M/s Khera Trading Company appealed against an Advance Ruling refusing to classify 'pizza topping' under GST Head 12% for cheese. The court upheld the lower ruling, holding that due to high vegetable fat content (22%) against low cheese content (14.5%), the product is not 'processed cheese' under HSN and is classified under Heading 2106 at 18% GST.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
BEFORE TIIE APPELLATE AUTHORITY r.OR ADVANCE RI'LING FOR THE STATE OF IIARYANA. FOR GOODS AITD SERVICES TAX. PANCHKULA. VANIJYA BHAWAN. PII)T ITO. I-3. SBCTOR-s. PAITCHKULA-l34Isl (HARYANAI
Order under Scctlor 1O1 ofthe Celtral gooda and Servlces Tax Act, 2Ol7l tbe Haryana Goods and S€ricea Tax Act, 2017
The present appeal has been preferred by the applicant M/s Khera Trading Company situated at Saloli Road, Near Govind Tobacco Factory, Panipat, Harjrana- 132103 ('Appellant') against t}Ie Advance Ruling No. HAR/HAAR/R/20 18- 19/08 Dated 30.08.2018 passed in their application dated 04.06.2018.
BRIEF FACTS OT THE CASE
2.1 The impugned good comprises of 14.5 percent moz.zarella cheese to which other milk products such as skimmed milk powder and rennet casein are added. The milk ingredients constitute another 15 percent. The composition of impugned good is tabulated as under;
| NatneofIngredielt/additlve | Ratio |
|---|---|
| Water | 44ks |
| VegetableFat | 22ks |
MozzarellaCheese |
14.5ke |
| RenretCasehlmilksolidl | 11ks |
| Sklmmedmilkpowder | 4ks |
| Premlx(emulsifier, stabilizer,acidityregulatorand preservanveI |
4.5kg |
| Total | 100ks |
2.2 Mauufacturirrgpnoceas:-
| NaneofIngredient/ additive | percert |
|---|---|
| VeeetableFat | 22o/o |
| Rennet Casein(milk solid)117o+skimrnedmilkpowder- 4o/o |
15kg |
| Premix(emulsifrer,stabliser,acidityregulatorard 1)reservauveI |
4.5kC |
2.3 The applicant submitted that the product "Pizza'fopping" containing 14.5 per cent Mozzarella cheese and 15 per cent of other milk products along with other ingredients forms a type of cheese. Thus, it is classifiable under Chapter Heading 406 (SI. No. 13 of Schedule -I1 to Notilication No. I/2O17 Integrated Tax/Notification No. 1/2017-Central Tax and Notilication No 35/ST2 as "cheese" ald chargeable to GST@ 12%.
2.4'fhe applicant submitted t}l.at mozzarella cheese constitutes 14.5 percent of the total Ptzza'fopping and it forms the main ingredient to which other ingredients are added in small quantities Pizza Topping contains 15 percent of other milk products such as milk solids and skimmed milk powder (atready provided at Para. 2 5 under Annexure )) Thus almost 30 percent {14.5% (mozzarella cheese) + 15% (milk solids and skimmed milk powder)) of product is comprised of cheese and other milk derivate. Thus, the essential character of Pizza Topping is provided by mozzarella cheese without which the Pizza Taping will not achieve its cheesy character. Notable tlat topping maintains its basic cheesy character even after addition of otler ingredients. Accordingly, t}fe pizza Topping is a tjape of cheese under Heading 0406 which covers cheese.
Page 2 of 23
"WtEtlEr *Ieproduct"pizza topping" is classifiableunder Clrapter Headirlg 0406 [5.No. 13 of Sclrcdute-1 of Notifcation No1/2olTJegrated rax @ie) d.at;dJune28, 2017, attractingIGST@ 5% / {SNo'89 of sctAdule-I of UotilcatfinNo O1/2O17Central Tqx (Rate) dt'28'O67attractirq CGST2'5ok]/ {5.io.89of scllr,dute-I of NotifLcationNo 35/ ST-2 attracting SGST @2'5ok}"'
2017
The impugned item,i.e.,"pizzatopping: beingmanufacturedby the applicant cannot be classifiedas "processcheese"under chapter heading0406' ratherit merits classification underchapter heading 2106 of the schedule to tlle Customs Tariff Act,1975, as "FoodPreparations not elsewhere specified or included" and chargeableto IGST @18o/", CGST @ 9%o ar.dSGST @ 9%' as specified under S.No'23of Schedule-lllof NotificationNo 1/2017 Integrated Tax(Rate) dated June2A, 2017, NotificationNo O1/2017-CentralTax (Rate) d.ared 28.06.17 andof Notiflcation No.35/ST-2
Submi8slonsmade in the ADPeal'bv the ADDellalt:
6.1 At the outset, itis pertinentto highlightthat the Authority in its impugned Ruling hasfailed to take note of the additionalsubmissions furnished and the lactum ofpersonalhearingon August 14, 2O!8' It apparently seemsthat the Authority did not botherto takeinto
Page 3 of 23
consideration the submissions advanced vide additional submissions and during the course of hearing.
6.2 In the case of Dharampal Satyapal Limited v. DCCE, 2015 (3201 ELT 3 (SC), the Apex Court explaining the concept and contours of principles of naturaljustice, observed that principles of natural justice include the following: {i)rule againstbias, i.e. memo judexin cqtse sua, (ii) opportunityof being heard, i.e. audi alteram partem, (iii) passing of a reasoned order. These principles or attributes are natural or fundamental to the exercise of judicial powers.
