Dismissed

M/s Khera Trading Company

GST AAAR7 Aug 2019HAAAR/2018-19/05

Case brief

AI extract

What is this about?

The appellate authority dismissed the appeal against an Advance Ruling classifying cooking cream as food preparations under Heading 2106 of the Customs Tariff Act, rejecting the appellant's claim for classification under Heading 1517 due to the presence of sugar beyond the limits of HSN Explanatory Notes.

What did the court decide?

The appeal was held to be failed and the Advance Ruling classifying the product under Heading 2106 was upheld.

M/s Khera Trading Company — GST and Indirect Tax | GST AAAR (2019)

¶1

STATE OF HARYANA. FOR CTOODS AIID SERVICES TAX. pANCHKIrIlt. -134151

¶2

IHARYANAI

¶3

Order utlder Section lol of the Celtral goode ard Servlces Thx Act, 2Ol7l the Ha4/ana Goode and Services Tax Act, 2O1?

¶4

The present appeal has been preferred by M/s Khera Trading Company situated at Sanoli Road, Near Govind Tobacco Factory, panipat, Haryana132103 ('Appeuant') against the Advance Ruling No. HAR/HAAR/R/20 t819/09 Dated 30.O8.2018 passed in their application dated 04.06.2018.

¶5

BRIEF FACTS OF THE CASE

¶6

The Appellant is inter alia engaged in the distribution of various dairy and non-dairy products and are registered with the jurisdictional GST authorities vide GSTIN 06AOEPKO998K1ZK. The goods "Cooking Cream" sold by the appellant under the name 'Cooking Delite, is a propiietary food consisting of Water, Edible Vegetable Fat (hydrogenated palm kemel oit), Milk Solid, Sugar along with premixes of emulsifiers and stabilizers. It is ideal for use in truffles, soups, sauces, gravies and all t,?es of cuisines.

¶7

2.1 Ihe impugned good comprises of 26 per cent edible oil (hydrogenated palm kernel oil) to which other ingredients such as milk solids, sugar and premixes are added, thus, forming a mixture/preparation of vegetable oil. The composition of the product is tabulated as under:

¶8

NaEeoflDgredlent/ additive	Ratio
Water	63.500/0
EdibleVegetablefat	26%
MilkSolids	40/o
Suga-r	1o/o
Premix(emulsihers, stabilizers,acidityregulators andpreservatives)	5.5%

¶9

2.2 T}]e process employed for manufacture of the Product is as under: Step 1 Sugar and water are mixed in a container (container 1) to form a sugar syrup. Milk cr€me/ vanilla flavour are added to the s].rup so formed. Step 2 Hydrogenated vegetable palm kernel oil is mixed with emulsifrer and stabilizers in another container {container 2).

¶10

Step 3 The mixture in container 1 and 2 are mixed at a high speed and then heated at a temperature of 75 degree Centigrade to 80 degree Centigrade. Step 4 The resultant material is subject to pasteurization at a

¶11

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temperature of 75 degree centigrade to 50 degree centigrade. Step 5 After pasteurization, mixture is passed through plate^heat exchanger and thereafter homogenised for proper blending. Step 6 The mixture is then stored in aging/ finishing tank where it is brought down to a temperature of 50 degree centigrade. After the temperature falls, tl e mixture is trarsferred to hlling machine where it is filled in 20O ml and 50O ml pouches, These pouches are sealed arrd packed in a-rl outer carton weighing 12 kg to 15 kg.

¶13

The contention of the appellant was tlat since "cooking cream" contains 26"/o edible oil a.long with some othei ingredients, it forms a mixture/preparation of vegetable oil and that it is classifiable under chapter heading 1517 as "edible mixture or preparations of animal or vegetable fats or oils or fractions of different fats or oils of this chapter, other than edible fats or oils or their fractions of heading 1516", Hence, the appellait contended tlat t}Iis product is chargeable to 5% IGST under S.No.89 of Schedule-I to Notification No. 1/2017lnte$ated Tax.

¶14

Based on the above submissions, the appellant raised the following question on which advance ruling was sought.

¶15

"whether^{the prcduct} 'coo6ng^{cream' is classifiable under chapterheading} 1517 IS No 89 of Scledule-1 of Notification No 1/ 21lTJntegrated Tax (Rate) dated June 28,2017, attracting IGST @ 5ol / {5.No.89 of ScheduleJ of Nottfication No.01/2O17 Central Tax (Rdte) d.dted 28.06.17 afiractirq CGST @ 2.5o/o)/ {5.No.89^{of Scttedule-IoJ Notirtcation No 35/ ST-2attracting SGST} @2.5ok}.'

¶16

comnerts of the concerred officer u/s 98(11 oF THE CGSTT/HG{IT ACT, 2017

¶17

The Deputy Excise & Taxation Commissioner (ST), Panipat, vide lotter No 5342 dt.2O.O7.18, submitted the requisite comments on the above^question raised by the appella-nt stating therein that as per the reading of heading 1517, it is apparent that all edible mixtures of^preparations of vegetable fat or vegetable oil or fraction of different vegetable fats or vegetable oils fall under this head, that the appellants submission makes them believe that it must fall under heading 1517.

¶18

Deciaio! of Authorltv for Advalce Rulfurq Harvarar

¶19

Advance Ruling under Section 98 of the CGST/ HGST Act, 2017^q/as pronounced as under:

¶20

6.1 The impugned item, i.e. non-diary cooking cream, does not merit classification under heading 1517 of the First Schedule to the Customs Tari.ff Act, 1975. Rather the same is classiliable under chapter heading 2106 of i}re schedule to the Customs Tariff Act, 1975 and chargeable to IGST @ 18%, CGST @9o/o^{atd SGST} @9%,^{as specified under S. NO. 23 of Schedule-lllof} Notification No. I / 20 1 Tlntegrataaed Tax (Rate) dated Jlune 28, 2017. Notification No. 01/2O17-Central Tax (Rate) dated 28-06.2017 alrd of Notification No. 35/ST-2 under State Tax.

