SODEXO FOOD SOLUTIONS INDIA PRIVATE LIMITED

Withdrawal of Advance Ruling application – Whether catering services which involve operating and managing the canteens/cafeteria of the customers, provided to corporate customers qualify as services provided by a restaurant, eating joint including mess, canteen with a GST rate of 5% as per entry 7(i) of the Schedule under N/N. 11/2017 (as amended vide Notification 46/2017)?

Whether retail services of cooking and serving food and beverages by canteens, cafeteria etc, provided by the canteen/cafeteria to the employees or visitors (belonging to the customer) qualify as services provided by a restaurant, eating joint including mess, canteen with a GST rate of 5% as per entry 7(i) of the Schedule under N/N. 11/2017 (as amended vide N/N. 46/2017)?

Held that:- The request of the applicant to withdraw the application voluntarily and unconditionally is hereby allowed without going into the merits or detailed facts of this advance ruling application – application disposed off as withdrawn.

No.- GST-ARA-46/2017-18/B-90

Dated.- August 20, 2018

SHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, MEMBER

PROCEEDINGS

(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)

The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by Sodexo Food Solutions India Private Limited, the applicant, seeking an advance ruling in respect of the following questions.

  • Whether catering services which involve operating and managing the canteens/cafeteria of the customers, provided to corporate customers qualify as services provided by a restaurant, eating joint including mess, canteen with a GST rate of 5% as per entry 7(i) of the Schedule under Notification 11/2017 (as amended vide Notification 46/2017) ?
  • Whether retail services of cooking and serving food and beverages by canteens, cafeteria etc, provided by the canteen/cafeteria to the employees or visitors (belonging to the customer) qualify as services provided by a restaurant, eating joint including mess, canteen with a GST rate of 5% as per entry 7(i) of the Schedule under Notification 11/2017 (as amended vide Notification 46/2017) ?

The preliminary hearing in the matter was held on 1804.2018 and the Final hearing was held on 05.06.2018. However the applicant has filed letter dated 14.08.2018 received on 20.082018 in this office with request to grant the permission to withdraw application.

The request of the applicant to withdraw the application voluntarily and unconditionally is hereby allowed without going into the merits or detailed facts of this advance ruling application by this authority.

ORDER

(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)

NO.GST-ARA-46/2017-18/B-90

Mumbai, dt. 20/08/2018

The Application in GST ARA form No. 01 of Sodexo Food Solutions India Private Limited, vide reference ARA No. 46 dated 27.03.2018 is disposed off as being withdrawn unconditionally.

SAMPADA CATERERS PROPRIETOR MRS. SAMPADA SANTOSH HEDAOO

Withdrawal of Advance Ruling application – Classification of services – supply of services by M/s. Sampada Caterers to the members of VCA Recreation Club – whether the services would fall under Restaurant service or under Outdoor Catering Service?

Held that:- The request of the applicant to withdraw the application voluntarily and unconditionally is hereby allowed without going into the merits or detailed facts of this advance ruling application – application disposed off as withdrawn.

No.- GST-ARA-45/2018-19/B-97

Dated.- August 20, 2018

SHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, MEMBER

PROCEEDINGS

(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)

The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by SAMPADA CATERERS, PROPRIETOR MRS. SAMPADA SANTOSH HEDAOO the applicant, seeking an advance ruling in respect of the following question :

Whether the supply of services by M/s. Sampada Caterers to the members of VCA Recreation Club for supply of food and drinks by M/s. Sampada Caterers in the Restaurant and bar/permit room of VCA Recreation Club fall under the ambit of Restaurant service and the Notification No. 46/2017 Central Tax (Rate) dated 14th Nov, 2017 effective from 15th Nov, 2017 be applicable for the above mentioned Services or the said services fall under outdoor Catering Service as both these services now attract different rate of Tax ?

The preliminary hearing in the matter was held on 24.07.2018 and the Final hearing was fixed for 23.08.2018 , but applicant filed letter dated 13.08.2018 received on 16.08.2018 in this office with request to allow withdrawal of the application filed on 25.06.2018 due to changes in the circumstances as per Notification No. 13/2018-Central Tax (Rate) and press release by the GST Council

The request of the applicant to withdraw the application voluntarily and unconditionally is hereby allowed without going into the merits or detailed facts of this advance ruling application by this authority.

ORDER

(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)

NO.GST-ARA-45/2018-19/B-97

Mumbai, dt. 20/08/2018

The Application in GST ARA form No. 01 of M/s. SAMPADA CATERERS, PROPRIETOR MRS. SAMPADA SANTOSH HFDAOO vide reference ARA No. 45 dated 25.06.2018 is disposed off as being withdrawn unconditionally.

SMITA GUPTA

Classification of goods/services/both – rate of tax – coverage of various items used in the sprinklers and drip irrigation systems sold individually as well as part of a complete system – N/N. 01/2017 dated 28.06.2017 as inserted vide N/N. 06/2018 dated 25.01.2018 – applicant has contended that along with nozzles later vide notification no. 06/2018 dated 25.01.2018 a new entry was introduced as entry no 195B “Sprinklers; drip irrigation system including laterals; mechanical sprayers” which included all the lateral parts of these irrigation systems into Schedule II also.

Held that:- The laterals related only to drip irrigation systems have been covered under this entry and laterals of sprinklers are not covered under the amended entry – Sprinklers is not in itself a complete irrigation system but constitutes an essential component of a Sprinkler Irrigation System which when assembled with other laterals and accessories makes a complete functional sprinkler irrigation system.

Risers, adopter, bend, coupler ,end cap, PCN(C-Type), group nipple, reducer bare, socket, Bush, Y(bere), Latch clamps, C clamps, Riser Pipes, Rubber Rings, Tee, Clamps, Foot button, Ripit, Nozzle are all laterals to the sprinklers which when assembled with sprinkler constitutes Sprinkler Irrigation System.

In case of drip irrigation system as per entry No.195A and 195 B of the schedule II of Notification No. 1/2017 – CT (Rate) dated 28-6-2017, later amended by Notification No.27/2017 CT- (Rate) dated 22.09.2017 and 6/2018 – CT (Rate) dated 25-1-2018 respectively, covers “Nozzles for drip irrigation equipments” and “drip irrigation system including laterals” and would attract GST (CGST 6% + SGST 6%) – In case of Sprinklers as per entry No. 195A and 195 B of the schedule II of Notification No. 1/2017 – CT (Rate) dated 28-6-2017, later amended by Notification No. 27/2017 CT- (Rate) dated 22.09.2017 and 6/2018 – CT (Rate) dated 25-1-2018 respectively covers only “Nozzles for Sprinkler” and “Sprinklers” which would attract GST 12% (CGST 6% + SGST 6%) – Risers ( which connects sprinkler to laterals) along with all other laterals such as adopter, bend, coupler ,end cap, PCN(C-Type), group nipple, reducer bare, socket, Bush, Y(bere) , Latch clamps ,C clamps, Riser Pipes, Rubber Rings, Tee, Clamps, Foot button, Ripit, Nozzle etc. are not covered under entry no. 195A and 195 B.

Ruling:- As per entry No. 195 B of the schedule II of Notification No. 1/2017 – CT (Rate) dated 28-6-2017, as amended by Notification No. 06/2018 – CT (Rate) dated 25-1-2018, Laterals of sprinklers such as clamps, bends, tee, coupler, bush, foot button, latch, clamp, riser pipe, socket etc. are not covered to attract GST 12% (CGST 6% + SGST 6%) but instead will attract GST at 18% (CGST 9% + SGST 9%).

Laterals of drip irrigation system will attract GST 12% (CGST 6% + SGST 6%).

No.- AAR No. RAJ/AAR/2018-19/12

Dated.- August 18, 2018

NITIN WAPA AND SUDHIR SHARMA MEMBER

Present for the applicant: Mr. Ranjan Mehta, (CA) Authorised Representative

Note: Under Section 100 of the RGST Act 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of RGST Act 2017, within a period of30 days from the date of service of this order.

The Issue raised by the applicant is fit to pronounce advance ruling as it falls under ambit of the Section 97(2) (a), it is given as under:

(a) Classification of any goods or services or both;

Further, the applicant being a registered person, GSTIN is 08AEOPG3970K1Z1, as per the declaration given by him in Form ARA-01, the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the application is ‘admitted’ to pronounce advance ruling.

1. SUBMISSION OF THE APPLICANT:

1. The applicant Smita Gupta (M/s. Vinay Irrigation) (here in after referred to as ‘Applicant’) has sought an Advance Ruling on the Entry No. 195B of Schedule II of notification no 01/2017 dated 28.06.2017 as inserted vide notification no 06/2018 dated 25.01.2018.

The applicant seeks advance ruling over the coverage of various items used in the sprinklers and drip irrigation systems sold individually as well as part of a complete system.

2. The applicant is engaged in manufacturing and trading of various plastic and metallic items which are used in agricultural irrigation. These items are Adopter, coupler, Tee, Clamps, Foot button, Ripit, Nozzle etc. All these items are used as part of sprinkler or Drip irrigation system depending upon the requirement of each farmer. These items are supplied as part of a complete sprinkler or drip irrigation system and also as spares separately as and when required by farmer for replacement.

3. All above items are used by the farmers and most of the items do not have an independent use. They are used only as part of Sprinkler or Drip irrigation system for the purpose of irrigation only.

2. Taxability

The applicant stated that these items fall under Chapter 84 of the Customs Tariff Act, 1975 under heading 8424 which reads as follows:-

MECHANICAL APPLIANCES (WHETHER OR NOT HAND OPERATED) FOR PROJECTING, DISPERSING OR SPRAYING LIQUIDS OR POWDERS; FIRE EXTINGUISHERS, WHETHER OR NOT CHARGED; SPRAY GUNS AND SIMILAR APPLIANCES; STEAM OR SAND BLASTING MACHINES AND SIMILAR JET PROJECTING MACHINES.

These items are used in the process of irrigation by means of which water is dispersed or sprayed on to the plants.

For heading 8424 there are 3 entries of taxation in notification no 01 / 2017 Central Tax (Rate) dated 28.06.2017, as amended from time to time; all of them are given below:-

Schedule II 6%

S.No.