6.3 The principle of audt alteram partem, i.e. right to be heard, forms part of the set of principles of natural justice, indispensable in exercise of t].e judicial authority. The principle must be applied even in cases where the same has not been expressly provided for in the enactment. The above view was echoed in followingjudicial precedents:
6.4 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 classification adopted by t}re Ah-all.h f a^-ahfad
7.1 It is noteworthy that Explanation (iii) appended to Notification 1/2017Integrated Tax, Notification I /2OI7 -Cer'traI Tax, Notification 35/ST-2, imports Chapter, Heading, Sub-heading and Tariff item as specified in First Schedule of t}Ie Customs Tariff Act, 1975 ('Customs Tariff Act,) for the purpose of determining classihcation under Notifications. Similarly, Explanation (iv) adopts the general rules for interpretation, Section Notes and Chapter Notes as provided in Customs Tariff Act for interpreting the Notifications.
Page 4 of 23
7.2 'fhe First Schedule to the Customs Tariff Act is divided into XXI Sections which are in turn divided into 98 Chapters. The dominant constituent in impugned good is cheese topping. Hence, Chapter 4 and Chapter 21 covering 'Dairy produce; birds' eggs; natural honey; edible products of animal' arise for consideration in the present instance.
7.3 In the present case, the Appellant seeks to classiS/ impugned good under Heading 0406 whereas the Autho.ity vide its Impugned Ruling has classified the same under Heading 2106. It is pertinent to extract each of the above headings for ascertaining ttreir scope and determining the classification of impugned good.
Chapter 4
| Dairyprodu | ce,birds'eggs,naturalhoney, edibleproductsofanimal |
|---|---|
| 0406 | CheeseandCurd |
| 04061000 | Fresh (unripenedor uncured)cheese,includingwheycheeseand curd |
| 040620 o0 |
cratedorpowderedcheese,ofall kinds |
| 040630 00 |
Processed cheesenotgratedorpowdered |
| 040640 00 |
Blue-veinedcheeseand byPenicilliumroqueforti othercheesecontaining veinsproduced |
| 040690 oo |
Othercheese |
| Chapter |
21 |
|---|---|
| Miscellaneous |
ediblepreparations |
| 2106 | Foodpreparations,notelsewhere specifiedorincludE |
| 21061000 |
Protein concentrates andtexturedsubstances |
| 210690 | Otller: |
| Softdrinkconcentrates | |
| 21069011 |
Sharbat |
| 210690t9 | Otller |
| 21069020 |
PanMasala |
| 2106 9030 |
Betelnutproductknownas "Supari', |
| 2106 9040 | Sugarslmrpscontaining addedflavouringor.olourirrg matter,notelsewherespecifiedorincluded; lactoseslrup; glucosesyrup and maltodextrin syrup |
Page 5 of 23
| 2106 9050 | Compoundpreparationsfor makingnon- alcoholicbeveraees |
|---|---|
| 2106 9060 | Foodflavouringmaterial |
| 21069070 | Chumaforpan |
| 2106 9080 | Custard powder |
---Other, |
|
| 2106 909I | Diabeticfoods |
| 210690 92 | Sterilized or pasteurizedmillstone |
| 21069099 | Other |
7.4 The Appellant contends that impugned good merits classification under Tariff Item 0406 90 O0 bearing description 'Other'. It is a residuarj. entry which is provided under Heading 0406. Therefore, in order to classifr impugned good under the aforesaid Tariff ltem, t}Ie products must quatry under Heading 0406.
7.5 The Authority in the Impugned Ruling has held that irnpugned good are classifiable under Heading 2106. The Appellant submitted tlat the relevant Tariff item under heading 2106 is 2106 90 99 bearing description 'Other, which is a four-dash entry covered under triple-dash entry'Other,. The triple-dash entry is further covered under Sub-heading 2LO6 gO bearing description 'Other', which is a single-dash entry covered under Heading 2106. Therefore, the impugned good must answer to t}Ie description of goods mentioned against Heading 2106 in Order to merit classification under Tariff item 2106 9O 99.
8.1 Definitions of the term 'cheese' as given in various dictionaries are reproduced as under:
The Concise Oxford' English Dictionary, [12rh edition (2011), Oxford University Press, refer at page 2IZl, defines the ter-m 'cheese' as ,A food made from the pressed curds of milk, firm and elastic or soft and semi_liquid in texture';
. The Collins English Dictionary Complete al:rd Unabridged, I12$ edition, l2014llprovides following delinitions for the term:
Page 5 of 23
8.2 A perusal of the above definitions reveals that the term ,cheese, refers to a product made from the milk, by application ofthe process of coagulation
8'3 The Appellant submitted that the product contains mozzarella cheese constituting almost 15 percent of the total product, It forms the main ingredient to which otler ingredients are added in small quantities. The product contains 15 percent of other milk products such as milk solids and skimmed milk powder. Thus, almost gO percent lI4.So/o (mozzarelta cheese) + 15% (milk solids and skimmed milk powder)) of product is comprised of cheese and other milk derivatives.
8.4 In addition to above, the product also contain vegetable lat constituting almost 22 percent of the product. The Appellant submiGd that vegetable fat is added only for the purposes of adding texture and providing flavour to the product. The cost of vegetable fat is quite less, hence this ."J_,tt" i., bri.rgirrg down the cosl of the product.