¶21

Subllssiotla trade fur the Arpeal. bv tbe Appellatlt:

¶22

The Autiority in its Impugned Ruling has failed to take note of t}Ie additional subnissions furnished and the factum of^personal hearing on August 14, 2018. It apparently seems that the Authority did not bother to take into consideration the submissions advanced vide additional submissions and during the course of hearing.

¶23

Z.L In the case of Dharampat Satg@pal Limited vs. DCCE, 2015 (32O) EL'I:3 fSCr,^{the Apex Court explaining the conceptard contoursof principles of} natural^justice, observed that principles of naturaljustice include tJle following: (i) rule against bias, i.e. nemo judex in cause sta; (ii) opportunity of being heard, i.e. a di alterem partem; (iii) passing of a reasoned order. These principles or attributes are natural or fundamental to tlle exercise of judicial powers.

¶24

7.2 Tl:.e principle of audi alterom partem, i.e. rigbt to be heard, forms^pa-rt of tie set of principles of natura-l^justice, indispensable in exercise of the^judicial authority. The principle must be applied even in cases where t]le sarne has not been expressly provided for in the enactment.

¶25

7.3 From the above, it is clear that the Impugned Ruling stands in stark violation to the well-established principles of natural^justice. Accordingly, the Impugned Ruling is liable to be set aside and classifrcation adopted by the Appellant accepted.

¶26

The Ffst Schedule to the Customs Tariff Act is divided into )Cc Sections which are in turn divided into 98 Chapters. The dominant constituent in impugned good is vegetable oil. Hence, Chapter 15 arrd Chapter 21 covering 'edible mixture or^preparation of^{vegetableoils' arise} for^{consideration} in^the Dresent rnslance.

¶27

8,1 In the present case, the Appellant seeks to classify impugned good under Heading 1517 whereas the Authority vide its Impugned Ruling has classifred the same under Heading 2106. lt is pertinent to extract each of the above headings for ascertaining their scope and determining the classification of imhr rdc.l o^^.1

¶28

''	- Ohapter1l
1517	Margadne; EdlblemlxtueorpreparatiotrofaniEal or vegetablefats orollsor offractions of ditferentfetsor oils ofthisChapter,otherthanedlblefatsorollaor tbcirfractiorsofheadinr1515
151710	Marsarine. excludingliouidmargarrne
1517 1010	^- Ofanimal origin
1517 1010	- Of veaetableoriain
1517 lO2r	Edibleerade
r5r71022	Linoxyn
1517 lO29	-Other
151790	-Otter:
15179010	Salfat{processedorreftned)
15179030	-Imitation lardofanimaloriein
15179040	-Imitalionlardofvegetableorgin
15179090	-Other

¶29

2106	Foo	dDreDaratioasaotelsewheresoecifiedorilcluded
21061000		Proteinconcentrates andtexturedsubstances
210690	-	Other:
		Softdrinkconcentrates
21069011	----	Sharbat
21069019	----	Other
2106 9020		PanMasala
2106 9030	---	Betelnut^productknownas"Supari"
2106 9040		Sugarsyrupscontainingaddedflavouringor colouringmatter,notelsewherespecifiedor included; lactosesyrup;glucosesyrupandmalto dextrins!.ruD
2106 9050	---	Compound preparationsformakingnon-alcoholic beveraqes
2106 9060	---	Foodflavourine material
2106 9070	---	Churnafor^pan
2106 9080	---	Custard^powder
		Oth.er:
2106 909r	----	Diabeticfoods
2106 9092	----	Sterilized orDasteurizedmillstone
2106 9099	----	Other

¶30

8.2 The Appellant contends that impugned good merits classification under Tariff Item 1517 90 90 bearing description 'Other'. It is a residuary entry which

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is provided under Heading 1517. Therefore, in order to classifu under t-l:e aJoresaid Tariff ltem, tle product must qualify under Heading 1 5 1 7 .

¶32

8,3 The Authority in the Impugned Ruling has held that impugned good is classifiable under Heading 2106. It is submitted that the relevant Tariff item under heading 2106 is 2106 90 99 bearing description 'Other'which is a fourdash entry covered under triple-dash entry'Other'. The triple-dash entry is further covered under Sub-heading 2106 90 bearing description 'Other', which is a single-dash entry covered under Heading 2106. Therefore, the impugned good must answer to the description of goods mentioned against Heading 2106 in order to merit classiflcation under Tariff item 2106 90 99.

¶33

The impugned goods are generally referred to in the market as Cooking DeLite'. It is prepared using Ultra Heat Treatment (UHT) under which a product is given powerful heat treatment to kill all micro-orgarisms arld deactivate enzjirnes. It is done to increase t]le shelf life of the product.

¶34

9,1 Impugned good is primarily based on vegetable oil (hydrogenated palm kernel oil) which constitutes almost 26 percent of the total Product. It forms the main ingredient to which other ingredients such as milk, sugar and premixes (consisting of stabilizers, emulsifiers etc.) are added, All these ingredients are emulsified together in water to make an edible preparation based on vegetable oil.

¶35

9.2 T}j.e essential character to impugned good is provided by vegetable fat without which it will not achieve its character of fat emulsion. Accordingly, the product is a preparation of vegetable fat classiliable under Heading 1517 which covers edible mixtures or preparations of vegetable fats or oils or of fractions of different fats or oils of this chapter. The relevant extract of this Heading is reproduced as under:

¶36

"Margartne; edibte mixhres or^preparations of animal or^uegetable fats^or oils of fractions of different fats or oils of this chapter, oth.er than edible fats or oils or their fractions of heading 1516"

¶37

9.3 It is pertinent to note that classification under Heading 1517 can be made subject to the condition t]lat tlle product does not fall under Heading 1516. In other words, Heading 1517 is a residuary heading. In order to classi$ goods under Heading 1517, they must specifically fall out of Heading 1516.