Chapter/Heading/Sub-heading/Tariff item

Description of Goods

CGST rate

(1)

(2)

(3)

(4)

195A*

8424

Nozzles for drip irrigation euipment or nozzles for 6%

195B**

8424

Sprinklers; drip irrigation system including laterals; mechanical sprayers”; 6%

*-inserted by Noti. No. 27/2017 Central Tax (Rate) dated 22.09.2017.

**-inserted by Noti. No. 06/2018 Central Tax (Rate) dated 25-01-2018.

Schedule III – 9%

S.No.

Chapter/Heading/Sub-heading/Tariff item

Description of Goods

CGST rate

(1)

(2)

(3)

(4)

325.

8424

Mechanical appliances (whether or not hand-operated) for projecting, dispersing or spraying liquids or powders; fire extinguishers, whether or not charged; spray guns and similar appliances; steam or sand blasting machines and similar jet projecting machines

9%

Mechanical sprayer; nozzles for drip irrigation euipment or nozzles

***-Amended vide notification no 27/2017 Central Tax (Rate) dated 22.09.2017 and 06/2018 Central Tax (Rate) dated 25-01-2018

5. Till 22.09.2017 all the items listed under tariff heading 8424 were taxable @ 18% (9% CGST + 9% SGST) vide entry no 345 of schedule III of notification no 01/2017.

6. Vide notification no 27/2017 dated 22.09.2017 nozzles of the sprinklers and the drip irrigation system were carved out of this entry no 345 of schedule III of Notification no 01/2017and were put into Schedule II as entry no 195A to be taxed @ 12% after representations were made from various sections of the industry being an agricultural input.

7. The nozzles form a very small part of these irrigation systems (Although an important one), later vide notification no. 06/2018 dated 25.01.2018 a new entry was introduced as entry no 195B “Sprinklers; drip irrigation system including laterals; mechanical sprayers”. This entry included all the lateral parts of these irrigation systems into Schedule Il also, in addition to the Nozzles.

8. The applicant stated that, the word lateral is not defined in the law. However its dictionary meaning is “A side part of something” or “Of, relating to, or situated at or on the side”. Examples of uses of this word as per dictionary are as follows:-

“The plant takes up water through its lateral roots”

“Designers added more storage space, with lateral expansion of the rear compartment”

In the case of applicant, laterals in relation to irrigation system mean all such devices and equipment which help in the working of the system and without which it may not work. All the products of the applicant are laterals to the sprinkler and drip irrigation.

9. The applicant further submitted that, sprinkler and drip irrigation are 2 different system designed for distinct uses. Sprinkler is in itself a complete system designed for irrigation by use of water pumping. It has not been defined in the law. Dictionary/ internet definitions are as follows:-

“An Irrigation sprinkler is a device used to irrigate agricultural crops, lawns, landscapes, golf courses, and other areas. They are also used for cooling and for the control of airborne dust. Sprinkler irrigation is a method of applying irrigation water which is similar to natural rainfall. Water is distributed through a system of pipes usually by pumping”

Sprinkler include firing Nozzle, pipes, clamps, foot buttons and different other items through which the system works.

Drip Irrigation is also not defined in the law. However its definition as per various sources is as follows:-

“Drip irrigation, which is also sometimes referred to as micro-irrigation or trickle irrigation, consists of a network of pipes, tubing valves, and emitters. Drip in-igation is defined as any watering system that delivers a slow moving supply of water at a gradual rate directly to the soil”

This system also includes nozzles, pipes, clamps, elbow, tee etc. to form a complete system and work.

10. The applicant contented that the items supplied by him are necessarily part of the sprinkler and drip irrigation system and are helping in overall functioning of the system. He stated that they are not to be used independently anywhere and further they are part of the system without which whole system may not work. Thus they are laterals.

11. The applicant has sought advance ruling on the coverage of the items covered under Annexure 1 under entry no. 195B of schedule II of notification no 01/2017 dated 28.06.2017 as amended vide notification no. 06/2018 dated 25.01.2018.

S.No.

Chapter/Heading/Sub-heading/Tariff item

Description of Goods

CGST rate

(1)

(2)

(3)

(4)

325.

8424

Mechanical appliances (whether or not hand-operated) for projecting, dispersing or spraying liquids or powders; fire extinguishers, whether or not charged; spray guns and similar appliances; steam or sand blasting machines and similar jet projecting machines [other than sprinklers; drip irrigation systems including laterals; mechanical sprayer;

9%

3 Personal Hearing (PH)

In the matter personal hearing was given to the applicant, Mr. Ranjan Mehta, CA, (Authorised Representative) of applicant appeared for personal hearing on 20.07.2018. During the PH he reiterated that the case may be decided as per submission already made in the application for Advance Ruling. He has sought time to submit statements regarding the explanation of Sprinkler system vis-å-vis Sprinkler which was submitted on a later date. Further, he has requested to decide the case at the earliest.

4. The jurisdictional officer in her comments has stated that the Entry relating to Sprinkler does not include Sprinkler irrigation system nor does it include laterals. Hence, the goods in question will attract 12% GST(SGST 6% + CGST 6%).

5. Findings and analysis:

Before we set to decide the issues raised in Advance Ruling Application we should analyse and understand the meaning of certain relevant items/commodities relating to entries of the notification in question such as Sprinkler, Sprinkler Irrigation system, Drip Irrigation system and Laterals.

a) Sprinkler :

As per collins dictionary meaning of sprinkler is “a device perforated with small holes that is attached to a garden hose or watering can and used to spray on plants, lawns, etc, with water.”

It is also defined as “a device with a lot of small holes that you put on the end of a hose in order to water plantsgrass,” etc.

Sprinkler may range from small single nozzle sprinklers to multiple nozzle sprinklers and can be used for irrigation, fire fighting, powder spraying etc.

b) Sprinkler Irrigation System

Sprinkler Irrigation is a method of applying irrigation water which is similar to rainfall. Water is distributed through a system of pipes usually by pumping. It is then sprayed into the air and irrigated entire soil surface through spray heads so that it breaks up into small water drops which fall to the ground.

Components of a sprinkler irrigation system.

A sprinkler system usually consists of the following components:

(i) A Pumping Unit

(ii) Tubings- main/sub-mains and laterals

(iii) Couplers

(iv) Sprinkler head

(v) Other accessories and laterals such as valves, bends, plugs and risers.

(i) Pumping Unit: Sprinkler irrigation systems distribute water by spraying it over the fields. The water is pumped under pressure to the fields. The pressure forces the water through sprinklers or through perforations or nozzles in pipelines and then forms a spray.

(ii) Tubings: Mains/submains and laterals: The tubings consist of mainline, submanins and laterals. Main line conveys water from the source and distributes it to the submains. The submains convey water to the laterals which in turn supply water to the sprinklers.

(iii) Couplers: Couplers are used for connecting two pipes and uncoupling quickly and easily.

(iv) Sprinkler Head: Sprinkler head distribute water uniformly over the field without runoff or excessive loss due to deep percolation. Different types of sprinklers are available. They are either rotating or fixed type.

(v) Fittings and accessories: The following are some of the important fittings and accessories used in sprinkler system. (a) Water meters. (b) Flange, couplings and nipple used for proper connection to the pump, suction and delivery. (c) Pressure gauge. (d) Bend, tees, reducers, elbows, hydrants, butterfly valve and plugs. (e) Fertilizer applicator.

It is clear from above that Sprinkler Irrigation system mainly consists of a functional assembly of pump unit, mainline and sub lines tubing, laterals and sprinkler connected to each other.

Nozzles and sprinklers covered in entry no. 195A and 195B are just one of the components of Sprinkler irrigation system hence to consider or equate Sprinkler as Sprinkler irrigation system will not be correct.

c) Drip Irrigation System:

Drip irrigation is a type of micro-irrigation system that has the potential to save water and nutrients by allowing water to drip slowly to the roots of plants, either from above the soil surface or buried below the surface. The goal is to place water directly into the root zone and minimize evaporation. Drip irrigation systems distribute water through a network of valvespipestubing, and emitters.

Components of Drip Irrigation System: A typical system consists of a source of water supply, pumping unit, main lines, laterals and emitters. Auxiliary components include filters, pressure regulators, valves and equipment for mixing fertilizers etc.

1. Filters: Filters are used to remove undesirable material from the water supply before it enters the distribution system and creates the potential for emitter clogging.

2. Main lines: The main line carries the water from the filtration system to the submain.

3. Submain: The submain distribute the water from main line to the laterals.

4. Laterals: The lateral distribute water to the emitter which deliver water directly to the root zone.

5. Emitters or drippers: The dripper or an emitter is a device used for discharging water from lateral to the plants root zone.

6. Control valves: These are used to control the flow through the submain pipes.

7. Flush valve: It is provided at the end of each submain to flush out the water and dirt accumulated at the end of submain.

8. Air release valve: It is provided at the higher point in the mainline to release the entrapped air during the start of system and to break the vacuum during shut off.

9. Non- return valve: It is used to prevent the damage of pump from back flow of water in rising main line of drip irrigation system.

10. Pressure gauge: It is used to indicate the operating pressure of the drip system. The pressure gauges are installed at the inlet and outlet of the san and screen filters

11. Grommet and take-off: These are used to connect the lateral to submain. A hole is pinched with hand drill of pre determined size in submain. Grommet is fixed into the hole on submain. Take-off is pressed into the grommet. Grommet acts as a seal. The sizes are different for 12 mm and 16 mm laterals.

12. End cap: They are used to close the lateral ends, submain ends or main ends. Submains and mains are preferably provided with flush valve.

13. Fertilizer system: It is used to add the chemicals (nutrients, herbicides, pesticides etc.) to the irrigation water.

d) Laterals:

Meaning of Laterals

“relating to the sides of an object or plant or to sideways movement”

“something that is extending to the side or moving to the side”

6. Conclusion :

The applicant has contended that along with nozzles later vide notification no. 06/2018 dated 25.01.2018 a new entry was introduced as entry no 195B “Sprinklers; drip irrigation system including laterals; mechanical sprayers” which included all the lateral parts of these irrigation systems into Schedule II also .

On perusal of above entry it is clear that laterals related only to drip irrigation systems have been covered under this entry and laterals of sprinklers are not covered under the amended entry.

The applicant further submitted that, sprinkler and drip irrigation are two different systems designed for distinct uses. Sprinkler is in itself a complete system designed for irrigation by use of water pumping.

