In re LVP Foods Private Limited (GST AAR Uttar Pradesh)
Question: Instant Tea Whitener’ which would be used like any milk powder used in hotel, restaurants, etc. as well as households for making instant tea and coffee and known as “milk powder” in common trade parlance.
(i) What shall be the classification of the above product manufactured and proposed to be supplied by the applicant?
(ii) What shall be the rate of GST on the said product in terms of the above classification?
Answer: The product ‘Instant Tea Whitener’ as described in the application will merit classification under Chapter Heading 0402 of the GST Tariff and would be chargeable to GST at applicable rate under the said tariff entry, presently read with Notification No. 01/2017-Central tax (Rate) dated 28.06.2017 (SI. No. 08 of Schedule-I).
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, (UTTAR PRADESH)
Sub:- GST ACT, 2017 – Advance Ruling U/s 98 – liability to tax under GST Act in respect to application dated 08.04.2019 from M/s LVP Foods Private Limited, 3 Km Stone, Hasanpur Road, Gajraula, Amroha, Uttar Pradesh, 244 235- Order- Reg.
***********
1) M/s LVP Foods Private Limited, 3 Km Stone, Hasanpur Road, Gajraula, Amroha, Uttar Pradesh (here in after called the applicant) is a registered assessee under GST having GSTN: 09AABCL2517K1ZH.
2) The applicant is a limited company engaged in the processing and packing of milk in pouches. The applicant propose to manufacture and supply a new product- Instant Tea Whitener’ which would be used like any milk powder used in hotels, restaurants, etc. as well as households for making instant tea and coffee and known as “milk powder” in common trade parlance.
3). As per applicant, the main constituent of ‘Instant Tea Whitener’ would be standard liquid milk which would undergone various process like filtration, separation, pasteurization, evaporation, homogenization etc. to obtain ‘Instant Tea Whitener’ in powdered form, which would then be packed in unit container/sachets. For manufacturing of 1kg of ‘Instant Tea Whitener’, following raw materials would be used:-
i. 2.70 kg of standard liquid milk.
ii. 160 g of Vegetable fat
iii. 354 g of Maltodextrin
210 g Sugar
4) . The following questions have been posted by the applicant, in its application dated 08.04.2019 (received by the Authority on 14.06.2019), before the Authority:-
i. What shall be the classification of the above product manufactured and proposed to be supplied by the applicant?
ii. What shall be the rate of GST on the said product in terms of the above classification?
5) . The applicant has further submitted that as per their view the aforementioned product could be most appropriately classifiable under Chapter Heading 0402. In support of their view the applicant have adduced the following points:
5.1) In the common parlance, the product supposed to be manufactured and marketed by the applicant will be known as instant tea milk powder. The HSN code “0402” covers milk concentrated and containing added sugar or other sweetening matter whether liquid, solid or paste.
5.2) As per Rule 2b of The General Rules for interpretation of the first schedule (Import Tariff), any reference in a heading to a material/substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. In the Applicant’s case, the Chapter Heading 0402 covers milk and even in the addition of other material in small quantities it remains to be milk powder classifiable under Chapter Heading 0402.
5.3) As per Rule 3a of the said Rules of interpretation, the heading which provides the most specific description shall be preferred to heading having more general description.
5.4) According to Rule 3b of the Rules of interpretation, in case Rule 3a is not applicable, the goods shall be classified as if they consisted of the material/ raw material which give their essential character. In the applicant’s case, the essential character to ‘Instant Tea Whitener’ is given by liquid milk. The said product cannot be manufactured without milk. All other ingredients are ancillary in nature.
5.5) The applicant also paid reliance on various case laws to vindicate their stand that the ‘Instant Tea Whitener’ proposed to be manufactured by them is most appropriately covered under Chapter Heading 0402.
6) The applicant was granted a personal hearing on 05.08.2019. Shri Kapil Vaish, CA, and Shri Ashish Vaish, CA, Authorized representatives of the applicant, appeared for hearing.
During the personal hearing they submitted the copy of relevant Notification, Tariff entries, Explanatory notes and case laws. They also provided RSS of T-Rich” manufactured by M/s Goodrich Carbohyderate Ltd, karnal Haryana and submitted that their product along with ingredients will be similar in nature. Later on, they also provided a copy of Invoice for T-Rich Milk Mix, issued by M/s Lokenath Enterprises, Changrabandha, West Bengal, wherein the classification of said product was made under Chapter Heading 0402.
7) The application for advance ruling was forwarded to the Jurisdictional GST Officer to offer their comments/views/verification report on the matter, which were received in this office vide letter C. No. 20-CGST/Misc./L.V.P. Foods/R-Gaj/12/2019/188 dated 30.07.2019, wherein he has reported that “the HSN code of milk powder is 40.2, sub code is 04022990 and the GST applicable rate is 5%.
DISCUSSION AND FINDING
8) We have gone through the submissions made by the applicant and have examined the detailed explanation submitted by them. At the outset, we find that the issue raised in the application is squarely covered under Section 97(2)(a) of the CGST Act 2017 being a matter related to classification of goods, We therefore, admit the application for consideration on merits.
9) We observe that the questions sought by the applicant are-
I. What shall be classification of the above product manufactured and proposed to be supplied by the applicant?
II. What shall be rate of GST on the said product in terms of the above classification?
10) Here, we observe that the Chapter heading 0402 of Custom Tariff Act, 1975 reads as under:-