¶38

9.4 The Heading 1516 covers vegetable fats or oils that have been subjected to refining processes such as hydrogenation etc., but not further prepared. In other words, the Heading covers only those goods which continue to remain

¶39

animal or vegetable fats and oils and their fractions alter^{processing.On the} other hand, processed vegetable fats and oils that have been further^prepared, will fall outside the purview of this heading.

¶40

9.5 In t}le instant case, the Product had undergone several^processes beyond the scope of Heading 1516 and hence, fall outside the purview thereof.

¶41

9.6 The above view of the Appellalt is supported by the Explanatory Notes appended to the HSN. Before discussing the same, it is essential to discuss the relevance of the HSN.

¶42

9.7 In the case of CCE r. Wood Crqft Products Ltmited, 1995 (74^ELT 23 fSCr,^{the Apex Court observedthat the HSN Explanatory Notes serve as a safe} guide for ascertainment of meaning of a term used in the Tariff Schedule in case of doubt. The relevant extract has been reproduced as under:

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"we are of the uieu tlwt ttle Trtbunal as well ds tlle High Court fetl into tlg etror of ouerlooking tte fact ttrat tLre structure of the Central Excise Taiff i,s ba.sed. on tle internationqllg accepted nonlenclqfiire found in the HSN and., therehre, anA dispute retatirq to tarilf cla.ssijlcation must, as far a.s possible, be resolued with rekrence to tle nomenclature indicated. bg tte HSN unless tfere be an express different intention indicated bA th.e Centrat Exci.se Tarilf Act, 1985 itself.'

¶44

9,8 In the case of R€chift Bencklser (IndtQ Ltmlted, a. Commlssloner, Comtna.rclul Toxes, 2075 (4 SCC 126, the Apex court held that when the taxation statute is aligned with the HSN codes, then, necessarily tie interpretation has to be based on the HSN code, as available in the Customs Act. The^judgment has been relied upon in the case of Parisons Food. Hrate Llfl.tted a. ,toint Comlmlssloner of Comtnerlclo,l Tqxes, 2018 (11) GSTL 44 lKer.).

¶45

9.9 WCo's brplaletory Notes to HsN lsixth edition (2017), refer page III1516-21 (HSN Explanatory Notes') provide that Heading 1516 includes products obtained from processes such hydrogenation, re-esterification etc. even if they are deodorized or subsequently subjected to similar refining^{process,gglggyg!,} it excludes^process€d fets and olls tbat undergo chemical modification for the^purposes of lreDaratlon of food. Relevant extract of the HSN Explanatory Notes is as under:

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"The heading inctudes tlLe products as described aboue, euen if th.eg have a uqxg cttaracter and. euen if thEA haue been subseE)en V deodorized. or stbjeded. to similar refining processes, and uhether or not theg can be used.

¶47

directlV as food. But it exclud.es hudroqenqted etc. fqts and oils and tlleir fradbns uhich haue underaone such fifitter^preparati.on for food.^purposes a.s texturation lmodification of th.e turture or crustq.Itine structurel (Headlng 1517r

¶48

9.1O It is submitted that the HSN Explanatory Notes clarify tlat heading excludes those processed fats or oils that have undergone a change in texture or crystalLine structure.

¶49

9.11 In the present instance, impugned good is prepared by mixing various ingredients (sugar, milk solids and various premixes) in edible vegetable fat with vegetable fat sereing as main constituent and base. lt is arr emulsion of vegetable fat in water to which other ingredients such as sugar, milk solids and flavours are added to provide the right taste. In addition to tiese, it contains stabilisers, thickeners and emulsifiers. Thus, the processed oil (hydrogenated palm kernel oil) has been subjected to processes such as emulsification which has caused a change in its chanacter and quality. Accordingly, it is excluded from the Heading 1516.

¶50

Appeuant has submitted tlat margarine is specifically covered under Heading 1517.

¶51

1O.1 The Appellant submitted that impugned good is similar to margarine insofar as it is a preparation of vegetable oil in the nature of an emulsion of water-in-oil t}?e and it resembles a regular cream which, like butter, is a dairy product. Similar to margarine which imitated butter by using vegetable fat instead of dairy fat, the impugned product imitates cream by using vegetable fat instead of dairy fat.

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1O.2 The Appellant further placed reliance upon the case of Ahz S:.tgar Agencg v. State oj Xercl4 2077 (272) ELT 649 {SCJ in which the following characteristics of margarine were discussed:

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. Margaine is used. a.s substihtte for butter (dairy product) speciallg in bakery products- In the instant case, impugned good is used as a substitute for dairy cream (dairy product) for use in soups, gravies etc.

¶54

. Margartne is prepared from refined and/ or hgdrogenated oils of sunflou.ter, sogabean, cotton seed, palmoline, palm, sesame oils, uegetable oils, salt, permitted emulsifiers and stabilizers- In otler uords, tle uegetable oil is present in maximum percentage. Tlals, it i.s regarded as a preparation of uegetable oit and fradiotls thereof.

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. Margaite i.s not consumed directlg i.e. in tLE form in uhich it is auailoble in the market or usecl for normal cookirq as other oils like coconut, sunflower, etc-, rathEr it is used. for preparing bakery itens consumed.

¶56

fo.2.f Impugned good is prepared by mixing various ingredients it:r hydrogenated palm kernel oil. Out of all the ingredients, vegetable oil is present in maximum percentage of 26 per cent. Altiough 63.50^per cent water is also present, it is added solely for the purpose of emulsi$ing all the ingredients. Emulsification is specifically permitted for the products of Heading 1517 and vegetable oil remains the core ingiedient of impugned good.