As discussed above Sprinklers is not in itself a complete irrigation system but constitutes an essential component of a Sprinkler Irrigation System which when assembled with other laterals and accessories makes a complete functional sprinkler irrigation system.

The applicant contented that the items supplied by him are necessarily part of the sprinkler and drip irrigation system which is true but unlike the entry relating to drip irrigation which clearly specifies “drip irrigation system including laterals” this entry confines only to “sprinklers” and neither includes “laterals of sprinkler” nor “sprinkler irrigation system.”

Risers, adopter, bend, coupler ,end cap, PCN(C-Type), group nipple, reducer bare, socket, Bush, Y(bere), Latch clamps, C clamps, Riser Pipes, Rubber Rings, Tee, Clamps, Foot button, Ripit, Nozzle are all laterals to the sprinklers which when assembled with sprinkler constitutes Sprinkler Irrigation System.

In case of drip irrigation system as per entry No.195A and 195 B of the schedule II of Notification No. 1/2017 – CT (Rate) dated 28-6-2017, later amended by Notification No.27/2017 CT- (Rate) dated 22.09.2017 and 6/2018 – CT (Rate) dated 25-1-2018 respectively, covers “Nozzles for drip irrigation equipments” and “drip irrigation system including laterals” and would attract GST (CGST 6% + SGST 6%).

In case of Sprinklers as per entry No. 195A and 195 B of the schedule II of Notification No. 1/2017 – CT (Rate) dated 28-6-2017, later amended by Notification No. 27/2017 CT- (Rate) dated 22.09.2017 and 6/2018 – CT (Rate) dated 25-1-2018 respectively covers only “Nozzles for Sprinkler” and “Sprinklers” which would attract GST 12% (CGST 6% + SGST 6%).

As discussed above, unlike as in the case of drip irrigation system (where drip irrigation system along with nozzles and laterals are covered in above entries) ONLY “ nozzles” for sprinklers and “ sprinklers” are covered in entry No. 195A and 195 B of the schedule II of Notification No. 1/2017 – CT (Rate) dated 28-6-2017, as amended by Notification No.27/2017 CT- (Rate) dated 22.09.2017 and 6/2018 -CT (Rate) dated 25-1-2018 respectively But Risers ( which connects sprinkler to laterals) along with all other laterals such as adopter, bend, coupler ,end cap, PCN(C-Type), group nipple, reducer bare, socket, Bush, Y(bere) , Latch clamps ,C clamps, Riser Pipes, Rubber Rings, Tee, Clamps, Foot button, Ripit, Nozzle etc. are not covered under entry no. 195A and 195 B.

Based on above facts along with provision of law the ruling is as follows:

RULING:

As per entry No. 195 B of the schedule II of Notification No. 1/2017 – CT (Rate) dated 28-6-2017, as amended by Notification No. 06/2018 – CT (Rate) dated 25-1-2018, Laterals of sprinklers such as clamps, bends, tee, coupler, bush, foot button, latch, clamp, riser pipe, socket etc. are not covered to attract GST 12% (CGST 6% + SGST 6%) but instead will attract GST at 18% (CGST 9% + SGST 9%).

Laterals of drip irrigation system will attract GST 12% (CGST 6% + SGST 6%).

M/S. TAG SOLAR SYSTEM,

Rate of tax on supply of goods/services/both – Solar Power Generating Systems and parts – Works Contract – Whether Supply, commissioning, installation and maintenance of Solar Water Pumping System would be taxable at the rate of 5% considering it as a composite supply where the principle supply being that of goods i.e. supply of Solar Power generating system having HSN Code 84 or 85? – Whether separate bills can be raised by the Applicant with respect to Supply and Goods and Supply of Services Purely in respect of the contract of the Applicant with RHDS enclosed herewith? – Will the said transaction be classified as a “Works Contract” and taxable at the rate of 18% being Supply of Services?

Held that:- Solar Photovoltaic (SPV) water pumping system has a permanent location (at specified farmer’s field in Rajasthan) as its works is undertaken on instructions of the Rajasthan Horticulture Development Society under subsidy scheme wherein the Solar Water Systems are required to be installed at the farmer’s field meant for supply of water using solar energy. Such plant would therefore have an inherent element of permanency – The output of the project i.e. water, using solar energy would be available to an identifiable consumer. Thus this output supply would involve an element of permanency for which it would not be possible and prudent to shift base from time to time or locate the plant elsewhere at frequent intervals – The Solar Photovoltaic (SPV) water pumping system cannot be shifted to any other place without dismantling the same. Further it is tailored made system which cannot be sold “as it is” to the other person.

Contract also includes civil work such as development of site, structure foundation for mounting PV modules on metallic structures and fencing of the system to ensure security and safety and such other civil structure related activities as set out in Scope of work and in the Technical Specifications. Civil structure cannot be dismantled and moved away.

The applicant has to supply a “Functional Solar Photovoltaic (SPV) water pumping system” as a whole which includes supply, installation and commissioning, maintenance for 10 years, hence instant transaction is neither a supply of i) “Solar Power Generating System” and nor a supply of ii) “Solar Power Based Devices” – the above entry under the notification describes the Tax rate on ‘Goods’. If the transaction is supply of goods i.e. supply of either “Solar Power Generating System” or supply of “Solar Power Based Devices” then the applicable Schedules would have to be seen but the intent of parties in instant case is always for supply of a “Functional Solar Photovoltaic (SPV) water pumping system” as a whole which includes supply, installation and commissioning at the site of farmer along with maintenance for 10 years and is not chattel sold as chattel. Hence cannot be treated as “Composite Supply” as contended by the applicant.

The impugned transaction for supply of Solar Photovoltaic (SPV) water pumping system which includes procurement, supply, development, testing, commissioning and providing maintenance service for 10 years is a “works contract” in terms of clause (119) of section 2 of the GST Act – Since the impugned transaction for supply and commissioning of Solar Photovoltaic (SPV) water pumping system is a “works contract” u/s 2(119) as supply of services, hence question of principal supply does not arise and so GST tax rate of Solar power Generating System or Solar Power Based Devices under notification No 01/2017-CT (Rate) dated 28.06.2017, at S.No. 234, under HSN Classification 84, 85 and 94 is not applicable.

Ruling: The scope of work includes procurement, supply, development, testing, commissioning and providing maintenance service for 10 years in respect of supply of a Solar Photovoltaic (SPV) water pumping system. Accordingly it is not getting covered under supply of ‘Solar Power Generating System’ under Entry 234 of Schedule I of the Notification no. 1/2017 – Central Tax (Rate), dated 28th of June, 2017 under HSN code 84 or 85. “Supply, installation, commissioning and maintenance of Solar Water Pumping Systems” falls under the purview of Works Contract as per Section 2(119) of GST Act.

In instant case as per terms and conditions of agreement, it is a single contract of supply, installation, commissioning and maintenance of Solar Water Pumping Systems and hence cannot be split in two separate contracts. Hence in instant case separate bills for supply of goods and supply of services cannot be raised.

The contract for “supply, installation, commissioning and maintenance of Solar Water Pumping Systems” falls under the ambit of “Works Contract Services” which comes under the purview of Works Contract as per Section 2(119) of CGST Act and attracts 18% rate of tax under IGST Act, or 9% each under the CGST and SGST Acts, aggregating to 18%.

No.- AAR No. RAJ/AAR/2018-19/11

Dated.- August 18, 2018

Citations:

  1. Commissioner of Central Excise, Ahmedabad Versus Solid & Correct Engineering Works & Ors. – 2010 (4) TMI 15 – Supreme Court
  2. TTG. INDUSTRIES LTD. Versus COLLECTOR OF CENTRAL EXCISE, RAIPUR – 2004 (5) TMI 77 – Supreme Court
  3. TRIVENI ENGINEERING & INDUS. LTD. Versus COMMISSIONER OF CENTRAL EXCISE – 2000 (8) TMI 86 – Supreme Court
  4. SIRPUR PAPER MILLS LTD. Versus COLLECTOR OF CENTRAL EXCISE, HYDERABAD – 1997 (12) TMI 109 – Supreme Court
  5. MITTAL ENGINEERING WORKS (P) LTD. Versus COLLR. OF C. EX., MEERUT – 1996 (11) TMI 66 – Supreme Court
  6. QUALITY STEEL TUBES (P) LTD. Versus COLLECTOR OF CENTRAL EXCISE, UP. – 1994 (12) TMI 75 – Supreme Court
  7. The Municipal Corporation of Greater Bombay Versus The Indian Oil Corporation – 1990 (11) TMI 407 – Supreme Court
  8. NARNE TULAMAN MANUFACTURERS PVT. LTD. Versus COLLECTOR OF CE. – 1988 (9) TMI 51 – Supreme Court
  9. Official Liquidator Versus Sri Krishna Deo – 1958 (5) TMI 35 – HIGH COURT OF ALLAHABAD
  10. GWALIOR RAYON SILK MFC. (WVG.) CO. LTD. Versus COLLECTOR OF C. EX. – 1992 (10) TMI 188 – CEGAT, NEW DELHI

NITIN WAPA AND SUDHIR SHARMA MEMBER

Present for the applicant: Shri Pankaj Ghiya (Authorised Representative).

Note: Under Section 100 of the RGST Act 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of RGST Act 2017, within a period of30 days from the date of service of this order.

The Issues raised by the applicant are fit to pronounce advance ruling as they fall under ambit of the Section 97(2) (e), it is as given under:

(e) Determination of the liability to pay tax on any goods or services or both

Further, the applicant being a registered person, GSTIN: 08AAKFT3688D1ZT, as per the declaration given by him in Form ARA-01, the issue raised by the applicant is neither pending for proceedings nor proceedings was passed by any authority. Based on the above observations, the application is ‘admitted’ to pronounce advance ruling.

1. Submission of the Applicant:

Statement of relevant facts having a bearing on the question(s) raised.

1. M/s. Tag Solar System, a partnership firm which is engaged in Supply, Commissioning, Installation, Maintenance of Solar Water Pumping System within a stipulated time period.

2. Such Supplies are given on the instructions of the Rajasthan Horticulture Development Society under subsidy scheme wherein the Solar Water Systems are required to be installed at the farmer’s field. The scope of work is reproduced hereunder:

“supply, installation, commissioning and maintenance of Solar Water Pumping Systems”

3. Accordingly the Applicant Supplies, Installs, Commissions and Maintains the said systems and perform end to end activities in this regard.

