns are same, these writ petitions are taken up together for hearing and disposal. 2. The petitioner is in the business of manufacture and sale of carbonated fruit drinks and ready to serve fruit drinks. The petitioner is a partnership firm and is represented in the present proceedings by the Managing partner. It manufactures and sells as many as 10 different products which are described as under: Product 1 - XSS Orange Product 6 - Thirst Cola Product 2 - Thirst clear lemon Product 7 - Thirst Orange Product 3 - XSS Cola Product 8 - XSS Clear Lemon Product 4 - XSS NimbooPaani Product 9 - Thirst Nimboo Paani Product 5 - Thirst Mango Produce 10- XSS Mango Drink 3. According to the contentions of the writ petitioner, these products are classifiable under Tariff Item 2202 99 20 of the Customs Tariff Act, 1975 and are specified as serial No.48 under Schedule-II as "fruit pulp or fruit juice based drinks" in notification No.1 of 2017 - Integrated Tax (Rate) dated 28.06.2017 and are taxable at the rate of 12%. 4. According to the petitioner, carbonated beverages with fruit drinks should not have less than 10% fruit juice (5% in case of lime or lemon) a....
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....sued to the petitioner alleging that the department was of the view that the goods manufactured and supplied by the petitioner contains carbonated water as an ingredient and as such these items were classifiable under Tariff Sub-Heading 2202 10 90 and it attracts GST at the rate of 28% and compensation cess at the rate of 12%. In the said impugned order it was stated that from the label available on the goods manufactured and sold by the petitioner and that it transpires that carbonated water "was an essential ingredient in the manufacture of these goods" and from the report of the analysis of food samples conducted by the State Public Health Laboratory, it appears that carbonated water was used in thirst clear lemon, thirst Orange and thirst Cola. The impugned order also contained the minimum and maximum consumption of apple concentrate, lemon concentrate, orange juice concentrate, mango pulp (neelam) and mango concentrate as per the data extracted from the Tally Accounting System maintained by the petitioner. 7. By the said order, the petitioner was asked to explain the reasons for the mismatch between the declaration made in the label as compared to the actual products as sig....
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.... Agro Pvt. Ltd. as well as the decision of the Apex Court rendered in Parley Agro (P.) Ltd. Vs. Commissioner of Commercial Taxes, Trivandrum. It was submitted that the judgments rendered in these cases squarely cover the case projected by the petitioner and are applicable to the factual matrix and therefore the subject drinks are liable to be classified as fruit juice based drinks as had been done by the petitioner. Pursuant to the reply submitted a personal hearing was granted to the petitioner where the petitioner reiterated its submissions made in the reply. It was also brought to the notice of the respondent authorities that by notification issued by the Government of India, Ministry of Finance, Department of Revenue being Notification No.8 of 2021 - Central Tax (Rate) dated 30.09.2021 whereby a new entry was inserted as serial 12A in Schedule-IV making carbonated beverages of fruit drinks or carbonated drinks with fruit juice to be taxable at the rate of 14%. The said notification was brought in force from 01.10.2021. It was also submitted that by Notification No.1 of 2021 - Compensation Cess (Rate) dated 30.09.2021 issued by the Government of India, Ministry of Finance, Depar....
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....ted that the expression "fruit pulp or fruit juice based drinks" falling under 2202 99 20 essentially means a drink based on fruit pulp or fruit juice (with or without additional flavors or sweeteners). It is further submitted that the products in question in present factual matrix of Petitioner, are prepared with base such as apple concentrate, lemon concentrate, orange concentrate, as its base, which will be added to the syrupy liquid consisting of water, sugar and other constituents. For instance, in the product XSS Cola, percentage of apple juice constitutes 5% of the total beverage. Similarly, in case of Thirst Cola, percentage of apple juice constitutes 10% of total beverage. This is also evident from the sample labels. Thus, apple juice is the active ingredient of the products in question, and imparts the basic attribute to the drink, including its taste and characteristics. However, carbonated water is added as a filler as well as preservative and the other substances are either flavours or regulators or preservatives etc. These products do not impart essential characteristic to the product. Similar is the situation in the other variants of the fruit drinks being sold by th....
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....& 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. 15. It is submitted that the distinction drawn above between fruit pulp or fruit juice based drinks' and mere 'flavoured beverages' is evident from the scheme of Chapter Heading 2202. If this distinction is ignored, it would render the specific Tariff Item No. 2202 99 20 redundant and otiose. Although Sub-heading 2202 99 is provided as a residuary entry, it has to be examined in the broader scheme of heading 2202. If Tariff Item 2202 10 90 is treated to include an apple juice-based drink, orange juice-based drink or lemon juice based drink, it would mean that any fruit juice- based drink would be susceptible to classification under Tariff Item No. 2202 10 90, as being flavoured water, irrespective of the composition, nature and common understanding of the market regarding the nature of the product. This is so bec....