8.5 Thus, the essential character of impugned good is prov ided W mozzarella cheese without which the product w.ill not a;hieve its cheesy character. Further, milk solids and skimmed milk powder falling under Chapter 4 of HSN, also constitutes essential ingredients. Notable that even after addition of other ingredients, the topping maintains its basic cheesy chatacter, Accordingly, the product is a type of cheese classifiable under Heading 0406 which covers cheese and curd.
8.6 The Appellant submitted that above view is supported by the Exptanatory Notes appended to the HSN.
8.7 In the case of CCE vs. Wood Craft products Limited, 1995 lTTl EW 2g (SC), the Apex Court observed that the HSN Explanatory Notes serve as a safe guide for ascertainment of mealing of a term used in the Tariff Schedule in case of doubt the relevarrt extract has been reproduced as under:
'We are of the uiew that the Tribunal as uell as the High Court fett into tE error of ouerlooking the fact that the structure of the Ceirat Excise Taiff b ba.sed. on tle intemationattA accepted. nomenclature found. in *E HSN and..
PaEe 7 of 23
ttlerefore, anA di,spute relating to tariff cla,ssiJication musl a,s far as possible, be resolued with rekrence to tle nomenclature indicated bg tte HSN unless there be an express d.ifferent intention indicated. bA the Central Excise Taiff AcL 1985 itself'
8,8 In the case of Reckitt Benckiser (India) Limited. v. Commissioner, Commercial Taxes, 2Ot5 (7) SCC 126, the Apex Court held tlrat when the taxauon statute is aligned with the HSN codes, then, necessarily the 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 private Limited v Joint Commissioner of Commercial Taxes, 2O1S (11) GSTL 44 (Ker.).
8.9 WCO's Explanatory Notes to HSN [Sixt-h edition (2017), refer page I_0406_ I and l-0406-21 provide that Heading 0406 covers all kinds of cheese. viz.. fresh cheese, powdered cheese, processed cheese, blue-veined cheese, soft cheese, medium-hard cheese and hard cheese. Relevant Dart of HSN Explanatory Notes is extracted below:
"Thi.s heading covers all kinds of cheese, uiz.:
(1) Fresh cheese (inctuding cheese ma.d.e form talteg or buttermitk) (e.g., Ricotta, Broccio; cottage ch.eese, cream cheese, Mozzarella);
(2) Grated or powd.ered cheese;
(3) Processed cleese, also knoun as process cleese. It is mqnufactured. bg comminuting, miin4, melting, emulsifAing, u.)ith tle qi.d. of Feat and emuLsifuing or acidifuing agents (including metting salts), orle or more uaieties of cheese and. one or more of tLE folowing: creem or otLer d.airy products, sq,lt, spices, flauouring,colouing and tuater,
(4) Blue-veined cheese and oth.er cheese contqining veins produced. bg Peniciltium roqueforti;
(5) Soft cheese (e.g. Camembert, Brte);
The presence of meat, fi.sh, ctustdceans, herbs, spices, uegetables, fruits, nuts, uitamins, skimmed. milk powder etc. d.oes not affed classifi.cation provid.ed. th.tt good.s rctain th.e character of cheese,
Page 8 of 23
Cheeses which have been @qted uith batter or bread crumbs remain classified in this tteading uhether or not tLeg have been pre-cooked, prouided" that the goods retain tfe character of clwese."
8.1O Heading 0406 covers different types of cheese such as fresh cheese, powdered cheese, processed cheese, blue-veined cheese, soft cheese, mediumhard cheese and hard cheese.
8.11 It is submitted that the HSN Explanatory Notes clarify that processed cheese is manufactured by comminuting, mixing, melting and emulsifying, with the aid of heat and emulsifying or acidilzing agents (including melting, salts), one or more varieties of cheese and one or more of the following: cream or other dairy products, salt, spices, flavourings, colouring a.rld water.
8.12 In the present instance, the product is manufactured by processing (melting, emulsiS'ing and comminuti:ng) mozzatella cheese in a STEpHAN,s cooker and then adding milk derivatives, premixes etc. to the sarne for the purposes of preservation and adding nutritious va1ue. Thus, the nature and texture of impugned good, the ingredients added to it and the method of its manufacture are in consonance wit-l HSN Explanatory Notes to Heading 0406.
8.13 The appellant submitted that it is pertinent to refer to the meaning of the term process. The term 'process' has been delined in various dictionaries as under:
Prem & Saharag's Judiciat Dictionary of Word.s arul phra.ses, [2rd Ed.ition (2016), Thonson Reuters, rekr at page 39321 defines the term i.s a mode of treatment of certain materials in ord.er to produce a pqtticular result,
8.14 A perusal of the above meaning reveals that process means, a procedure or a series of actions to 'achieve a particular end; that the moz,zarella cheese is subjected to different processes such a heating, mixing etc, in order to achieve the product. Accordingly, the product qualihes to be processed cheese.
a.ls Additionally, Heading 0406 is broad and non_restrictive regarding ingredients that can be added to cheese, It specifically permits addition of only specific ingredients such as meat, fish, spices, skimmed milk etc. subiect to tlle
Page 9 of 23
condition that the essential character of cheese is retained. Relevant extract is reproduced as under:
"Tfie presence of meat, fi.st1 crustaceans, herbs, spices, uegetables, fruits, nuts, vitamins, skimmed milk powd.er etc. does not affeit classif.cation provi.ded. that goods retain the character of cheese.,,
8.16 Further, it even permits coating of cheese with an entirely different product like bread/batter, the only requirement is that the product should retain the character ofcheese despite the addition ofother ingredients.