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1o.2.2 Likewise, impugned good is not consumed directly but after adding in soups, gravies as arl extra dressing in various food preparations to^give a creamy taste.

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1O.3 It is concluded from above that where margarine is referied to as 'imitation butter' and classilied under Heading^{1517, impugnedgood} manufactured by the Appellant can be referred to as 'imitation cream'which is a preparation of vegetable oils / fats. Thus, impugned good is classifiable under Heading 1517.

¶59

1O.4 The Appella-nt placed reliance upon the case of Pcrisons Poods H,eate Llmlted u. Joint Cornmlssloner o! Com''nercla'l faxes, f973-EC-2O181XfnI yA? wherein the assessee was engaged in manufacture of 'bakery shortening', a product derived from a preparation of mixture of hydrogenated vegetable oils. In tlle aforesaid case hled a clarification regarding tlle correct classifrcation of t}Ie product with the Clarilication Authorities under Kerala Value Added Tax Act, 2003. The Authorities held that the^product was correctly classifrable under Heading 1517 covering edible mixture or preparations of animal or vegetable fats or oils. The High Court upheld the above clarification on the ground that bakery shortening is prepared by mixing together various vegetable oils which provide its essential character. Thus, it constituted a^preparation of hydrogenated vegetable oils.

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1O.5 In the light of above, it is submitted that impugned^good is akin to 'bakery shortening / marga-rine' as it is essentially^prepared by miing otler ingredients/additives in hydrogenated vegetable oil. The oil is the main ingredient and gives impugned good its essential character.

¶61

The Appellant submitted that Heading 1517 covers preparations of vegetable fats. Some of such vegetable fat-based preparations such AS

¶62

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marga,rine are actually low cost substitutes for dairy products such as butter. Thus, it is evident that Heading 1517 covers substitutes of dairy products that aJe made by emulsi$ing vegetable fat in water within its ambit. In other words, Dairy Analogues' made from vegetable/animal fats are covered under Heading 15i7.

¶64

11.1 Appellant submitted tllat a diary product is a preparation of or derived from nothing but milk. Hence, impugned good cannot be called a cream under the FSS Act. However, a non-dairy substitute for a dairy cream prepared by imitating the constitution thereof by using vegetable oil, vegetable fat, skimmed milk powder etc. can be called a creann aialogue, connoting that it is similar to cream. As submitted above, Heading 1517 covers preparation of vegetable fats or oils such as margarine etc., that arc substitute of various dairy products. Impugned good beng a non-dairy product is prepared using the sarne ingredients and qualifies as a cream analogue.

¶65

L2, In tlre case of Shree Gopal Vanaspatl Llrrdted v. CC, 2074 (37O) ELT 3OA rEfl-De'.l, the classilication of bakery shortening was under dispute. The assessee proposed t-lire correct classification of the product under Heading 1516, however, the revenue classified tlle product under Heading 1517. The Tribunal observed that the shortenings were produced by further working up of vegetable fats by way of emulsification in texture resulting in tenderizing effect in frnished products. Accordingly, the product was classifiable under Heading t5t7 .

¶66

12,I US Custome Cros3 Rulilg lff Ca1464 dealt with classification of vegetable fat spread, consisting of 69 percent vegetable oi1 (a mixture of rapeseed and pakn), 28 percent reconstituted buttermilk, 1.7 percent salt and balance ingredients such as emulsifiers, flavourings, vitamins A artd D, colours. It was held that the product was classifrable under HTS f517 90 90.

¶67

12,2 In US CustoEa Cross Ruling HQ 964557, the classification of Primrose /^{Flax Oil Capsuleswas under consideration. The capsules are manufactured} by encapsulation ald processing Primrose and Flax Oil. The product was held to be classifiable under HS 1517 as the above processing lead to a change in the existing characteristics of the product and formation of an altogether new product.

¶68

12.3 In the view of the aforesaid submissions, impugned goodis excludible from Heading 1516 and correctly classifiable under Heading 1517.

¶69

The appellant has contended that Impugned^good is not^classifiable under Heading 2 1 06 in view of the following:

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13.1 Heading 2106 is the last Heading under Chapter 21 of the First Schedr-rle to t}le Customs TariIT Act. A bare perusal of the title of Chapter 21 denotes that tl.e products covered thereunder are miscellaneous edible^{preparations.} The term 'miscellaneous' refors to items gathered or considered toget}ler which are of various^qapes or from different sources. Therefore, there is no common thread running through tlle Headings, Sub-headings and tarilf items covered r.uder this Chapter.

¶71

13.2 The description to Heading 2106 is'Food, prepqratlons not elseraLere speclfred or lncluded. The title makes it plain and clear tllat t]le items covered thereunder are foods preparations which are not covered under any other Heading. The description of^goods against Heading 2i06 employs tJle terms 'specified' and 'included'. While the term 'specify' means to identif clearly aid definitely, the terrn 'include' means to comprise or contain as^part of a whole. Further, the two expressions are^joined by the term br',^which denotes that the conditions comprised therein are disjunctive in nature.

¶72

13.3 From the above, it follows that where species are not specifica-lly mentioned but are covered under the^genus inscribed under some other Heading, t}Ie species will not merit classification under Heading 2106. Therefore, goods which are neither specifically nor impliedly covered^{under any} other Heading alone are to be covered under Heading 2106.