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....ent Companies Ltd., (2001) 133 ELT 400. 13. CCE, Bhubaneswar-I v. Champdany Industries Ltd. (2009) 9 SCC 466. 14. CCE V Connaught Plaza Restaurant (P) Ltd. (2013) 18 GSTR 1 SC. 15. Delhi Cloth & General Mills Co. Ltd. V. State of Rajasthan (1980) 4 SCC 71. 16. HPL Chemicals Ltd. v. Commissioner of Central Excise, Chandigarh (2006) 5 SCC 208. 17. Hindustan Ferodo Ltd. v. CCE, Bombay (1997) 2 SCC 677. 18. Colgate Palmolive (India) Ltd. v. UOI 1980 SCC Online Bom 384. 19. CCE V. Chemphar Drugs & Liniments, Hyderabad (1989) 2 SCC 127. 20. Anand Nishikawa Co. Ltd. v. Commissioner of Central Excise, Meerut (2005) 7 SCC 749. 21. Hindustan Steel Ltd. v. State of Orissa (1962) 2 SCC 627. 22. CCE Vs. H.M.M. LIMITED 1995 Supp (3) SCC 322. 23. CCE, Aurangabad v. Balakrishna Industries, Civil Appeal No. 3389-3390 of 2001, SC. 24. Goyal Tobacco Co Pvt. Ltd. v. CCE & ST, Jaipur-1, 2015 SCC Online CESTAT 979. 25. Commissioner of Central Excise, Bangalore Vs. Mysore Electricals Industries Ltd. (2006) 12 SCC 448. 18. It is submitted by the learned Senior Counsel for the petitioner ....
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....f Commercial Taxes Trivandrum, reported in 2017 7 SCC 540, where the Apex Court held on the facts of the case that the food based drinks were always covered under section 6(1)(a) of the Kerala Value Added Tax Act, 2003 and therefore the claim of the State Government that they were included in a subsequent notification issued under section 6(1)(d) was rejected. The Apex Court held that fruit based drinks were always covered under section 6(1)(a) and were never treated as "aerated branded soft drinks" as was sought to be done by the State while issuing notifications under section 6(1)(d). In support of his contentions he has further referred to the following judgments Godrej Foods Ltd. vs. CCE Indore reported in 2000 (121) ELT 231 (TRI) and Hamdard (Wakf) Laboratories vs. Collector of Central Excise, Meerut reported in 1999 6 SCC 617, Katrala Products Ltd. V. CCE, Meerut reported in (1999) SCC Online SC 701. It is submitted that any orders passed by higher authorities are required to be rigorously followed until and unless such order is stayed or set aside. It is submitted that the Tribunal in Parle Foods Pvt. Ltd. had rendered a finding rejecting the similar stand of the Revenue in ....
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....at the main contents of the goods are alleged to be carbonated water, sugar, along with the preservative present is only contrary to the scheme of the Tariff Act and the classifications made under the said Tariff Act read with the judicial pronouncements discussed. It is submitted by the learned Senior Counsel that carbon-dioxide is added merely for preservation of the beverage and not for any other purpose. Rather, it is the fruit juice which gives the subject product its essential character and forms the base of the beverage. He submits that the carbon-dioxide in combination of other additives are added only for ensuring the safety of the beverage for consumption over its declared "best before date". The learned Senior Counsel places reliance on materials extracted from the "Carbonated Soft Drinks Formulation and Manufacture" edited by David P. Steen and Philip R. Ashurst, 2006 by Blackwell Publishing Ltd. He also places reliance on "Chemistry and Technology of Soft Drinks and Fruit Juices, Second Edition, edited by Philip R. Ashurst & Associates, Consulting Chemists for Food Industry, Hereford, UK, 2005 by Blackwell Publishing Ltd. Referring to these authorities by specialists i....
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....s the base component of the product (being more than 5%/ 10%/ 12% content of the total product), the correct classification of the subject products will be under tariff item 2202 99 20 and not/ under tariff item 2202 10 20 or 2202 10 90. Thus, primary ingredient in the subject products are fruit juice and not carbonated water, sugar and other preservatives as alleged by the Ld. Joint Commissioner in the impugned SCN. 25. Hence, the proposed classification of the subject products by Ld. Joint Commissioner, as carbonated water falling under CTH 2202 10 90 is factually incorrect and legally erroneous. 26. Thus, it is submitted that the goods manufactured by the petitioner are classifiable as fruit juice based drink since the essential component of the drink comprises of apple fruit juice and therefore the goods are classifiable under the tariff item 2202 99 20 as against the tariff sub-heading 2202 10 as proposed in the impugned SCN. Hence, the impugned SCN is liable to be dropped on this ground alone. 27. The learned Joint Commissioner of Taxes has applied the HSN Explanatory Notes of heading 2202 to propose that the subject products are classifiable under the tariff sub- he....
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....onated Sweetened Water, or a Carbonated Fruit Drink, fruit juice or flavoured water/ aerated water. 31. Once a product meets all the essential characteristics of a category of product, the trader is granted a licence under FSSAI Act to manufacture and sell the product. A copy of the license (FORM C) granted to the Noticee under FSS Act, 2006. 32. It is submitted that the standards for 'thermally processed fruit beverages/ fruit drink/ ready to serve fruit beverages' have been laid down under Para 2.3.10 of the said Regulations. As per the said Para, thermally processed fruit beverages/ fruit drink/ ready to serve fruit beverages' means an unfermented but fermentable product which is prepared from juice or pulp/puree or concentrated juice or pulp of sound mature fruit. Further, the drink may also contain water, peel oil, fruit essences and flavours, salt, sugar, invert sugar, liquid glucose, milk and other ingredients. Similarly, the standards for 'carbonated fruit beverages or fruit drinks' have been laid down under Para 2.3.30 of the said Regulations. As per the aforesaid para, Carbonated Fruit Beverages or Fruit Drink means any beverage or drink....