4. There may be a consolidated price for all the activities undertaken by the Applicant which involves both the Supply of Goods and Supply of Services.

5. Applicant has no clarity with respect to the rate of tax on such Supply. As per their understanding it will be taxable at the rate of 5% being covered under Chapter 84 / 85 under the item “Solar Power Generating System”. Applicant has confusion that whether it would be treated as a Supply of goods and taxable at 5% or will it be treated as a works contract and charged at 18%.

2. Applicant’s interpretation of law and/or facts:

RATE OF SOLAR POWER GENERATING SYSTEM

The item “Solar Power Generating Systems and parts for their manufacture” are taxable @ 5% under GST Act, 2017 vide Notification No. 01/2017-CT (Rate) dated 28.06.2017. The entry is reproduced herein below for your kind perusal:

Chapter

Heading

Particulars

84 or 85 or

94

Following renewable energy devices and parts for their manufacture
a) Bio-gas Plant
b) Solar Power based devices
c) Solar Power generating System
d) Wind Mill and Wind Operated electricity generator
e) Waste to energy plants/devices
f) Solar lanterns/solar lamps
g) Ocean waves/tidal waves energy devices / plants
h) Photo voltaic cells, whether or not assembled in modules or made up into panels

As per the above Entry in the Rate Schedule, the supply of item under consideration i.e. Solar Water Pumping System falls squarely under the definition of “Solar power generating System” and such supply should be taxable at the rate of 5% as they are systems which absorb sunlight and convert it into electricity which can be put to further use.

The above mentioned Entry “Solar Power Based Devices” under Chapter heading 84 or 85 or 95, the item in question i.e. Solar Water Pumping System can also be covered under this category as it is a device run by solar power. Solar Water Pumping System is an apparatus used for pumping water which runs on solar energy. The dictionary meaning of “device” is reproduced as under:

“a thing made or adapted for a particular purpose, especially a piece of mechanical or electronic equipment”

Solar Water Pumping System is an equipment which harnesses solar energy in order to pump water. Therefore, it can also be alternatively classified as a “Solar Power based device” under Chapter 84 or 85.

Applicant has stated that item cannot be termed as an immovable property as these Solar Water Pumping Systems are screwed by nuts and bolts into the ground and can be removed by simply unscrewing the nuts and bolts and in no way do they get attached or affixed to the earth. The pumping sets do not get permanently attached to the ground and can at any time be removed from the fields. They are assembled at the site for maximum operational efficiency. When the item can simply be dismantled and removed from the ground at any given time and is not affixed to the earth permanently, the said goods cannot be categorized as an immovable property. As per applicant Hon’ble Supreme Court of India in the case of Sirpur Paper Mills Ltd. vs. The Collector of Central Excise =  1997 (12) TMI 109 – SUPREME COURT OF INDIA, has held as under:

“It is not possible to hold that the machinery assembled and erected by the appellant at its factory site was immovable property as something attached to earth like a building or a tree. The Tribunal has pointed out that it was for the operational efficiency of the machine that it was attached to earth. If the appellant wanted to sell the paper making machine it could always remove it from its base and sell it.

Apart from this finding of fact made by the Tribunal, the point advanced on behalf of the appellant, that whatever is embedded in earth must be treated as immovable property is basically not sound. For example, a factory owner or a house-holder may purchase a water pump and fix it on a cement base for operational efficiency and also for security. That will not make the water pump an item of immovable property. Some of the components of water pump may even be assembled on site. That too will not make any difference to the principle. The test is whether the paper making machine can be sold in the market. The Tribunal has found as a fact that it can be sold. In view of that finding, we are unable to uphold the contention of the appellant that the machine must be treated as a part of the immovable property of the company. Just because a plant and machinery are fixed in the earth for better functioning, it does not automatically become an immovable property.”

The same has also been held in the case of Commissioner of Central Excise vs. Solid & Correct Engg. Works & Ors. = 2010 (4) TMI 15 – SUPREME COURT, as under:

“23. The courts in this country have applied the test whether the annexation is with the object of permanent beneficial enjoyment of the land or building. Machinery for metal-shaping and electro-plating which was attached by bolts to special concrete bases and could not be easily removed, was not treated to be a part of structure or the soil beneath it, as the attachment was not for more beneficial enjoyment of either the soil or concrete. Attachment in order to qualify the expression attached to the earth, must be for the beneficial attachment of that to which it is attached. Doors, windows and shutters of a house are attached to the house, which is imbedded in the earth. They are attached to the house which is imbedded in the earth for the beneficial enjoyment of the house. They have no separate existence from the house. Articles attached that do not form part of the house such as window blinds, and sashes, and ornamental articles such as glasses and tapestry fixed by tenant, are not affixtures.

24. Applying the above tests to the case at hand, we have no difficulty in holding that the manufacture of the plants in question do not constitute annexation hence cannot be termed as immovable property for the following reasons:

(i) The plants in question are not per se immovable property.

(ii) Such plants cannot be said to be “attached to the earth” within the meaning of that expression as defined in Section 3 of the Transfer of Property Act.

(iii) The fixing of the plants to a foundation is meant only to give stability to the plant and keep its operation vibration free.

(iv) The setting up of the plant itself is not intended to be permanent at a given place. The plant can be moved and is indeed moved after the road construction or repair project for which it is set up is completed.

33. ….. In the instant case all that has been said by the assessee is that the machine is fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth but because a foundation was necessary to provide a wobble free operation to the machine. An attachment of this kind without the necessary intent of making the same permanent cannot, in our opinion, constitute permanent fixing, embedding or attachment in the sense that would make the machine a part and parcel of the earth permanently. In that view of the matter we see no difficulty in holding that the plants in question were not immovable property”

Applicant has contended that in the light of the abovementioned facts and judgments Solar Water Pumping Systems cannot be categorized as Immovable Property and the activity in relation to movable property cannot in any way be categorized as a Works Contract as the definition of Works Contract under CGST Act, 2018 does not cover activities in relation to movable property. Hence, the whole transaction cannot be termed as a Works Contract.

Applicant has stated that the instant case is of “ Composite Supply” where in the present scenario, it is very important to see what the Principal Supply is as the rate of tax of such transactions depends on the rate of tax of the Principal Supply.

Applicant has interpreted that predominant element of the Supply being made in the instant case relates to Supply of Solar Water Pumping Systems. There is one single Supply Tender which involves the Supply of the Systems to the recipient and the work of installation, maintenance, commissioning is ancillary to the activity of Supply of the Solar Water Pumping Sets. Since, the scope of Supply of the applicant involves provision of both goods and services, where the entire Supply is one transaction; it would qualify as a composite supply. The principal Supply in the present scenario would be provision of Solar Water Pumping System and so the entire contract should be taxable at the rate of 5%. As the service element forms only about in the whole provision of Supply.

3. Question(s) on which Advance Ruling is required:

1. Whether Supply, commissioning, installation and maintenance of Solar Water Pumping System would be taxable at the rate of 5% considering it as a composite supply where the principle supply being that of goods i.e. supply of Solar Power generating system having HSN Code 84 or 85?

2. Whether separate bills can be raised by the Applicant with respect to Supply and Goods and Supply of Services Purely in respect of the contract of the Applicant with RHDS enclosed herewith?

3. Will the said transaction be classified as a “Works Contract” and taxable at the rate of 18% being Supply of Services?

4.1 Personal Hearing (PH):

In the matter personal hearing was given to the applicant Shri Pankaj Ghiya (Authorised Representative) who appeared for personal hearing on 08.07.2018. During the PH he submitted EOI Document of Empanelment Report, copy of a circular of CBEC dated 15.01.2002 and Supreme court judgment of M/s. Sirpur Paper Mills containing the applicant’s interpretation of law and facts in respect of the aforesaid questions which was placed on record. They reiterated the submission already made in the application for Advance Ruling and further requested that the case may be decided as per the submission made earlier in Advance Ruling Application. Applicant was instructed to submit copy of Work Order and some sample bill which was done by them on a later date.

4.2 The jurisdictional officer in her comments has stated that the contract given to the applicant is of supply, installation, commissioning and maintenance of Solar Water pumping system in which the dealer has to deliver a functional solar water pumping system. Hence, it is a one single contract so it is to be treated as works contract and taxed @ 18% under GST. She further stated that separate bills one for supply of goods and other for supply of services cannot be generated as it is a single contract.

5. Findings and analysis:

As per copy of contract submitted by the applicant i.e. M/s. Tag Solar System has to execute “Supply of Solar Photovoltaic (SPV) water pumping system”. After going through the written submissions, copy of contract and other additional statements following findings and analysis are made:

a) M/S Tag Solar System, is a partnership firm is engaged in Supply, Commissioning, Installation, Maintenance of Solar Water Pumping System.

b) Such Supplies are given on the instructions of the Rajasthan Horticulture Development Society under subsidy scheme wherein the Solar Water Systems are required to be installed at the farmer’s field.

c) The intention in the instant case is not to procure goods of Solar Photovoltaic (SPV) water pumping system but to procure a completely functional Solar Photovoltaic (SPV) water pumping system as a whole wherein applicant undertakes end to end responsibility of supply of equipments including installation and commissioning to a defined technical specifications and testing, commissioning of a fully functional Solar Photovoltaic (SPV) water pumping system.

d) Under General Condition of Contract (IV) in clause IV.2 of EOI all risk and liabilities (insurance charges) accruing in relation of works (temporary or permanent), and of all equipments, machinery, materials, shall be with applicant until occurrence of the Final Acceptance.

e) Schedule IV -(Scope of works) of EOI clearly spells out the terms and conditions where contractor has to undertake works of supply installation and commissioning of Solar Photovoltaic (SPV) water pumping system as per specific demands of the owner. So it is not the something sold out of shelf.

f) There is a single lump sum price for the entire work undertaken by the applicant.

g) After completing installation and commissioning of system, final payment shall only be made on basis of satisfactory inspection and verification report.

h) The applicant has laid claim under notification No 01/2017-CT (Rate) dated 28.06.2017, at S.No. 234, under HSN Classification 84, 85 and 94, for description:

  • Following renewable energy devices & parts for their manufacture

(c) Solar Power Generating System

The rate of CGST has been mentioned as 2.5%. According to assessee, the correct classification of given supply should be Chapter 84: Solar Power Generating System at the rate of (2.5%+2.5%) 5%.