¶73

13.4 In t]:e case of CCE o. Mg,h(rrsft'l Aggnada corpordtlon Llmtted, 2006 (193) ELt 10 (S'Ct, the product under consideration^{was herbonic tonic,} a mixture of assorted vegetarian and dry fruits and seeds which could^be consumed as such. The assessee sought to classi$ the^{products under} Heading 2OO8 whereas the revenue sought to classify the^productunder Headi::g 2106. The Apex court observed that^{product was includedunder} Heading 2008, hence Heading 2106 automatically^{becameinapplicable.}

¶74

13.5 In tlre case of CC a. Abott Heauhcare PrttEte LlmitEd,2015 P2a) ELT 129 (T'rt-Mun ), the product under consideration was 'I\4ama's^Best Premium Chocolate', a nutritional^powder. The importer classified under tariff item 1901 90 90 bearing description 'Other'as against revenue's classifrcation under tariff item 21O6 90 OO bearing description 'Other'. The Tribunal after considering the nature of^goods and HSN Explanatory Notes, noted tiat^the imported goods were classifrable under Heading 1901. It further held that

¶75

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Heading 2106 is a residuary entry. Thus, once goods are classiliable under a particular Heading, tlle same cannot be classifled under Heading 2106.

¶77

13.6 In the case of Agrotech Foods Llmtted u, CC, 2077 (334 ELT $6 $"1IturrL), the product under consideration was "Act-II Microwave Popcom" which was ready-to-use popcorn mixed witl butter, required to be microwaved before consumption. The assessee claimed classification under Heading 2008 as Edible parts of plants, otherwise prepared or preserved', whereas the revenue sought to classi$r it under Tariff item 2106 90 0O. The Tribunal opined that the goods are classiliable under Heading 2008. HSN Explanatory Notes as well as Chapter Notes under Customs Tariff Act to Chapter 21 talk primarily about products which are preparations not elsewhere specihed or included. Therefore, if the goods are classifiable under Heading 2008, it will automatically cancel any considerations in favour of Heading 2106.

¶78

13.7 Therefore, the test to determine u/hether a product is classi{iable under Heading 2106 is to check if it is not classifiable under any other Heading under the First Schedule of the Customs Tariff Act.

¶79

13.a By application of the above test, it is clear tiat Heading 2106 being a residuary alld miscellaneous entry is automatically cancelled for considering the classification of impugned good.

¶80

The appellant finally submitted that the Impugned Ruling passed by Authority suffers from the above-mentioned defects. Accordingly, the Impugned RuLing is Liable to be discharged ald impugned good classifiable under Heading 1517 on this ground alone.

¶81

Whether Appeal flled itr tlme:

¶82

In terms of Section 100(2) of the Act, an appeal against Advance Ruling has to be filed witiin thirty (3O) days from the date of communication thereof to the applicant. As seen from record, the signed copy of the impugned order dated 30.08.2018 was received by the appellant on 07.12.2018 as mentioned in tlle appeal. Appellant filed the present appeal on 3L.I2.2O\8. Accordingly, the appeal is found to be filed within prescribed time.

¶83

Reqord of Persolal Eeartlg.

¶84

The personal heai'irlg was fixed for 30.05.2019. The case could not be ta-ken up for hearing on given date due to DETCS meeting and thus the same was adjoumed to 25.O7.2OI9. Due to GST Council meeting at New Delhi, the

¶85

¶86

case could not be taken up and adjourned to o7.o8.2o19. Finally,^personal hearing was held on 07.08.2019. Advocates Shri Puneet Bansal, Miss. Anshika Agarwa,l, Sh. Ralesh Gupta and^gTO, Panipat Shri Ajay Kumar, attended t}Ie hearing on the fixed date and time.

¶87

16.1 During the hearing the appellant while reiterating the submissions made in their appeal papers put forth that t}Ie basic emphasis of their submissions was that impugned goods are correctly classifiable under Heading No. 1517.

¶88

16.2 Shri Puneet Bansal, Advocate emphasized tllat as^per HSN Explanatory Notes, t]le product "Cooking Delite' is classifiable under Heading 1517 of Customs Tariff Act. He submitted that HSN Explanatory Notes for Heading 1516, inter atiq, provides that "The heading inctudes tlle^products a.s descibed aboue, euen if th.eg lLaue a uaxA chardcter and euen if thpg have been sabseE)enttA deodorized or subjected. to similar refning^processeg and ultEtlgr or not theg can be used directlA as food. Ehtt it excludes hudroqenated etc. fats arld oils arld their fractions which have underaone such furtter^preparation for food^purposes a.s tertLtration lmodification of tlg krture or crustalline structurel (Eeqdtng 1517)".

¶89

16.3 As per HSN Explanatory Notes, this heading covers margarine and other edible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this Chapter, other than those of heading 15.16. The Explanatory Notes further provides that t}Ie^products of this heading, the fats or oils of which may previously have been hydrogenated, may be worked by emulsihcation (e.g., with skimmed milk), churning, texturation^{(modification} of the texture or crystalline structure), etc., and may contain small^quantities of added lecithin, starch, colouring, flavouring, vitamins, butter or other milk fats (subject to t}te restrictions in Note 1 (c) of this Chapter).

¶90

16,4 As per the HSN, margarine is a plastic mass,^{generally yellowish,} obtained from fats or oils of animal or vegetable origin or from a^{mixture of} these fats or oils. It is an emulsion of the water-in-oil t,?e,^genera.lly made to resemble butter on appearance, consistency, colour, etc.

¶91

16.5 The Appellant submitted that impugned^good is similar to margarine insofar as it is a preparation of vegetable oil in tl.e nature of an emulsion of water-in-oil tjrpe ald it resembles a regular cream which, like butter, is a dairy product. Similar to malgarine which imitated butter by using vegetable fat instead of dairy fat, the impugned product imitates cream by using vegetable lat instead of dairy fat.