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....ng from 10% to 5% is also classified as a carbonated fruit beverage. 36. It is, therefore, submitted that once the carbonated fruit beverages falling under the Regulation 2.3.30 have been held by the CESTAT/ Hon'ble Supreme Court to be classified under the tariff item 2202 99 20, the sub-set of the same also needs to be classified thereunder. Thus, the subject products would merit classification under Sl. No. 48 of Schedule II to the IGST Rate Notification (for inter-state supply of goods made by Noticee). Even the learned CESTAT. Kolkata in Anutham Exim case (supra) held the same in its recent Final Order No. 75031/2021 dated 25.01.2021. 37. Hence, it is submitted that the products in question are fruit juice-based drinks, wherein fruit juice (having percentage content in excess of 5%, as provided under the regulation) is used to provide the essential characteristic of the drink and the related features of appearance and mouth- feel. Thus, the subject products, in present SCN, are correctly classifiable under tariff item 2202 90 20 as "fruit pulp or fruit juice-based drink" 38. It is thus, submitted that the products manufactured and supplied by the petitioner are classif....
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....ssification of a commodity under the said Notification the rules of Interpretation of Customs Tariff Act, 1975 will be applicable. 43. It is submitted that Rule 3(a) categorically provides that a heading that is most specific is preferred over a heading that provides more general description. The Rules provide that any mixture is to be classified based on the material that gives it their essential character. Therefore, when there is specific Tariff Entry No. 2202 99 20 for 'fruit pulp and fruit juice-based drinks', there is no need to place reliance on the residuary entry for classification of a product if such entry is self-sufficient to classify a particular product. 44. Reliance is placed on the case of Hindustan Poles Corporation v. CCE, Calcutta, 2006 (196) E.L.T. 400 (SC) wherein it was held that the residuary entry is meant only for those categories of goods, which falls outside the ambit of specified entries. Further, the Hon'ble Tribunal of Chennai, in the case of CC, Chennai v. Associated Cement Companies Ltd., 2001 (133) E.L.T. 400 (Tri.- Chennai) held that a residuary heading cannot be resorted to for classification when specific entry is available. ....
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....oner relies on the Judgment of the Apex Court rendered in CCE Vs. Cannaught Plaza Restaurant (P) Ltd., reported in 2012 (286( ELT 321 (SC) as well as Delhi Cloth & General Mills Co. Ltd. Vs. State of Rajasthan, reported in 1980 (6) ELT 383 (SC). 47. It is submitted that the Apex Court has held that if there is one principle fairly well settled it is that the words or expressions must be construed in the sense in which they are understood in the trade, by the dealer and the consumer. 48. Referring to the said Judgment, the learned Senior counsel submits that from ratio laid down by the Apex Court it is abundantly clear that the ordinary meaning of a product must be considered over the technical meaning for classification purpose. 49. It is submitted that the subject products in the present case, clearly indicates that such beverage is a fruit juice and not as merely flavoured water. The label of each of the product labels (e.g. XSS Apple Fruit Drink, XSS clear lemon, XSS cola, Thirst Cola, XSS Orange etc.) clearly depict in the centre that it 'CONTAINS FRUIT', photograph of fruits, phrase 'fruit drink' etc. This clearly indicates the intent of the petitioner....
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....nion of India Vs. Garware Nylons Ltd., reported in 1996 (87) ELT 12 (SC). Referring to the said Judgment, he submits that the decision of the Bombay High Court in favour of the assessee was upheld by the Apex Court. It was held by the Apex Court that the burden of proof is on the taxing authorities to show that the particular case of the item in question is taxable in the manner claimed by them, Mere assertion in that regard is of no avail. There should be material to enter appropriate finding in that regard and the material may either be oral or documentary. The taxing authority therefore must lay evidence in that regard even before the first adjudicating authority. 54. Reliance is also placed on the Judgment of the Apex Court rendered in HPL Chemicals Ltd. Vs. CCE, Chandigarh, reported in (2006) SCC 208; Hidustan Ferodo Ltd. Vs. CCE, Bombay, reported in (1997) 2 SCC 677; Colgate Palmolive (India) Ltd. Vs. Union of India & Ors, reported in 1980 SCC OnLine Bom 384. 55. In view of the elaborate submissions made above by the learned Senior counsel representing the petitioner it is vehemently urged that the subject products were correctly classified by the petitioner and the tax....
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.... by the petitioner are classified under tariff item 2202 99 20. 59. Since the impugned Show Cause Notices are is based on the information suo moto declared by the petitioner in statutory returns and during investigation process, therefore, there can be no ground to allege any suppression or concealment of information where everything was disclosed. This goes on to establish that all relevant facts were well within the knowledge of the Department and no suppression can now be alleged against the petitioner. The question, thus, of evading the liability to pay tax cannot arise. 60. Further, the petitioner humbly submits that the impugned SCN has not brought on record any evidence to show that suppression of any fact from the Department. 61. It also submitted that the present issue involves interpretation of complex and technical question of determining classification of goods manufactured and supplied by the petitioner. The position adopted by the petitioner is in line with the settled principles of law and various judicial precedents as referred to above. Thus, there cannot be said to be any malafide intent on the part of the petitioner. Therefore, the provisions of Section ....