8-17 In the present instance, the product primarily comprises of mozzarella cheese and otler ingredients such as skimmed miit powa.., renner casetn, water, stabilizers, emulsifiers, etc. which are specifically permitted under the HSN Explanatory Notes. In addition to this, impugnei .good also contains vegetable fat which is added to reduce the cosf oi the p;duct. Even after addition of the above ingredients, impugned good does not lose its character of cheese and maintains the same taste, flavour, appeara_nce and consistency. It is used for the purpose same as mozzarella cheese.
8'18 In view of the above, the appellart submitted that since the product has the character of cheese and satisfles all the criteria laid down under the HSN Explanatory Notes, it merits classihcation under Heading 0406.
9.2 In t}Ie case ofCCE vs Connaught plaza Restaurant private Ltmited, 2012 (286) ELT321 (SC) wherein the classification of soft serve was disputed, the Honble supreme court has herd that soft serve was knoqm as rce crearn' in common parlance. A consumer would not disregard tl.e product as ice-cream, on the basis that it contains only 5 per cent miik. Hence, it was classifiable as ice cream.
9.3 In the case of Travancore Rayons Limited v. UOI and Others, t9S5 (19) ELT 354 (Del.), the classification of nitrocellulose lacquer was disputed. The product was composed of paraffin wax, volatile mier and nltrocellulose contents, The percentage of volatile matter was gs.2per cent whereas the percentage of paraffin wax and nitrocellulose content was only 14.g per cent. The revenue alleged that the product could not be classified as
Page 10 of 23
nitrocellulose lacquer as the presence of nitiocellulose contents was low. The Tribunal held that traders and consumers know this product as nitrocellulose lacquer and generally do not know the exact materials used in preparing it. The product is known as nitrocellulose lacquer in common parlance. Thus, merely based on lower percentage of nitrocellulose contents, it cannot be disresarded as nitrocellulose lacquer.
9.4 In the case of Akbar Badruddin Jiwani v. CC, 1990 (47) EL.t 161 (SC), the Apex
Court observed that express words of the Tariff Headings and relevant Section and Chapter Notes would take precedence over the commercial or trade parlance test for classilring excisable goods. However, if the specific headings and notes do not cover the excisable goods, then resort must be made to, the commercial or trade understanding of the goods. The above view also resonates
in the cases provided as under:
9.5 In the case of CCE vs. Fusebase Eltoro Limited, Lgg3 (62) ELT 30 (,So, the Apex Court held that in t}te absence of statutory definition of the goods, the classiflcation is to be done based on the common parlance, primar5r function and the utility.
9.6 In the present instance, the term 'cheese,, has not been defined an],where in the Customs Ta-riff Act, 1975. Accordingly, it is pertinent to reter to the use of the term in common parlance, the primary function of the product and its u d liry.
9.8 In the light of the above, it is submitted that impugned good is a type of cheese.Accordingly, impugned good is classifiable under Heaaing O+OO.
1(). The Appellant places reliance upon US Customs Cross Ruling NYK8S532 which dealt with classilication of battered/ bread ed. mozzarella cheese sticks. The composition of the product is as under:
| Ingredient | Percentage |
|---|---|
| Cheese |
17o/oto23yo |
| Breading |
44o/oto53o/o |
| Others | 24o/oto39o/o |
It was held that even though the percentage of bread was 44 to 53 percent, i.e. almost twice the amount of cheese, yet the product v/as classifiable as 'Cheese and Curd, as the essential character of tlte product rs cheese and
Page 11of23
the same was retained even aJter addition of breading. Hence, the product was classifiable under HTS 0406.
1O.l In the US Customs Cross Ruling He 9631,75, the classification of product battered cheddar was as under:cheese balls -^" ,,,.rd". "o.,"id".atio.r. Th" composidon of the
| CheedarCheese |
|---|
It was held that even though the percentage of batter (55.6 percent) was greater than that of cheese (44.4 percent), the product was classifiable as 'Cheese and Curd, under HTS 0406 as the essential character of t.l.e product was imparted by cheese. 1O.2 In the US Customs Cross Ruling I(g6Z4Z, the classification of Assorti Processed Cheese was under consideration. The composition of the product is as under:
| ]!gledient |
Percentage |
|---|---|
| RennetCheese |
20.60/0 |
| Cheesecurd |
1'.J.3u/o |
| Sugar | 25.7% |
| WAICI |
18.gyo |
| Batter |
13.7o/o |
| Cocoapowder | 4.70/o |
| Wholemilkpowder | 4.Iyo |
| Sodium orthophosphate | 20/o |
In this case, it was held that the product was classifiable under HTS 0406 as the sarne was obtained after processing of cheese.
1O.3 In view of the above, the Appellant submitted that impugned good is correctly classifiable under Heading 0406 as a type of cheese. 11. The Authority in its impugned ruling has observed that impugned goods are classifiable under Heading 2106. In order to approciate the fallacy of such classification, it is important to first venture into the scope of Heading 2706.
Page 12 of 23
11.1 Heading 2106 is the last Heading under Chapter 21 of the First Schedule to the Customs Tariff Act. A bare perusal of the title of Chapte!>21 denotes that the products covered thereunder are miscellaneous edible preparations.T The term 'miscellaneous' refers to items gathered or considered together which are of various types or from different sources'. Therefore, there rs no common thread running through the Headings, Sub-headings and tariff items covered under this Chapter.
