04-0 No. 82/2023 (DGGI) Dated: 29.12.2023 Ms. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi [Eeeaaee 7 Fax No:044-24312797 cel NATION email: dggiadi-chsouth@gov.in TAX MARKET ‘a ae Bar at Bee TE er ang aT OFFICE OF THE COMMISSIONER OF GST & CENTRAL EXCISE ‘tf efi siguiest / CHENNAI SOUTH COMMISSIONERATE 692, wean, wae, a7, B4 - 600035 692, M.H.U.COMPLEX, NANDANAM, CHENNAI - 600 035, File No. GEXCOM/ADJN/GST/ADC/1887/2023-ADJN Date of Order: 29.12.2023. DIN- 20231259TLOOOOOOCSF1 ORDER-IN-ORIGINAL No.82/ 2023 (DGG!) (PASSED BY Sri T.SAMAYA MURALI, |.R.S., ADDITIONAL COMMISSIONER) ‘efeBVPREAMBLE 1.ae sft Se cata & ferot soeter & fore fees af onc & feet ag ort fear sar 8) This copy is granted free of charge for the private use of the person to whom it is issued. 238 see 8 cata ae et cara sae frequ sare siya Gris) a arte ae ‘Frat Bl Any person deeming himself aggrieved by this order may appeal against it to the Jurisdictional ‘Commissioner (Appeals) 3.ane, feitte wa a, se cafes a carta Hf ot Ht arte a dit ade & shox craw a area fraat se aalida Par sar 31 The appeal shall be filed in the prescribed form within three months from the date of its communication to the person whom it is addressed. 4am Hee A sere aN, Sas, Galen, Yow HR Gai Hr aft & WS Res F ot aprarer oy, Star fa edgar & aie Saat eer S scare Pare A siamed ax A, Bree dae 4 ada aan ag %, Oe aie & ae viaert A are UR, sed Fr aida veda aris wad & apres We ge sree Pare vega aia agar ria) & wares erat | ‘An appeal against this onder shall lie before the Commissioner (Appeals) on payment in full of such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted and a sum equal to ten percent of the remaining amount of tax in dispute arising from the said order subject to a maximum of twenty - five crore rupees, in relation to which the appeal has been filed. Page 1 of 420-1-0 No, 82/2023 (DGGI) Dated: 29.12.2023 Mis. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi Sub:- GST ~ M/s. Innovative Retail Concepts Private Limited — Short-payment of GST on account of ‘wrong classification of “Tofu (soya paneer)’ - SCN No. 13-GST-2023-24 dated 15.09.2023 issued by DGG, Jammu Regional Unit- Order passed Regarding, MJs. Innovative Retail Concepts Private Limited, (herein afier referred to as the “Texpayer"/ having PAN: AACCI2053A hereinafter referred to as M/s Innovative) , registered under multiple GSTINs in various states, are supplying, amongst other goods, Tofu (also known as Soya Paneer) by paying GST at 5% (2.5% CGST+ 2.5% SGST) rate by declaring the same under HSN 0406. M/s Innovative Retail Concepts Private Limited, Plot no.167/22, Sector 28, Bamnoli village, New Delhi-110077 having GSTIN 07AACCI2053A1Z9 (hereinafter referred to as ‘M/s “Innovative Dell Innovative Delhi" or ‘the Party’) is one of such registered entities supplying, amongst other goods, ‘Tofu (also known as Soya Paneer) by paying GST at 5% (2.5% CGST+ 2.5% SGST) in Delhi NCR. 2. Intelligence was developed that M/s Innovative Chandigarh (GSTIN 044ACCI2053A1ZF), were wrongly classifying Tofu (Soya Paneer) by paying GST @ 3% & by classifying it under 0406 whereas, GST, Tofia being a food preparation, ought to be discharged @ 28% for the period 01.07.2017 to 14.11.2017 as pet Entry No. 9 of Schedule IV to Notification No. 01/2017-CT (rate) dated 28.06.2017and @ 18%, as per entry no. 23 of Schedule III to Notification No 01/2017-CT (Rate) as amended. 3. Acting upon the intelligence, investigations were initiated by way of inspection mode under Section 67(1) of the CGST Act, 2017 and it emerged that M/s Innovative Chandigarh (GSTIN 04AACCI2053A1ZF) is selling Tofu (Soya Paneer) of various brands and paying GST @5% on such Tofu (Soy Pancer). As such figures of total sale made by M/s Innovative Retail Concepts Private Limited on all GSTIN registered under PAN - AACCI2053A has been obtained and it wes found that they have short paid GST on Tofu by paying GST @ 5%, instead of 28%/18%. 4. Classification of Tofu ‘The Party has been declaring the Tofu supplied by them under HSN 0406 and have paid GST @ 5% under Notification No.01/2017-C1(R) dated 28.06.2017. General manufacturing process of *Tofu’ is as below: i) Soya Bean seeds are soaked in water for 4 to 10 hours depending upon the temperature and washed, ii) Then soaked soya beans seeds are grinded in grinding machine by adding water to obtain ground material i.e., slurry which is then cooked at 100degree Celsius for 5 minutes and then filtered to obtain soya extract. iii) Soya extract is then coagulated by adding coagulating agents like citric acid and then coagulated material is pressed and hard material obtained is soya paneer (tofu). iv) Soya paneer (tofu) is then cut to size and dipped in brine solution and packed. Hence manufacturing process of the Tofu clearly shows that it is manufactured from Soy Bean seeds and appears to be of plant origin and not of animal origin. Chapter 04 of Customs Tariff Act covers the — following: “Dairy produce; birds’ eggs; natural honey; edible products of animal origin, notelsewhere specified or included” Page 2 of 42041-0 No, 82/2023 (DGG!) Dated: 29,12.2023 Mis. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi 4.1 Further Notification No. 01/2017-CT(R) covers following categories in GST Rate Notification 01/2017-CT (R): i) Chena or paneer, other than those put up in unit container and,- (a) bearing a registered brand name; or (b) bearing a brand name on which an actionable claim or enforceable right in a court of law is available [other than those where any actionable claim or enforceable right in respect of such brand name has been foregone voluntarily, subject to the conditions as in the ANNEXURE I] : NIL GST RATE ii) Chena or paneer put up in unit container and,- {a) bearing a registered brand name; or (b) bearing a brand name on which an actionable claim or enforceable right in a court of law is available [other than those where any actionable claim or any enforceable right in respect of such brand name has been voluntarily foregone, subject to the conditions as in the ANNEXURE] : 5% GST RATE iii) Cheese: 12% GST RATE In view of the above, it appears that Tofu or Soya Paneer does not merit classificationunder Chapter 04, as the Chapter only pertains to Dairy Produce/Animal Origin products, while Tofu is Plant based product. M/s KCL Ltd, the manufacturer of ‘Murginns’ brand of Tofu, which is being supplied by M/s Innovative, along with other brands of Tofu, has admitted that they were wrongly classifying the Tofu under Chapter 0406 and have claimed its classification under S.No.71 of the Schedule I of Goods Rate Notification. S.No 71 of Schedule | of rate Notification No. 01/2017-CT(R) dated 28.06.2017 reads as under: S.No | Chapter/Heading7 | Description of Goods Sub-heading / Tariff faeces item eStats | dy (2) G3) 7 1208 Flour and meals of oil seeds or oleaginous fruits, cs otherthan those of mustard ‘Thus classification of Tofu (Soy Paneer) is claimed under $.No.71 as Flour and meals of Oil Seeds or Oleaginous fruits. However, it appears that above classification is only reserved for Flour and meals of Oil Sceds. Oilseed cakes and meals are the residues remaining after removal of the greater part of the oil from oilseeds. The residues are rich in protein and most are valuable feeds for livestock. Further, soybean meal is produced from the residue left after oil extraction, Thus, it appears that Tofu cannot be equated with Flour and meals of Oilseed, and thus HSN 1208 is not the proper classification for Tofu. Meals of Soyabean as defined in various open sources are as under: https://www.sciencedirect .com Soybean Meal is ground soybean cake, ground soybean chips, or ground soybean flakes. A name descriptive of the process of manufacture, such as “expeller,” “hydraulic” or “solvent extracted” is used in the brand name. It shall be designed and sold according to its protein content John K, Bernard, in Encyclopedia of Dairy Sciences (Third Edition), 2022 Soybean Meal Page 3 of 4204-0 No. 82/2023 (DGGI) Dated: 29.12.2023 Mis. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Dethi Soybean meal is the most commonly used protein supplement and is the standard used for determiningthe nutritive value of other protein supplements, The most common forms of SBM are solvent extracted (44% CP, as-fed basis) and dehulled, solvent extracted (48% CP, as-fed basis). Soybean meal is very palatable and contains large quantities of essential AA (approximately 45% of the total AA), but a large proportion of the protein is degraded by the ruminal microorganisms. In terms of essential amino acid balance, methionine is more limiting in SBM than is lysine. Soybean meal is commonly heat or chemically treated to reduce ruminal protein degradability (nereases RUP/UIP) and increase the flow of dietary AA to the small intestine. Commercial Processes used to produce heat-treated SBM include cooker expeller processing of SB, extruder- expeller processing of SB, non-enzymatically browning of dehulled, solvent extracted SBM, and cooker processing of dehulled, solvent extracted SBM. Controlled research studies are lacking for SBM produced by extruder-expeller or expeller-extracted processing of SB and cooker processing of dchulled, solvent extracted SBM, Heat-treated SBM increases the total flow of essential AA to the small intestine and supports higher milk yields. Chemically treating SBM with sulfate liquor and xylanase, sodium hydroxide, or formaldehyde increases flow of dietary AA to the small intestine but does not increase the total flow of essential AA to the small intestine because of reduced microbial protein flow. While formaldehyde treatment is legal in some countries, it is not commonly used due tothe higher cost compared with other more common treatments. Production responses to feeding treated SBM has resulted in similar or increased milk yield when compared with solvent extracted SBM. Positive milk yield responses to treated SBM are more common when diets contain alfalfa silage as the primary forage compared with diets based on com silage. Heat treated SBM products usually support greater levels of milk yield compared with solvent extracted SBM (35.9 kg/d versus 34.7 kg/d, respectively). Milk yield was increased for cows fed nonenzymatically browned SBM compared with solvent extracted SBM. In another trial, milk yields were similar for cows fed either solvent extracted SBM or nonenzymatically browned SBM fed at halfthe amount of solvent extracted SBM in the control diet. Few trials have reported increased performance or efficiency when chemically treated SBM replaced solvent extracted SBM. Replacing solvent extracted SBM with cooker-expeller SBM increased milk yield 3% and efficiency of dry matter utilization 4%, Soybean meal From Wikipedia: Soybean meal is used in food and animal feeds, principally as a protein supplement, but also as a source of metabolizable energy. Typically 1 bushel (ie. 60 Ibs, or 27.2 kg) of soybeans yields 48 Ibs. (21.8 kg) of soybean meal. Some, but not all, soybean meal is produced as a co-product of soybean gilextraction. Some, but not all, soybean meal contains ground soybean hulls, Soybean meal is heat-treated during production, to denature the trypsin inhibitors of soybeans, which would otherwise interfere with protein digestion, Major kinds of soybean meal- Three main kinds of soybean meal are produced: + Full-fat_soybean meal, made from whole soybeans. It has a high metabolizable energy concentration. (For example, metabolizable energy for swine in this product is about 3.69 megacalories (i.e. 15.4MJ) per kg dry matter.) Crude protein concentration is about 38 percent (as fed). This kind of product is sometimes fed to various classes of livestock. + Defatted soybean meal, containing no hulls. This product has an intermediate energy concentration. (For example, metabolizable energy for swine in this product is about 3.38 megacalories (je, 14.1MJ) per kg dry matter.) Crude protein concentration is about 48 percent. This percentage [which is commonly used in describing the product] is calculated at the typical as-fed moisture content of 88 percent. Thus, crude protein concentration expressed on a dry matter basis is ‘54 percent. This product is commonly fed to swine, broilers and layers. Page 4 of 4204-0 No, 82/2023 (DGGI) Dated: 29.12.2023 Ws. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi + Defatted sovbean meal, containing soybean hulls. The hulls are readily digestible by ruminant livestock. This product is often fed as a protein supplement for domestic ruminants. Ruminant- metabolizable energy concentration is about 3.0 megacalories (ie. about 12.5 MJ) per kg dry matter,and crude protein concentration is about 44 percent.The latter percentage [which is commonly used in describing the product] is calculated at the typical as-fed moisture content of 90 percent. Thus,crude protein concentration on a dry matter basis is 49 percent. ‘Thus from the above definitions of Soyabean Meals, it appears that it is totally different than Tofu being manufactured by the Party which cannot be considered as Flour and Meal of Soyabean to merit its classification under HSN 1208 of the Customs Tariff Act. 42. Therefore, the only applicable classification for Tofu or Soya Paneer appears to be ‘ChapterHeading 2106, which is referred in rate notification(as amended), as under: i. 2106: Khakhra, Plain chapatti or roti: GST 5% i. 2106: Roasted Gram idli/dosa batter, chutney powder: GST 5% 2106 90: Sweetmeats: GST 5% 2106 90: Namkeens, bhujia, mixture, chabena and similar edible preparations in ready for consumption form, other than those put up in unit container and.- (a) bearing a registered brandname; or (b) bearing a brand name on which an actionable claim or enforceable right in a court of law is available [other than those where any actionable claim or any enforceable right in respect of such brand name has been voluntarily foregone, subject to the conditions as specified in the ANNEXURE] : GST 5% v. 2106: Texturised vegetable proteins (soya bari), Bari made of pulses including mungodi and batters: GST 12% vi. 2106 90: Namkeens, blujia, mixture, chabena and similar edible preparations in ready for consumption form [other than roasted gram] put up in unit container and,- (a) bearing a registered brand name; or (b) bearing a brand name on which an actionable claim or enforceable right in a court of law is available [other than those where any actionable claim or any enforceable right in respect of such brand name has been voluntarily foregone, subject to the conditions as specified in the ANNEXURE]: GST 12% vii, 2106 90 91: Diabetic foods: GST 12%2106: Food preparations not elsewhere specified or included {other than roasted gram, sweetmeats, batters including idli/dosa batter, namkeens, bhujia, mixture, chabena and similar edible preparations in ready for consumption form, khakhra, chutney powder, diabetic foods: GST 18% Even in the earlier scheme of classification in Central Excise the Food items not elsewhere specified were classifiable under Central Excise Tariff Heading 2107 which read as under: Heading No. Sub-Heading No. | Description of goods 21.07 Ee Edible preparations not | elsewherespecitied or | included. - 2107.10 Prasad or Prasadam 2107.20 ~Sterilised or pasteurisedmiltone I oa Other : 2107.51 “Pat up in unit containers, | andordinarily intended for sale i a 2107.99 EOther! aan Muwe ani) ‘Thus, it appears that most appropriate classification for Tofu or Soya Paneer, appears to be HSN 2106, taxable @28%/ 18% GST. The HSN Code 1208 is for Flour and meals of Oil Seeds and other Oleaginous Fruits. As discussed above, Tofu (Soy Paneer) is neither flour nor meal of Soyabean but Page 5 of 4204-0 No. 82/2023 (DGG!) Dated: 29.12.2023 Mis. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi isa food product derived by specific processes applied to Soya Beans and cannot be termed as Soyabean Meals. 4.2.1 Above classifications under HSN 2106 is also justifiable on following grounds: ®. __ As per International Standards also, Tofu is classifiable under HSN 2106 as gathered from the Government websites of U.K, Singapore and Canada. b. GST on Milk has been kept NIL rated (HSN 0401: 0%). However, GST on Soya Milk has been taxed at 12%, vide specific HSN entry 2202 99 10, Thus, Soya Milk has been made taxable, even though Milk is exempted. Tofu or Soya Paneer is made after processing of soya milk made from soya beans. If pancer is taxable @ 5% (under HSN 0406), soya paneer merits classification under 2106 only, in absence of specific HSN entry in Rate Notification or Customs schedule. ¢. Plant Milks are Non-dairy beverages, as such, cannot be classified under Chapter HSN 04. Soy milk is made from whole soybeans or full-fat soy flour, The dry beans are soaked inwater for 2 minimum of three hours up to ovemight depending on the temperature of the water. The rehydrated beans then undergo wet grinding with enough added water to give the desired solids content to the final product which has a protein content of 1~4%, depending on the method of production. The ratio of water to beans on a weight basis is 10:1 for traditional soy milk, The resulting slurry or purée is brought to a boil to improve its taste properties, by heat inactivating soybean trypsin inhibitor, and to sterilize the product. Heating at or near the boiling point is continued for a period of time, 15-20 minutes, followed by the removal of insoluble residues (soy pulp fiber) by straining/filtration. Mere mention of word “Milk’ does not make Soya Milk exempt under HSN 0401. On similar issue, Almond Milk has been held to be taxable @ 18% under HSN 2202 99 90, even though specific heading "Beverages Containing Milk under HSN 2202 99 30" exists with 12% GST. Thus, even though it is marketed as Almond Milk, it cannot be said to be beverage containing milk, as milk is construed to be associated with Dairy Milk/Animal Origin only. Similarly, Soya Paneer cannot be held as Paneer, or under any Chapter Heading of HSN 04, as soya paneer is made by coagulating Soya Milk only, which is not Milk under Chapter HSN code 04. 4.3. On_ being asked as to why M/s Innovative were classifying Tofu under HSN 0406, M/s Innovative has stated that classification of product cannot be changed at recipient’s end, and that the company used the same description, classification and HSN on the tax invoices issued to its customers as was done by their suppliers. However, they have not responded to queries as to why ‘Tofu was being classified under HSN 0406 when it is a product of ‘plant origin’, and as to why Tofu should not apparently be classified under HSN 2106. 5 As per the data submitted by ‘M/s Innovative’ vide email dated 18-01-2023 (RUD-1) and 08- 06-2023 (RUD-2) they have made outward supplies of *Tofu’ (under HSN 04069000) having taxable value as mentioned in the Table and have charged GST @ 5% detailed as under: Table-1 IRCPL Details of Tofu Sales PLY. 2022-23 (April 22 to Dec 22) State Rate | HSN Code | Taxabl cGsT sGsT eValue Andhra Pradesh 5} 4069000 56568 1414 1414 ‘Assam 5| 4069000 140743 3519 3519) Bihar 5] 4069000 (6557 164 164 ‘Chandigarh S[ 4069000 401906 10048 10048 ‘Chhattisgarh | 4069000 15340 384 384 Page 6 of 42.041-0 No. 82/2023 (DGG!) Dated: 29.12.2023, Mis. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi Gujarat 5] 4069000 523104 13078 13078 Haryana. 5] 4069000 2953585 73840 73840 Jharkhand S| 4069000 16900 423 423 Kerala S| 4069000 107519 2688 2688 Karnataka, 5 4069000, 2988478 74712. 74712 Maharashtra [4069000 3321626 83041 83041 Madhya Pradesh. | 4069000 266435 6661 6661 Odisha 5|__4069000 115779 2894 2894 Rajasthan [4069000 226431 5661 5661 ‘Telangana S| 4069000 766360, 19159 19159 ‘Tamil Nadu | 4069000 810139 20253 20253 Uttar Pradesh. 5] 4069000 1463453 36586 36586 ‘West Bengal S| 4069000 1095812 27395, 27395 Grand Total 15276734 381918 381918 TRCPL Details of Tofu Sales FY. 2021-22 State Rate | HSNCode | Taxable Value | CGST sesT Andhra Pradesh 5 4069000 248124 6203, 6203, ‘Assam g 4069000 16688 417 417 ‘Chandigarh 5 4069000 471389 11785 11785 Delhi 5 4069000 9149) 229 229. Gujarat 5 4069000 671407 16785 16785 Haryana_ 5 4069000 3466937 86673 86673 Kerala 5 4069000 127029 3176 3176 Kamataka 5. 4069000 3730976 93274 93274 Maharashtra 5 4069000 3823600 95590. 95590 ‘Madhya Pradesh 5 4069000 253191 6330 6330 Odisha_ 5 4069000 16537 413 413 Rajasthan 5 4069000 384743 9619) 9619. Telangana 5 4069000 1092875 27322 27322 Tamil Nadu 5 4069000 1066002 26650 26650 Uttar Pradesh 5 4069000 2248484 56212 56212 West Bengal 5 4069000 1491842, 37296 37296 Grand Total 19118973 A77974 ATI9TA IRCPL Details of Tofu Sales F.Y. 2020-21 State Rate | HSN Code | Taxabl cGsT sGsT eValue Andhra Pradesh 3 0406 187942 4699 4699 (Chandigarh 3 0406 430761 10769 10769 Delhi 5 0406 4305 108 108 Gujarat 5 0406 666488 16662, 16662 Haryana 5 0406| 3406804 85170 85170 Kerala 5 0406 67003 1675 1675 Kamataka 3 0406 2610783 65270 65270 Maharashtra 5 0406 { 3059959 76499 76499 Madhya Pradesh 5 0406 228432 S711 S71 [Rajasthan 3 0406 279508 6988 6988 Page 7 of 42041-0 No, 82/2023 (DGG!) Dated: 29.12.2023 Mis. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi Telangana’ 5 0406 710790 17770 17770 Tamil Nadu 5 0406 563472 14087 14087 Uttar Pradesh, 5 0406 2002550 50064 50064 West Bengal 5. 0406 1211209 30280 30280 Grand Total 15430004 385750 385752 IRCPL Details of Tofu Sales F.Y. 2019-20 State Rate | HSN Code | Taxabl cost scsT eValue “Andhra Pradesh 3 0406 57273 1432 1432 ‘Chandigarh 3 0406, 98560 2464 2464 Delhi 5 0406 1774 44 44 Gujarat 5 0406 109101 2728 2728 Haryana, 3] (0406 669729) 16743 16743 Kerala 5 0406 16978 424 424 Kamataka 5 0406 878529 21963 21963 ‘Maharashtra 3 0406 (699474 17487 17487 Madhya Pradesh 3 0406 23764 594 594, Rajasthan 5 (0406 68457 17 iit Telangana 3 0406 133745 3344 3344 ‘Tamil Nadu. 5 0406 60598 1513] 1515 Uitar Pradesh 5 0406 316393 7910 7910 West Bengal 5 0406 286996, 175 7175 Grand Total 3421371 85534 85534 IRCPL Details of Tofu Sales F.Y. 2018-19 State Rate | HSN Code | Taxabl cast sGsT eValue ‘Andhra Pradesh 3 0406 90550 2264 2264 Delhi 5 (0406 31726 793 793 Haryana, 5 0406320881 8022 8022 Karnataka 3 0406 497876 12447 12447 Maharashtra 3 0406 10911 273 273 Telangana 5 0406 374764 9369 9369 Uttar Pradesh 5 0406 169313 4233 4233 ‘Grand Total 1496022 37401 37401 IRCPL Details of Tofu Sales F.Y, 2017-18 (From July 2017 to March 2018) State Rate HSN | Taxable Value) CGST SGST Code Delhi 5. 0406 176676 4417 4417 Haryana. I 0406. 111980, 2800 2800 Kamataka 5 0406, 823240 20581 20581 Maharashtra 5 0406, 289003 7225 7225, ‘Telangana 3 0406, 94487 2362 2362 Tamil Nadu 5 0406. 