Malabar 'Parota' Is Akin To 'Bread', Exigible To 5% GST: Kerala High Court

The Kerala High Court has held that Malabar 'Parota' is akin to 'bread' and is exigible at the rate of 5% GST and not 18% GST.

The bench of Justice Dinesh Kumar Singh has observed that Malabar 'Parota' and Whole Wheat Malabar Parota are exigible at the rate of 5% GST and not 18% as held by the Advance Ruling Authority and Advance Ruling Appellate Authority.

The petitioner is in the business of manufacturing and supplying food products, namely Classic Malabar Parota and Whole Wheat Malabar Parota. The petitioner filed an application for advance ruling under Section 97 of the CGST/SGST Act for the classification and rate of tax on the two products. The petitioner sought an advance ruling seeking classification of its products and rate of GST on the understanding that the petitioner's products qualify as 'bread'.

The Kerala Authority for Advance Ruling (AAR) rendered a ruling on the application dated 10.12.2018 and classified the petitioner's two products under Chapter Heading 2106 as taxable at 18% GST under Schedule III of the Rate Notification. AAR also held that exemption from GST under notification No. 2/2017—Central Tax (Rate)/SRO No. 361/2017 would not be applicable in the case of the petitioner's products as it is applicable only for specific commodities (bread) (branded or otherwise) covered under Harmonized System of Nomenclature (HSN) 1905.

Aggrieved by the AAR, the petitioner preferred an appeal before the Appellate Authority for Advance Ruling. Before the appellate authority, the petitioner contended that ingredients involved in and processes employed for preparing the petitioner's two products would merit classification of these products under Tariff item 1905 9090, bearing the description 'other'. It is a triple-ddash entry bearing the description 'other'. In order to classify the impugned goods under tariff items, products must qualify under Subheading 1905 9090. A mere perusal of the description of heading 1905 would reveal that it, inter alia, covers bread. The Customs Tariff does not define the expression 'bread', and the meaning of 'bread' has to be ascertained from different English dictionaries. The contention in substance was that the 'bread' refers to a product prepared by cooking dough made from the dough of flour, water, and yeast by application of the process of baking, and therefore the impugned products are to be classified under HSN 1905 and consequently under Sl No. 97 of Notification No. 02/2017 liable to be exempted from GST.

The appellate authority has been of the view that the contents of subheading 1905 would cover products of a bakery and all these items covered therein, which are in ready-to-eat form. Whereas, whole wheat Malabar Parota or classic Malabar Parota manufactured by the petitioner is neither a bakery product nor ready for human consumption as it needs to be heated or further processed for human consumption.

In view of the common parlance test applied by the appellate authority, it has been of the opinion that bread cannot be equated with parotas, and the same cannot be classified as 'bread'.

The AAAR therefore held that the impugned products of the petitioner cannot be classified under Entry 1905 as the products covered under the heading are generally completely prepared and cooked and do not require any further processing for consumption.

The assessee contended that if the goods are not specified in Schedules I, II, IV, V, or VI under any chapter, they would attract a levy of 18% CGST unless they were exempt or a different rate of tax was provided. Entry 99A of Schedule I to the rate notification provides 5% GST in respect of Chapter, Heading, Subheading, or Tariff Item 1905 or 2106 in respect of the goods such as Kharkha, plain chapati, or roti.

The department contended that while looking at the Entry 99A mentioned above, only three specific goods were enumerated in Column 3, namely Kharkha, plain chapatti, or roti, falling under HSN heading 1905 or 2106 mentioned in Column No. 2. In the absence of words like 'similar products' or 'and the like', the enumeration in the entry is exhaustive, and no other item can be included in the 3rd column. The Classic Malabar Parota and Whole Wheat Malabar Parota are either Kharkha, plain chapatti, or roti. The petitioner's products are different from Kharkha, plain chapatti, or roti. Entry 99A of the Rate Notification No. 1/2017 and State Notification No. 360/2017 dated June 30, 2017 are not applicable to goods falling within the ambit of HSN Heading 1905 or 2106 other than three specific goods enumerated in Column No. 3. The submission is that even if the petitioner's product falls under HSN Heading 1905, the petitioner's product would not come within Entry 99A of Schedule I to the Rate Notification and is not eligible for 5% tax.

The court noted that if the petitioner's products are akin to or similar to the products mentioned in HSN Code 1905 of Chapter 19, with the heading Preparations of cereals, flour, starch, or milk, pastrycooks' products, as the ingredients used and processes applied in their preparations are somewhat similar to the products mentioned in Chapter heading HSN Code 1905, excluding the petitioner's products from Entry 99A of the Rate Notifications, which are almost similar to the three products mentioned in the Entry, cannot be justified.

The court held the Malabar 'Parota' and Whole Wheat Malabar Parota are liable to be taxed under the GST Acts and rules made under GST at the rate of 5% on their supply.

Counsel For Petitioner: M. Gopikrishnan Nambiar

Counsel For Respondent: Muhammed Rafiq

Case Citation: 2024 LiveLaw Ker 269

Case Title: Modern Food Enterprises Private Limited Versus Union Of India

Case No.: WP(C) NO. 13935 OF 2021

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