Commissioner of Customs (Prev.) Vs Anutham Exim Private Limited (CESTAT Kolkata)
Conclusion: The goods imported by assessee, such as, Big Cola, Big Orange Cola, Big Lemon etc., which they described as ‘carbonated beverage with fruit juice’ were neither carbonated beverage alone nor fruit juice alone gave the essential character of the products in question; both contribute to its essential character. The issue could not be resolved as per Rule 3(a) and 3(b) of the Rules of Interpretation and therefore resort was to be made to Rule 3(c). Since Customs tariff heading (CTH) 22029920 came last in the order, it prevails and the goods were classifiable under this heading.
Held: Assessee-company was an importer of branded drinks namely Big Lemon with fruit juice, Big Kids Jeera with fruit juice, Big Kids Orange with fruit juice, Big Lemon Lime with fruit juice etc. They classified these products as “fruit pulp or fruit juice based drinks” under Customs Tariff heading 22029920. Goods which were imported were chargeable to customs duty as per the Custom Tariff and were also chargeable to Integrated Goods and Services Tax (IGST) as was applicable to the corresponding goods sold in India. The issue which fell for consideration in this appeal was whether the goods imported by assessee, such as, Big Cola, Big Orange Cola, Big Lemon etc., which they described as “carbonated beverage with fruit juice” were classifiable under Customs Tariff Heading 22021090 and 22021020 as claimed by Revenue or were classifiable under 22029920 as claimed by the importer. It was held that a decision on this could be made by examining how they were being sold. They were being sold as „Carbonated beverages with fruit juice’- neither as fruit juice based drinks nor as carbonated beverages although the fruit juice content was only 5% (or 2.5% in case of lime). This gave the products their unique characteristic distinct from both carbonated beverages and fruit juices. The FSSAI regulation (2.3.30 clause 3A) also conceived of such a category of products in the market. Thus, they form a separate specie of products known to the market and were recognised as such by FSSAI. The Customs Tariff, however, did not have a separate entry for such products. Thus, Revenue’s contention that the essential character of the products was only carbonated drinks and not the fruit juices was not agreeable. Both components were important. As carbonated beverages, they could be classified under 2202 10 20/ 22021090 (as claimed by the Revenue). As fruit juice based drinks, they could as well be classified under 2202 99 20 (as claimed by the assessee). Neither carbonated beverage alone nor fruit juice alone gave the essential character of the products in question; both contribute to its essential character. The issue could not be resolved as per Rule 3(a) and 3(b) of the Rules of Interpretation and therefore resort was to be made to Rule 3(c). Since Customs tariff heading 22029920 came last in the order, it prevails and the goods were classifiable under this heading. The ruling of the Advance Ruling Authority in the case of IGST and a support to such a decision by the GST Council were not binding precedents for Tribunal. The ruling of the Advance Ruling Authority was not even applicable to any assessee other than the one who sought clarification.
FULL TEXT OF THE CESTAT JUDGEMENT
This appeal and stay application were filed by the Revenue. In this appeal, Revenue is assailing order-in-appeal No.KOL/CUS(CCP)/AKR/299/2020 dated 08/06/2020 passed by the Commissioner of Customs (Appeals), Kolkata. In this regard, the respondent/assessee had approached the Hon’ble High Court of Calcutta by filing W.P.A./8405 of 2020. The Hon’ble High Court of Calcutta was pleased to pass the following order on 04/01/2021:
“I have heard learned Counsel appearing on behalf of all the parties and perused the materials placed on record and upon suggestion of the Court, the parties have consented to the following order being passed :-
a) The Customs Excise and Service Tax Appellate Tribunal (CESTAT) is directed to decide the main appeal bearing Customs Appeal No. 75195 of 2020 within a period of three weeks from date.
b) The petitioner shall be at liberty to pursue its remedy before the Customs Excise and Service Tax Appellate Tribunal (CESTAT) against the order passed by the Principal Commissioner of Customs dated December 07, 2020 as well as the order dated December 15, 2020 passed by the Deputy Commissioner of Customs before the Appellate Authority.”