11.2 The description to Heading 2106 is 'pood preparations not elsewhere specified or included'. The title makes it plain and clear tiat the items covered thereunder are foods preparations which are not covered under any other Heading. The description of goods against Heading 2106 employs tlle terms 'specified' and 'included' While the term,specii/, means to identi$ clearly and dehnitely, the term 'include' means to comprise or contain as part of a whole. Further, the two expressions are joined by the term ,or,, which denotes that the conditions comprised therein are disjunctive in nature,
11.3 From the above, it follows that where species are not specifically mentioned but are covered under the genus inscribed under some other Heading, the 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 Headins 2106, 11,4 In the case of CCE v. Maharshi A5rurveda Corporalion Limited, 2006 (193) ELT 1O(SC), the product under consideration .was herbonic tonicr a mixture of assorted vegetarian arld dry fruits and seeds which could be consumed as such. The assessee sought to classit, the products under Heading 2008 whereas tJle revenue sought to classify the product under Heading 2106. The Apex Court observed that product was included ulder Heading 2008, hence Heading 2106 automatically became inapplicable.
11.5 In the case of CC v. Abott Healthcarc private Limited, 2015 (S28) ELT 129 (Tr-Mum.), the product under consideration was,Marna,s Best premium Chocolate', a nutritional powder. The importer classified under tariff item 1901 90 90 bearing description,Other, as against revenue,s classification under tariff item 2106 90 00 bearing description 'Other,. The Tribunal after considering the nature of goods and HSN Explanatory Notes, noted tlat the imported goods rvere classifiable under Heading 1901. It further held that Heading 2106 is a residuary entry. Thus, once goods are classiflable under a particular Heading, the same cannot be classified under Headine 2106
Page 13 of 23
11.6 In the case of Agrctech Foods Limited v. CC, 2.012 (337) ELT 436 (Tt_ Mum.), the product under consideration was,,Act-TI Microwave popcorn,, which was ready-to use popcorn mixed with butter, required to be microwaved before consumption. The assessee claimed classification under Heading 2OOg as 'Edible parts of plants, otherwise prepared or preserved', whereas the revenue sought to classify it under Ta-riff item 2106 90 OO. The Tribunal opined that the goods are classifiable under Heading 2OOg. HSN Explanatory Notes as well as Chapter Notes under Customs Tariff Act to Chapter 21 talk primarily about products which are preparations not elsewhere specified or included. Therefore, if the goods are classifiable under Heading 2OOg, it will automatically cancel ary considerations in favour of Heading 2106,
11,7 In the light of above analysis, it is clear that impugned good squarely qualiff under Heading 0406. This understanding has been internationally validated by various rulings of customs authorities of other nations. Therefore, impugned good are conclusively covered under Heading 0406.
1 1.8 By application of the above test, it is clear that Heading 2106 beirrg a residuary ard miscellaneous entry, is automatically cancelled for considerins the classification of impugned good.
11,9 From the above discussion, it is clear that impugned good is not classifiable under Heading 2106. The Authority clearly erred in holding tiat impugned good are classifiable under Heading 2106 without taking note of the above points. Accordingly, the impugned ruling is liable to be discharged and impugned good held to be classifiable under Heading 0406 on this ground alone.
12.1 In the present instance, the Authority has majorly relied upon the Explanatory Notes to HSN for classification of impugned good under Heading 2106. It is submitted that the Authoritjr has relied upon the definition of 'processed cheese' to reject the classification adopted by the appellant. The relevant extract of the definition is reproduced as under;
"Processed cheese, also known as process cLeese. It is marutfacdred bg comminuting, miing, melting, emulsifging, utith the aid of heat and emul.sifling or acidifuing agents (including melting, salts), one or more vari.eti.es of ch.eese and one or more of the foltowing: cream or other d.airy products, salr, sprLes, flauourtng,colouing and water.
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12.2 \t is noteworthy that tie aforesaid explanation / meaning of processed cheese is restricted only to provide a broad scope to the types of cheese that can be covered under Heading 0406. The aforesaid entry facilitates classification ofany type of cheese which has been further processed by mixing, melting, emulsification etc. to be classified under Heading 0406. Moreover, the definition of processed cheese does not dis€row addition of vegetable oil.
12.3 In addition to above, the Authority has failed to apprecrate the Explanatory Notes as appended to Heading 0406 in its entrety. The Explanatory Notes read as under
TLE presence of meat, ftslt" ctustolceans, lerbs, spices, uegetables, fruits, tlltts, uitamins, skimmed. milk powder etc. does not affect classificatian prouided. that good.s retain tle character of cheese.
Cheeses which haue been coated with batter, or bread crumbs remain classifted. in this heading uhether or not theA haue been pre-aoked, provid.ed that the goods retain th.e character of cleese.,,
12.4 From a perusal of the above, it is clear that Heading 04O6 is wide enough to allow addition of meat, fish etc. to cheese and still be classified under Heading 0406 as long as the basic character ofcheese is retained.
12.5 In the above backdrop, it is noteworthy that Explanatory Notes whilst providing the scope of expression,processed cheese, expressly covers ,any kind of addition to cheese as long as the basic character is retained,.
12.6'lhe Appellant, in preceding paragraphs and tl|e Application had advanced detailed submissions which prove that the impugned goods is a processed form of cheese which even after addition of various ingredients retain the basic character of cheese. Evidently, the Authority failed to consider or counter any of the submissions advanced vide the Application in respect of tie same. Accordingly, the Impugned Ruling is liable to be discharged and classification as adopted by the Appellant be accepted on this ground a1one.
