Popcorn is not namkeen , will be chargeable to GST of 18% : AAR

PROCEEDINGS

1. M/s. Shyam Sundar Sharma, 21, Icon Vatika Vigyan Vihar, Bharmoli, Ahir Road, Agra-282009 (hereinafter referred to as the ‘applicant) is an individual planning to initiate a business of manufacturing and sale of eatable item ready to eat ‘Popcorn’ with various flavours in retail packs under the Brand name ‘Yo Popcorn’. The brand name will be registered under the applicable laws. As of now, the applicant is not registered under GST and he is desirous of obtaining GST registration for this business.

2. The applicant has submitted application for Advance Ruling dated 5-10-2020 enclosing dully filled Form ARA-01 (the application form for Advance Ruling) along with annexure and attachments. The applicant in his application has sought advance ruling on following question–

“What should be the classification and GST rate on supply of Popcorn under Notification No. 01/2017 – Central Tax (Rate), dated 28-6-2017 amended till date?”

3. As per declaration given by the applicant in Form ARA-01, the issue raised by the applicant is neither pending nor decided in any proceedings under any of the provisions of the Act, against the applicant.

4. The applicant has submitted that–

Chapter Note 4 to Chapter 19 states as under :

4. For the purposes of heading 1904, the expression “otherwise prepared” means prepared or processed to an extent beyond that provided for in the headings of, or Notes to, Chapter 10 or 11.

Relevant Supplementary Notes to Chapter 21 state under :

5. Heading 2106 (except tariff items 2106 90 20 and 2106 90 30), inter alia, includes :

(b) preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption;

6. 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.

The first part is “Prepared foods obtained by the swelling or roasting of cereals or cereal products (for example, corn flakes)”. The basic requirements for the application of the first part are that the products must be :

(i) prepared foods,

(ii) such food must be obtained only by swelling or roasting and

(iii) it should be obtained by swelling or roasting of cereals or cereal products.

– The second part of the Heading appears to include pre-cooked or otherwise prepared cereal in grain form or in the form of flakes or other worked grains which not elsewhere specified or included. It excludes the products prepared from following :

– Maize (corn)

– Any cereal in flour and meal form

5. The application for advance ruling was forwarded to the Jurisdictional GST Officer to offer their comments/views/verification report on the matter. The Assistant Commissioner, CGST & Central Excise Division II, Agra vide her letter C.No 06/Misc/Tech/CGST/Div-II/Agra/17/3406 dated 4-12-2020 submitted that the item popcorn should fall under the HSN 210690. The Additional Commissioner Grade-1, Commercial Tax, Agra Zone vide his letter C.No. 1371/GST-Advance Ruling/2020-21/Ad.Com.Gradel, Va. Ka, Aa. dated 27-11-2020 forwarded report dated 11-11-2020 of the Deputy Commissioner, Commercial Tax, Division-3, Agra, wherein it has been opined that popcorn supplied under brand name ‘Yo Popcorn’ will attract GST @ 18% (9% CGST & 9% SGST) under Tariff item 2106.

6. The applicant was granted a personal hearing on 14-12-2020 which was attended by Ms. Shuchi Sethi, Authorized Representative during which she reiterated the submissions made in the application of advance ruling.

7. At the outset, we would like to make it clear that the provisions of both the CGST Act and the UPGST 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 provision under the UPGST Act. Further for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act/UPGST Act would be mentioned as being under the ‘CGST Act’.

8. We have gone through the submissions made by the applicant and have examined the 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. The applicant is presently unregistered and planning to initiate a business of manufacturing and sale of eatable item ready to eat ‘Popcorn’ with various flavours in retail packs under the Brand name ‘Yo Popcorn’. The applicant has sought advance ruling as to “What should be the classification and GST rate on supply of Popcorn under Notification No. 01/2017 -Central Tax (Rate), dated 28-6-2017 amended till date?”

10. As per the applicant, the raw material ingredients for preparation of the product “Popcorn” are Maize corn, Edible oil and Salt & Seasoning for flavours like salt, butter, tomato, cheese, chocolate etc. The production process is as under :

11. The applicant has submitted that the product ‘popcorn’ merit classification under HSN 210690 and the jurisdictional authorities of (Centre as well as state) had also in agreement of the view that ‘popcorn’ merits classification under HSN 2106. The applicant had argued that their product is excluded from the HSN 1904 as their product is not just by swelling or roasting of cereals and there are more ingredients involved in the manufacture of popcorn. Manufacturing process involves mixing of oil and salt and seasoning for bringing the flavour like butter, cheese, tomato or chocolate popcorns.