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....tor of Central Excise Vs. H.M.M. Limited 1995 (76) ELT 497 (SC) as well as CEE, Aurangabad Vs. Balakrishna Industries, reported in 2006 (201) ELT 325 (SC). 69. Relying on the aforesaid Judgments, it is submitted that penalty is not imposable when differential duty is not payable. 70. It is submitted that the issue in the present case is highly technical and interpretational since it pertains to the classification of goods vis-à-vis fruit juice based drinks. Therefore, in such cases, where the issue is complex and requires technical understanding of the product, no penalty can be imposed on the petitioner. It is settled law that the imposition of penalty on the petitioner cannot be sustained when the issue is one of pure interpretation. Therefore, proposal to impose penalty under Section 122(2)(b) of the CGST Act is invalid and unsustainable in law. It is therefore submitted that the proposal for imposition of penalty on the petitioner is not sustainable in law. 71. The further contention of the petitioner is that the interest under Section 50 of the CGST is also not recoverable in the instant case. It is submitted that the charging of interest under the provisions o....
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.... have effect only from the date, the same have been made effective. It is also respectfully submitted that if the aforesaid items dealt with by the Petitioner would have fallen within the Entry 2202 10 10 i.e. "Aerated Waters", there was no necessity of inserting a separate item in the Schedule and also by inserting a new entry into the Cess into the Assam Goods & Service Tax Act, 2017. He refers to the Judgment of the Parle Agro (P) Ltd. (Supra) to submit that the Apex Court in that case held that the items concerned were always included under Section 6(1)(a) and therefore, there was no occasion of the subordinate authority to include the products in the Notification under Section 6(1)(d). 77. Similarly, in the present case if the aforesaid product would have been covered by 2202 10 10, there would have been no occasion to issue the aforesaid Notifications by inserting new items making it effected from 01.10.2021. In view of the aforesaid, it is very clear that earlier the items in question were covered by Tariff Item 2022 90 20 and only after issue of the aforesaid Notification, the same are made taxable at a higher rate. 78. It is therefore submitted that in the absence of....
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.... added sugar or other sweetening matter or flavoured" and sub-heading 2202 90 which covers "other". 84. It is submitted that the petitioner manufactures various types of beverages using different ingredients/inputs such as sugar, sucrose, flavours, artificial sweetener, fruit pulp, fruit concentrate, preservatives etc. Different ingredients/inputs are used for manufacture of different finished products which give different identity to each product. 85. Referring to the labels of the various products showing the ingredients, the respondent counsel submits that from the label available on the products manufactured by the petitioner, which has been listed as above, it transpires that Carbonated Water, is used as an essential ingredient in some of the products manufactured by him. 86. It is further submitted that from the "Report of Analysis of Food Samples" conducted by the State Public Health Laboratory, Govt. of Assam, it is clear that Carbonated Water (i.e. aerated water) has been used in case of thrist Clear Lemon, Thrist Orange and Thrist Cola. However, in case of Thrist Mango Drink and Thrist Namboo Pani Drink, carbonated water has not been used. 87. Based on the ing....
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....petitioner, under various brand names such as X'SS, Thrist, Fontys, etc., contains carbonated water along with added sugar or other sweetening matter or flavoured depending on the type of product manufactured, are to be covered under HSN 2202 10. 93. The Chapter 22 has different tax rate for different items ranging from 12% to 28% and Cess @ 12% is also leviable on some items. For the HSN Code 2202 10 90: the tax rate is 28% (14% SGST + 14% CGST) and 12% Cess, whereas the petitioner has categorised such products under the HSN code 2202 only with tax rate of 12% (6% SGST + 6% CGST) without any cess. 94. It is therefore submitted that the petitioner has deliberately misclassified his products in lower tax rate category with the sole intention of minimizing his tax liability. 95. With regard to the submissions of the petitioner placing reliance on the Food Safety and Standard (Food Products and Food additives) Regulation, 2011 for the purpose of determining the classification of the subject matter, it is submitted that the classification of the product is well placed in accordance with the Customs Tariff Act, 1975 and GST Law, and as such by adhering to the well settled princ....
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....harat Hansraj Gandhi Vs. Addl. Collector of Central Excise, reported in 1990 (12) TMI 89-High Court of Judicature at Bangalore (Karnataka), wherein it has been held that it is not a sound principle to interpret the expressions with reference to their use in another Act, when the two statutes are not in parimateria. 100. Reference has also been made to the Judgment of the Apex Court in CCE Vs. Shree Baidyanath Ayurved Bhawan Ltd., reported in 2009 (4) TMI 6- Supreme Court, to submit that the definition of one statute having different object, purpose and scheme cannot be applied mechanically to another statute. 101. It is also submitted that based on findings about the nature of products, ingredients used, manufacturing process it can be clearly seen that the product was misclassified by the petitioner to wrongly avail the benefit of incorrect classification into goods which are taxed at lower rate. 102. The further submission of the Revenue is that the GST being a progressive tax regime it encourages self- policing by the taxpayers and generally undertakes enforcement activities in cases where there is a strong suspicion of tax evasion. Hence, the contention of the tax paye....
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....on of the said products under HSN 2202 99 20 instead of HSN 2202 10 90 does not find merit to the fact that the correct classification rightly falls under HSN 2202 10 90 instead of HSN 2202 99 20. It is submitted again that the said product are manufactured using juice concentrate along with it being sweetened and aerated, which is sold in PET Bottles. The Revenue also disputes the submissions made by the petitioner in providing that the tariff heading 2202 10 would cover only those beverages which are prepared with flavours. 110. It is contended by the Revenue that the petitioner has indulged itself into misclassification of the said product under HSN 2202 99 20 instead of HSN 2202 10 90. It is submitted that the petitioner has been using concentrate for manufacturing of the said product along with Carbonated Water and other ingredients. It is submitted that the HSN Classification Heading 2202 10 specifically provides for "Water including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured" 111. The contention of the petitioner that applying common parlance tests, the subject products are known in the markets as "fruit pulp" or "....