12.7 From tie above discussion, it is clear, tlat the Impugned Ruling passed by Authority suffers from the above-mentioned defects. Accordingly, the Impugned Ruling is liable to be discharged and impugned goods are classifiable under Heading 0406 on tllis ground a]one.
Whether Appeal Illed in time:
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Record of Personal llearing.
14.1 During the hearing the appellant while reiterating the submissions made in their appeal papers put forth that the basic emphasis of their submissions was that impugned goods are correctly classifiable under Heading No. 0406.
14.2 Shri Puneet Bansal, Advocate submitted that the Heading No. 0406 covers all kind of cheese including processed cheese, also known as process cheese. It is manufactured by comminuting, mixing, melting, emulsifying, with the aid of heat and emulsi$'ing or acidif ing agents (including melting, salts), one or more varieties of cheese and one or more of the following: cream or other dairy products, salt, spices. flavouring, colouring and water.
14,3 He emphasized that Hon'ble Supreme Court of India in the case of Commissioner of Central Excise , New Delhi vs Connaught plaza Restaurart {p) Ltd reported as 2012 pa6) EL"t 32I {SC) has held that:
"Timeand. qgain, the principle of common parlance a,s tle stand.ard for interpreting terms in tlLe taxitlg statutes, albeit subject to certain excEptiotls, tphere the stahttory contert runs to tlLe contrary, has been reiterated,, The apptication of the common parlance test is an ertension of the generat principte of nterpretation of stafi.Ltes for d.eciplleing the mind of tLe taw maker; "it is an attempt to discover the intention of tlle Legisla1re from tle language used bg it, keeping aluags in mind, thclt the language is (lt best qn imperfect instrument for tLE expression of actual human thoughts."
"Therefore, uhat flous from a reading of tle aforementioned deci,sions i.s
Page 16 of 23
nt in,the a.bsence of a statutory d.efinition in precise temls; word.s, entrtes and. ttems in taxing statutes mlrst be construed in ierms of theii'iimmerctal or tra.d.e I::lerstanlinq o.r.according to their,popular neoninj. n other word.s tlag have to be constructed in the sense that ttte people converiant iiti tite suaieA-matter of the statute, would. attibute to,tt. Resort to rigid tnterprelanon tn ternls of sctentific and technicar meaninqs shoutd be auoida. tn "i ir^"torces. This, houever, is bg no me(lns an aisotute rut . w;;t"";;;i;;;'ha.s expressed. a contrary intention, such as bg pro.uidtng a statutory ie1niion of ttg-pqrticular entry. uord or item in snecific. ,scientific or technkil t"lr||Li, ti,fo", rnterpretation ought to be in .lccordaice-u,,ith tte""a""W" Teanirg ond not "iiit*ii"i according to common parlance understandinl."
14.4 Shri Puneet Bansal, Advocate for appellant further relied upon the decision of Appellate Authoriw for Advance Ruling, uttar pradesh in the case of savencia Fromage & Dairy (p) Ltd 2019 (4) TMI 1545 where the question before the Appellate Authority was whether the product "Breaded Cheese, is classifiable as theese, under Heading O4o6_taxable at the rate of 6 percent each under S.No. 13 of the Schedule_Il appended to Notification No. 1/2017_ Central Tax (Rate) dated 2A.06.20IZ. In this case Appellate Authority for Advance Ruling, Uttar pradesh has held that " The cheesl-forms mosi' tmpoftant constituent (55o/o of total uotume) of fie product and the impugned goods cannot be formed cleese. The batter and. brea.d coating are not esJential and. can be easitA substituted.. It i.s onlg cheese thqt differentiates tle im1rugned. goods from ang otler product, As Headin4 O4O6 includ.es , processed iLeese,, u-,hich may also contain cream or other dairy products, salt spices, Jlavouring, colouing and water- it is undispttted that impugned good.s are neither staeetmlat nor are theg in the nahre of namkeens, btujia etc. TLe impugrted. good,s thus are not coveted. bg Supplementary Chapter Note 6.
Ttte HSN and Explanatory Notes which fonn essential gurdance for interpretation of ang heading make it abundanttg clear ttat ctaese uhich contain uaious additions that are battered" or breqd.ed. and pre_cooked. are included. as ' cheese'under Heading 04O6. Ingredients and cLwracteristics of the product uith which ue are concemed d,o not contain anA material or feature, u,thich witt take the said product out of goods falling und.er Heading 0406..
Discuasio! and Findiags:
Paee 77 of 23
fit, confirming or modifying the ruling appealed against.
16.1 The appellant has contended. that the product ,,pizza topprrrg,, containing 14.5 percent Mozzarella cheese and 15 per "".rt of oth". ltt i'roaucts such a" milk solids arld skimmed milk powder along with ott", irrg;"ai"rrt" fo.", type of cheese; that topping maintains its basic cheesy .rrf.".,". even after addition of other ingrcdients. Thus, it is classifrable uirder Chapter ueading 0406 (SI. No. 13 of Schedule _Il to Notification i".-itirfi Integrated Tax/Notification No. 1/2017-Central Tax and Notification 'f,fo aSTSf_Z as "cheese" and chargeable Lo GS"l @ l2o/o.
16.2 The question for determination in this appeal is whether the product "Piz,:a Topping" manufactured/ supplied by trre appettant merit classification under Heading 0406 as claimed by ttre appellalt o. .t"..in.lt" i.r.raer Heading 2106 as determined by the Authority for Advance Ru;;;-;;;..