2. Accordingly, the matter was heard on a priority basis on 18 January 2021 for final disposal.
3. The issue which falls for consideration in this appeal is whether the goods imported by the respondent, such as, Big Cola, Big Orange Cola, Big Lemon etc., which they described as “carbonated beverage with fruit juice” are classifiable under Customs Tariff Heading 22021090 and 22021020 as claimed by the Revenue or are classifiable under 22029920 as claimed by the respondent/importer.
4. The respondent is an importer of branded drinks namely Big Lemon with fruit juice, Big Kids Jeera with fruit juice, Big Kids Orange with fruit juice, Big Lemon Lime with fruit juice etc. They classified these products as “fruit pulp or fruit juice based drinks” under Customs Tariff heading 22029920. Goods which are imported are chargeable to customs duty as per the Custom Tariff and are also chargeable to Integrated Goods and Services Tax (IGST) as is applicable to the corresponding goods sold in India. The rates of IGST are specified by the Government by Notification No. 1/2017 – Integrated Tax (rate) dated 28/06/2017 as amended from time to time. Relevant portion of this Notification is as follows:
“IGST Rates for specified goods – Schedules I to VI
In exercise of the powers conferred by sub-section (1) of Section 5 of the Integrated Goods and Service Tax Act, 2017 (13 of 2017) [readwith sub-section (5) of Section 15 of the Central Goods and Service Tax Act, 2017 (12 of 2017)], the Central Government, on the recommendations of the Council, hereby notifies the rate of the integrated tax of –
(i) 5 per cent in respect of goods specified in Schedule I,
(ii) 12 per cent in respect of goods specified in Schedule II,
(iii) 18 per cent in respect of goods specified in Schedule III,
(iv) 28 per cent in respect of goods specified in Schedule IV,
(v) 3 per cent in respect of goods specified in Schedule V, and
(vi) 0.25 per cent in respect of goods specified in Schedule VI,”
Explanation (iii) and (iv) to the notification read as follows: For the purposes of this Schedule,
(i)………………………
(ii)………………………
(iii) “Tariff item”, “sub-heading” “heading” and “Chapter” shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975).
(iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification”.
5. From the above explanation to the notification, it is clear that there is no separate classification of goods for the purpose of IGST and the classification of the goods under the Customs Tariff holds good for IGST as well. The Customs Tariff Act, 1975 provides for Rules of interpretation which aid in classifying the goods and these Rules also apply to IGST. If the imported goods are classified under Customs tariff Heading 220210 as “all goods (including aerated waters), containing added sugar or other sweetening matter or flavoured”, IGST @ 28 per cent is to be levied on the imported goods. On the other hand, if they are classified under Customs Tariff Heading 22029920 as “fruit pulp or fruit juice based drinks”, IGST @ 12 per cent is to be levied. On a specific query by the Bench, the learned Counsel for the respondent explained that they have been importing these goods in the past and have always been classifying them under 22029920 as “fruit pulp or fruit juice based drinks” and Customs department has been clearing them accordingly. After the present show cause notice was issued and an order confirming the demand has been passed by the Assistant Commissioner, the learned Commissioner has issued to them a Show Cause cum demand for all the previous consignments alleging suppression of facts and invoking extended period of limitation seeking to change the classification of the goods. He has passed an “Order-in-Original” confirming the demand of differential duty. They are yet to file appeal against the order of the learned Commissioner.
6. A perusal of the records and the labels of the product shows that the imported products are being sold as “carbonated beverages with fruit juice” under the brand names Big Cola (with fruit juice), Big Kids Orange, Big Kids Apple, Big Kids Jeera, Big Kids Lime and Big Lemon. All these contain carbonated water, sugar, fruit juice, acidity regulator and preservative, caramel and colour. The respondents classified them under Customs Tariff Heading 22029920, whereas the Department wants to classify them under 22021020 (drinks containing lime) and 22021090 (drinks containing other fruit). The relevant Tariff entries of the Custom Tariff Act are as follows:
