Case: Alisha Foods [2020] 113 taxmann.com 495 (AAR – MADHYA PRADESH)
1. Facts: Applicant is a partnership firm and manufactures Fried Fryums of different shapes, sizes and varieties which are ready to eat.
2. Query:
What is the correct classification of Fried Fryums of different shapes, sizes and varieties which are ready to eat and What is the HSN Code and GST rate applicable on such goods manufactured.
3. Contention of the Applicant:
Papad even after roasting or frying are known and used as Papad only. In commercial or trade parlance also, the Fryums can be said to be known as Papad. Fried Papad and Fried Papad Pipes of different sizes, shapes, and all of varieties which are ready to eat may be classified under Chapter 19 Heading No. 1905. Cases Referred by the Applicant were as follows:
a) Shivshakti Gold Finger: All varieties of Papad, whether they are circular or flat in shape consisting of all ingredients whether it is of pulse, rice, Maida etc. entitled for exemption. The Hon’ble Supreme Court clearly held that size or shape is irrelevant. The Papad of all shapes and sizes are covered under the Entry “Papad”.
b) State of Karnataka Vs. Vasavamba Stores and others: Papad of all shapes and sizes are covered under the entry “Papad” and exempted from tax.
c) Jay Khodiyar Agency: Papad and Papad pipes (Fryums) are covered under Entry 9(2) of Schedule-1 appended to the VAT Act, 2003 and exempted from tax.
4. Observation:
1. Words not Defined in Statue are to be considered in popular sense: AAR observed that words not defined in statute must be construed in its popular sense, meaning “that sense which people conversant with the subject matter with which the statue is dealing would attribute to it”. It is to be construed as understood in common language. AAR referred to the decision of Hon’ble Supreme Court in the case of Indo International Industries v. Commissioner of Sales Tax, U.P. 1981 taxmann.com 385 (S.C.)], Oswal Agro Mills Ltd. v. Collector of Central Excise 1993 (66) E.L.T. 37 (S.C) and in the case of Commissioner of Central Excise v. Connaught Plaza Restaurant (P.) Ltd. [2012 (286) E.L.T. 321 (S.C.).
2. Whether Fryums in common parlance are understood as Papad- AAR therefore referring to the above decision then examined whether “Fried Fryums” would be covered by the term “Papad” as understood in common parlance.
3. Decision of CESTAT in the matter of T.T.K. Pharma Ltd. Vs. Collector of Central Excise [1993 (63) E.L.T. 446 (Tribunal)- The issue before CESTAT was classification of the product “Fry Snack Foods called Fryums” and whether it would be considered as “Namkeen” and not as “Papad”. It was held that “Fry Snack Foods called Fryums” have to be considered as “Namkeen” and not as “Papad”.
4. Why Fried Fryums are not Papad- AAR observed that Fried Fryums are eatable and used as food articles or eatables and such fried, salted Fryums are found to be commonly known and used as “Namkeen’. Further it can be seen that “Papad” even after roasting or frying are known and used as “Papad only. Whereas, in commercial or trade parlance also, the ‘Fried Fryums’ cannot be said to be known as “Papad’.
5. Why decision of Hon’ble Apex Court in the matter of Shivshakti Gold Finger is not applicable- Hon’ble Supreme Court examined the matter whether ‘Gole Papad’ manufactured out of Maida. Salt and Starch are Papad or not and held that size or shape is irrelevant and that Papad of all shapes and sizes are covered under the entry ‘Papad’. In the case of Shivshakti Gold Finger, Hon’ble Supreme Court has not examined the issue of ‘Fried Fryums’ and therefore the said case is not found to be applicable in the facts of the present case. Therefore, the ‘Fried Fryums’ are not classifiable as ‘Papad’ under Tariff Item 1905 90 40.
6. Classification of Fried Fryums: Tariff item 2106 90 99 includes sweet meats commonly known as “Misthans” or “Mithai” or called by any other name. They also include products commonly known as “Namkeens”, “Mixtures”. “Bhujia”. “Chabena” or called by any other name. Such products remain classified in these sub-headings irrespective of the nature of their ingredients.