16'3' we found that for any given product, the name, character and use are three important ingredients which decide tt" "ta""iti"atlon of any given product. Hence we proceed to examine the classification of impugned item, keeping in mind the above guiding factors.
16.4 The impugned item is being sold by the appellant as "pizza Topping, which contains water, mozzarella cheese, milk "ofla", "U_*"A milk powder and vegetable oil along with premix of emulsifiers, stabilizers, acidity regulators and preservatives, chesses fall under chapter heading O+Oe, wnicn reads as under:-
| d,"i.,bitd,"egg@ |
|---|
| 04061000 Fre*{unripened@ |
| cratedorpowdereactreese,otittkinds |
| Processedch.e".notl.aGdo.poiGred |
| Blue-veined"be.ieand othercheeseconraining,reiosproauc.d byPenicillium roqueforti |
Page 18 of 23
0406 90 | Other cheese 00
16.5 We have gone through the HSN Explanatory notes to chapter heading O406 which provides as under:
(a) the term 'butter" means natural butter, whey butter or recombined butter (fresh, salted or rancid, including canned butter) derived exclusively from milk, with a milk fat content of 8O7o or more but not more than 95% by weight, a maximum milk solids-not-fat content of 2o/o by weight and a ma.j<imum water content of 16% by weight. Butter does not contain added emulsiflers, but may contain sodium chloride, food colours, neutralizing salts and cultures of harmless lacticacid-producing bacteria; (b) the expression .dairy spreads" means a spreadable emulsion of the water_in_oil type, containing milkfat as the only fat in the product, with a milkfat content of 3g\o or mote but less tllan 80% by weight.
(b) a dry matter content, by weight, of at least ZO yo but not exceeding 85 yo; and
(c) they are moulded or capable of being moulded.
(a) products obtained from whey, containing by weight more than 95yo lactose, expressed as anhydrous lactose calculated on the dry matter (heading l7O2);
(b) products obtained from m k by repracing one or more of its natural constituents (for example, butyric fats) by another substance (for example, oleic fats) (heading 1901 or 2106); or"
(c) albumins (including concentrates of two or more whey proteins, containing by weight more than 80% whey proteins, calculated on thl dry matterl @eading 3502) or globulin (heading 3504).
Page 19 of 23
SUB-HEADING NOTES :
2 For the purposes of sub-heading o4o5 10, tie term "butte/ does not include dehydrated butter or ghee (sub-heading O4O5 90).
The above notes categorically state that this heading covers a-ll kind of cheese, vLz.
"(3) Processed cheese, also known q,s process cheese. It is manufacfured. bg comminuting, miing, melting and emulsifging, utith the aid of heat and emulsifairLg a: acidifuing agents (inctud.ing meltinsarts), one or more uaneties of cLteese and, one or more of the fottotaing: cream or other d.airy products, sc,tt, , spices, flauouing and uater.
16.6 In the instant case , the 'pjzza Topping,, (impugned ,item), has been manufactured from, rr,ozzarella cheese, vegetable oil anJ milk solids along with premix comprising of emulsifiers and stabilizers, in following proportions.
| Nallreottngtedtent/addittve | Ratlo |
|---|---|
| ;;re;- -- |
44W |
| veqetaole !at |
22ks. |
| r-------:---:-- Ntozzareliauheese |
145ke |
| SennetLlasq!4(milksolidl DKlmmedmr<Dowder |
. 1lKg 4Fe |
| r-remlxs(emulsfiter) !!gservative) stabliser,acidityregularorand |
. 4.5kg |
16.7 It is tlre case of the applicant thaL the 'pizza Topping, manufactured by it with the above combination of ingredients falls under the category of processed cheese as per HSN 0406 30. The HSN explanatory notes to chapter heading 0406 under clause (3) has clearly defrned the product ,processed cheese, wherein the mixing and combination of ingredients are limited to one or more varieties of cheese with one or more of the following only:_ cream or other dairy products, salt, spices, flavouring, colouring and water. By arly stretch of
Page 20 of 23
imagination 'vegetable fat' cannot be understood to be included in the above combination of ingredients.
f!. The appellant relied upon the decision of of Appellate Authority for Advance Ruling, Uttar pradesh in the case of Savencia Fromage & Dairy (p) Ltd 2019 (4) TMI 1545. In this case Appellate Authority for Advaice Ruling, Uttar Pradesh has held that the product "Breaded Cheese" is classifiable under Heading 0406.
l8.l We have gone through the said decision of Authority for Advance Ruling Uttar Pradesh. We find that cheese form the most importlt constituent (55o/o of total volume). Since the product in question in t.his case consisting predominantly cheese, hence the Authority has coffectly classified tie product under Heading 0406. Hov/ever, in the case before us cheese ts not the predominant constituent. Hence the case relied upon by the appellant is not at all applicable in the case before us.
18.2 The appellant also contended that t}Ie impugned product rs a type of cheese and relied upon t}le case of CCE vs. Wood Cratt proaucts Limited, 1995 (77) EL"l 23 (sc). In this case the Apex court has observed that the HSN Explanatory Notes serve as a safe guide for ascertainment of meaning of a term used in the Tariff Schedule. We find that it is a well settled principle that HSN Explanatory Notes serve as a safe guide for ascertainment of mealing of term used in Tariff Schedule. However, as discussed herein above, the HSN explanatory notes to chapter heading 0406 under clause (3) has clearly defined the product 'processed cheese'. As per the said definition vegetatle fat is not an ingredient of processed cheese. We find that in the impugnj product vegetable fat is. the major constituent l22o/o) and the cheese, i per appettants own submissions, constitutes only 14.5o/o- Hence the i-pugrr"j product cannot be considered to be a type of cheese. Thus the p.odu.t ; pizza Topping" do not qualify to be classilied under Headins 0406.