As can be seen, the above entry is under the notification describing the Tax rate on ‘Goods’. If the transaction is supply of goods then the applicable Schedules would have to be seen but the intent of parties is always for supplying a Functional Solar Photovoltaic (SPV) water pumping system as a whole which includes supply, installation and commissioning and it is not chattel sold as chattel.

i) Applicant has submitted that under GST, there is a monumental shift in concept of Works Contract which was prevalent under erstwhile VAT and Service Tax regime. In GST, as per definition of works contract service if construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning is for immovable property, then only it would classify as works contract service . Hence it means that if aforesaid activities are undertaken for a movable property then it will not be works contract service.

j) Applicant has relied upon following judgment and Circular in furtherance of their arguments of Solar Photovoltaic (SPV) water pumping system being movable property and not immovable:

i) Sirpur Paper Mills Ltd. v. Collector – 1998 (97) E.L.T. 3 (S.C.) = 1997 (12) TMI 109 – SUPREME COURT OF INDIA

ii) CBEC circular number 58/1/2002-CX dated 15/1/2002

iii) Commissioner of Central Excise, Ahmedabad v. Solid and Correct Engineering Works [(2010) 5 SCC 122 = 2010 (4) TMI 15 – SUPREME COURT

Relying on aforesaid judgements and citations the applicants contention is that as the Solar Photovoltaic (SPV) water pumping system, once installed is capable of being removed and transferred from one place to another without substantial damage hence same should qualify as movable property. Hence in view of above precedence and facts of the case, the given supply should be treated as supply of Solar Photovoltaic (SPV) water pumping system.

k) As per the terms and condition laid in EOI the applicant has to undertake activities of procurement of the material and has also to commission a functional plant before Final Acceptance. In contracts of such a nature, the liability of the contractor doesn’t end with the procuring of materials but it extends till the successful testing and commissioning of the system and further has a obligation of maintenance for a certain period. The transaction is a ‘work contract’ but it is for us to decide whether it is a ‘work contract’ in terms of GST Act. So, we come to the crux of the issue and which is as to whether the transaction results into any immovable property. The term ‘immovable property’ has not been defined under the GST Act. However, there are a plethora of judgments of the Hon. Supreme Court and the Hon. High Courts which have helped understand the term ‘immovable property’.

1. In decision of Allahabad High Court in Official Liquidator v. Sri Krishna Deo and Ors. [AIR 1959 All. 247] = 1958 (5) TMI 35 – HIGH COURT OF ALLAHABAD, wherein, the Court held that a machinery fixed to their bases with bolts and nuts although easily removable are not movable property when they have been set up with definite object of running an oil mill and not with intention of being removed after a temporary use.

2. In decision of M/s. T.T.G. Industries Ltd vs Collector of Central Excise, (2004) 4 SCC 751 on 7 May, 2004 = 2004 (5) TMI 77 – SUPREME COURT OF INDIA. The facts of the case are as follows:

The facts of the case are not in dispute. The appellant-company pursuant to the acceptance of its tender, entered into an agreement with M/s. SAIL, Bhilai Steel Plant for design, supply, supervision of erection and commissioning of four sets of Hydraulic Mudguns and Tap Hole Drilling Machines required for blast furnace Nos. 4 and 6 of the Bhilai Steel Plant. For this purpose, it imported several components and also manufactured some of the components at their factory in Marai Malai Nagar, Chennai. These components were transported to the site at Bhilai where the manufacture and commissioning of the aforesaid machines took place. It is undisputed that duty was paid in respect of the components manufactured at its workshop in Chennai, but no duty was paid on manufacture of the aforesaid Mudguns and Drilling Machines which were erected and commissioned on site.

In their reply to the show cause, the respondents explained the processes involved, the manner in which the equipments were assembled and erected as also their specifications in terms of volume and weight. It was explained that the function of the drilling machine is to drill hole in the blast furnace to enable the molten steel to flow out of the blast furnace for collection in ladles for further processing. After the molten material is taken out of the blast furnace, the hole in the wall of the furnace has to be closed by spraying special clay. This function is performed by the mudgun which is brought to its position and locked against the wall for exerting a force of 240-300 tons to fill up the hole in the furnace. The blast furnace in which the inputs are loaded is a massive vessel of 1719 m cubic metre capacity and the size of its outer diameter is 10.6 metres, and the height 31.25 metres. Hot air at 1200 degrees centigrade is fed into the blast furnace at various levels to melt the raw materials. With a view to protect the shell against heat, the blast furnace is lined with refractory brick of one metre thickness. Thus, the drilling machine has to drill a hole through one metre thickness of the refractory brick lining. The drilling machine as well as the mudgun are erected on a concrete platform described as the cast house floor which is in the nature of a concrete platform around the furnace. The cast house floor is at a height of 25 feet above the ground level. On this platform concrete foundation intended for housing drilling machine and mudgun are erected. The concrete foundation itself is 5 feet high and it is grouted to earth by concrete foundation. The first step is to secure the base plate on the said concrete platform by means of foundation bolts. The base plate is 80 mm mild sheet of about 5 feet diameter. It is welded to the columns which are similar to huge pillars. This fabrication activity takes place in the cast house floor at 25 feet above ground level. After welding the columns, the base plate has to be secured to the concrete platform. This is achieved by getting up a trolley way with high beams in an inclined posture so that base plate could be moved to the concrete platform and secured. The same trolley helps in the movement of various components to their determined position. The various components of the mudgun and drilling machine are mounted piece by piece on a metal frame, which is welded to the base plate. The components are stored in a store-house away from the blast furnace and are brought to site and physically lifted by a crane and landed on the cast house floor 25 feet high near the concrete platform where drilling machine and mudgun has to be erected. The weight of the mudgun is approximately 19 tons and the weight of the drilling machine approximately 11 tons. The volume of the mudgun is 1.5 x 4.5 x 1 metre and that of the drilling machine 1 x 6.5 x 1 metre. Having regard to the volume and weight of these machines there is nothing like assembling them at ground level and then lifting them to a height of 25 feet for taking to the cast house floor and then to the platform over which it is mounted and erected. These machines cannot be lifted in an assembled condition.

The judicial member noticing these facts observed that it is a physical and engineering impossibility to assemble mudguns or the drill tap hole machines elsewhere in a fully assembled condition and thereafter erect or install the same at a height of 25 feet on the cast floor of the blast furnace. She found that even the Adjudicating Authority conceded the fact that the equipments have to be assembled/erected on the base frame projection of the furnace. She also accepted the submission urged on behalf of the appellant that if the machines are to be removed from the blast furnace, they have to be first dismantled into parts and brought down to the ground only by using cranes and trolley ways considering the size, and also considering the fact that there is no space available for moving the machines in assembled condition due to their volume and weight. She considered the authorities on the subject and came to the conclusion that erection of mudgun and tap hole drilling machine results in erection of immovable property. She noticed the judgment of this Court in Narne Tulaman Manufacturers Pvt. Ltd. (supra) and also noticed the judgment of the Tribunal in Gwalior Rayon Silk Manufacturing (Weaving) Co. Ltd. v. CCE – 1993 (65) E.L.T. 121 = 1992 (10) TMI 188 – CEGAT, NEW DELHI; which held that the issue of immovable property was never raised before the Supreme Court in Narne Tulaman Manufacturers Pvt. Ltd = 1988 (9) TMI 51 – SUPREME COURT OF INDIA.  She found support for her conclusion in the decision of this Court in Municipal Corporation of Greater Bombay & Ors. v. The Indian Oil Corporation Ltd. (1991) Supp. (2) SCC 18 = 1990 (11) TMI 407 – SUPREME COURT; and held that the twin tests laid down by this Court to determine whether assembly/erection would result in immovable property or not were fully satisfied in the facts of this case. She concluded :-

“The test laid down by the Supreme Court is that if the chattel is movable to another place as such for use, it is movable but if it has to be dismantled and reassembled or re-erected at another place for such use, such chattel would be immovable. In the present appeal, even according to the finding of the Collector, mudguns and drill tap hole machines have to be dismantled and disassembled from the cast floor before being erected or assembled elsewhere. We have also arrived at the same conclusion independently, in para 10 above.

Accordingly applying the test laid down by the Supreme Court we hold that the erection and installation of mudguns and drill tap hole machines result in immovable property. In the light of the ratio of the above case law, we hold that the mudguns and tap hole drilling machines do not admit of the definition of goods and, therefore, excise duty is not leviable thereon”.

The core question that still survives for consideration is whether the processes undertaken by the appellant at Bhilai for the erection of mudguns and drilling machines resulted in the emergence of goods leviable to excise duty or whether it resulted in erection of immovable property and not “goods”

The appellant has placed considerable reliance on the principles enunciated and the test laid down by this Court in Municipal Corporation of Greater Bombay (supra) to determine what is immovable property. In that case the facts were that the respondent had taken on lease land over which it had put up, apart from other structures and buildings, six oil tanks for storage of petrol and petroleum products. Each tank rested on a foundation of sand having a height of 2 feet 6 inches with four inches thick asphalt layers to retain the sand. The steel plates were spread on the asphalt layer and the tank was put on the steel plates which acted as bottom of the tanks which rested freely on the asphalt layer. There were no bolts and nuts for holding the tanks on to the foundation. The tanks remained in position by its own weight, each tank being about 30 feet in height 50 feet in diameter weighing about 40 tons. The tanks were connected with pump house with pipes for pumping petroleum products into the tank and sending them back to the pump house. The question arose in the context of ascertaining the rateable value of the structures under the Bombay Municipal Corporation Act. The High Court held that the tanks are neither structure nor a building nor land under the Act. While allowing the appeal this Court observed :-

“The tanks, though, are resting on earth on their own weight without being fixed with nuts and bolts, they have permanently been erected without being shifted from place to place. Permanency is the test. The chattel whether is movable to another place of use in the same position or liable to be dismantled and re-erected at the later place? If the answer is yes to the former it must be a movable property and thereby it must be held that it is not attached to the earth. If the answer is yes to the latter it is attached to the earth. If the answer is yes to the latter it is attached to the earth.”

