18% GST applicable on Pizza Topping: AAAR [Read Order]

The Haryana Appellate Authority of Advance Ruling ( AAAR ) has held that 18% GST applicable on Pizza Topping.

The appellant, M/s Khera Trading Company is inter alia engaged in the distribution of various dairy and non-dairy products. The goods ” Pizza Topping’ is sold by the appellant under the brand ‘Goodrich’ is a proprietary food consisting of water, mozzarella cheese, vegetable oil and milk solids along with premixes of emulsifiers and stabilizers. It is ideal for use on pizza as a topping of cheese as it provides smooth lasting taste and stringiness to pizza.

The applicant applied before the AAR for clarifying whether that the product “Pizza topping” containing 14.5 per cent Mozzarella cheese and 15 per cent of other milk products along with other ingredients forms a type of cheese and classifiable under Chapter Heading 406 as “cheese” and chargeable to GST at 12%. The AAR has held that the impugned item, i.e., “pizza topping” being manufactured by the applicant cannot be classified as “process cheese” under chapter heading 0406′ rather it merits classification under chapter heading 2106 of the schedule to the Customs Tariff Act, 1975, as “Food Preparations not elsewhere specified or included” and chargeable to IGST at 18%. Aggrieved by the order the applicant approached AAAR.

Shri Puneet Bansal, Advocate for the appellant submitted that the Heading No. 0406 covers all kind of cheese including processed cheese, also known as process cheese. It is manufactured by comminuting, mixing, melting, 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, flavoring, coloring and water.

The Coram of Sri Dr. Amit Kumar Agarwal, Member and Sri Anil Kumar, Member while upholding the decision of AAR has held that “the HSN explanatory notes to chapter heading 0406 under clause (3) has clearly defined the product ,processed cheese, wherein the mixing and combination of ingredients are limited to one or more varieties of cheese with one or more of the following only:- cream or other dairy products, salt, spices, flavoring, coloring and water. By any stretch of imagination ‘vegetable fat’ cannot be understood to be included in the above combination of ingredients. Thus it is evident that the impugned item contains ‘vegetable fat” as a substantial portion being 22% of the ingredients, apart from mozzarella cheese which is only 14.5% of the combination of ingredients. Thus, the impugned item mainly comprises of “vegetable fat”. It is apparent from the above definition of “process cheese” as appearing in the HSN explanatory notes, that “vegetable fat” is not a prescribed ingredient for process cheese, hence, the presence of “vegetable fat” in substantial quantity, results the impugned item do not qualify to be categorized as “process cheese” or a type of cheese”.

Further submitted that “the appellant also contended that the impugned product is a type of cheese and relied upon the case of CCE vs. Wood Cratt products Limited, 1995 (77) ELT 23 (SC). In this case the Apex court has observed that the HSN Explanatory Notes serve as a safe guide for ascertainment of meaning of a term used in the Tariff Schedule. We find that it is a well settled principle that HSN Explanatory Notes serve as a safe guide for ascertainment of meaning of term used in Tariff Schedule. However, as discussed herein above, the HSN explanatory notes to chapter heading 0406 under clause (3) has clearly defined the product ‘processed cheese’. As per the said definition vegetable fat is not an ingredient of processed cheese. We find that in the impugned product vegetable fat is the major constituent (22%) and the cheese, as per appellants own submissions, constitutes only 14.5%. Hence the impugned product cannot be considered to be a type of cheese. Thus the product “pizza topping” do not qualify to be classified under Heading 0406. We thus conclude that the impugned- product ‘Pizza topping’ would merit classification as , Food preparations not elsewhere specified or included’ under Chapter Heading 2106 of the schedule to the Customs Tariff Act, 1975, and chargeable to 18% GST as applicable”.

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