Page 21of 23
18.3 As regards case of CCE vs Connaught plaza Restaurant private Limited, 2012 (286) ELT 321 (SC) , we find that the facts of the said case is different than the case before us. Hence the case is not applicable in the rnstalt case.
18.4 In view of above, we are of the considered opinion that the impugned i13na "pizza topping", is not covered under the Chapter Heading 0406 of the lst schedule to the Customs Tariff Act, 1975, in the light of HSN explanatory notes, as discussed in preceding paras and accordingly, not covered by serial number S.No 13 of schedule II to Notification No l/2o17lnte$ated Tax (Rate), Notification No.1/2O 17-Central Tax (Rate) and Notification no.35/ST_2 arrd chargeable to GST @ 12yo.
t9.1 9lr:1,^"1Note5 of Chapter-21.provid€s that "Heading2106 (except tariff items 2106 90 20 ar'd 2106 90 3Ol, inter atia, includes:
(4, ...............;
(b) Preparations for use, either directly or aiter processing (such as cooking, dissolving or boiling in water, milk or other liquids), for numan consumption;
(cl
(d)
Further, Chapter Note 6 of Chapter 21 reads as under:
"Tariff item 2106 90 99 includes sweet meats commonly known as - Misthans" or " Mithai" or called by any other name. lhe], also include products -.commonly known as "Namkeens","mixtur;", "Bhujia", 'Chabena" .or called by any other name. Such pioducts remain classified rn rnese sub-headtngs i1"Iespective ofthe nature of their ingredients.
Page 22 of 23
19.2 We hnd that the product in question i.e.,Fizza Topping, is a product made out of moz.zarella cheese, vegetable oil and milk solids as main ingredients with premixes of emulsifiers and stabilizers. The mozzarella cheese is blended witl other ingredients and heated upto a required degree. After heating, the m4teriel is transfeired to a mould of requisite-apacity for packing the product ifto-'Fduches containing smaller quantities (1 kg and 2Ob grm)l These pouches are sealed and packed in an outer carton. The product cannot be termed as 'Processed Cheese' as already discussed above. However, there is no doubt that being edible preparation for human consumption, it would merit classifrcation under Chapter 21 i.e.,Miscellaneous Edible preparations,. Once the chapter is decided, a careful examination of different entries under Chapter 21, the quest for appropriate classification rests finally at 2106 90 99, the residual entry, as the product itself does not find specific place ary.where else in the Chapler 21. We thus conclude that the impugned- produci viz.,Fizza Topping' would merit classification as, Food preparations not elsewhere specified or included' under Chapter Heading 2106 of the schedule to the Customs TariffAct, 1975, ar.d. chargeable to cST as applicable.
19.3 Having observed as above, we further hold that the impugned goods shall be aptly classifiable under Chapter Head 2106 of the schedule to tlre Custom Tariff Act, i975 as Food preparations not elsewhere specified or included' and chargeable to IGST @ 18%, CGST @ g\o ajld SGST @ 9%, as specified under S.No.23 of Schedulelll of Notification No.I |2OIZ. Integrated Tax (Rate) dated June 28, 2Ot7, Notification No.01/2O 17-Central tax lnate) dated 28.06.17 and of Notification No.35/ST-2.
ORDER
The Ruling pronounced by the Authority for Advance Ruling, Haryana is thus corect and justified. Thus, the appeal Iiled by the appellart fails ald the ruling of the Haryana Autlority for Advance Ruling pronounced vide Order No. HAR/HAAR/R/2O18-19/08 dated 30.08.20i8 is upheld. The instant appeal stands disposed of accordingly.
(Dr. Amif Klmar Agrawall Member
(Antl K Member
PaEe 23 ot 23
3 issues framed by the court
Whether 'pizza topping' containing mozzarella cheese, vegetable fat, and milk solids is classifiable under Chapter Heading 0406 as cheese or under Heading 2106 as food preparations.
Whether the presence of vegetable fat as a substantial ingredient (22%) disqualifies the product from classification as 'processed cheese' under HSN explanatory notes.
Whether the appeal was filed within the prescribed time limit under Section 100(2) of the CGST Act.
Colour shows how this judgement treated each authority
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CCE v. Connaught Plaza Restaurant Private LimitedExplained¶9
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Travancore Rayons LimitedExplained¶9
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Akbar Badruddin JiwaniExplained¶9
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CCE v. Fusebase Eltoro LimitedExplained¶9
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CCE v. Maharshi Ayurveda Corporation LimitedExplained¶11
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CC v. Abbott Healthcare Private LimitedExplained¶11
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Agrotech Foods LimitedExplained¶11
Agrotech Foods Limited v. CC, 2012 (337) ELT 436 (Tri-Mum.)
Savencia Fromage & DairyDistinguished¶18
Savencia Fromage & Dairy (p) Ltd 2019 (4) TMI 1545
4 provisions across 3 enactments
M/s Khera Trading Company
State of Haryana
Dr. Amit Kumar Agrawal
Anil
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