¶92

16,6 Shri Bansal submitted that Heading^{1517 covers preparationsof} vegetable fats. Some of such vegetable fat-based^{preparationssuchas} margarine are actually low cost substitutes for dairy^{products such as butter.} Thus, it is evident that Heading 1517 covers substitutes of dairy^products tiat are made by emulsi$ing vegetable lat in water within its ambit.^{In other words,} Dairy Analogues'made from vegetable/animal fats are^{covered underHeading} 1517.

¶93

16.? He also heavily relied upon the case of^{AluvaSugar Agencyvs Stateof} Kerala reported as 2OIl 1272'1 ELT 649^(S.C.) and Parisons^Foods Plt^{Ltd vs} Joint Commissioner of Commercial Taxes, Thiruvananthapuram 2018⁽¹¹⁾ GSTL 44(Ker.).

¶94

Discusaio! and FlndfurEsl

¶95

17, We have considered the material on record including the^grounds of appeal, written as well as oral submissions, statutory^{provisions etc.} In^terms of Section 101(1) of the Act, this Appellato Authodty is mandated to^pass such order as it thinks f1t, confirming or modifoing the ruling appealed against.

¶96

We now proceed to record our discussions and findings.

¶97

18.1 The appellant contented that the product "cooking cream" is^primarily based on vegetable fat as its main ingredient to which other ingredients are added, forming a mixtures/preparation of vegetable fat. Hence, it is classifiable under Heading 1517 which covers "Edible mixtures or^preparation of vegetable fats or vegetable oil or of fractions of different vegetable fats or vegetable oil of this Chapter, other tllal edible fats or oils or their fractions of heading 1516" and chargeable to 5% IGST as specified under S. No. 89 of Schedulel of Notification No. 1 /2o17lntegrated Tax.

¶98

18.2 The question for determination in this appeal is whether t}Ie^product "cooking cream" manufactured/ supplied by ttre appellant merit classiflcation under Heading 1517 as claimed by the appellant or classifiable under Heading 2106 as determined by the Authority for Advance Ruling, Haryana.

¶99

18.3. We found that for arly given product, the name, character and use are t}Iree important ingredients which decide the classification of any^given pr:oduct. Hence we proceed to exarnine the classification of impugned item, keeping in mind the above guiding factors.

¶100

18,4 The impugned item is being sold by the appellant as "Cooking Cream" under tlle name 'Cooking Delite' consisting of water, Edible Vegetable Fat

¶101

(hydrogenated palm kernel oil), Mitk Solid, Sugar along with premixes of emulsihers and stabilizers. It is idea-l for use in truffles, soups, sauces, gravies ines. Vegetable fats and oil fall under chapter heading 1517. which reads as under:-

¶102

CHAPTER 15

¶103

Anlmal or vegetable fats and oll and their cleavage products; prepared edible fats; animal or vegetable waxeg

¶104

1517	MARGARINE;EDIILEMIXTUREORPREPARATIONSOF ANIMALORVEETABLEFATS OROILS OR OFFRACTIONSOF DIFERENT FATSOROILS OFTHISCHAPTER,OTHER"AN EDIBLEFATSOROILSORTHEIRFRACTIONSOFHEADING 1516
151710	-MaJgarine,excludingliquidmargarine
1517 1010	-^{Ofanimal origin}
	--Ofvegetableorigin
r5r7to21	---Ediblegrade
r5r71022	---- Linoxyn
t5t71029	---- other
151790	---- other
15179010	--Salfat(processedor refined)
15179030	---Imitationlardoranimal oriein
15i79040	---Imitation laidofvegetableorgin
151790 90	---other

¶105

We have gone through the HSN Explanatory notes to chapter heading 1517 which provides as under:

¶106

75.77. Margarlne; edthle ndxtare or^preparatTons o! aninal or lEgetnbl.e Jats^{or olls or of} frr:ctions^{of dttlercnt} fa6^{or olls oJ thls Chq)te4} other than edlhle Jats or oiLs or tLel/ fr(rctlo'€s of h.ea.dtng 1516^(+).

¶107

1 5 1 7. 1 O- Margarine, excluding tiquid mqrgaine

¶108

1517.gO-AhEr

¶109

This heading couers margarine and other edible mixtures or^{preparatiotls} oJ animal or uegetable fats or oil.s or of fractions of different fats or oiLs of thi.s Ch.apter, oth.er tlLan tlnse of heoding 15.16. TheA are generallg tiqtid or solid mixtures or preparation s of:

¶110

¶111

(1) Different animal fats or oils or th.eir fractions;

¶112

P)^{Afferent vegetable} fats^{or oils or th.eir} fractions;^or

¶113

(3) Both animal and uegetabl.e fats or oils or tlveir fractions.

¶114

Tle produds of this headirq, tte fats or oil.s of uhich mag^{previoustghnvebeen} hgdrogenated, mag be uorked bg emulsification^(e.g.' tuith skimmed^mitk), chuming, texturation (modification of the texture or crystalline^{structure),etc.,} and maA contain smatl Etantities of ad.d.ed Lecithin, starclt^colouring, JTavouing, uitamins, butter or other milk fats (subject to the restictions in Note^{1 (c) of thi.s} Chspter).

¶115

The teading^(rlso @uers edible preparatipns made from a single fat^or oil^(or fractions^{thereoJ),wletler or not hAdrogenated, uhich have beenworkedbg} emttsification, ctatrning, texturation, etc.

¶116

Tle heading inctudes hgdrcgenated, inter-esterified, re-esteified or elaidinized fats^{and oil,sor their} frartions,^{wleremodification inuoluesmorethanone} fqt^or oil.