151600 3790, 3790 Uttar Pradesh 5 0406, 74770 1869 1869 Grand Total 1721756 43044 43044 6 On the basis of above figures in Table-1, GST liability payable (CGST/SGST/IGST) arrived Page 8 of 4204-0 No. 82/2023 (DGGI) Dated: 29.12.2023 Ms, INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi (on proportional basis) in respect of * Innovative Delhi * is as under:~ Table-2 (Figures in) ___Dethi (07AACCI2053A129) Lee aa 7 | Period | Taxable] Tax paid Tax paid Tax due | Tax due Value | (2.5%CG| (2.5%SGST | (11.5%/6.5% | (11.5%/6.5% st) | cast) SGsT) Saag es + 2017-18 (July a 2017 | to November 59190 1480 1480 6807 6807 2017) | Ss x| 2017-18 (December 2017 j to 117485 2937 2937 7637 7637 March 2018) earl lls 2018-19 31726 793 793 2062 2062 2019-20 1774 44 44 15 115] 2020-21 4305 108 708 280 280 Bj__f08} _280)__280 2021-22 «| «49 229 m9) 595 395 223629 ‘5591 5591 | 17495| «17495 7 Contravention & Legal Provision: On scrutiny of record as discussed above, “M/s Innovative Delhi * appears to have contravened thefollowing provisions of the CGST Act, 201 7irespective State GST Acts, 2017 (in shorts Acts) @ Section 31 of the Acts read with Rule 46 & 47 of the CGST Rules, 2017 as amended from time to time read with rule 46 of the corresponding State GST Rules, 2017 as amended from time to time (in short Rules) as much as they have not issued invoices showing correct classification, in respect of their outward supply of Soy Paneer (Tofu) and charged GST @5% instead of applicable rate of GST @18%I28%. (ii) Section 39 of the Acts read with Section 20 of the IGST Act, 2017 and with Rule 59 & 61 of the rules as much as they have failed to file their GST return showing applicable rate of tax in respect of supply of Soy Paneer(Tofu). (vi) Section 59 of the Act as much as they have failed to self-assess their tax payable under the ‘Acts or under the IGST Act, 2017 as they have wrongly classified their product and paid less tax. 6 The relevant sections and rules of the Act applicable in this case are as under:~ Section 50. () Every person who is liable to pay tax in accordance with the provisions of this Act or the rules ‘made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his ‘own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council. (2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid. Page 9 of 4204-0 No. 82/2023 (DGGI) Dated: 29.12.2023 Mis. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi (3 A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent, as may be notified by the Government on therecommendations of the Council. Section 73(1) of the CGST Act,2017 Section 73. Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any willful-misstatement or suppression of facts.~ () Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been maule, or who has wrongly availed or wilised input tax credit, requiring him 10 show cause as to why he should not pay the amount specified in the notice along with interest payable thereon undersection 50" and a penalty leviable under the provisions of this Act or the rules made thereunder, 8. _In view of the discussion supra, the Soy Paneer (Tofu) supplied by ‘M/s Innovative Delhi? appears to be classifiable under HSN code of 2106 and chargeable to GST @ 28% for the period 01.07.2017 to 14.11.2017 {SLNo 9 of Schedule IV (o the Notification No. 01/2017-Central Tax (Rate)} and 18% (S. No. 23 of Schedule-III to the Notification No. 01/2017-Central Tax (Rate) as amended) wee.f, 15.11.2017. Thus, for the period 01.07.2017 to 14.11.2017, applicable GST rate on ‘Tofu(Soya Paneer) was 28%, classifiable under Entry 9 of Schedule IV in Notification No. 01/2017- CT (rate) dt 28.06.2017. Said Notification was amended vide Notification 41/2017-CT(Rate) dt 14.11.2017, vide which Entry 9 of Schedule IV was omitted, As such, w.e.f. 15.11.2017, appropriate classification is under Entry 23 of Schedule II] of Rate Notification 01/2017-CT(R) as amended. Therefore, the short payment of GST to the extent of differential rate icc 13% (18% from the 5%) is demandable and recoverable from ‘M/s Innovative Delhi’ under section 73(1) of CGST Act, 2017 read with corresponding Section of State GST Acts, 2017 alongwith interest payable thereon under Section 50 of the Act. Further penalty Section 73 of the Act is also applicable under the provisions of the Act, 9. DRC-O1A dated 02-09-2023 (RUD-3) has been issued to the party and the party has not filed any reply against the same, 10. Para 7.1 of Circular No.31/05/2018 - GST dated 09-02-2018 as amended vide Circular 'No.169/01/2022-GST dated 12.03.2022 reads as under: “7.1. In respect of show cause notices issued by officers of DGGI, there maybe cases where the principal place of business of noticees fall under the jurisdiction of multiple Central Tax Commissionerates or where multiple show cause notices are issued on the same issue to different noticees, including the persons having the same PAN but different GSTINs ,having principal place of business falling under jurisdiction of multiple Central Tax Commissionerates, For the purpose of adjudication of such show cause notices, Additional/Joint Commissioners of Central Tax of specified Commissionerates have been empowered with All India jurisdictionvide Notification No. 02/2022-Central Taxdated LI"March, 2022, Such show cause notices may be adjudicated, irrespective of the amount involved in the show cause notice(s), by one of the Additional/Joint Commissioners of Page 10 of 42O-I-O No. 82/2023 (DGG!) Dated: 29.12.2023 Ms. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi Central Tax empowered with Ail India jurisdiction vide Notification No. 02/2022-Central Tax dated 1!"March, 2022. Principal Commissioners/ Commissioners of the Central Tax Commissionerates specified in the said notification will allocate charge of Adjudication (DGGI cases) to one of the Additional Commissioners! Joint Commissioners posted in their Commissionerates. Where the location of principal place of business of the noticee, having the highest amount of demand of tax in the said show cause notice(s). falls under the jurisdiction of a Central Tax Zone mentioned in column 2 of the table below. the show cause notice(s) may be adjudicated by the Additional Commissioner’ Joint Commissioner of Central Tax, holding the charge of Adjudication (DGGI cases), of the Central Tax Commissionerate mentioned in column 3 of the said table corresponding 10 the said Central Tax Zone. Such show cause notice(s)may, accordingly, be made answerable by the officers of DGGI to the concerned Additional/ Joint Commissioners of Central Tax.” Hence as per figures supplied by M/s Innovative _, the highest demand lies in the state of Kamatka and as per Circular No.31-05-2018-GST dated 09-02-2018 as amended, the show cause notice(s) shall be adjudicated by Additional /Joint Commissioner of Central Tax (holding the charge of Adjudication of DGGI cases), Chennai South Commissionerate, in respect of all the Noticee(s). 11. Now, therefore, M/s Innovative Retail Concepts Private Limited, Plot no.167/2/2, Sector 28, Bamnoli village, New Delhi-110077 having GSTIN 07AACCI2053A1Z9 are hereby called upon to show cause to the Additional /Joint Commissioner ( holding the charge of Adjudication of DGGI cases) of Central Tax, Goods and Services Tax, Chennai South, MHU Complex No.692, Anna Salai, Nandanam, Chennai - 600035 within 30 days of the receipt of this Show Cause Notice as to why: i ‘The taxpayer should not pay CGST amounting to 217,495/- under Section 73(1) of the CGST Act, 2017 along with interest payable thereon under section 50(1) of the Act ibid; ii, The taxpayer should not pay SGST amounting to 817,495/- under Section 73(1) of the Delhi GST Act, 2017 along with interest payable thereon under section 50(1) of the Act, ibid; i The taxpayer under Section 73(1) of CGST/ Delhi GST Act, 2017 should not be imposedon the amounts specified at (i)& (ii) above. 12, REPLY TO THE SHOW CAUSE NOTICE: Innovative Retail Concepts Private Limited vide their letter dated 21.12.2023 submitted their reply to the show cause notice wherein they have stated inter alia that ~ 1. The Noticee Company is inter alia engaged in sale of Tofu (Soya Paneer) through bigbasket.com. 2. During the impugned period, Wellness Food, a unit of KCL Ltd. was the major supplier of the “Tofu (Soya Pancer) sold by the Noticee Company through bigbasket.com. The variants of Tofu (Soya Paneer) sold by KCL Ltd. to the Notice Company under the brand names ‘Mooz’ and ‘Murginns’ are Plain Tofu, Masala Tofu, Vegetable Tofu and Peanut Chilli Tofu. Page 11 of 42O-I-0 No. 82/2023 (DGG!) Dated: 29.12.2023 Mis. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi 3. KCL Lid. has classified the Tofu (Soya Paneer) manufactured and sold by it under CTH 0406 (Cheese and Curd) and Customs Tariff Entry 0406 9000 (Other Cheese). KCL Ltd. has charged 5% GST on sale of Tofu (Soya Panner) to the Noticee Company. 4, Sample invoices raised by KCL Ltd. on the Noticee Company for sale of Tofu (Soya Paneer) by classifying the same under CTH 0406 (Cheese and Curd) and charging 5% GST are enclosed as Annexure-2, 5. Considering the settled principle that classification cannot be changed at recipient's end, the Notice Company has classified the ‘Tofu (Soya Paneer) sold/traded by it through bigbasket.com under CTH 0406 (Cheese and Curd) and Customs Tariff Entry 0406 9000 (Other Cheese) — the very same classification adopted by its suppliers. 6. — The Noticee Company lists Mooz brand of ‘Tofu (Soya Paneer)’ under the sub-category “Dairy & Cheese’ which in turn falls under the category ‘Gourmet & World Food’. In this regard, relevant screenshot of bigbasket.com is extracted below: Riteeet ue «=o =e ontmey. te oo wet > coms @ tome / crane nites / Dahmer! srsver 00 @ ~ ee ie Ea MOO2 Organ Tots-Soy Paneer, 2000 =) 20% 07 eamys 9 teen je Pre: 100.0578) MGOZ ceed ensien | = a 7. The ingredients of Mooz Soya Tofu: are Soya Bean and Coagulant (citric acid). In this regard, relevant screenshot of bigbasket.com is extracted below: Page 12 of 42O4-0 No. 82/2023 (DGG!) Dated: 29.12.2023 Mls. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi Babigbesket rownntie ‘ome 60004 Barcus oti Fruts ev. tee hee Noni » ‘ @ tome / Gourmet worsted / Daly& cneese / Tom fon MOOZ Organic Tofu - Soy Paneer, 2009 39% 2987 Rasngs & 159 Reviews Price: 100 ro /<) Serene enn aie Meg ie: orion Eanes: ‘The proposed adjudication of the impugned SCN by the Ld. Additional /Joint Commissioner of Central Tax (holding the charge of Adjudication of DGGI cases), Chennai South Commissionerate is without jurisdiction A.1. In the instant case, the impugned SCN is issued by the Senior Intelligence Officer of DGGI, Jammu Zonal Unit under Section 73 of the CGST Act. However, the same is proposed to be adjudicated by Additional / Joint Commissioner of Central Tax, CGST Chennai South Commissionerate, a different proper officer. Proposed adjudication of the impugned SCN by a proper officer, other than the one issuing the impugned SCN, is without jurisdiction, ‘A2. Section 73 of the CGST Act empowers “the proper officer” to serve notice for recovery of any tax not levied or paid or short-levied or short-paid or erroneously refunded. Section 73(3) of the Act also empowers “the proper officer” to serve a statement of demand, which is deemed to be service of notice. Section 73(9) of the Act empowers “the proper officer” to adjudicate such notice. ‘A.3. The aforesaid provisions of Section 73, thus, empower “the proper officer” to issue and adjudicate SCN. Hence, the deliberate use of “the” before proper officer in Section 73 is indicative that only the officer, who has issued the SCN in the first place, can only adjudicate the SCN. Once the power of issuance of SCN is exercised by one proper officer. the power of its adjudication is also to be exercised by the same proper officer. A.4. Applying the principle of comity in the present case, it can be concluded that the impugned SCN can be adjudicated only by the officer, who issued it in the first place and proposed adjudication by Page 13 of 4204-0 No. 82/2023 (DGG!) Dated: 29.12.2023 M/s. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi Additional / Joint Commissioner of Central Tax, CGST Chennai South Commissionerate is without jurisdiction. ‘Tofu is classifiable under CTH 0406 (Cheese and Curd) and the demand raised in the impugned SCN merits to be set aside B.1 It is submitted that Tofu is classifiable under CTH 0406 (Cheese and Curd) and the demand raised in the impugned SCN merits to be set aside. B.2_ The Noticee Company submits that under the GST Regime, the rate of tax for supply of goods is to be determined in accordance with Notification No.1/2017-Central Tax (Rate) dated 28.06.2017 (“Goods Rate Notifeation”). Applicability of appropriate Customs Tariff classification B.3_ The Goods Rate Notifications contain 6 Schedules, each of which prescribes a particular rate of tax. Goods are then sorted into these 6 Schedules, such that all goods appearing under a given Schedule Will attract the rate of tax applicable to that Schedule. For instance, goods under Schedule I will attract tax at 5%, goods under Schedule II will attract tax at 12%, goods under Schedule III will attract tax at 18%, etc, B44 Goods are categorized under these 6 Schedules, based on the description of goods and applicable Chapter Heading, Sub-Heading/Tariff Items of the First Schedule to the Customs Tariff. B.S _ Explanations (iii) and (iv) to the Goods Rate Notification provides as under: “Git) “Tariff item”, “sub-heading" “heading” and “Chapter” shall mean respectively a tariff ‘tem, sub-heading, heading and chapter as specified in the First Schedtule 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.” B.6 From the above, it is apparent that for the purposes of interpretation of the entries in the GST ‘Tariff, the General Interpretative Notes, Section Notes, Chapters Notes, and the HSN explanatory notes are applicable to the extent possible. This is evident frum the use of the phrase ‘shall, so far as may be, apply to the interpretation of this notification’. B.7 In other words, the classification principles applicable to classification of goods under the ‘Customs Tariff Schedule and the jurisprudence evolved so far on the questions of interpretations of the various entries in the HSN Tariff Schedule would apply to the extent possible for classification of the goods for the purposes of levy of GST also, B.8 Accordingly, the Noticee Company submits that the process of classification of goods under the Customs Tariff involves the interpretation of the Section Notes, Chapter Notes, Sub-Heading Notes, Page 14 of 420-1-0 No. 82/2023 (DGG!) Dated: 29.12.2023 M/s, INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi Supplementary Notes, Headings, Sub-headings and the General Rules for Interpretation (hereinafter referred to as the “GRI”) of the Customs Tariff. B.9 The GRI isa set of 6 rules that aid in the classification of the goods under Customs Tariff. It is a settled law that the GRI have to be applied sequentially to arrive at a proper classification of the imported goods. B.10 GRE 1 to 5 Jay down the principles determining the classification of goods under a specific Heading whereas GRI 6 is applicable if the objective is to determine the classification of goods in the Sub-headings of a Heading. B.11 GRI I of the GRI stipulates that the goods under consideration should be classified in accordance with the terms of the Headings and any relevant Section or Chapter Notes, and if the goods are not classifiable as per the description provided, subsequent rules are to be looked into. For ease of reference, Rule 1 of the GRI is reproduced below: Classification of goods in this Schedule shall be governed by the following principles: 1. The titles of Sections, Chapters and Sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative ‘Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions:...” B.12 Further, the Section Notes or Chapter Notes and Sub-Heading Notes give detailed explanation as, to the scope and ambit of the respective Sections and Chapters. These notes have been given statutory backing and have been incorporated at the beginning of each Chapter. B.13 In the case of CCE y, Simplex Mills Co. Ltd, [2005 (181) E.L.T. 345 (S.C)], it was held that according to Rule 1, titles of Section and Chapters in the Schedules are provided for ease of reference only. But, for legal purposes, classification shall be determined according to the terms of the headings and any relevant section or Chapter Notes. The other rules for interpretation shall be required only when the relevant Heading or Section Notes are not sufficient to lead to a definitive classification. “11. The rules for the interpretation of the Schedule to the Central Excise Tariff Act, 1985 have been framed pursuant to the powers under Section 2 of that Act. According to Rule I titles of Sections and ‘Chapters in the Schedule are provided for ease of reference only. But for legal purposes, classification “shall be determined according to the terms of the headings and any relevant section or Chapter Notes”. If neither the heading nor the notes sufjice to clarify the scope of a heading, then it must be construed according to the other following provisions contained in the Rules. Rule-I gives primacy to the Section and Chapter Notes along with terms of the headings. They should be first applied. If no clear picture emerges then only can one resort to the subsequent rules.” HSN Explanatory Notes: Page 15 of 4204-0 No. 82/2023 (DGG!) Dated: 29.12.2023 Mis. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi B.14 Schedules of Customs Tariff Act are based on the Harmonized Commodity Description and Coding System, generally referred to as Harmonized System of Nomenclature (herein after referred to as "HSN"), developed by World Customs Organization (WCO) which is applied uniformly by more than 137 countries of the World. Under the HSN, various goods are classified under different headings, sub-headings and tariff entries, B.15 For purposes of uniform interpretation of the HSN, the WCO has published detailed Explanatory Notes to HSN which have long been recognized as a safe guide to interpret the Tariff Schedule, B.16 In the case of CCE vs. Wood Craft Products Lid, [(1995) 77 ELT 23] the Hon'ble Supreme Court of India vide a 3-member bench held that as per Statement of Objects and Reasons of Central Excise Tariff Bill, 1985, new tariff’ has been introduced, based on HSN to reduce classification disputes. Thus, in case of doubt, HSN is a safe guide for ascertaining true meaning of any expression used in the Act, unless there is an express different intention indicated in the Tariff itself. This decision was subsequently confirmed in the case of CC vs, Business Forms, 2002 (142) ELT 18 (SC 3-Member bench). This proposition was also affirmed, upheld and followed in catena of cases by various judicial authorities: @ OK, Play (India) vs. CCE, AIR 2005 SC 1023, (2005) 180 ELT 300 (SC 3 member bench); 4) CC vs. Gujarat Perstorp Electronics Ltd., (2005)7 SCC 118, (2005) 186 ELT 532 (SC 3 member bench); ©) — CCE vs. Phil. Corporation Ltd, (2008) 223 ELT 9 (SC), B.17 It can be inferred from the above decisions that classification of goods is done in accordance with GRI 1 ie., through the primacy of terms of headings and Section Notes and Chapter notes. When the nature and description of goods match the terms of headings in a chapter and further the goods fall within the scope of Section notes and Chapter notes of the Customs Tariff, such goods are classifiable as per Rule | of GRI. Classification of Tofu (Soya Paneer) under CTH 0406 (Cheese and Curd) B.18 In accordance with GRI 1, the Noticee Company submits that first reference must be made to the relevant Heading, Section Notes, and Chapter Notes, B.19 In this regard, it is submitted that Chapter 04 specifically covers “Dairy produce; bird's eggs; natural honey; edible products of animal origin, not elsewhere specified or included” B.20 The Notice Company submits that the appropriate classification for the Tofu (Soya Panner) traded by them is CTH 0406 (Cheese and Curd). Page 16 of 4204-0 No, 82/2023 (DGGI) Dated: 29.12.2023 Mis, INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi B.21 The Chapter Notes to Chapter 04 relevant to the present dispute are extracted below: “4. Produets obtained by the concentration of whey and with the addition of milk or milkfat are to be classified as cheese in heading 0406 provided that they have the three following characteristics: (a) A milkfat content, by weight of the dry matter, of 5% or more; (b) A dry matter content, by weight, of at least 70% but not exceeding 85%; and (c) They are moulded or capable of being moulded. 5. This Chapter does not cover: (a) non-living insects, unfit for human consumption (heading 0511): (b) products obtained from whey, containing by weight more than 95% lactose, expressed as anhydrous lactose, calculated on the dry matter (heading 1702); (¢) products obtained from milk by replacing one or more of its natural constituents (for example, butyric fats) by another substance (for example, oleic fats) (heading 1901 or 2106); or (d) Albumins (including concentrates of two or more whey proteins, containing by weight more than 80% whey proteins, calculated on the dry matter) (heading 3502) or globulins (heading 3504)." B.22 The HSN Explanatory Notes to Chapter 04 relevant to the present dispute are extracted below: “GENERAL This Chapter covers: @ Dairy products: ‘G) Milk, ie, full cream milk and partially or completely skimmed milk, Cream. (© Buttermilk, curdled milk and cream, yogurt, kephir and other fermented or acidified milk and cream. «@ Whey. ©) Products consisting of natural milk constituents, not elsewhere specified or included. (© Butter and other fats and oils derived from milk; dairy spreads. (©) Cheese and curd. The products mentioned at Items (A) to (E) above may contain, in addition to natural milk constituents (e.g., milk enriched in vitamins or mineral salts), small quantities of stabilising agents which serve to mainuain the natural consistency of the product during transport in liquid state (disodium phosphate, trisodium etrae and caleiam chloride, for instance) as well ax very small quantities of ant-osidans or of vitamins not normally found in the product. Certain of these products may also contain small {quantities of chemicals (e.g., sodium bicarbonate) necessary for their processing; products in the form Of ponder or granules may contain anticaking agents (or example, phospholipids. amorphous silicon lioxide). For the purposes of Note 4 (b) to this Chapter the expression “ butyric fais” means milk fats and the expression “oleic fats” means fats other than milk fats, in particular vegetable fats (e.., olive oil). Qn the other hand, the Chaper excludes products obiained from whey. containing I welsit more than 95 % lactose, expressed as anhydrous lactose, calculated on the dry matter (heading 17.02). For the purposes of calculating the percentage weight of lactose in a product the expression “dry matter” should be taken to exclude both free water and water of erystallisation. The Chapter also excludes, inter alia, the following : «Food preparations based on dairy products (in particular, heading 19.01). ©» Products obtained from milk by replacing one or more of the natural constituents (e.g. butyric fats) by another substance (e.g., oleic fats) (heading 19.01 or 21.06). ‘@ Ice cream and other edible ice (heading 21.05). « Medicaments of Chapter 30. w Casein (heading 35.01), milk albumin (heading 35.02) and hardened casein (heading 39.13). B.23 The HSN Explanatory Notes to CTH 0406 relevant to the present dispute are extracted below: “04.06 - Cheese and curd (+). (0406.10 - Fresh (unripened or uncured) cheese, including whey cheese, and curd 0406.20 - Grated or powdered cheese, of all kinds 0406.30 - Processed cheese, not grated or powdered 0406.40 - Blue-veined cheese and other cheese containing veins produced by Penicillium roqueforti 0406.90 - Other cheese Page 17 of 4204-0 No. 82/2023 (DGGI) Dated: 29.12.2023 M/s. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi This heading covers all kinds of cheese, viz: (I) Fresh cheese (including cheese made from whey or buttermilk) and curd. Fresh cheese is an unripened or uncured cheese which is ready for consumption shortly after manufacture (e.g., Ricotta, Broccio, cottage cheese, cream cheese, Mozzarella), (2) Grated or powdered cheese. (3) Processed cheese, also known as process cheese. It is manufactured by comminuting, mixing, melting and emulsifying, with the aid of heat and emulsifying or acidifying agents (including melting salts), one or more varieties of cheese and one or more of the following * cream or other dairy products, salt, spices, flavouring, colouring and water. () — Blue-veined cheese and other cheese containing veins produced by Penicillium roqueforti. (3) Soff cheese (e.g., Camembert, Brie). (6) Medium-hard cheese and hard cheese (e,g., Cheddar, Gouda, Gruyere, Parmesan). Whey cheeses are obtained by concentrating whey and adding milk or milk fat. They are classified in this heading only if they have the three following characteristics: @ a milkfat content, by weight of the dry matter, of 5 % or more: ® ——adry matter content, by weight, of at least 70% but not exceeding 85%; (othey are moulded or capable of being moulded. The presence of meat, fish, crustaceans, herbs, spices, vegetables, fruit, nuts, vitamins, skimmed milk powder, etc., does not affect classification provided that the goods retain the character of cheese. Cheeses which have been coated with batter or bread crumbs remain classified in this heading whether or not they have been pre-cooked, provided that the goods retain the character of cheese.” B.24 The Chapter Notes and HSN Explanatory Notes to Chapter 04 and the HSN Explanatory Notes to CTH 0406 are summarized below: ‘+ Heading 0406 covers all kinds of cheese, viz. Fresh cheese (including cheese made from whey or buttermilk) and curd. Fresh cheese is an unripened or uncured cheese which is ready for consumption shortly after manufacture (¢.g., Ricotta, Broccio, cottage cheese, cream cheese, Mozzarella). + The presence of meat, fish, crustaceans, herbs, spices, vegetables, fruit, nuts, vitamins, skimmed milk powder, etc., does not affect classification provided that the goods retain the character of cheese. Tofu (Soya Paneer) is squarely covered by Heading 0406 B.25 Basis the above discussion, it is amply evident that all kinds of cheese are covered by Heading 0406, It is submitted that Tofu is a cheese ie., curd extracted from soya milk and coagulated by chemical processes. B.26 In this regard, reliance is placed on the 2" Edition of the International Dictionary of Foods and Cooking Terms by Charles Sinclair which defines “Tofiu’ as ‘Bean curd’. In this regard “Bean curd’ is defined as follows: “A rather flavourless, textureless but nutritious coagulated soya bean protein made by treating boiled soya milk with various coagulants such as flaked sea salt (nigari), Epsom salts, vinegar, etc. and Separating off the curd r cheese, It can be soft and jelly-like or have the water content Progressively reduced to form finally a cheese-like substance." B.27 Reliance is also placed on the 5" Edition of the Springer US Dictionary of Food ingredients, which defines ‘Tofir’ as a soybean curd product. The relevant extract is noted below: Page 18 of 42041-0 No. 82/2023 (DGGI) Dated: 29.12.2023, Ms. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi “A soybean curd product. Soybeans are soaked, ground, and filtered, with the remaining mixture being heated to 75°C and a coagulant added, which results in the formation of the soy curd and whey. The Soy curd is pressed to separate it from the whey and then washed and cooled. It is low in calories and saturated fats while high in vitamins, minerals, and digestible protein. itis tasteless, but takes on the flavors of the products with which it is cooked." B.28 It is submitted that the word ‘Tofu’ has a Chinese origin from the word “Dou fu” that plainly translates to Bean (Dou) Curd/Ferment (Fu). B.29 Further, relianc also placed on the following technical literature wherein Tofu is recognized asa cheese: © Jeewanthi RKC & Paik HD, Modifications of nutritional, structural, and sensory characteristics of non-dairy soy cheese analogs to improve their quality attributes 55 JFST 4384-4394 (2018) “Owing to this global expansion, these cheeses appeared with different names, such as tofu, sufi, and ‘furu. Fermented tofu is the most common traditional cheese type among them that prepared using soybean curd, obtained by precipitating proteins from soymilk either with an acid or an alkali salt. Numerous types of soy cheeses are made worldwide, and many have received significant attention. © Chen, Hsieh & Kuo, Insight into the Processing, Gelation and Functional Components of Tofu: A Review, 1] MDPI (20233 “Therefore, some researchers have used different processing methods to form tofu, a soft cheese curdled from heated fresh soy milk, to which calcium or magnesium salts have been added to maintain the good protein in fofu.” © SChumchyere, Douglas MacDougall & Richard Robinson, Production and properties of a semi- hard cheese made from sova milk 33 INTERNATIONAL JOURNAL OF FOOD SCIENCE & TECHNOLOGY 577-581 (2000) “A semi-hard soya cheese, with mean moisture content 61.5%, crude protein 21.8% and fat 2.6%, was produced from reconstituted soya-milk powder using a starter culture of Strepto- coccus thermophilus and Lactobacillus fermentum. The physical properties of the cheese, as determined with a Texture Profile Analyser, were similar to a cheese made to the same compositional standards from bovine milk.” B.30 Placing reliance on the above discussed technical literature which amply states that Tofu is a curd, cheese, ete., and HSN Explanatory Notes stating that HSN 0406 covers all kinds of cheese, it is submitted that Tofu (Soya Paneer) is classifiable under CTH 0406. B31 Having established the same, we proceed to discuss the relevant entries of Goods Rate Notification which are extracted hereinbelow:~ Entry as on 01.07.2017 till 17.07.2022 Schedule | -2.5% | ‘S. | Chapter! Description of goods No | Heading/ + | Sub- Heading! Page 19 of 4204-0 No. 82/2023 (DGG!) Dated: 29.12.2023 Mis. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi Tariffitem @| @ GB) TT | 0406 ‘Chena or paneer, put up in unit container and,- (@) bearing a registered brand name; or (b) bearing a brand name on which an actionable claim or enforceable right in a court of law is available [other than those where any actionable claim or any enforceable right in respect of such | brand name has been voluntarily foregone, | subject to the conditions as in the ANNEXURE, Entry w.ecf, 18.07.2022 Schedule I~ 2.5% 'S. | Chapter/ Description of goods No | Heading/ - | Sub- Heading ‘Tariff item QM) @ G) [in | 0406 Chena or paneer, pre-packaged and labelled. Tofa is commercially understood as ‘Soya Paneer’, thereby falling within the scope of SLNo. 11 of the Goods Rate Notification (Schedule I). B.32 The Noticee Company humbly submits that the Tofu (Soya Paneer) sold by them is covered by S.No. 11 of the Goods Rate Notification (Schedule I). It is submitted Tofu is a Soya ‘Paneer’, thereby falling within the scope of the above extracted entry, B.33 It is submitted that the impugned SCN alleges that paneer is taxable @ 5% (under HSN 0406) whereas Tofu (Soya Paneer) merits classification under HSN 2106 in the absence of specific HSN entry in Rate Notification or Customs schedule. B.34 The impugned SCN itsclf admits and records that Tofu is also known as Soya Paneer. In this regard, it is submitted that Tofu as “Soya Paneer’ made from soya milk instead of cow milk is a kind of cottage cheese classifiable under CTH 0406 and taxable at 5% GST vide S.No. 11 of the Schedule I to the Goods Rate Notification. In this regard, the Noticee Company places reliance on the following technical literature to submit that ‘paneer* is understood as ‘Indian Cottage Cheese’ or ‘Cottage Page 20 of 4204-0 No. 82/2023 (DGGI) Dated: 29.12.2023 Mis. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi ‘Cheese’ and consequently falls within the scope of CTH 0406 - in terms of the HSN Explanatory Notes to Heading 0406 which includes Fresh Cheese (e.g., Cottage Cheese) within the scope of HSN 0406. 1. §. Sivaranjani, KS Pandian, Parveen, Baskaran, Arun P,F Nambi and R. Pandiselvam Influence of Machine Parameters and Coagulant on the Textural Properties of Paneer (Indian Cottage Cheese) JOURNAL OF FOOD QUALITY 1-14 (2022) “Paneer is an Indian cottage cheese obtained by heat treating the miik followed by acid coagulation... 1: is traditionally prepared from buffalo milk and extensively consumed in India as an analogue to meat.” 2. C-Sen, PR Ray, S Hossain, M Bhattacharyya, S Mondal & A Debnath, Influence of nisin on water activity, textural and other quality attributes of paneer (Indian cottage cheese) during storage, 1 FOOD AND HUMANITY 1134-1] 44 (2023; “Paneer (Indian cottage cheese) is a heat-acid, coagulated, traditional Indian dairy product. It is very popular in India and is used to prepare various culinary items. It is also used as an ingredient for vegetable dishes and snacks.” 3. P_ Prajapati, M. Garg, N. Singh, R. Chopral. A. Mittal, Extension of Shelf Life of Paneer Indian Variety of Soft Cheese: A Review, ASIAN JOURNAL OF DAIRY AND FOOD RESEARCH 2023; “Paneer, an indigenous soft cheese, is a versatile nutrient-dense food used as a pedestal substance in various culinary preparations. It contains a good amount of high-quality animal protein, fat and minerals. However, relatively short shelf life of paneer, up to 5-6 days, creates a significant obstacle ‘for commercial manufacturers.” B.35 It is submitted that Tofu is also known as ‘Soya Paneer’ and marketed as ‘Soya Paneer’ by the entire industry. Reliance in this regard is placed on the product packaging of the Noticee’s disputed goods extracted below: inet sxc. mo ay botcraV. Te ome tron > ones @ Home / coumet west /oatyeereee / TY owen OO @ mad oor wa en MoO? Organic Totu - Soy Paneer, 2003 som 2957Rings 4199 Renew Price: 8100.59) Page 21 of 4204-0 No. 82/2023 (DGG) Dated: 29.12.2023 Mis. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi B.36 The Notice Company also places reliance on the product packaging of Tofu products sold by other manufacturers and traders (enclosed as Annexure-4) wherein Tofu is consistently referred as “Soy Paneer’ or Soya Paneer’, B.37 The Notice Company also places emphasis on the fact that the impugned SCN itself admits and records that Tofu is also known as Soya Paneer. B.38 The Noticee Company refers to the ‘Reading Manual for Soya Soy Paneer Under PMFME Scheme’ published by the National Institute of Food Technology Entrepreneurship and Management (NIFTEM), established by the Ministry of Food Processing Industries - GOI). In this Manual, Tofu is predominantly referred to as Soya Paneer. B.39 It is submitted that the Supreme Court in Commissioner of Central Excise v. Woekhardt Life Sciences Lid., 2012 (277) E.L.T. 299 (S.C.) has held that whether an article will be covered by a Heading or not can be determined by examining the manner in which the said article is conceived in ‘common parlance’, or how it is understood in the ‘commercial world’ or in the ‘trade circle” by the people who are concemed with and are dealing with the said article, In other words, the manner in which a customer perceives a particular product and the purpose or usage for which the customer purchases a product plays a large role in the determination of classification. B.40 It is submitted that the approach adopted by the Supceme Court in A/ul Glass Industries Ltd. v. Collector of Central Excise, 1986 (25) E.L.T. 473 (S.C.) and CCE y, Sharma Chemical Works, 2003 (154) B.L.T, 328 (S.C.) has been to determine the classification based on tangible evidence of how an article is understood in ‘common parlance’ or ‘trade parlance’ and not the etymological or scientific meaning, BAL The Notice Company places reliance on CCT v. A.R. Thermosets Private Limited, 2016 (339) E.L-T, 500 (S.C.) wherein the Supreme Court has held that when the schedule specifies ‘bitumen’, bitumen emulsion could not be treated as a distinet commodity as itis (in both popular and commercial sense) nothing other than liquid bitumen, and would hence be classifiable as bitumen. B42 The Notice Company also places reliance on the case of CCE v. Shree Baidvanath Ayurved Bhawan Ltd., 2009 (237) ELT. 225 (SC) wherein the Supreme Court adopted a twin test to differentiate between a medicament and cosmetic: - 1. Whether the item is commonly understood as medicament which is called the common parlance test. For this test it will have to be seen whether in common parlance the item is accepted as a medicament. Ifa product falls in the category of medicament it will not be an item of common use. A user will use it only for treating a particular ailment and will stop its use after the ailment is cured. The approach of the consumer towards the product is very material. One may buy any of the ordinary soaps available in the market. But if one has a skin problem, he may have to buy a medicated soap. Page 22 of 42,4-0 No. 82/2025 (UGGI) Dated: 29.12.2025 Mis. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi Such a soap will not be an ordinary cosmetic, It will be medicament falling in Chapter 30 of the Tariff Act. Il Are the ingredients used in the product mentioned in the authoritative textbooks on Ayurveda?” B.43 To sum up, applying the common parlance test elucidated above, it is submitted that Tofu (Soya Paneer) is classifiable under CTH 0406 (Cheese and Curd) and liable to 5% GST vide S.No. 11 of the Schedule I to the Goods Rate Notification covering ‘Paneer’. Consequently, it is submitted that the Noticee Company has not short paid any GST. Without prejudice to the foregoing, Tofu merits classification under CTH 1208 (attracting 5% GST) or CTH 0406 (attracting 12% GST) and Tofu is not classifiable under CTH 2106 C1 Without prejudice to the foregoing submissions under Ground B supra, it is submitted that Tofu merits classification under CTH 1208 (Flours and Meals of Oil Sceds or Oleaginous Fruits, other than those of mustard) and attracts 5% GST. C.2_ Itis submitted that CTH 1208 consists of the following tariff entries: 1208 || | FLOURS AND MEALS OF OIL SEEDS ‘OR OLEAGINOUS FRUITS, OTHER THAN THOSE OF MUSTARD 12081000, -|, Of soya beans 12089000]| -|| Other | C3 Itis submitted that Note 2 to Chapter 12 of the Customs Tariff provides that . C4. Itis submitted that the HSN Explanatory Notes of Heading 1208 explains its scope and coverage. ‘The relevant parts are extracted below: “Headings 12.01 to 12.07 cover seeds and fruits of a kind used for the extraction (by pressure or by solvents) of edible or industrial oils and fats, whether they are presented for that purpose, for sowing or for other purposes. These headings do not, however, include products of heading 08.01 or 08.02, olives (Chapter 7 or 20) or certain seeds and fruits from which oil may be extracted but which are primarily used for other purposes, eg., apricot, peach or plum kernels (heading 12.12) and cocoa beans (heading 18.01). The seeds and fruits covered by the heading may be whole, broken, crushed, husked or shelled. They may also have undergone heat treatment designed mainly 10 ensure better preservation (e.g, by inactivating the lipolytic enzymes and eliminating part of the moisture), for the purpose of de-bittering, ‘for inactivating antinutritional factors or to facilitate their use. However, such treatment is permitted ‘only if it does not alter the character of the seeds and fruits ax natural products and does not make them suitable for a specific use rather than for general use. The headings exclude solid residues resulting from the extraction of vegetable oil from oll seeds or oleaginous fruits (including defatted flours and meals) (heading 23.04, 23.05 or 23.06).” C.5. Itis submitted that the term ‘flour’ and ‘meal’ have not been defined for the purposes of Chapter 12. Page 23 of 4204-0 No. 82/2023 (DGGI) Dated: 29.12.2023 Mis, INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Dethi C.6 It is submitted that to understand ‘flour’ and ‘meals’ in common parlance, reference is made to the dictionary meanings of the said words as follows: Cambridge Dictionary: ‘Flour’: soft powder made from the seeds or roots of a plant that ofien contains a lot of starch, used in cooking. ‘Meal’: an occasion when food is eaten, or the food which is eaten on such an occasion, ‘Meal’: a substance that has been crushed to make a rough powder, especially plant seeds crushed to make flour or for animal food. Merriam-Webster Dictionary: ‘Flour’: a fine soft powder ‘Meal’: an act or the time of eating a portion of food to satisfy appetite; the portion of food eaten at a ‘meal ‘Meal’: the usually coarsely ground and unbolted seeds of a cereal grass or pulse Concise Oxford Dictionary: “Flour’: fine soft powder made from the seeds or roots of vegetables. ‘Meal’: grain that has been made into a powder, used as food for animals and for making flour. ‘Meal’: A customary or social occasion of taking food, esp. at a more or less fixed time of day, as breakfast, dinner, etc, C.7 It is submitted that the common meaning of ‘meal’ is ‘food’ and there is no doubt that Tofi is a food made from Soya Beans. The impugned SCN in Para 4 while describing the general manufacturing process of Tofu has duly noted that Tofu is a food made from Soya Beans. C.8_ Ibis submitted that the GST portal’s HSN directory has listed out DIET TOFU MASALA TOFU and NOW HEALTHY MASALA TOFU as commonly used trade descriptions of FLOURS AND MEALS OF OIL SEEDS OR OLEAGINOUS FRUITS, OTHER THAN THOSE OF MUSTARD OF SOYA BEANS classifiable under CTH 1208 1000. The screenshot is enclosed as Annexure-5. C.9 Without prejudice to the submissions in Grounds supra, placing reliance on GST portal’s HSN directory and the meaning of ‘meal’, it is submitted that Tofu merits classification under CTH 1208 (Flours and Meals of Oil Seeds or Oleaginous Fruits, other than those of mustard) and are liable to 5% GST vide S.No. 71 of Schedule I to the Goods Rate Notification extracted below: Schedule 12.5% Ss. Chapter/ Description of goods No. | Heading/ Sub- Heading/ Tariff. item a | @ 8) a 1208 Flour and meals of oil seeds or oleaginous fruits, other than those of mustard €.10 The Noticee Company submits that during the impugned period, Tofu has been sold by discharging 5% GST.04-0 No. 82/2023 (DGGI) Dated: 29.12.2025 Ms. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi C.11 Accordingly, once Tofu is appropriately classifiable under CTH 1208 (attracting 5% GST) as ‘opposed to CTH 2106, the demand raised in the impugned SCN merits to be set aside insofar as ‘Notice Company has not short paid any GST on sale of Tofu. Without prejudice to the foregoing, Tofu is a cheese/curd and is classifiable under CTH 0406 and is liable to 12% GST vide S.No. 13 of Schedule II to the Goods Rate Notification. C.12 Without prejudice to the submissions made supra, it is submitted that Tofu is a cheese i.c., curd extracted from soya milk and coagulated by chemical processes. In this regard, reference is made to the detailed discussion above at Para B.25 to B.30. C.13 Placing reliance on the said technical literature which amply states that Tofu is a curd, cheese, etc. and HSN Explanatory Notes stating that HSN 0406 covers all kinds of cheese, it is submitted that Tofu (Soya Paneer) is classifiable under CTH 0406 (Cheese and Curd) and Customs tariff entry 0406 9000 (Other Cheese) and liable to 12% GST vide S.No. 13 of Schedule II to the Goods Rate Notification. Schedule II - 12% GST ‘S.No.| Chapter’ Heading/| Description of goods Sub-Heading/ Tariff item ;o 7 @ ae | Gq aa eee p33 0406 Cheese C.14 To sum up, without prejudice to the submissions made in Ground B and Ground C.1 to C.11, the Tofu traded by the Noticee Company is classifiable under CTH 0406 (Cheese and Curd) and Customs tariff entry 0406 9000 (Other Cheese) and liable to 12% GST vide S.No. 13 of Schedule II to the Goods Rate Notification. CTH 2106 is not applicable to classify Tofu (Soya Paneer) C.15 The impugned SCN has alleged that the only applicable classification for Tofu or Soya Paneer appears to be Chapter Heading 2106, taxable @ 18% GST. Even in the earlier scheme of classification in Central Excise the Food items not elsewhere specified were classifiable under Central Excise Tariff Heading 2107. The impugned SCN has also alleged that as per Intemational Standards also, Tofu is classifiable under HSN 2106 as gathered from the Government websites of U.K, Singapore and Canada, Page 25 of 420-1-0 No. 82/2023 (DGGI) Dated: 29.12.2023 Mls. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi C.16 Against these allegations, it is submitted that once Tofu is more specifically classifiable under CTH 0406 or CTH 1208, Tofu is not classifiable under the residuary entry of CTH 2106. Detailed submissions are made infra. C.17 Heading 2106 covers Food preparations not elsewhere specified or included and is taxable at 18% vide S.No. 23 of Schedule III to the Goods Rate Notification. The said entry carries the description: “Food preparations not elsewhere specified or included other than roasted gram, sweetmeais, batters including idli/dosa batter, namkeens, bhujia, mixture, chabena and similar edible reparations in ready for consumption form, khakhra, chutney powder, diabetic foods C.18 Supplementary Note 5(b) to Chapter 21 provides that Heading 2106 (except tariff items 2106 90 20 and 2106 90 30), inter alia, includes preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption. C.19 The HSN Explanatory Notes of Heading 2106 explains its scope and coverage. The relevant parts are extracted below:~ “Provided that they are not covered by any other Heading of the Nomenclature, this Heading covers (A) Preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, mitk, etc.), for human consumption @ C.20 From the above discussed Chapter Notes and HSN Explanatory Notes, it may be noted that Heading 2106 covers preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk, ete.), for human consumption provided the said preparations are not covered by any other Heading. C.21 Thus, it is clear that Entry 23 of Schedule IIT covering goods falling under Heading 2106 is a residuary entry which will cover all other food preparations that are not specifically classifiable elsewhere, C.22 Further reliance in this regard is placed on the following cases/rulings: * In re Savencia Fromage & dairy Pvt. Ltd. (GST AAAR Untar Pradesh) Order No. 07/AAAR/18/04/2019 — In this ruling, it was ruled that “Breaded Cheese’ was classifiable as “cheese” under Heading 0406 and not classifiable under Heading 2106. It was specifically held that “hence, where goods are cqually classifiable under Heading 0406 and Heading 2106, then the former, ic. Heading 0406 shall prevail.” * Dunlop India Ltd. & Madras Rubber v. Union of India 1983 (13) ELT. 1566 (S.C.): In this ease, it was held that when an article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tariff Schedule, it will be against the very principle of classification to deny it the parentage and consign it to an orphanage of the residuary clause,4-0 No, 82/2023 (DGGI) Dated: 29.12.2025 Mis. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi © Collector of Central Excise v, Jayant Oil Mills Pvt. Lid 1989 (40) ELT 287 (S.C.): It was held that it is well settled that resort could not be had to the residuary item if the product comes within the ambit of any other tariff item. © Bharat Forge & Press Industries v. Collector Of Central Excise 1990 (45) ELT 525 SC: It was held that only such goods as cannot be brought under the various specific entries in the tariff should be attempted to be brought under the residuary entry. In other words, unless the department can establish that the goods in question can by no conceivable process of reasoning be brought under any of the tariff items, resort cannot be had to the residuary item. © Western India Plywood Lid v. Collector of Customs 2005 (188) ELT 365 SC: It was held that it ‘was well settled that application of the residuary tariff entry must be made with good deal of caution as it was attracted only when no other provision expressly or by necessary implication applied to the goods in question, C.23 In view of the above, it is submitted that the impugned SCN’s proposed classification of Tofu under CTH 2106 is without any merit and is liable to be sot aside. ‘When the Department is unable to sustain classification proposed by it, the classification adopted by the Assessee should prevail C.24 The Notice Company submits it is a settled position that the classification adopted by the assessee should be sustained when the Revenue is unable to discharge the burden to re-classify the product under a different heading, C.25 It is trite law that when the classification proposed by the Department cannot be sustained, then irrespective of the fact as to whether or not the classification of the assessee is proper, the same would prevail. This position of law has been settled by the Hon’ble Apex Court in Warner Hindustan Ltd. v. CCE, [1999 (113) E.L-T. 24 (SC)]. The relevant portion of the decision is extracted below: “42. The appellant manufactures what it calls “Halls Ice Mint tablets". It classified these tablets as ‘Ayurvedic medicines” under Heading 3003.30 of the Central Excise Tariff. It was issued a notice to show cause why these tablets should not be classified under Tariff Heading 3003.19 as “patent or proprietary medicines". The Assistant Collector, after hearing the appellant, held that the tablets were ‘patent or proprietary medicines classifiable under Heading 3003.19. In appeal by the appellant, the Collector of Central Excise (Appeals) held that the tablets were Ayurvedic medicines classifiable under Heading 3003.30. The Excise authorities went in appeal to the Tribunal and, for the first time, took the stand that the tablets were correctly classifiable under Heading 17.04 as “confectionery”. The ‘appellant, of course, stuck to its stand that the tablets were Ayurvedic medicines classifiable under Heading 3003.30. The Tribunal noted that the Assistant Collector had classified the tablets under Heading 3003.19, that is, as patent or proprietary medicines. This was clear indication that the stand of the Excise authorities prior to the stage of the appeal to the Tribunal was that the tablets were patent or proprietary medicines classifiable under Heading 3003.19. The Tribunal also noted that “both sides have not adduced any detailed arguments as to why these tablets can be considered as ‘Confectionery item or otherwise although a plea is there from the Collector in the grounds of appeal that the goods are assessable under Tariff 17.04". In our opinion, the Tribunal was quite wrong in these circumstances in allowing the appeal of the Excise authorities and classifying the mint tablets as items of confectionery under Heading 17.04, The correct course for the Tribunal io have followed was to have dismissed the appeal of the Excise authorities making it clear that it was open to the Excise authorities to issue a fresh show cause notice to the appellant on the basis that the tablets classifiable under Heading 17.04 as items of mfectionery. tis would ha siven_the ‘appellant the opportunity to place on record such material as was available to it to establish the Page 27 of 42O4-0 No, 82/2023 (DGGI) Dated: 29.12.2023 Mis. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi contrary. It is impermissible for the Tribunal to consider a case that is laid for the first time in appeal because the stage for setting out the factual matrix is before the authorities below.” C.26 The si decision of the Hon'ble Apex Court has been followed by Hon’ble Tribunal in Pepsico Holdings Pv Ltd. v. CCE, [2019 (25) G.S.T.L. 271 (Tri-Mumbai) wherein the Tribunal held that the classification proposed in the Bill of Entry will prevail when classification of Revenue is found to be inappropriate. The relevant portion of the decision is extracted below: “8 In the light of the above, we cannot decide on a classification that has not been pleaded before us. Once the classification proposed by Revenue is found to be inappropriate, that claimed, while clearing the goods, will sustain even if it may appear 10 be inappropriate. We cannot also, in our appellate capacity, direct or accord the latitude for invoking Section 114 of Central Excise Act, 1944 by obliteration of the proceedings leading to the impugned order. The mandate of the law pertaining to recovery of duties not paid or short-paid will have to be followed to the letter.” C.27 Further, the Hon’ble Tribunal in M/s. Sunrise Traders & ors. v. CC, [2022 (1) TMI 468 CESTAT AHMEDABAD] has affirmed the settled position of law and followed the same. The relevant portion of the decision is extracted below: “25 Without prejudice (0 above findings, it is a settled legal position that if the goods are noh classifiable under the chapter heading proposed by the revenue thereafier even the goods is classified under the chapter heading claimed by the assessee is correct or not, the case of the department will fail. This gets support from the following judgments: In view of the above settled law, irrespective whether the classification claimed by the appellant is correct or not since the classification proposed by the Revenue is absolutely incorrect, the entire case Of the Revenue will not sustain.” C.28 Thus, it is submitted that when the classification proposed by the Department s, the correct course of action would be to sustain the classification adopted by the Noticee. C.29 Therefore, the observations in the impugned SCN are devoid of any merit and contrary to settled principles of classification. Rebuttals to the specific allegations of the impugned SCN D.1, The specific allegations of the impugned SCN and the rebuttals to the same are tabled below: ‘Allegation Rebuttal * Tofu or Soya {It is submitted that the Section Notes, Chapter Notes and HSN Paneer does not merit | Explanatory Notes to CTH 0406 do not stipulate anywhere that classification under | said Heading is appliable only to animal origin products and Chapter 04, as the | excludes plant-based products. The said heading applies in Chapter only pertains to| general to dairy products such as Cheese and Curd, It is Dairy Produce/Animal | submitted that there is no specific exclusion in the Section Origin products, while | Notes, Chapter Notes and HSN Explanatory Notes to CTH 0406 Tofu is Plant based | to exclude plant-based products.OAD NO. S2IZUZ5 (UE) VateG: £9.14.4029 Mis, INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi product Tt is submitted that Tofu and Soy Milk are considered to be © Plant Milks are} ‘Dairy products’. Reliance in this regard is placed on a Non-dairy beverages, as | ‘knowledge article’ published by the UNITED STATES such, cannot be | DEPARTMENT OF AGRICULTURE (USDA) wherein it has classified under Chapter | been stipulated as under: HSN 04. Soy milk is | “Title: What food group is soy milk (soy beverage) in? What made from — whole | about fofiz, tempeh, and other soy products? soybeans or full-fat soy | “Fortified soy milk (soy beverage) is part of the dairy group. Fortified soy milk contains calcium, vitamin D, and vitamin A in ‘amounts similar to cow's milk. It is also used in meals in similar word ‘Milk’ does not ways fo cow's milk. Other soy products such as tofu and tempeh make Soya Milk exempt | 4 Part of the protein foods group. Based on how they are made, these foods are similar in nutritional content to other under HSN 0401. On) protein foods.” flour. Mere mention of similar issue, Almond | Jt is submitted that on referring to the Merriam Webster Milk has been held to be | Dictionary definition of “milk”, it is evident to note that this taxable @ 18% under | term includes both, the milk obtained from an animal and used HSN 2202 99 90, even | as food by people, as well as food product produced from seeds though specific heading | or fruit that resembles and is used similarly to cow's milk (eg: “Beverages Containing | soy milk, almond milk ete). Milk under HSN 2202 It is submitted that Cambridge Dictionary defines the term milk 99 30" exists with 12% in an inclusive manner to encompass plant based milk GsT. products as well. the white liquid produced by cows, goats, and sheep and used by humans as a drink or for making butter, cheese, ete.: the liquid made from some plants and trees or their nuts, ete. [eg: soy milk, coconut milk (plant-based)] In view of the above, it is submitted that Tofu or Soya Paneer merit classification under Chapter 04 and said Chapter is not | restricted only to animal products. Tofuu cannot be classified | Reliance is placed on the detailed submissions made in Ground under HSN 1208 and | C.1 to C.11 supra to submit that without prejudice to the other under S.No. 71 of the | submissions made, Tofu can be classified under HSN 1208 and Schedule I of Goods| taxable vide S.No. 71 of the Schedule I of Goods Rate Rate Notification as said | Notification. It is submitted that the term ‘meal’ has not been entry is only reserved for | specifically defined in the Section Notes or Chapter Notes or Flour and meals of Oil] Explanatory Notes to CTH 1208 and consequently the term | Seeds, ‘Tofu (Soy | ‘meal’ is required to be understood to mean ‘food’ prepared | Paneer) is neither flour | from soybeans. In the present facts, there is no doubt that Tofu nor meal of Soyabean | is prepared from Soybeans and the same can be regarded as a but is a food product | meal of Soyabean. Page 29 of 4204-0 No. 82/2023 (DGGI) Dated: 29.12.2023 M/s. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi derived by specific processes applied to Soya Beans and cannot be termed as Soyabean Meals. Noticee Company has | In view of the detailed submissions made in this reply on the contravened Section 31, } merits of Noticee Company’s classification, it is submitted that 39 and 59 of the CGST | Notice Company has not contravened Section 31, 39 and 59 of AcUSGST Act. Noticee | the CGST AcvSGST Act or Rules 46, 47, 59 and 61 of the Company has | CGST Rules/SGST Rules. contravened Rules 46, 47, 59 and 61 of the CGST —_RulesSGST Rules Classification of goods cannot be disputed at the recipient-trader’s end E.1. The Notice Company submits that classification of goods cannot be disputed at the recipient trader's end, E.2. It is a settled proposition of law that the classification of a particular product is always the prerogative of the manufacturer and not the recipient and classification cannot be questioned at the end of the recipient. Reliance is placed on the decision of the wherein it was held that the recipient cannot alter the classification declared by the manufacturer supplier and the same is binding upon the former. E.3. Reliance is also placed on CCE v. Mohan Breweries [2010 (259) E.L.T. 176 (Mad.)}, wherein the Hon’ble Madras High Court has held that: “In the light of the said categoric pronouncement of the Hon'ble Supreme Court and applying the same to the facts of this case, when it is not in dispute that the manufacturer declared the product as one falling under ‘shovel loader’ under the heading 84.29, there is no scope for any other authority 10 classify the same under any other heading.” E44, The Noticee Company places reliance on FAQ 30 in CBE&C Website, dated 16-8-2017 wherein it has been clarified that classification, in general, will be in continuity from the HSN declared by the ‘manufacturer or importer both of whom have been using the system in the past also. Q30. The traders are not used to classify the goods under the HSN nomenclature and are likely to face hardship in this regard. How will they cope with it? Ans. Taxpayers whose turnover is below Rs, 1.5 crores are not required to mention HSN Code in their invoices. Taxpayers whose turnover is above Rs. 1.5 crores but below Rs. 5 crores shall use 2- digit code and the taxpayers whose turnover is Rs. 5 crores and above shall use 4-digit code. Further the goods emanate either from manufacture or from imports. The traders usually do not change the nature of goods. The classification, in general, will be in continuity from the HSN declared by the ‘manufacturer or importer both of whom have been using the system in the past also.O4-0 No, 82/2025 (UGLI) Vated: 29.14.4029 Mis, INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Dethi E.5. Thus, the Noticee Company submits that the present proceedings initiated at the recipient- trader’s end instead of the manufacturer’s end merits to be set aside. The burden of proof lies on the Department to classify the subject goods under a different heading F.1 The Noticee Company submits that when a tax demand is raised by the Department on the ground of short levy/non-levy of tax by an assessee, the burden of proof to establish such short Ievy/non-levy of tax is on the Department. F2 The Noticee Company submits that when the Revenue challenges the classification made by the assessees, the onus is on the Revenue to establish that the item in question falls in taxing category as claimed by them, The burden is on the Revenue to adduce proper evidence to show that the goods are classifiable under a different heading than that claimed by the assessee. Reliance in this regard is placed on the Hon'ble Court’s decision in CC v. D.L. Steels [2022 (381) E.L.T. 289 (S.C.)}. Relevant portion of the Court’s decision is extracted below for ready reference: “25. In the context of the present case, once we accept the finding of fact recorded by the CESTAT that ‘anardana’ is a dried product of local ‘daru’ or wild pomegranate, which grows in mid hill conditions and which fruit in its fresh form is different from the pomegranate included in clause 7 to Heading 08.10, as this wild pomegranate is not consumed as a fresh fruit, the contention of the Revenue must fail. GRE3, which in the absence of the Heading, Section or Chapter Notes, prescribes the order of priority as - (a) specific description, (b) essential character, and (c) the Heading that ‘occurs last in numerical order, and even GRI-4 - the heading appropriate for the goods “to which they ‘are most akin", supports our conclusion and finding. The submission of the Learned Counsel for the Respondent is correct that when the Revenue challenges the classification made by the assessees, the onus is on the Revenue to establish that the item in question falls in taxing category as claimed by them. The burden is on the Revenue to adduce proper evidence to show that the goods are classifiable under a different heading than that claimed by the assessee. The finding of fact as recorded by CESTAT gets reinforced by the policy condition attached to the sub-heading 1209.99.00 of the Import Policy which specifically states - ‘import of pomegranate seeds will be free’. Without any doubt, sub-heading 1209.99.00 in the Import Policy correlates to sub-heading 1209.99 to Chapter 12 of the HSN. The contention of the Revenue that the Import Policy is in the nature of delegated legislation albeit correct, would not make any difference in the context of the present case as the policy condition in the Export/Import Policy specifically includes pomegranate seeds - as ‘anardana’ under sub-heading 1209.99.00, whereas the Schedule to the Customs Tariff Act, 1975 merely reproduces the Heading and the sub-heading of the HSN, without specifically including or excluding pomegranate seeds under the sub-heading 1209.99. F.3 In Hero Motocorp Lid. v. CC [2022 (379) E.L.T. 214 (Tri. - Mumbai)}, it has been held that the resolution of adversarial conflict in classification of imported goods by comparison of the claimed classification and counter-proposal of assessing authorities can be undertaken only after establishing that the distinction between the two is only one of degree. It is, therefore, not sufficient that the assessing authority demonstrate the claim to be wrong; the proposed classification should be shown to be correct failing which the claim shall, by default, prevail. FA In Wockhardt Ltd. v. CCE [2019 (370) E.L.T. 687 (Tri. - Mumbai)], the Hon'ble Tribunal has held that a pre-requisite for redetermination of classification of any goods is, undoubtedly, the Page 31 of 4204-0 No. 82/2023 (DGGI) Dated: 29.12.2023 Mis. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi discarding of the claimed classification. The resolution is, thereafter, to be consummated by ascertaining the alternate classification based on governing principles and after having placed the assessee on notice. F.5 It is submitted that where Department is disputing the classification adopted by an importer, the burden to prove the correctness of the proposed classification is on the Department. However, in the present case, the impugned SCN has neither made any efforts in this regard, nor does it rely on any expert opinion/technieal information in support of its contention, F.6 Reliance is placed on the following decisions wherein it has been held that the burden of proof to levy tax is on the revenue: @) CCE, Lucknow v. Railway Equipment and Engg. Works, 2015 (325) E.L.T. 184 (Tri. - Del); b) Union of India v. Garware Nylons Ltd., (1996) 10 SCC 413; ©) Commissioner of Customs, Mumbai v. Foto Centre Trading Co., 2008 (225) EL 193 (Bom.); @) — Commr. of C. Ex., Chandigarh v. Khalsa Charan Singh And Sons, 2010 (255) ELT 379 (P&H); e@) H.P.L Chemicals vs. Commissioner of Central Excise, 2006 (197) E.L.T. 324 (S.C). F.7 In the light of above discussion, the Noticee Company humbly submits that the burden of proof is on the Department to prove that the Noticee Company has short paid the GST by misclassifying the goods. However, it is submitted that the Department has failed to provide any legal basis as to why the subject goods merit classification under the various headings proposed in the impugned SCN. F.8 Further, no evidence, expert report, statement, etc. have been relied upon in the impugned SCN that support the view that the subject goods are classifiable under such headings. Therefore, it is submitted that the Department has failed to discharge the burden of proof for re-classifying the subject goods. F.9 Therefore, it is submitted that the subject goods have been correctly classified and hence, the proceedings initiated vide the impugned SCN is liable to be dropped If ta: elf is not payable, there is no question of levy of interest G.1. Section 50(1) of CGST Act provides that when person who is liable to pay GST fails to pay GST, then the person is liable to pay interest at the prescribed rate. G.2. It is submitted that the proposal of the demand of interest under Section 50(1) of CGST Act is not sustainable, since the demand proposed against the Noticee Company is itself not sustainable and the Noticee Company has not failed to pay any tax or any part thereof to the GovernmentOAD NO, 822025 (UUEI) Vated: 29.14.4069 Mis. INNOVATIVE RETAIL CONCEPTS PRIVATE LIMITED-New Delhi G.3. In this regard, reliance is placed upon the judgment of Hon’ble Supreme Court in Pratibha Processors vs. Union of India, 2002-TIOL-273-SC-CUS, the Hon'ble Supreme Court held that interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable, The levy of interest is geared to actual amount of tax withheld and the extent of the delay in paying the tax on the due date, G4. Therefore, since no GST is payable by the Noticee, no interest can be imposed upon it. Therefore, the proposed recovery of interest is not sustainable under Section 50(1) of CGST Act. No penalty is imposable H.1. The impugned SCN seeks to impose a penalty under Section 73(1) of the CGST AcvSGST Act. H.2. It is submitted that GST law is a new law and many suppliers have been facing genuine difficulties in understanding the compliance requirements such as correct reporting of supplies made by them, etc. In such a scenario, penalty should not be imposed. 1.3. Section 73(1), Section 73(9) read with Section 122(2)(a) of the CGST Act providing for the imposition of @ penalty reads as follows: Section 73(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall ‘serve notice on the person chargeable with tax which has not been so paid or which has been so short ‘paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as 10 why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder. Section 73(9) The proper officer shall, afier considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty equivalent to ten per cent. of tax or ten thousand rupees, whichever is higher, due from such person and issue an order. Section 122(2) Any registered person who supplies any goods or services or both on which any tax has not been paid or short-paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilised,- (@) for any reason, other than the reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent. of the tax due from such person, whichever is higher; HA. From the above extract of Section 73(1), Section 73(9) and Section 122(2)(a), it is clear that a penalty can only be imposed when any tax has not been paid or short-paid. In the present case, considering the detailed submissions made above, the Notice Company submits that they have not short-paid any tax. It is submitted that the Notiece Company has complied with the statutory provisions Page 33 of 42