AAR observed that Heading 2106 is an omnibus heading covering all kind of edible preparations, not elsewhere specified or included. Chapter Note 5 provides an inclusive definition of this heading and covers preparations for use either directly or after processing, for human consumption. In 5(b) above preparation for use after processing has been included and mentioned therein such as cooking, dissolving or boiling in water, milk or other liquids. Obviously, the term ‘such as’ is purely illustrative but not exhaustive and therefore processing includes frying also, hence fried goods are also covered under chapter head 2106 which is ready for human consumption. Further, Chapter Note 6 pertaining to Tariff Item 2106 90 99 also provides inclusive definition and products mentioned therein are illustrative only. Taking all these aspects into consideration, it is held that the product “Fried Fryums” is appropriately classifiable under Tariff Item 2106 90 99.
5. Held:
Sl. No. 23 of Schedule III of issued under the CGST Act, 2017 and corresponding Notification No. 1/2017-State Tax (Rate) dated 30.06.2017, as amended, issued under the CGST Act. 2017 covers “Food preparations not elsewhere specified or included [other than roasted gram, sweetmeats, batters including idli/dosa batter, namkeens, bhujia, mixture, chabena and similar edible preparations in ready for consumption form, khakhra, chutney powder, diabetic foods]” falling under Heading 2106.
Therefore, AAR held that GST Rate of 18% (CGST 9% + SGST 9% or IGST 18%) is applicable to the product ‘Fried Fryums’ as per Sl. No. 23 of Schedule III of Notification No. 1/2017 -Central Tax (Rate) dated 28.06.2017, as amended, issued under the CGST Act, 2017 and Notification No. 1/2017-State Tax (Rate) dated 30.06.2017, as amended, issued under the SGST Act, 2017 or IGST Act, 2017.
6. Comment
An issue of perineal dispute between the assessee and department whether Fryums are Papad or not. AAR referred in its observation that
Thus, in the aforesaid decision, the product “Fry Snack Foods called Fryums” have been considered as “Namkeen” and not as “Papad”.
7.10 It is observed that Fried Fryums are eatable and used as food articles or eatables and such fried, salted Fryums are found to be commonly known and used as “Namkeen’.
However, while classifying Fryums in HSN 2106 90 99 classified it in 18%.
In Pre GST Regime also there were decisions one which was referred by AAR i.e. T.T.K. Pharma Ltd. Vs. Collector of Central Excise [1993 (63) E.L.T. 446 (Tribunal) and other one i.e. Commissioner of Central Excise, Bangalore v. TTK Pharma Ltd [2005] 2005 taxmann.com 262 (Bangalore – CESTAT) held that Fryums are to be considered as namkeen which are to be required to be fried before they are consumed.
There are two other decision of AAR in GST Regime however relating unfried Fryums and there also dispute was whether Fryums are Papad or not. The same are as follows:
a) Sonal Product [2019] 103 taxmann.com 280 (AAR – GUJARAT)-The issue before this AAR was “Unfried Fryums” i.e. before Frying and not ready to eat. The applicant in its application has submitted that such ‘Un-fried Fryums’ are not a cooked foods, not used as ready to eat food, not an instant food article or eatable for human consumption.
Held: The product ‘Un-fried Fryums’ manufactured and supplied by M/s. Sonal Product (GSTIN 24AGPPK7290R1ZF) is classifiable under Tariff Item 2106 90 99 of the First Schedule to the Customs Tariff Act, 1975.
b) Subramani Sumathi,[2019] 104 taxmann.com 197 (AAR – TAMILNADU)- The issue to be decided before us is the rate of tax applicable to the product of the Applicant and the applicable HSN Code. From the various submissions of the Applicant, it is evident that the product is made out of dough of maida as main ingredient along with preservatives. The mixed dough is cut into desirable shapes and dried in oven. The Applicant uses machinery for making the same. The products are sold by the Applicant in retail packing which have shelf life of around 6 months as they have added preservatives are not fully cooked and are not ready to eat. On purchase by the consumer, they are to be fried in edible oil before consumption. It is seen from the samples and photographs produced during the hearing, that the items are indeed edible only after frying in oil which is not done by the Applicant but those who purchase it.
Held- The Applicants product namely “Maida Vadam/Papad” is classifiable under ‘1905 05 40’ and is exempted from CGST and SGST vide SI No. 96 of Notification No. 02/2017 -CT (Rate), dt 28.06.2017 as amended and Notification No. II(2)/CTR/532(d-5)/2017 vide G.O. (Ms) No. 63, dated 29.06.2017 respectively.