¶117

Tte prirrcipal products of this leading are:

¶118

(A) Md"gdrlne (otlEr tlwn liquid. margaine, tuhich i.s a pta.stic mass, generallg gellor.uisfu obtaitwd from fats or oils of animal or vegetable origin or from a mixture of ttlese fats or oils. It is an emutsion of tle uater-in oil tApe, generallA ma.de to resemble butter in appearance, con sist encA, cotou r, etc,

¶119

(B) Mlhb m;Ltcf,,u'le ol prepd"dtlons oJ anln^l or uegetable fats or olls or of fraatlons ol dqlerent Iqts or olLs oI this chq)ter, otler than edtble fats or olls or th.eir fractlons of ,vadtng 75.76; for example, imitation lard, li4rtid margaine and. slnrtenings ( produced from texfirrised. oils or fats).

¶120

18.5 We have observed that the product "Cooking cream" or to say Cooking Delite'consists of water, Edible Vegetable Fat (hydrogenated^palm kemel oil), Milk Solid, Sugar along with premixes of emulsihers arld stabilizers.

¶121

18.6 It is the case of the appellant that the 'Cooking Delite' manufactured by it with the above combination of ingredients falls under the category of Margarine; edible mixture or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of Chapter 15, other thai edible fats or oils or their fractions of heading 1516, falls under Heading 1517. The HSN explanatory notes to Chapter Heading 1517 has clearly provides that the products of this heading, the fats or oils of which may previously have been

¶122

hydrogenated, may be worked by emulsification^(e.g., with^{skimmed milk),} churning, texturation^{(modification} of t}Ie texture or crystalline structure), etc., ald may contain small quantities of added lecithin, starch, colouring, flavouring, vitamins, butter or other milk fats (subject to tlle restrictions in Note 1 (c) of this Chapter). By any stretch of imagination 'Sugar' cannot be understood to be included in t}le above combination of ingredients. ,&.;,

¶123

The Appellant contended that impugned go'dd is similar to margarine insofar as it is a preparation of vegetable oil in tlle nature of an emulsion of water-in-oil t5rpe arrd it resembles a regular cream which, like butter, is a dairy product. Similar to margarine which imitated butter by using vegetable fat instead of dairy fat, the impugned prodr]ct imitates cream by using vegetable fat instead of dairy fat. In their defen$appellant relied upon tJre decision in the case of Aluva Sugar Agency vs State of Kerala 20lI (2721 EW 649 (SC).

¶124

19.1 We have noted that HSN Explanatory notes discussed supra clearly provides that what otier ingredients, besides fats or oils may contain in small quantities to classi$ t}le product under Heading 1517. Sugar as ingredient has not been found mentioned in the HSN Explanatory Notes in respect of preparations of vegetable oil in the nature of an emulsion of water-in-oil, though it may resemble like a regular cream.

¶125

19.2 We found tllat in t]le case of Aluva Sugar Agency case cited supra, Hon'1rle Supreme Court of India has held that "Margaine - Made onlg from vegetable oils - Used exchtsivetg as raw-material bA bakeries^qnd confectianaies makets - TLnugh margorine taas not cotl,sumed. d-irecttg and not used for normql cooking as ottter oils like cocoru.rt, sunJTou.ter, etc-, fact that it LUas used for prepaing bakery item,s consumed bg taman beings made it edibte - Having around 8O% fat, and beirry in naturc of oil, it tws to be ansidered as edible oil.

¶126

Margaine is a generb term and it is used as a substitute for butler. It^i,s used in preparation of food articles and speciallA used for prepaing bakery products. For the purpose of manufachtring margaine, refined and/ or hAdrogenated oils of sun-Jloue\ sogabea4 cotton seed,^palmoline, palm and sesame oils are used. Moreouer, uegetable oils, salt,^penrLitted. emulsifiers and stabitizers are atso used. for mamtfa.ctuing margaine. So far as th.e margaine manufactured. bg tfe appellanl is concerned, it is made ontg from vegetable oits as stated bA tLre appellant and a,s borne out from th.e record. T'he margaine manufactured bg the appettant is excfusivetg used. as rau)-mateiat bg bakeries and tl@se utto manufacture conJectionaries.'

¶127

19.3 As per the HSN Explanatory Notes for t]le purpose of Heading 0405:

¶128

¶129

(a) the term "bulter' m.eans naturql butTer, uheA butter or recombined. butler (fresty salted or rancid., including canned butter) d.eived. exclusivetg from millg ruith a milk fat^(nntent of 8O%) or more but not more than 95% bg weight, a moximum mitk solids-not-fat content of 20,6 bA ueight and a maximum water content of 16% bg weighl. Butter does not contain add.ed. emulsifiers, but mag contain sod.ium chlorlde, food colours, neutrqlizing satts and atltures of harmless lacticacid -producing baeteia,

¶130

19.4 It may be seen that butter consists milk fat contents of 80% or more but not more tharl 95% by weight. In the case of Aluva Sugar Agency also the fat contents of Marga-rine is around 80% and thus the sane is used as substitute of butter. However, in the case before us the fat contents is only 267o. Thus the product 'Qooking Cream'cannot be said to be a substitute or imitation of butter. Thus Cooking Cream is not similar to Margarine ald hence the case law relied upon by the appellant holds no water.

