The ruling has been passed by the appellate authority for advance ruling, Harayana in case of M/s Khera Trading Company having appeal No. and Date as HAAAR/2018-19/06 dated 07.08.2019.
The main question in the below mentioned ruling was whether the topping prepared by the taxpayer/ applicant needs to be taxed as cheese at 12% or as any other food item at 18%. It was never questioned that whether pizza topping should be taxed as pizza and in many business there is higher GST on input then on output and thus this judgement has just been publicized out of proportion by everyone as even cheese is sold at 12% GST which is the main ingredient of Pizza whereas in most cases pizza is sold at 5% as restaurant service.
Brief Facts of the case:
The Appellant is inter alia engaged in the distribution of various dairy and non-dairy products and are registered with the jurisdiction at GST authorities vide GSTIN 06AOEPK0998K1ZK. The goods ” Pizza Topping’ is sold by the appellant under the brand ‘Goodrich’ is a proprietary food consisting of water, mozzarella cheese, vegetable oil and milk solids along with premixes of emulsifiers and stabilizers. It is ideal for use on pizza as a topping of cheese as it provides smooth lasting taste and stringiness to pizza.
The impugned good comprises of 14.5 percent mozzarella cheese to which other milk products such as skimmed milk powder and rennet casein are added. The milk ingredients constitute another 15 percent.
The manufacturing process of the the topping was also discussed.
Applicant’s contention
The applicant submitted that the product “Pizza topping” containing 14.5 per cent Mozzarella cheese and 15 per cent of other milk products along with other ingredients forms a type of cheese. Thus, it is classifiable under
Chapter Heading 406 (SI. No. 13 of Schedule -II to Notification No. 1/2O17 Integrated Tax/Notification No. 1/2017-Central Tax and Notification No 35/ST-2 as “cheese” and chargeable to GST@ 12%.
The applicant submitted t}l.at mozzarella cheese constitutes 14.5 percent of the total Pizza topping and it forms the main ingredient to which other ingredients are added in small quantities Pizza Topping contains 15 percent of other milk products such as milk solids and skimmed milk powder (already provided at Para. 2 5 under Annexure )) Thus almost 30 percent {14.5% (mozzarella cheese) + 15% (milk solids and skimmed milk powder)) of product is comprised of cheese and other milk derivate. Thus, the essential character of Pizza Topping is provided by mozzarella cheese without which the Pizza Taping will not achieve its cheesy character. Notable that topping maintains its basic cheesy character even after addition of other ingredients. Accordingly, the pizza Topping is a type of cheese under Heading 0406 which covers cheese.
GST officer’s comments:
The Deputy Excise & Taxation Commissioner (ST), Panipat vide letter No 5339 dated 20.07.18, submitted the requisite comments on the above question raised by the applicant stating therein that after reading the above heading it cannot be concluded that pizza topping falls under this head. There must be some different procedure adopted while preparation of cheese and pizza topping Heading 0406 clearly mentions cheese which is taxable @ l2%. Pizza topping is not specified under chapter 4 and hence requires to be subjected to 18% being unclassified in any schedule.
Submission of applicant during Appeal
During the course of appeal before appellate authority, applicant discussed various definition of cheese and submitted that since the major ingredient of topping is cheese and hence it should be classified as cheese only and in support of this contention it also relied on various case laws.
Appellate authorities Discussion and judgement:
We found that for any given product, the name, character and use are three important ingredients which decide classification of any given product. Hence we proceed to examine the classification of impugned item, keeping in mind the above guiding factors.
The impugned item is being sold by the appellant as “Pizza Topping, which contains water, mozzarella cheese, milk solids, skimmed milk powder and vegetable oil along with premix of emulsifiers, stabilizers, acidity regulators and preservatives, chesses fall under chapter heading 0406.
From the discussion, it is evident that the impugned item contains ‘vegetable fat” as a substantial portion being 22% of the ingredients, apart from mozzarella cheese which is only 14.5% of the combination of ingredients. Thus, the impugned item mainly comprises of “vegetable fat”. It is apparent from the above definition of “process cheese” as appearing in the HSN explanatory notes, that “vegetable fat” is not a prescribed ingredient for process cheese, hence, the presence of “vegetable fat” in substantial quantity, results the impugned item do not qualify to be categorized as “process cheese: or a type of cheese.
In view of above, we are of the considered opinion that the impugned item “pizza topping”, is not covered under the Chapter Heading 0406 of the 1st schedule to the Customs Tariff Act, 1975.
Having observed as above, we further hold that the impugned goods shall be aptly classifiable under Chapter Head 2106 of the schedule to the Custom Tariff Act, 1975 as Food preparations not elsewhere specified or included’ and chargeable to IGST @ 18%, CGST @ 9% and SGST @ 9%, as specified under S.No.23 of Schedule-III of Notification No. 1/2O17. Integrated Tax (Rate) dated June 28, 2017, Notification No. 01/2017 – Central tax (Rate) dated 28.06.17 and of Notification No.35/ST-2.
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