Whether carbonated fruit juices fall under Fruit Juices or aerated drinks?

PJ/Case Law/2020-2021/3572

Rich Dairy Products (India) Private Limited Order No. 41/AAR/2019 dated 23.09.2019
Brief Facts:M/s. Rich Dairy Product (India) Private Limited is engaged manufacturing of fruit juices and also carbonated fruit juices. The applicant is using input of carbonated water is around 92.5% and lime juice/lime juice concentrate is 2.5% and Orange juice is 5% for manufacturing of carbonated fruit juices. The applicant is selling in the above product in sealed bottle and same is marketed as “Carbonated Beverage with Fruit Juice”.
Issue: Whether carbonated fruit juices fall under Fruit Juices or aerated drinks?
Applicant’s contention:The contention of applicant is that they stated that as per FSSAI regulation of 2016, their products are ‘carbonated fruit based drinks’ to be classified under HSN 22029020, taxable at 12% GST.
The applicant has stated that the GST rate @28% and Cess @12 % are applicable only for the goods with description as all goods including Aerated water containing added sugar or other sweetening materials or flavoured. Hence nowhere fruit juices are mentioned.
Their product Carbonated fruit juices do not fall under the above description of Aerated water containing added sugar or sweetening materials. Also Nowhere the percentage of fruit juices content are given for determination of tax rates whether falls under 28% or 12%.
In a similar issue during the VAT regime, the Honorable Supreme Court in the case of ‘Appy Fizz’ has given verdict saying that Appy Fizz belongs to fruit juices only and therefore KVAT @ 20% could not be demanded and since fruit juices were involved it can be taxed @ KVAT 12%. The judgment was given to Kerala Sales tax offices.
The Government of India- Food Safety and Standards Authority of India (FSSAI) has also issued necessary amendment that if the quantity of fruit juice in the beverage is below 10%, but not less than 5% (2.5% in case of lime or lemon), the product shall be called carbonated beverage with fruit juice. Hence it is carbonated beverages with fruit juices only.
Concentrate of fruit juices content in the carbonated fruit juices manufactured by them is as follows-Lemon juice-2.5% as per FSSAI norms; other juice- 5% as per FSSAI Norms
Respondent’s contention and reasoning:The advance ruling argued that content of lime juice and orange juice for manufacturing of “Carbonated Beverage with Fruit Juice” is under parameter of 3A of FSSAI regulation 2.3.30 and also satisfies the categorization under 14.1.4.1. Hence, the said product cannot be classified as “Aerated Water” under chapter heading 22021010. The product will be classified either under chapter 22021020 or 22021090 on depending on flavors. The GST is applicable @ 28% on the said product under GST Regime.
The Applicant has relied on the decision of Hon’ble Supreme Court in classification of ‘APPY FIZZ’ in case of M/s Parle Agro Ltd vs. Commissioner of Commercial Taxes, Trivandrum in the VAT regime. However, that ruling is not relevant here as the products are different and that ruling was based on the classification as per the Kerala VAT notifications. Under GST, classifications is based on First Schedule to the Customs Tariff Act, 1975.
The fruit juices are extracted from fresh, healthy and ripe fruits through various processes followed by filtration to remove solids, aeration, homogenization and sterlisation. Such fruit juices to be classified under CTH 2009 can have added sugar, standardizing agent, preservatives as long as they retain their original character. However, addition of water to normal fruit juice or to a concentrated juice of a greater quantity of water than is necessary to reconstitute the original fruit juice results in diluted products excludes such products from CTH 2009 and are to be classified as beverages of heading 2202 – In the instant case, water constitutes around 92% in all the products in question. The product is prepared by adding fruit juice, procured by the applicant (as per the input invoices submitted), to filter water. It is evident that this large quantity of water results in diluted products which as per the Explanatory Notes above get classified under CTH 2202.
Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, and Other Non-alcoholic beverages, not including fruit or vegetable juices of Heading 2009’ are covered under CTH 2202. Further, The Explanatory Notes classifies Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured’ under CTH 220210 – In the case at hand, the manufacturing process of the products involves addition of fruit juice (Lime/ Orange), sugar, ingredients, flavours to filtered water in a blending tank, which is chilled at 5°C in the Chilling Tank and then passed through Juice& CO2 Mixing Unit after which the same is bottled for supply in various quantities such as 200 ml, 300 ml, 600 ml, 1500 ml, etc. and are sold as ‘Carbonated Beverage with fruit juice’. These beverages fall squarely under the category mentioned in the Para (A) (2) of the Explanatory Notes above. That is they are classifiable under CTH 220210.
The products to be supplied by the applicant are to be classified as ‘Richyaa Darner Lemon’ and ‘Licta Lemon’ are classifiable under CTH 22021020 and all others i.e. ‘Richyaa Darner Cola’, ‘Licta Cola’, ‘Richyaa Darner Jeera Soda’, ‘Licta Jeera Masala, ‘Richyaa Darner Orange’ and ‘Licta Orange’ are classifiable as ‘Other’ under CTH 22021090.
Comment: AAAR also upheld the order of AAR vide Order in Appeal No. AAAR/01/2020 (AR) dated 10.02.2020
Prepared : Vijay

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PJ/Case Law/2020-2021/3572

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