In re Sri Venkateswara Cashew Chikky Manufacturers (GST AAAR Andhra Pradesh)
The appeal case involving Sri Venkateswara Cashew Chikky Manufacturers addresses the classification of their product “Crackle” under the GST tariff headings. The product, containing sugar, cashew nuts, butter, liquid glucose, and other flavors, was initially classified under Chapter 17049020 with a GST rate of 18%. However, the manufacturer sought to classify it as “Sugar Boiled Confectionery” under Tariff Heading 1704, specifically under Serial number 32AA of Schedule II of Notification No.01/2017-Central Tax (Rate), which would subject it to a 12% GST rate.
The Authority for Advance Ruling (AAR) in Andhra Pradesh originally denied this classification, leading to an appeal. The appellant argued that the AAR’s decision violated the principles of natural justice by not considering their submissions, which included details about the manufacturing process, regulatory standards, and technical specifications that supported their classification.
In their detailed appeal, the manufacturer highlighted that the primary ingredient of “Crackle” is sugar, constituting 68% to 72% of the product, followed by cashew nuts (28% to 30%), with minor amounts of butter and glucose. They argued that, based on its ingredients and manufacturing process, “Crackle” fits the definition of “Sugar Boiled Confectionery” as per the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011, and the Indian Standard IS 1008:2004.
They also contested the AAR’s view that “Crackle” was an industrial input not meant for direct consumption by end users, arguing that it is used both as an ingredient in ice cream toppings and as a standalone confectionery product, thus meeting the criteria for classification under the requested tariff heading.
The Appellate Authority for Advance Ruling (AAAR) overturned the AAR’s decision, agreeing with the appellant. The AAAR held that “Crackle” should indeed be classified under Tariff Heading 1704 as “Sugar Boiled Confectionery” and be subject to a 12% GST rate. The AAAR’s decision was based on the product’s composition, its classification as a sugar confectionery in common parlance, and the specifics of the manufacturing process, which align with the definitions and standards cited by the appellant.
This ruling underscores the importance of detailed documentation and adherence to regulatory definitions in the classification of goods under GST. It also highlights the appellate process as a vital mechanism for resolving disputes regarding GST classifications.
The finding of the AAR that only products generally meant for immediate consumption are to be classified under CH 1704, we find that the same has an inherent flaw. If the said HS Explanatory provisions of immediate consumption is to be made applicable to “Crackle”, then the same is equally applicable to all the products falling under Chapter Heading 1704 which are covered under Schedule -I, Schedule -II and Schedule -III as all these products are grouped under CH 1704. It cannot be said that products falling CH 1704 of Schedule -II only are hit by the said clause of immediate consumption and those falling under CH 1704 of Schedules I and III are not affected. Further, No alternative HSN was suggested by the AAR.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, ANDHRA PRADESH
(Under Section 101 of the Central Goods and Service Tax Act and the Andhra Pradesh Goods and Service Tax Act).
At the outset, we would like to make it clear that the provisions of both the CGST Act and the APGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the APGST Act.
The present appeal has been filed under Section :100 of the Central Goods and Services Tax Act, 2017 and the Andhra Pradesh Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and APGST Act”] by M/s. Sri Venkateswara Cashew Chikky Manufacturers (herein after referred to as the “Appellant”) against the advance ruling no. AAR No. 10/AP/GST/2023 dated 26.05.2023 issued by Authority for Advance Ruling No. Andhra Pradesh .