¶131

2O. The appellart further relied upon the decision of Kerala High Court in tlle case of Parisons Foods R/t Ltd vs Joint Commissioner of Commercial Taxes, Thiruvananthapuram reported at 2018 (11) cSTL-44(Ker.). In this case the assessee was engaged in manufacture of ba]<ery shortening', a prcduct derived from a preparation of mixture of hydrogenated vegetable oils. The Authorities held tl.at the product was correctly classihable under Heading 1517 covering edible mixture or preparations of animal or vegetable fats or oils. The High Court upheld ttre above clarification on the ground that bakery shortening is prepa-red by mixing together various vegetable oils which provide its essential character. Thus, it constituted a preparation of hydrogenated vegetable oils,

¶132

2O.1 We have gone through the aforeaaid case law. We have observed that in the said case various hydrogenated vegetable oils (vanaspati) and liquid refiaed vegetable oils were blended together in a blending vessel; and all the fractions of oil were properly melted and additives (like Sesame Oil, Vitamin A and Vitamin D) were added to t}Ie mixture. The mixture so formed was kept under agitation for 45 minutes to get a homogenous mass. The vanaspati was passed through Rotators and Crystallizers which churned the product from 45'C to 2O'C; ald the chilled mixture of valaspati so formed was called Batery Shortening which was t1en packed in 15 Kg packs ald kept for tempering in air-conditioned room for a day. We found that the additives in the said case were only those specified in HSN Explanatory notes. No other additives or ingredients outside the scope of HSN Explanatory Note of Heading 1517 were available, However, in the case before us we found that appellant is using Sugar as ar ingredient which does not found place in the list of ingredients

¶133

described in HSN Explanatory Notes of Heading 1517. Thus, tl}e aforesaid case Iaw of Parisons Foods Pvt Lts is not applicable to the instant case. Moreover, t] e case of Parisons Foods Pvt Ltd relied upon by t}Ie appellant has not attained the fina-lity and pending with the Apex Court.

¶134

2L. Thus, we are of the considered view that the product 'Cooking Delite'is not classifiable under Heading 1517 of Customs Tariff Act.

¶135

Now the question before us is that if the impugned goods do not qualry to be classified under Heading 1517 of Customs Tariff Act, as claimed by the appellant t] en which is the appropriate Chapter Heading wherein the product in question is classifiable. We find that Authority for Advance Ruling in its ruUng has classified the impugned product under Heading 2106 of Customs TariIf Act, 1975.

¶136

We examined the impugned product vis-A-vis Chapter 2106. We observe that Chapter 21 essentially covers 'Miscellaneous Edible Products'. Obviously, the term Miscellaleous' indicates that this particular chapter would contain a-ll such edible products which are not specifically covered elsewhere under tlle Tariff. The Chapter Headings further describes various edible preparations such as extracts of Coffee, tea, Yeast, Soups, broths, Sauces etc. under Heading 2101 to 2105. Further as is the convention, Heading 2106 has been given to include all those items which are not elsewhere speciJied. Furthermore, 2106 further sub-divides and classifres various edible items like Protein Concentrates, Pan Masala, Sha-rbats, Supari, Custard Powder etc. under Sub-headings 2106 10 0O to 2106 90 80 and to conclude there is a residual entry as l)thers' under 21O6 90 99.

¶137

23.1 Chapter Note 5 of Chapter 21 provides that "Heading 2106 (except tariff items 2106 90 20 alfd 2106 90 3OJ, inter alia, includes:

¶138

(4, . ..... ..

¶139

(b) Preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumDtion:

¶140

(c)

¶141

(d)

¶142

Further, Chapter Note 6 of Chapter 21 reads as under:

¶143

"Tariff item 2106 90 99 includes swee t meats commonly knor.n as ' Misthans" or ' Mithai" or called by any other name. They also include products commonly known as "Namkeens', "mixtures', "Bhujia',

¶144

¶145

"Chabena' or ca-lled by any other name. Such^products remain classihed in these sub-headings irrespective of t}Ie nature of their ingredients.

¶146

23.2 Simultaneous perusal of the a-foresaid chapter notes of Chapter 21 and on going through the details of the impugned item, t}re impugned item being mixture of chemicals and foodstuffs, merits classihcation under chapter heading 21069099 which refers to food preparations not elsewhere specfied or included as it does not remain fraction of palm oil. Here it is important to take note of the General Rules for the interpretation of tariff Rule 2 (b) provides that classilication of goods consisting of more t1 an one material or substance shall be according to the principles of Rule 3.

¶147

23.3 Rule 3 (a) provides that when by application of Rule 2(b) or for any otier reason, goods are, prima facie, classifiable under two or more headings, classification shall be made under the heading which provides tfie most specific description compared to headings providing a more genera-l description.

¶148

23.4 In the instant case, the impugned item is mixture of vegetable oil arld other food stuffs. After the manufacturing process, as detailed in the appeal, it is observed tl:at individual identity of all the mixtures is lost arrd what, emerges is totally a different item, a new product having different name, character and use. Thus, cooking cream canoot be said to be merely a mixture of vegetable oil with other in$edient, but a totally new product having different name cha-racter ald use, Under such circumstances, it does not merit classification under chapter heading 1517, ratler merits classification under chapter heading 21069099, as "preparations not elsewhere specilied or included" as it does not remain fraction of palm oil.

¶149

23.5 Further, we have a-lso noted that the Authority for Advance Ruling in its ruling has discussed the issue as to how the impugned goods merit classification under Heading 2106. Autiorify for Advance Ruling discussed in detail that WCO- HS Committee, US International Trade Commission Rulings ard Harmonised Tariff Schedule has classified t}re product under Heading 2106 90. Authority for Advance Ruling also discussed in its flndings that import data oflndia, as regard to import of "non-dairy whipping/topping cream at various Indian ports was also checked on various websites and as per this import data, non dairy topping/whipping cream is being imported by classifring under chapter sub-headin g 21069O99 .

¶150

Thus, in view of the above discussions and findings, the impugned item merits classification under chapter heading 2106 of the schedule to tl.e

¶151

¶152

Customs Tariff Act, 1975 alrd chargeable to GST accordingly.^We also^found that the Advance Ruling Autiority has gone through the matter in detailed way and passed a well reasoned spea-king order and hence, there is no reason to interfere with the order.

¶153

ORDER

¶154

In view of the above discussion we find no infirmity in the ruling pronounced by the Haryana Autiority for Advalce Ruling. The appeal thus fails and stands disposed accordingly.

¶155

umar Agrawall

¶156

(Artl Ku Member

¶157

M/s Khera Trading Company

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