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....nce for which the petitioner should be made liable. 114. The contention of the petitioner that no default should be charged and that the same is without jurisdiction, is also denied by the Revenue. The Revenue reiterates that the petitioner has been rightly charged under Section 74 of the CGST Act, 2017 and penalty has been appropriately imposed under Section 122 of the CGST Act, 2017 as also the interest under Section 50 of the Assam GST Act, 2017 as the petitioner is required to pay the demand raised by the Revenue. 115. The learned counsel for the parties have been heard. Pleadings available on record carefully perused. The Judgments and authorities placed before the Court have been carefully perused. 116. In order to understand the issues raised in the present proceedings, it is necessary to refer to the Show Cause Notice which was issued on 17.02.2022. The Show cause Notice was issued by the Revenue on the following grounds: "1) The products manufactured by the Taxpayer have been misclassified. Based on the ingredients of the products as seen from the label of the products, and which has been duly described in the SCN and the list of ingredients as found in t....
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....being marketed and sold to the consumer at large. In taxpayer's case, the products in question are being marketed and sold as Carbonated Fruit Beverage, Fruit Band Carbonated Beverage, based on the product. Further, the ingredients provided/specified in the label of the products sold provides for Carbonated Water as one of the ingredient. 9) The chapter 22 has different tax rate for different items ranging from 12% to 28% and Cess @12% is also leviable on some items. For the HSN Code 2202 10 90: the tax rate is 28% (14% SGST+14%CGST) and 12% Cess, whereas the taxpayer had categorised such products of his under the HSN Code 2202 only with tax rate of 12% (6% SGST + 6% CGST) without any cess. It appears that the taxpayer have misclassified to minimize his tax liability. This implies that tax has been short paid on such products. 10) There appears to be significant difference in the consumption of concentrates in manufacturing the finished products." 117. In the said Show case notice, the raw materials in the subject products are extracted in a tabular form indicating the minimum percentage consumption and the maximum percentage of the concentrate. The Revenue....
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....manufacturing flow chart showing the method of preparation of the various products. The assessee submitted in the reply that the appropriate sub-heading in the Customs Tariff Act of 1975 for application of the products is 2202 99 20 as the products manufactured by the petitioners are "Fruit Juice Based Drink" 121. The respondent No. 3 upon considering the submissions rejected the contentions of the assessee/writ petitioner. The Revenue rejected the case of the petitioner on the following grounds: "The prayer for dropping the proceeding initiated vide issue of SCN dated 17/02/2022 is being rejected to the fact that taxpayer has not paid the demand raised in the SCN and further the demand raised is tenable taking into consideration the facts and circumstances involved in the present case. Hence, it would not be appropriate to drop the proceeding as has been prayed by the taxpayer. The prayer for classifying the subject products under tariff item 2202 99 20 and accordingly praying for no-conforming the demand raised is rejected to the fact: that the actual classification of the subject product is under HSN 2202 10 90, the reasons for which has been rightly provide....
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....t is to be mentioned here that for the purpose of classifying the items for fixation of the rate of tax to be imposed, the Customs Tariff Act, 1975 is adopted for the said purpose. 124. To ensure adherence to quality, the goods manufactured and supplied by the petitioner are regularly tested by sending sample products to the State Public Health Laboratory, Government of Assam. These test results indicate Fruit Juice Content of more than 10%, Soluble Solieds, Sugar, Acidity Regulators and Synthetic Food Colour. As such the petitioner relying on the Food Safety and Standards (Food Products Standards and Food addictives) Regulations, 2011, considered these products to be as per the specifications stipulated under Regulation 2.3.30 of FSSAI for Carbonated Beverages with Fruit Juice. Based on the classification adopted by the Petitioner, the GST returns were being filed regularly on payment of appropriate taxes i.e. 12%. The classification of the products were also disclosed in the invoices raised and the returns filed by the Petitioner. There is no dispute that there was no objection raised by the GST Department with regard to the classification of fruit juice-based drinks under Tar....
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....t be reclassified under the Tariff sub-head considered to be appropriate by the department instead of its classification under the Tariff subhead as maintained by the petitioner. 127. The petitioner has assailed this impugned show cause notice as well as impugned order and consequential demand raised on several grounds and the same are dealt with accordingly. 128. The subject products are "Fruit Juice Based Drink" classifiable under the Tariff Item 2202 99 20 of Schedule-II of CGST/IGST Rate Notification and that Tariff heading 2202 10 would cover only those beverages which are prepared with flavours. 129. In order to deal with the contentions raised, it is necessary to refer to the tariff heading 2202 of the Customs Tariff Act, 1975 which has been adopted for the purposes of CGST/IGST Rate Notification. The same is extracted below: Tariff Item Description of goods (1) (2) 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, contain....
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....(11) The base of a substance such as paint or food is the main ingredient of it, to which other substances can be added" 135. Similarly, The Compact Edition of the Oxford English Dictionary, 1987, Oxford University Press explains 'base' to mean "...II. The main or the most important element or ingredient, looked upon as its fundamental part." Thus, a substance or ingredient of a food item can be called its base when such substance/ ingredient forms the main or fundamental ingredient and imparts the essential attribute to the food item. 136. Similarly in D. Hicks (ed.), Production and Packaging of Non-carbonated Fruit Juices and Fruit Beverages, 1990, Van Nostrand 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. 137. The US Customs Ruling No. N122815 in the matter of Ms. Michele Peplinski Parker's Organic Fruit Juice, which deals with the issue regarding the classification of certain beverages containing concen....
