In re Sitaram Kumhar (GST AAR Rajasthan)
The Authority for Advance Ruling (AAR) in Rajasthan considered the classification of groundnuts with shell that Sitaram Kumhar intends to trade. The applicant plans to purchase groundnuts from farmers and, before selling them, subject them to a heating process to reduce moisture content for better storage and transportation, aiming to prevent spoilage without altering the fundamental characteristics of the groundnuts. The applicant sought a ruling to confirm that this process would not disqualify the groundnuts from classification under HSN code 1202, which covers “Ground-nuts, not roasted or otherwise cooked, whether or not shelled or broken,” and attract a 5% GST rate (as per their initial understanding, later contradicted in the prayer).
The applicant argued that the mild heating process is essential for preserving the groundnuts in their raw form during storage and transit, distinguishing it from roasting or cooking, which involve higher temperatures and result in significant physical and chemical changes, including a charred appearance. They referenced advance rulings and case laws that differentiated between drying with mild heat for moisture removal and roasting with intense heat that alters the product’s nature. The applicant emphasized that their intention is merely to extend the shelf life of the raw groundnuts without changing their inherent properties, thus maintaining their eligibility for classification under HSN 1202.
However, the AAR observed that the applicant did not provide specific details about the intended heating process, such as temperature and equipment. The authority noted the close proximity between heating and roasting, stating that sufficient heating could be considered roasting, which is explicitly excluded from HSN 1202. The AAR opined that any heating process, even if mild, aimed at reducing moisture for preservation could be construed as falling under the broader concept of roasting, thus rendering the groundnuts ineligible for classification under HSN 1202. Consequently, the AAR ruled that heating groundnuts with shell to reduce moisture for storage and transportation does indeed make them ineligible for classification under HSN 1202.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, RAJASTHAN