Applying the permanency test laid down in the aforesaid decision, counsel for the appellant contended that having regard to the facts of this case which are not in dispute, it must be held that what emerged as a result of the processes undertaken by the appellant was an immovable property. It cannot be moved from the place where it is erected as it is, and if it becomes necessary to move it, it has first to be dismantled and then re-erected at another place. This factual position was also accepted by the Adjudicating Authority.

The technical member, however, held that the aforesaid decision was of no help to the appellant inasmuch as a leading international manufacturing firm had offered such machines for export to different parts of the world. He further observed that though on account of their size and weight, it may be necessary to shift or transport them in parts for assembly and erection at the site in the steel plant, they must nevertheless be deemed as individual machines having specialized functions. We are not impressed by this reasoning, because it ignores the evidence brought on record as to the nature of processes employed in the erection of the machine, the manner in which it is installed and rendered functional, and other relevant facts which may lead one to conclude that what emerged as a result was not merely a machine but something which is in the nature of being immovable, and if required to be moved, cannot be moved without first dismantling it, and then re-erecting it at some other place. Some of the other decisions which we shall hereafter notice clarify the position further.

In Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, UP – 1995 (75) E.L.T. 17 (S.C.) = 1994 (12) TMI 75 – SUPREME COURT OF INDIA; the facts were that a tube mill and welding head were erected and installed by the appellant, a manufacturer of steel pipes and tubes by purchasing certain items of plant and machinery in market and embedding them to earth and installing them to form a part of the tube mill and purchasing certain components from the market and assembling and installing them on the site to form part of the tube mill which was also covered in the process of welding facility. After noticing several decisions of this Court, the Court observed that the twin tests of exgibility of an article to duty under the Excise Act are that it must be a goods mentioned either in the Schedule or under Item 68 and must be marketable. The word “goods” applied to those which can be brought to market for being bought and sold and therefore, it implied that it applied to such goods as are movable. It noticed the decisions of this Court laying down the marketability tests. Thereafter this Court observed :-

“The basic test therefore, of levying duty under the Act is two fold. One, that any article, must be a goods and second, that it should be marketable or capable of being brought to market. Goods which are attached to the earth and thus become immoveable do not satisfy the test of being goods within the meaning of the Act nor it can be said to be capable of being brought to the market for being bought and sold. Therefore, both the tests, as explained by this Court, were not satisfied in the case of appellant as the tube mill or welding head having been erected and installed in the premises and embedded to earth they ceased to be goods within meaning of Section 3 of the Act.”

In Mittal Engineering Works Pvt. Ltd. v. CCE – 1996 (88) E.L.T. 622 (S.C.) = 1996 (11) TMI 66 – SUPREME COURT OF INDIA; this Court was concerned with the exigibility to duty of mono vertical crystallisers which are used in sugar factories to exhaust molasses of sugar. The material on record described the functions and manufacturing process. A mono vertical crystaliser is fixed on a solid RCC slab having a load bearing capacity of about 30 tons per square meter. It is assembled at site in different sections and consists of bottom plates, tanks, coils, drive frames, supports, plates etc. The aforesaid parts were cleared from the premises of the appellants and the mono vertical crystalliser was assembled and erected at site. The process involved welding and gas cutting. The mono vertical crystalliser is a tall structure, rather like a tower with a platform at its summit. This Court noticed that marketability was a decisive test for dutiability. It meant that the goods were saleable or suitable for sale, that is to say, they should be capable of being sold to consumers in the market, as it is, without anything more. The Court then referred to the decision in Quality Steel Tubes (supra) and distinguished the judgment in Narne Tulaman (supra) holding that the contention that the weigh bridges were not goods within the meaning of the Act was neither raised nor decided in that case. After considering the material placed on the record it was held that the mono vertical crystalliser has to be assembled, erected and attached to the earth by a foundation at the site of the sugar factory. It is not capable of being sold as it is, without anything more. This Court, therefore, concluded that mono vertical crystallisers are not “goods” within the meaning of the Act and, therefore, not exigible to excise duty. In Triveni Engineering & Indus. Ltd. v. CCE – 2000 (120) E.L.T. 273 = 2000 (8) TMI 86 – SUPREME COURT OF INDIA; a question arose regarding excisability of turbo alternator. In the facts of that case, it was held that installation or erection of turbo alternator on a concrete base specially constructed on the land cannot be treated as a common base and, therefore, it follows that installation or erection of turbo alternator on the platform constructed on the land would be immovable property, as such it cannot be an excisable goods falling within the meaning of Heading 85.02. In reaching this conclusion this Court considered the earlier judgments of this Court in Municipal Corporation of Greater Bombay, Quality Steel Tubes and Mittal Engineering Works Pvt. Ltd. (supra) as also the earlier judgment of this Court in Sirpur Paper Mills Ltd. v. Collector of Central Excise, Hyderabad – 1998 (97) E.L.T. 3 (S.C.) = 1997 (12) TMI 109 – SUPREME COURT OF INDIA. This Court observed :-

“There can be no doubt that if an article is an immovable property, it cannot be termed as “excisable goods” for purposes of the Act. From a combined reading of the definition of ‘immovable property’ in Section 3 of the Transfer of Property Act, Section 3(25) of the General Clauses Act, it is evident that in an immovable property there is neither mobility nor marketability as understood in the Excise Law. Whether an article is permanently fastened to anything attached to the earth require determination of both the intentions as well as the factum of fastening to anything attached to the earth. And this has to be ascertained from the facts and circumstances of each case.”

It was also held that the decision of this Court in Sirpur Paper Mills Ltd. must be viewed in the light of the findings recorded by the CEGAT therein, that the whole purpose behind attaching the machine to a concrete base was to prevent wobbling of the machine and to secure maximum operational efficiency and also safety. In view of those findings it was not possible to hold that the machinery assembled and erected by the appellant at its factory site was immovable property as something attached to earth like a building or a tree.

Keeping in view the principles laid down in the judgments noticed above, and having regard to the facts of this case, we have no doubt in our mind that the mudguns and the drilling machines erected at site by the appellant on a specially made concrete platform at a level of 25 feet above the ground on a base plate secured to the concrete platform, brought into existence not excisable goods but immovable property which could not be shifted without first dismantling it and then re-erecting it at another site. We have earlier noticed the processes involved and the manner in which the equipments were assembled and erected. We have also noticed the volume of the machines concerned and their weight. Taking all these facts into consideration and having regard to the nature of structure erected for basing these machines, we are satisfied that the judicial member of the CEGAT was right in reaching the conclusion that what ultimately emerged as a result of processes undertaken and erections done cannot be described as “goods” within the meaning of the Excise Act and exigible to excise duty. We find considerable similarity of facts of the case in hand and the facts in Mittal Engineering and Quality Steel Tubes (supra) and the principles underlying those decisions must apply to the facts of the case in hand. It cannot be disputed that such drilling machines and mudguns are not equipments which are usually shifted from one place to another, nor it is practicable to shift them frequently. Counsel for the appellant submitted before us that once they are erected and assembled they continue to operate from where they are positioned till such time as they are worn out or discarded. According to him they really become a component of the plant and machinery because without their aid a blast furnace cannot operate, it is not necessary for us to express any opinion as to whether the mudgun and the drilling machines are really a component of the plant and machinery of the steel plant, but we are satisfied that having regard to the manner in which these machines are erected and installed upon concrete structures, they do not answer the description of “goods” within the meaning of the term in the Excise Act.

Thus, it can be seen that the Hon. Supreme Court while holding the machines as immovable property took into account facts such that the machines could not be shifted without first dismantling it and then re-erecting it as another site. It was also sought to distinguish as to how a concrete base meant just to prevent wobbling of the machine would not place the machine in the category of ‘immovable property’ as something attached to the earth.

6. In light of above judgments and scope of work it is observed:

1) That Solar Photovoltaic (SPV) water pumping system has a permanent location (at specified farmer’s field in Rajasthan) as its works is undertaken on instructions of the Rajasthan Horticulture Development Society under subsidy scheme wherein the Solar Water Systems are required to be installed at the farmer’s field meant for supply of water using solar energy. Such plant would therefore have an inherent element of permanency.

2) The output of the project i.e. water, using solar energy would be available to an identifiable consumer. Thus this output supply would involve an element of permanency for which it would not be possible and prudent to shift base from time to time or locate the plant elsewhere at frequent intervals.

3) The Solar Photovoltaic (SPV) water pumping system cannot be shifted to any other place without dismantling the same. Further it is tailored made system which cannot be sold “as it is” to the other person.

4. Contract also includes civil work such as development of site, structure foundation for mounting PV modules on metallic structures and fencing of the system to ensure security and safety and such other civil structure related activities as set out in Scope of work and in the Technical Specifications. Civil structure cannot be dismantled and moved away.

5. Schedule IV Scope of work, clearly states “Commissioning of solar pumping infrastructural facility and its maintenance and after sales services for 10 years (It includes 5 years guarantee period).” The applicant has himself agreed to be bound by this clause which reflects permanency of the installed Solar Photovoltaic (SPV) water pumping system. Contract between applicant and the counter-party is entered into on the premise that the system would continue to be situated at the place of construction;

6. Case laws citied by applicant has to be understood in terms of the facts as available therein. As in the case of M/S Solid and correct Engineering Works (citied Supra) the plant was not intended to be permanent and was to be shifted after completion of road repair and Construction work hence was regarded as moveable. But in instant case the solar power water pumping system has an element of permanency.

7. The applicant has laid claim under notification No 01/2017-CT (Rate) dated 28.06.2017, at S.No. 234, under HSN Classification 84, 85 and 94 and has regarded the instant transaction as supply of i) “Solar Power Generating System and also at the same time he regards it as supply of ii) “Solar Power Based Devices” treating such supplies to be taxable at the rate of 5%.

8. The applicant has to supply a “Functional Solar Photovoltaic (SPV) water pumping system” as a whole which includes supply, installation and commissioning, maintenance for 10 years, hence instant transaction is neither a supply of i) “Solar Power Generating System” and nor a supply of ii) “Solar Power Based Devices”.

9. As can be seen, the above entry under the notification describes the Tax rate on ‘Goods’. If the transaction is supply of goods i.e. supply of either “Solar Power Generating System” or supply of “Solar Power Based Devices” then the applicable Schedules would have to be seen but the intent of parties in instant case is always for supply of a “Functional Solar Photovoltaic (SPV) water pumping system” as a whole which includes supply, installation and commissioning at the site of farmer along with maintenance for 10 years and is not chattel sold as chattel. Hence cannot be treated as “Composite Supply” as contended by the applicant.

