The Telangana State Authority for Advance Ruling ( AAR ) has held that ready-to-eat popcorn attracts 18% GST.
The applicant, M/s. Agro Tech Foods Limited is selling readymade popcorn. According to the applicant ready to eat (RTE) popcorn is obtained by popping the maize corn by using heating process which are subsequently coated with the palmolene oil, salt natural or artificial flavouring and spices.
In applicant’s opinion, Heading 1904 includes prepared foods obtained by swelling or roasting of cereals or cereal products. Thus, the popcorn being manufactured by the applicant by using the process of swelling by heating would merit classification under Heading 1904. However that, in certain cases, RTE popcorn has also been held to be classified under Tariff Heading 2008 i.e., ‘Fruit, Nuts and Other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included. Further that the tariff heading 2106 is a residuary entry that covers food preparations that are not covered elsewhere like mithai, mishtans, sweetmeats, namkeen etc. Thus, for an item to be classified under this entry, it must not be falling under any other chapter heading. Thus, the popcorn containing an element of flavor (strawberry/chocolate) may also merit classification under Heading 2106. The application filed by the applicant to clarify the correct HSN classification and consequently rate of GST applicable on ‘Ready to Eat’ popcorn sold in retail packages.
It was observed by the authority that as seen from the facts of the case the tariff heading ‘2008’ pertains to a class of commodities covering fruits, nuts, and other parts of plants and not the preparations pertain to cereals, etc., which are enumerated in the competing tariff entry ‘1904’. Therefore the commodity under question clearly does not fall under tariff head ‘2008’. Regarding the contention of the applicant with respect to classification of RTE popcorn under a general tariff heading ‘2016’ it is to inform that, the Hon’ble Supreme Court of India in a catena of case laws held that a general entry or a residual entry will be preferred for a classification of commodity only in the absence of a specific entry.
The Coram of Sri B. Raghu Kiran, IRS, Additional Commissioner (Central Tax), and Sri S.V. Kasi Visweswara Rao, Additional Commissioner (State Tax) have held that “thus when a specific entry is available for enumerating the commodity ‘RTE popcorn’ to relegate it to the orphanage of the residuary entry will be against the principle of classification as held by Honorable Apex Court in Indian Metals & Ferrous alloys Vs CCE AIR (1991) SC 1020 and Honorable Supreme Court in Dunlop India Ltd. & Madras Rubber Factory Ltd. Vs. Union of India (UOI) and Ors. (1976)2SC C 241. Hence RTE popcorn is classifiable under tariff head 1904 enumerated at Serial No. 15 of Schedule III of Notification No. 01/2017 and attracts rate of tax 9% SGST & CGST each”.Subscribe Taxscan AdFree to view the Judgment