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.... moulds by depriving the moulds of oxygen required for growth." 140. In Chemistry and Technology of Soft Drinks and Fruit Juices, Second Edition, edited by Philip R. Ashurst, Ashurst and Associates, Consulting Chemists for the Food Industry, Hereford, UK, 2005 by Blackwell Publishing Ltd., wherein it has been stated that: "RTD (ready to drink) beverages are mostly carbonated (i.e. contain carbon dioxide). This, as well as giving sensory characteristics, provides a very effective antimicrobial effect, especially against yeasts and moulds. Carbon dioxide is effective against yeasts because it tends to suppress the production of more CO2 as a by product of the fermentation of sucrose to ethanol. It deprives moulds of the oxygen that most require for growth." The Random House Compact Unabridged Dictionary, 1996, Random House, New York defines 'flavour' thus: "1. Taste, esp. the distinctive taste of something as it is experienced in the mouth." According to The Shorter Oxford English Dictionary, 1973, Clarendon Press, Oxford 'flavour' is "1. A smell or odour. In mod. Use: A trace of a particular odour." 141. From these Technical Literat....
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....flavoured and second is in respect of others. Whereas Central Excise Tariff under Sub-heading No. 2202 there are specific headings in respect of soya milk, drinks etc. As per the Central Excise Tariff, the waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured are classifiable under sub-heading No. 2202.10. The drinks based on fruit juice are specifically classifiable under Heading No. 22029020 of the Tariff. In the present case, there is no dispute regarding the contents of the product. Revenue is not disputing the certificate given by the Ministry of Food and Processing Industries, New Delhi rather they are relying it in the ground of appeal, and as per the certificate, the product in question contains 23% of apple juice, therefore, we find no infirmity in the impugned order. The appeal is dismissed." 144. The above decision of the Hon'ble Tribunal was affirmed by the Hon'ble Supreme Court by dismissing the civil appeal filed by the Department, as reported in 2010 (254) ELT A13 (SC). 145. The Hon'ble Supreme court in the case of Parle Agro (P) Ltd. v. Commissioner of Commercial Taxes, Trivandrum, (2017....
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....eetening matter [* * *] [ Omitted by SRO No. 543/2007 dated 20-6-2007 published in Kerala Gazette Extraordinary No. 1167 dated 21-6-2007. Prior to the omission it read as under:"(a) Mineral water 2201.10.10"] (b) Aerated water (2) Water containing added sugar or other sweetening matter 2201.10.20 (3) Fruit juices and vegetables juices, unfermented and not containing added spirit, whether or not containing added sugar of other sweetening matter (4) Fruit pulp or fruit juice based drinks 2009 (5) Soft drink concentrates (a) Sharbat (b) Others 2202.90.30 2106.90.11 2106.90.19 (6) Beverages containing milk 2202.90.30" By SRO No. 119 of 2008 Entry 71 has been substituted by another Entry. Entry 71 after amendment by SRO No. 119 of 2008 w.e.f. 1-4-2007 is as follows: "71.Non-alcoholic beverages and their powders, concentrates and tablets in any form including- (1) aerated water, soda water, mineral water, water sold in sealed containers or pouches; (2) fruit juice, fruit concentrates, fruit squash, fruit syrup and pulp and fruit cordial; (3) soft drinks other than aerated branded sof....
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....atories Vs. Collector of Central Excise, Meerut, reported in (1999) 6 XCC 617, the Apex Court was examining with regard to the classification of a product made by the Appellate Court called "SharbatRoohAfza" which contained some orange juice and distillates of citrus medica, rose damascene and permissible food colours and was said to be a summer drink and useful also in treating disorders associated with heat. The Apex Court was examining the question of the said sharbat falls within Tariff Heading 2202.90. In this connection the Apex Court held as under: "6. The Tribunal would appear to have gone wrong in concluding that the said sharbat did not fall under Entry 2202.90 because it read "not including fruit or vegetable juices of Heading 20.01" as meaning beverages which do not contain fruit or vegetable juices. This is patently erroneous. Where the Tariff wanted to convey this intention it used the words "not containing", as in Heading 22.01, and where it intended to convey that an article should contain something it used the word "contained", as in Entry 22.02 itself. The fact that a beverage includes fruit or vegetable juice does not ipso facto exclude it from Heading 2....
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.... be classifiable under Tariff Item 2202 99 20. Relevant portion of the order is reproduced herein below: "25.The question which falls for consideration in the present case is how to view the products in question- (a) as carbonated beverages treating the fruit juice as a secondary character as the Revenue views them or (b) as fruit juice based drinks as the Respondent assessee views them. In our considered view, a decision on this could be made by examining how they are being sold. They are being sold as Carbonated beverages with fruit juice"- neither as fruit juice based drinks nor as carbonated beverages although the fruit juice content is only 5% (or 2.5% in case of lime). This gives the products their unique characteristic distinct from both carbonated beverages and fruit juices. The FSSAI regulation (2.3.30 clause 3A) also conceives of such a category of products in the market. Thus, they form a separate specie of products known to the market and are recognised as such by FSSAI. The Customs Tariff, however, does not have a separate entry for such products. We do not agree with the Revenue's contention that the essential character of the products is only carbonated ....