10. An overview of all makes us observe that the impugned transaction for supply of Solar Photovoltaic (SPV) water pumping system which includes procurement, supply, development, testing, commissioning and providing maintenance service for 10 years is a “works contract” in terms of clause (119) of section 2 of the GST Act.

11. Since the impugned transaction for supply and commissioning of Solar Photovoltaic (SPV) water pumping system is a “works contract” u/s 2(119) as supply of services, hence question of principal supply does not arise and so GST tax rate of Solar power Generating System or Solar Power Based Devices under notification No 01/2017-CT (Rate) dated 28.06.2017, at S.No. 234, under HSN Classification 84, 85 and 94 is not applicable.

Based on above facts along with provision of law the ruling is as follows:

RULING

1 As per the statement of facts submitted by the applicant, the scope of work includes procurement, supply, development, testing, commissioning and providing maintenance service for 10 years in respect of supply of a Solar Photovoltaic (SPV) water pumping system. Accordingly it is not getting covered under supply of ‘Solar Power Generating System’ under Entry 234 of Schedule I of the Notification no. 1/2017 – Central Tax (Rate), dated 28th of June, 2017 under HSN code 84 or 85. “Supply, installation, commissioning and maintenance of Solar Water Pumping Systems” falls under the purview of Works Contract as per Section 2(119) of GST Act.

2 The applicant has sought a clarification on division of contract in two, one for supply of material and other for installation, commissioning and maintenance of Solar Water Pumping Systems. In this regard it is opined that in instant case as per terms and conditions of agreement, it is a single contract of supply, installation, commissioning and maintenance of Solar Water Pumping Systems and hence cannot be split in two separate contracts. Hence in instant case separate bills for supply of goods and supply of services cannot be raised.

3 The contract for “supply, installation, commissioning and maintenance of Solar Water Pumping Systems” falls under the ambit of “Works Contract Services” which comes under the purview of Works Contract as per Section 2(119) of CGST Act and attracts 18% rate of tax under IGST Act, or 9% each under the CGST and SGST Acts, aggregating to 18%.

AAKASH ENGINEERS

Classification of goods – Cargo Trolley – whether the product of the applicant in question i.e. Cargo Trolley used to carry Cargo from one place to another, towable in nature and has solid tyre designed for transportation of baggage and light cargo with a minimum payload, the trolley is rugged and is suitable and treated for outdoor use is to be classified under HS Code 87169090 or otherwise? – CBEC Circular No. 696/10/2003 dtd 19.02.2003.

Held that:- HSN 8716 covers product Trailers and Semi Trailers; Other Vehicles, Not Mechanically Propelled; Paris thereof whereas the assessee manufacture product Cargo Trolley used to carry Cargo from one place to another, towable in nature and has solid tyre designed for transportation of baggage and light cargo with a minimum payload. The trolley is rugged and is suitable and treated for outdoor use which is nearer to their product – thus, their product i.e. Cargo Trolley used to carry Cargo from one place to another, towable in nature and has solid tyre designed for transportation of baggage and light cargo with a minimum payload. The trolley is rugged and is suitable and treated for outdoor use is merit classification under major head 8716.

Circular No. 696/10/2003 dtd 19.02.2003 specifically direct that in the judgement in the case of Gujrat Industrial Trucks Ltd. Vs. CCE Baroda [2000 (9) TMI 473 – CEGAT, MUMBAI], it is clarified that the correct classification of the Hand Pallet Trucks/Trolley Is under Heading 87.16.

The last sub beading under the major head of 6 digit HSN for the product is 87168090 is meant for “Others”. Therefore, the product in question i.e. Cargo Trolley used to carry Cargo from one place to another, towable in nature and has solid tyre designed for transportation of baggage and light cargo with a minimum payload. The trolley is rugged and is suitable and treated for outdoor use is correctly classifiable under HSN 87168090.

Ruling:- Cargo Trolley used to carry Cargo from one place to another, towable in nature and has solid tyre designed for transportation of baggage and light cargo with a minimum payload. The trolley is rugged and is suitable and treated for outdoor use is correctly classifiable under HSN 87168090.

No.- Order No. 03/AR/Daman-Silvassa/2018

Dated.- August 17, 2018

Citations:

  1. JALDOOT MATERIALS HANDLINGS (P) LTD. Versus COMMR. OF CUS. & C. EX., PUNE – 2002 (3) TMI 527 – CEGAT, MUMBAI
  2. GUJARAT INDUSTRIAL TRUCKS LTD. Versus COMMR. OF C. EX. & CUS., BARODA – 2000 (9) TMI 473 – CEGAT, MUMBAI

SHRI SATISH KUMAR AND SHRI KANNAN GOPINATHAN, IAS MEMBER

Any person deeming himself aggrieved by this Advance Ruling may appeal against the Ruling before the Appellate Authority for Advance Ruling, in terms of Section 100 of the Central Goods & Service Tax Act, 2017. Such appeal shall be done within 30 days from the date of the communication of the order. The appeal papers shall bear fee of ₹ 10,000/- as provided under Rule 106(1) of the Central Goods & Service Tax Rules,2017.

The Appeal should be filed in Form GST ARA-02, prescribed under sub-rule (1) of Rule 106 & GST ARA-03 of the Central Goods & Service Tax Rules, 2017, as the case maybe, duly signed by the person specified in sub-rule (3) (a&b} of the Rule 106.

The appeal including the statement of facts and relevant documents, shall be filed in quadruplicate accompanied by equal number of copies of the order appealed against [one of which at least shall be certified copy).

An appeal against this order shall lie before the Appellate Authority of Advance Ruling on payment of ₹ 10,000/- as provided under Rule 106(1) of the Central Goods & Service Tax Rules, 2017,

Brief Facts of the Case:-

M/s. AAkash Engineers, Plot No. 277/2, Village-Dadra,Silvassa, registered under Goods & Services Tax vide GSTIN Number 26AAAFA5770D1ZT, vide their letter dated 17.08.2018, submitted an application in Form of GST ARA-01 under Rule 104(1) of Adavance Ruling along with statements of facts and copy of challan bearing No.1802600001756 Dated 16.05.2018 evidencing the payments of required fee of ₹ 10,000/-. In the said application the assessee has sought clarification for correct classification of their goods i.e. a Cargo Trolley used to carry Cargo from one place to another, towable in nature and has solid tyre design for transportation of baggage and light cargo with a minimum payload. The trolley is rugged and is suitable and treated for outdoor use.

To verily the facts, application of the assessee was forward vide letter F.No. V/AR-07/Aakash/DUM/2017-18 dtd 24.05.2018 to the Assistant commissioner, Div-VI, GST& CR Silvassa, Daman Commissionerate for examination and their detailed reports on the following points was called for:-

I. Classification of the said goods under Central Excise Tariff Act,1985;

II. Whether any issue on the subject matter has been decided by the appellate Authority In their own case of the assessee or other cases. If Yes, please furnish the copy of the said orders;

Ill. What is prevalling practice of classification of the product In question? and

IV. Their report on classification of the subject goods under GST regime with supporting Case Laws/Notifications/Circulars or other similar documentary evidence.

2. The JAC, Division-VI, Silvassa, Daman Commissionerate vide their letter No. DSLV-VI/Misc -Tech/2017-18 dtd 21.06.2018 have submitted their reply on the following points.

A. The assessee was a registered unit under Central Excise having registration No.AAAFA5770 DXM001, The assessee has cleared the said goods under HSN code 87169090 under Central Excise Tariff Act, 1985, currently after implementation of GST also the assessee is clearing the subject goods with the same HSN 87169090. Sample Invoice copies in respect of Central Excise regime as well as GST regime obtained from the assesse, have been submitted.

B. Issue in question, In the case of the assessee, has not been decided by the appellate Authority. in their own case of the assessee or other cases.

C. The assessee is the only manufacturer of the subject goods in their jurisdiction.

D. From the photograph provided by the assessee, the product under consideration appears to be a baggage/cargo trolly used at Air Cargo Complex/Airport for shifting baggage/goods/parcels from airline warehouse to on board the flights and vice versa. On going through the GST Tariff Act, 2017, it is noticed that there is no specific entry for the said product. However, it appears to be classifible under heading 87168090.

3. Defence submission and records of personal Hearing:

To abide by the law of natural justice, the assessee were given a chance to be heard in person vide letter dtd.24.07.2018. they were also requested vide said letter to submit documentary evidence in support of their claim, if any, In compliance of the said PH letter.

Shri Milan R. Shah, authorized representative of the applicant appeared for personal hearing on 06.08,2010. During the personal hearing, he submitted that as per their understanding the correct classification of the product appears to be 87169090. However, if in the above Chapter, the product is not classifiable then it may be considered as miscellaneous item may be allowed as such for payment of GST. He further requested that in light of the above submission the application may be disposed accordingly.

4. Discussion and Findings:-

ln the present case we, the members of Advance Ruling, have to decide as to whether the above said product of the applicant in question i.e. Cargo Trolley used to carry Cargo from one place to another, towable in nature and has solid tyre designed for transportation of baggage and light cargo with a minimum payload. The trolley is rugged and is suitable and treated for outdoor use is to be classified under HS Code 87169090 or otherwise.

4.1 The assessee in their application have contended that their product may be classified under HSN 84279000 or 87163100 or 87169090. Therefore, before deciding the issue we find need to discuss the products merit classifiable under the said HSN.

4.1.1 First of all we discuss HSN 84279000. On going through the GST Tariff Act, 2017 we find that major head of HSN 8427 covers “Fork-lift trucks; other works trucks fitted with lifting or handling equipment”. It is very clear that major head 8427 covers fork lift trucks or other works trucks fitted with lifting or handling equipment which is different from the product manufactured by the assessee. Therefore, it is concluded that the product i.e. Cargo Trolley used to carry Cargo from one place to another, towable in nature and has solid tyre designed for transportation of baggage and light cargo with a minimum payload. The trolley is rugged and is suitable and treated for outdoor use, does not fall under HSN 84279000 which is specifically classified for other trucks.