12. The applicant had also submitted that in view of ingredients being oil, salt and seasonings, the product is aptly classifiable as namkeen under chapter 2106. The ‘popcorn’ has not been defined under Customs Tariff Act, 1975, the CGST Act, 2017, the UPGST Act, 2017, the IGST Act, 2017 or the Notifications issued under the CGST Act, 2017/UPGST Act, 2017/IGST Act, 2017. It is now well settled principle of interpretation of statute that the word not defined in the statute must be construed in its popular sense, meaning “that sense which people conversant with the subject matter with which the statute is dealing, would attribute to it”. It is to be construed as understood in common language. In the case of Indo International Industries v. Commissioner of Sales Tax (SC), Hon’ble Supreme Court has held as follows :

“4. It is well settled that in interpreting Items in statutes like the Excise Tax Acts or Sales Tax Acts, whose primary object is to raise revenue and for which purpose they classify diverse products, articles and substances resort should be had not to the scientific and technical meaning of the terms or expressions used but to their popular meaning, that is to say, the meaning attached to them by those dealing in them. If any term or expression has been defined in the enactment then it must be understood in the sense in which it is defined but in the absence of any definition being given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted…… “

13. This view was upheld by Hon’ble Supreme Court in the case of Oswal Agro Mills Ltd. v. Collector of Central Excise 1993 (66) ELT 37. While reiterating the principle that in absence of statutory definitions, they have to be construed according to their common parlance understanding, Hon’ble Supreme Court, in the case of CCE v. Connaught Plaza Restaurant (P.) Ltd. [2014] , has referred to various decisions on the subject and observed as follows :—

Common Parlance Test :

“18. Time and again, the principle of common parlance as the standard for interpreting terms in the taxing statutes, albeit subject to certain exceptions, where the statutory context runs to the contrary, has been reiterated. The application of the common parlance test is an extension of the general principle of interpretation of statutes for deciphering the mind of the law maker; “it is an attempt to discover the intention of the Legislature from the language used by it, keeping always in mind, that the language is at best an imperfect instrument for the expression of actual human thoughts.” [(See Oswal Agro Mills Ltd (supra)].”

14. It needs to be therefore examined whether “popcorn” would be covered by the term “namkeen” as understood in common parlance. Applying the principle laid down by the Hon’ble Supreme Court of India, in common parlance popcorn is not known as namkeen and it is construed entirely different from namkeen in commercial parlance. As such, the popcorn does not merit classification under HSN 210690.

15. It is observed that the Explanations (iii) and (iv) to the Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017 provides as follows :–

[Explanation. – For the purposes of this notification,–

16. Further, Hon’ble Supreme Court, in the case of L.M.L. Ltd. v. Commissioner of Customs [Civil Appeal No. 3764 of 2003, dated 21-9-2010], has observed in para 12 of its order as follows :–

“[12. In Collector of Central Excise, Shillong v. Wood Crafts Products Ltd. reported in (1995) 3 SCC 454, it was held by this Court that as expressly stated in the statements of objects and reasons of the Central Excise Tariff Act, 1985, the Central Excise Tariffs are based on the Harmonious System of Nomenclature (HSN) and the internationally accepted nomenclature was taken into account to reduce disputes on account of tariff classification. Accordingly, for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the Harmonious System of Nomenclature (HSN). Although, the decision in the case of Woodcraft Products (supra) dealt with the interpretation of the provisions of the Central Excise Tariff there can be no doubt that the HSN Explanatory Notes are a dependable guide even while interpreting the Customs Tariff.]

17. It is observed that the product in question i.e. ‘POPCORN” is manufactured from maize Corn by heating in an electric kettle and due to the heat of kettle, they turn into puffed corns/popcorns and then to make it palatable other ingredients like salt and turmeric powder are added to it and a negligible quantity of oil is also used for the purpose of sticking the salt and turmeric on the maize/corn. Thus it is a ready to eat prepared food and fits the description as ‘Prepared foods obtained by the roasting of cereal’. This description attracts classification under chapter sub-heading 1904 10 of the First Schedule to the Customs Tariff Act, 1975. Since it is not Corn flakes (tariff item 1904 10 10), Paws, Mudi and the like (tariff item 1904 10 20) or Bulgur wheat (tariff item 1904 10 30), it will fall under the residual tariff item 1904 10 90 of the First Schedule to the Customs Tariff Act, 1975.

18. Although, there is no specific entry for the product ‘POPCORN’ in Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017, there is an entry most akin to the product and process (chapter heading 1904) at Sl. No. 15 of Schedule III of Notification No. 1/2017 Central Tax (Rate), dated 28-6-2017 and attracts 9% CGST and 9% SGST or 18% IGST. The Entry, at sl. No. 15, in the Schedule III is as follows :

SCHEDULE III -9%

19. In view of the above discussions, we, both the members unanimously rule as under :

Que. What should be the classification and GST rate on supply of Popcorn under Notification No. 01/2017 – Central Tax (Rate), dated 28-6-2017 amended till date?

Answer– The HSN code of the product namely “Popcorn” is 19041090 attracting rate of tax @ 9% each under Central and State Tax (cumulatively 18%) as per Sl. No. 15 of Schedule III of Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017 as amended.

21. This ruling is valid only within the jurisdiction of Authority for Advance Ruling Uttar Pradesh and subject to the provisions under section 103(2) of the CGST Act, 2017 until and unless declared void under section 104(1) of the Act.