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.... on the judgment of the Hon"ble Apex Court in the case of Parle Agro (supra) as it was in respect of Appy fizz in which the apple fruit content was more than 10% whereas in the present case the juice content is only 5% or 2.5% (in case of Lime). We find no force in this argument because products containing 5% fruit juice (2.5% in case of lime) are now squarely covered by the FSSAI regulations. 30. In view of our above findings and respectfully following the decisionof the Hon'ble Supreme Court in the case of Parle Agro (supra) and the decision of the Larger Bench of the Tribunal in the case of Brindavan Beverages (supra), we hold that the products, in question, have been correctly classified under 22029920 by the learned Commissioner (Appeals) in the impugned order and the same calls for no interference. 31. The impugned order is upheld and Revenue's appeal is rejected. The stay application filed by the Department also stands disposed of." 156. The catena of judicial pronouncements as discussed above unequivocally lead to the conclusion that while interpreting the classification under Tariff heads and the sub heads, the meaning ascribed or provided in the statute must be....
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....ption. {for reference Swami Achyutananda Teerth Vs Union of India 2016 (9) SCC 669}. 161. Under Section 92 read with Section 16 of the Food Safety and Standard Act, 2006, the Food Safety and Standards (Food Products Standards and Food Additive) Regulations, 2011 have been framed. The assessee has referred to the standards mentioned in Regulation 2.3.30 which pertains to carbonated food beverages or fruit drinks. 162. It is further provided thereunder that in order to confirm to the Micro Biological Requirements given in Appendix-B, the product must meet the following requirements: (i) Food content (m/m) A lime or lemon not less than 5% (ii) Other foods not less than 10% 163. It is further provided that the product shall have the colour, tastes and flavour characteristic of the product and shall be free from extraneous matter. 164. Under the Customs Tariff Act, which is adopted by the GST authorities for the purpose of rate of tax in respect of the items prescribed in the schedules, the Rules for interpretation of the schedule as prescribed would be relevant for the purposes of this case. Under the said general Rules, the classification of good....
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....cable. (c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in the numerical order among those which equally merit consideration. 4. Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin. 5. For legal purposes, the classification of goods in the sub- headings of a heading shall be determined according to the terms of those sub-headings and any related Chapter Notes and, mutatis mutandis, to the above rules, on the understanding that only sub-headings at the same level are comparable. For the purposes of this rule, the relative section Notes also apply, unless the context otherwise requires. General Explanatory Notes 1. Where in column (3) of this Schedule, the description of an article or group of articles under a heading is preceded by "-", the said article or group of articles shall be taken to be a sub- classification of the article or group of articles covered by the said heading. Where, however, the description of an article or group of article is preceded by....
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.... this conclusion, which is based on Laboratory Test reports, the Revenue is required to place alternative materials to suggest that the classification made by the assessee is incorrect and the one made by the Revenue is the appropriate one. No such contrary material has been placed before the Court by the Revenue. The only ground on which the Revenue has classified the subject product under sub-heading 2202 10 is that it contains carbonated water. However, a quick reference to the Tariff schedule makes it clear that Sub-heading 2202 10 is primarily 'WATER' and it also includes mineral waters/ aerated waters /water containing added sugar or sweetening matter or flavour whereas sub-heading 2202 99 includes 'OTHERS' which are further described under the said sub- heading. The Tariff heading 2202 99 20 is seen to be for fruit pulp or fruit juice based drinks. 168. There is also no dispute that the subject products manufactured by the petitioner had at any point in time earlier been classified as water in order that it is required to be classified under sub-head 2202 10 as per Revenue. The Revenue has never at any point in time raised the issue or question that the subject products a....
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.... the correctness of the placing reliance by the petitioner on the Food Safety and Standards (Food Products and Food Additive) Regulation, 2011. It is seen that the Central Excise Tariff Act does not specify any particular category of laboratory where such tests are to be conducted nor does it specifically debar tests results undertaken under the FSSAI for the purposes of determining the classification of the items under the appropriate tariff heads. The Revenue has also not suggested any alternative methods or means by which such tests results were undertaken leading to contradictory findings to that of the tests results conducted under the FSSAI. During the search and seizure operations conducted in the petitioners unit, sample products were also taken by the Revenue which is not denied. These products could have been sent to appropriate laboratories for tests to find out the contents of each of them. However, no such laboratory results etc have been placed before this Court to substantiate the claim of the Revenue that these tests results under FSSAI are unreliable. As it has already been held in the above discussions that the tests conducted by the State Laboratory indicate the ....
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.... Other 2202 99 10 Soya milk drinks, whether or not sweetened or flavoured 2202 99 20 Fruit pulp or fruit juice based drinks 2202 99 30 Beverages containing milk 2202 99 90 other 176. A perusal of the chart reveals that Tariff Head 2202 is for Water 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. This head is again further divided into sub-heads namely 2202 10 for Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured and Sub- Head 2202 99 for Others. 177. If the sub heading 2202 10 and the items specified under that sub heading are to be seen, it will be apparent that all the sub heads under 2202 10 are meant for different kinds of water. Whereas 2202 99 and the Tariff Items thereunder have been so classified as to distinguish them from products which are ordinarily identified with water or mineral water or aerated waters. Under such circumstances, it is a well established Rule to be followed that Tariff Items are to be classified under Ite....
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....y in accord with the decisions of this Court and the same is justified in law. The burden of proof is on the taxing authorities to show that the particular case or item in question, is taxable in the manner claimed by them. Mare assertion in that regard is of no avail. It has been held by this Court that there should be material to enter appropriate finding in that regard and the material may be either oral or documentary. It is for the taxing authority to lay evidence in that behalf even before the first adjudicating authority. Especially in a case as this, where the claim of the assessee is borne out by the trade inquiries received by them and also the affidavits filed by persons dealing with the subject matter, a heavy burden lay upon the revenue to disprove the said materials by adducing proper evidence. Unfortunately, no such attempt was made. As stated, the evidence led in this case conclusively goes to show that Nylon Twine manufactured by the assessee has been treated as a kind of Nylon Yarn by the people conversant with the trade. It is commonly considered as Nylon Yarn. Hence, it is to be classified under Item 18 of the Act. The Revenue has failed to establish the contrar....
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....w cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice. (2) The proper officer shall issue the notice under sub-section (1) at least six months prior to the time limit specified in sub- section (10) for issuance of order. (3) Where a notice has been issued for any period under sub- section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under sub- section (1), on the person chargeable with tax. (4) The service of statement under sub-section (3) shall be deemed to be service of notice under sub-section (1) of section 73, subject to the condition that the grounds relied upon in the said statement, except the ground of fraud, or any wilful-misstatement or suppression of facts to evade tax, for periods other than those covered under subsection (1) are the same as are mentioned in the earlier notice. (5) The person chargeable with tax may, before servic....
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.... 185. Under Section 74 Explanation 2, the term "suppression" has been explained as non declaration of facts or information in the returns. In this context, it is necessary to examine whether there was any suppression or non-declaration of materials by the assessee while payment of taxes by classifying the subject items under Tariff Head 2202 99 20. In order to decide, whether there was any wilful suppression or mis-statement by the petitioner, it is necessary to examine the case laws pressed into service in this regard. 186. In the case of CCE V. Chemphar Drugs & Liniments, 1989 (40) E.LT. 276 (S.C.), it has been observed that the term 'willful' and 'suppression' signifies conscious withholding of information with mala fide Intention and not an unintentional failure due to inadvertence. Thus, in order to invoke the extended period of limitation, it is necessary to prove an act or omission on the part of the petitioner equivalent to collusion or wilful misrepresentation or suppression of facts. 187. Again in Anand Nishikawa Co. Ltd. Vs. Commissioner of Central Excise, Meerut, reported in 2005 (188) ELT 149 (SC), the Apex Court held that suppression of facts" can ha....
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....itioner in respect of the subject products will amount to deliberate and wilful suppression or non-disclosure of facts and thereby attract the provisions of Section 74. Accordingly, it is held that invocation of powers by the Revenue under Section 74 was uncalled for and the same is therefore unwarranted. 192. In order to dwell upon the arguments made by the petitioner questioning the penalty imposed under Section 122 of the Assam GST Act and to decide on the correctness of such imposition, it is necessary to refer to the provisions of Section 122 of the Assam GST Act. For the purposes of the present proceedings, reference to the provisions of Section 122 (2)(b) would be sufficient. The said Section reads as under: "Penalty for certain offences. (2) Any registered person who supplies any goods or services or both on which any tax has not been paid or short-paid or erroneously refunded, or where the input tax credit has been wrongly availed of utilised,- (a) for any reason, other than the reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent. of the tax due fr....
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....proposed demand is unsustainable in law, no penalty is imposable on the petitioner. Under such circumstances, it is held that where the demand has been found to be unsustainable on the ground that there was no wilful and deliberate suppression or mis-statement or evasion or payment of tax, the question of imposition of penalty must also failed. Accordingly, the imposition of penalty by the Revenue is therefore interfered with and set aside. 199. Similarly, the imposition of interest under Section 50 is also not recoverable in the present proceedings. The reason being that where the primary demand has been held to be unsustainable there is no basis for levy of any interest. Therefore, the levy of interest under Section 50 of the CGST Act is also interfered with and set aside. 200. Coming to the Notification No. 8/2021-Central Tax (Rate) dated 30.09.2021 and Notification No. 1/2021- Compenation Cess (Rate) dated 30.09.2021, it is seen by the said Notification No. 8/2021-Central Tax (Rate) dated 30.09.2021 whereby a new entry was inserted as Serial No. 12A in Schedule - IV making Carbonated Beverages of Fruit Drink or Carbonated Beverages with Fruit Juice to be taxable @ 14% and....
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.... to be classified by the Revenue, there would have been no necessity of inserting a separate item in the schedule and also by inserting by new entry of Cess under the Assam GST Act, 2017. In this context, the reference to the Judgment of Parle Agro (P) Ltd (Supra) is very relevant. 204. In this case before it, the Apex Court observed that fruit juice based drink were also to be covered by aerated branded soft drink, there was no occasion for the subordinate authorities to include the said products in Notification under Section 6(1)(d). Paragraph 31 of the said Judgment is extracted below: "31. The aerated branded soft drinks, excluding soda were always covered under Section 6(1)(a) and prior to 1-4-2007 it bears HSN Code 2201.10.10. Entry 71 Item 4 also reads as "fruit pulp or fruit juice based drinks with HSN Code 2202.90.20". When fruit juice based drinks were covered under Entry 71 the State Government knew that fruit juice based drinks were not covered by Section6(1)(a). Applicability of the power of State to issue notification under Section 6(1)(d) arises only when goods were not covered by Section 6(1)(a). Fruit juice based drinks, thus, were never treated as "aer....