4.2 Now we refer to the Chapter Note of Heading 8716 under GST Tariff which reads as under-

8716: Trailers and Semi Trailers; Other Vehicles, Not Mechanically Propelled; Parts Thereof

87161000 : Trailers And Semi Trailers; Other Vehicles, Not Mechanically Propelled; Parts Thereof Trailers And Semi Trailers Of The Caravan Type, For Housing Or Camping

87162000 : Trailers And Semi Trailers; Other Vehicles, Not Mechanically Propelled; Parts Thereof Self Loading Or Self Unloading Trailers And Semi Trailers For Agricultural Purposes

87163100: Trailers And Semi Trailers; Other Vehicles, Not Mechanically Propelled; Parts Thereof Other Trailers And Semi Trailers For The Transport Of Goods : Tanker Trailers And Tanker Semi Trailers

87163900: Trailers And Semi Trailers; Other Vehicles, Not Mechanically Propelled; Parts Thereof Other Trailers And Semi Trailers For The Transport Of Goods : Other

87164000 : Trailers And Semi Trailers; Other Vehicles, Not Mechanically Propelled; Parts Thereof Other Trailers And Semi Trailers For The Transport Of Goods : Other Trailers And Semi Trailers

87168010: Trailers And Semi Trailers; Other Vehicles, Not Mechanically Propelled; Parts Thereof Other Vehicles Hand Propelled Vehicles (E.G. Hand Carts, Rickshaw’s And The Like)

87169020: Trailers And Semi Trailers; Other Vehicles, Not Mechanically Propelled; Parts Thereof Other Vehicles Animal Drawn Vehicles

87168090: Trailers And Semi Trailers; Other Vehicles, Not Mechanically Propelled; Parts Thereof Other Vehicles Other

87169010: Trailers And Semi Trailers; Other Vehicles, Not Mechanically Propelled; Parts Thereof: Parts And Accessories of Trailers

87169090: Trailers And Semi Trailers; Other Vehicles, Not Mechanically Propelled; Parts Thereof parts Other

4.2.1 On going through the HSN description of 8716, we find that HSN 8716 covers product Trailers and Semi Trailers; Other Vehicles, Not Mechanically Propelled; Paris thereof whereas the assessee manufacture product Cargo Trolley used to carry Cargo from one place to another, towable in nature and has solid tyre designed for transportation of baggage and light cargo with a minimum payload. The trolley is rugged and is suitable and treated for outdoor use which is nearer to their product Therefore, we jointly take a view that their product i.e. Cargo Trolley used to carry Cargo from one place to another, towable in nature and has solid tyre designed for transportation of baggage and light cargo with a minimum payload. The trolley is rugged and is suitable and treated for outdoor use is merit classification under major head 8716.

4.3 The view of Members of Advance Ruling finds support from the Circular No. 696/10/2003 dtd 19.02.2003 wherein the Issue have been clarified by the CBEC which reads as under-

Circular No. 694/10/2003,

Dated 19th February, 2003

F. No. 171/15/200-CX.4,

Government of India

Ministry of Finance & Company Affairs

Department of Revenue

Sub:- Classification of Hand Pallet Trucks / Trolley.

I am directed to say that a doubt has been raised whether the Hand Pallet Truck/Trolley are classifiable under heading 84.27 or under heading 87.16 of the Central Tariff. This classification issue had already been examined once by the Board for defending the Writ Petition filed by M/s jaldoot Material Handling Pvt. Itd., it was then clarified that the appropriate classification of the item would be under heading 87.16. The CEGAT however has held in this case that the correct classification of Hand Pallet Trucks is under chapter heading 84.27 of CETA, 1985. An appeal against the CEGAT judgement has been filed before Apex Court.

2. In case of a similar product described as Hand Trolley, the CEGAT has held (in the case of Gujrat Industrial Trucks Ltd. Vs. CCE Baroda = 2000 (9) TMI 473 – CEGAT, MUMBAI) that the correct classification of the item is under chapter heading 87.16 of CETA 1985.

3. The matter has been examined by the Board. In view of Ministry’s stand to appeal against the CEGAT decision in the case of jaldoot Material Handling Pvt. Ltd., and also the Judgement in the case of Gujrat Industrial Trucks Ltd. Vs. CCE Baroda, it is clarified that the correct classification of the Hand Pallet Trucks/Trolley is under Heading 87.16. However, since in the case of jaldoot Material Handling Pvt. Itd. = 2002 (3) TMI 527 – CEGAT, MUMBAI the CEGAT has taken a different view, for this particular party protective demands should only be raised and kept alive till the decision of the Apex Court. In respect of other parties demands can be raised under the normal period prescribed under section 11A of the Central Excise Act, 1994 and adjudicated.

4. Trade and field formations may be suitably Informed.

5. Receipt of this circular may please be acknowledged.

6. Hindi version will follow.

(MANISH MOHAN)

UNDER SECRETARY (CX-4)

4.3.1 We note that the Circular No. 696/10/2003 dtd 19.02.2003 specifically direct that in the judgement in the case of Gujrat Industrial Trucks Ltd. Vs. CCE Baroda = 2000 (9) TMI 473 – CEGAT, MUMBAI. It is clarified that the correct classification of the Hand Pallet Trucks/Trolley Is under Heading 87.16. Therefore, we hold that the correct HSN classification for the product in question i.e. Cargo Trolley used to carry Cargo from one place to another, towable in nature and has solid tyre designed for transportation of baggage and light cargo with a minimum payload. The trolley is rugged and is suitable and treated for outdoor use is merit classification under major bead 8716.

4.3.2 Now we discuss the product presently classified by the assessor under the HSN 87169090 is correct or otherwise. On going through the major head for HSN 871690 which is specifically cover parts whereas the detail description given under HSN sub heading 87169010 is meant for Parts and accessories of trailers and HSN code 871690920 for other. Here it is worth mention that the eight digit HSN for sub heading 87169090 is also a type of specification for parts only. Hence, it can not be the correct eight digit HSN for the product in question i.e. Cargo Trolley used to carry Cargo from one place to another, towable in nature and has solid tyre designed for transportation of baggage and light cargo with a minimum payload. The trolley is rugged and is suitable and treated for outdoor use.

5. We further note that the JAC in their reply have reported under point “d” that from the photograph provided by the assessee. the product under consideration appears to be a baggage/Cargo trolly used at Air Cargo Complexes/Airport for shifting baggage/goods/parcels from airline ware house to on board the flights and vice versa. On going through the GST Tariff Act, 2017, it is noticed that there is no specific entry for the said product. However, it appears to be classifiable under heading 871611090

5.1 On going through the GST HSN code for major 6 head 871680 which is cover “other Vehicle” whereas further sub heading 87168010 covers hand propelled vehicles e.g. hand cart, rickshaw and the like, hence, it can not be the proper HSN code for their product. Further sub heading 87168020 covers the product “Animal drawn Vehicle” the product manufactured by the assessee is other than the product of animal drawn vehicle hence it can not be classified under sub heading 87168020. Now the last sub beading under the major head of 6 digit HSN for the product is 87168090 is meant for “Others”. Therefore, we are of the view that the product in question i.e. Cargo Trolley used to carry Cargo from one place to another, towable in nature and has solid tyre designed for transportation of baggage and light cargo with a minimum payload. The trolley is rugged and is suitable and treated for outdoor use is correctly classifiable under HSN 87168090.

6. We note that Harmonized System or Nomenclature (HSN) is internationally recognized product/items coding system which has also been accepted in India. From the above detailed Chapter Sub Heading wise classification of the product in the existing law i.e under Central Excise it is found that the classification of the above said product is one and the same under GST regime as well as under Customs law. No change in the classification under all the entire three “Act” have been noticed. Therefore, find that the product in question i.e. Cargo Trolley used to carry Cargo from one place to another, towable in nature and has solid tyre designed for transportation of baggage and light cargo with a minimum payload. The trolley is rugged and is suitable and treated for outdoor use is correctly classifiable under HSN 87168090.

7. In view of the above discussing and findings, we hereby pronounce Advance Ruling under Sub Section 4 of Section 98 using power vested in us under sub Section 6 of Section 98, Section 96 of the Central Goods and Service Tax Act, 2017 read with Rule 103 of the Central GST Rules, 2017 and defined under Section 14 of the UTGST Act, 2017 as under-

Order/ Advance Ruling

7.1 We hereby take decision against application dtd 22.07.2017 of M/s Aakash Engineers, Plot No. 277/2, Village-Dadra, Silvassa., and pronounce Advance Ruling that Cargo Trolley used to carry Cargo from one place to another, towable in nature and has solid tyre designed for transportation of baggage and light cargo with a minimum payload. The trolley is rugged and is suitable and treated for outdoor use is correctly classifiable under HSN 87168090. Their application dtd 17.05.2018 is disposed off accordingly. Present decision will be applicable for the payment of all types of taxes i.e. CGST/IGST and UTGST.

TATA PROJECTS LTD.

Rate of GST – Construction Services – Construction of factory for Madhepura Electric Locomotive Pvt. Ltd. which subsidiary of Indian Railways – Supply of services – Composite Supply – Special Purpose Vehicle – whether the construction services are connected to Railways or not?

Held that:- The nature of activity undertaking by the applicant is Works Contract – However, the work completed by the applicant company cannot be held to be Resale/supply to railway company – the rate of GST applicable will be at 9%.

No.- AR(B)-01/2017-18

Dated.- August 16, 2018

Citations:

  1. State of Madhya Pradesh Versus Marico Industries Ltd. – 2016 (7) TMI 1057 – Supreme Court
  2. TRUTUF SAFETY GLASS INDUSTRIES Versus COMMISSIONER OF SALES TAX, UP – 2007 (8) TMI 21 – Supreme Court
  3. MSCO PVT. LTD. Versus UNION OF INDIA AND OTHERS – 1984 (10) TMI 44 – Supreme Court

PC. CHERIYAN Versus MST. BARFI DEVI – 1979 (10) TMI 77 – Supreme Court

 

AL-KHAIR CO-OPERATIVE CREDIT SOCIETY LTD.

Taxable Supply – Borrowing Cost – Whether Consideration represented by way of Borrowing Cost received from members to whom loan was sanctioned, amounts to taxable supply?

Ruling:- In Service Charge or any other type of liability, loan or any other borrowings vide Sl. No. 27 of N/N. 12/2017 is not exempt – resultantly these services are liable to GST.

No.- AR(B)-01/2017-18

Dated.- August 16, 2018

M/S. SILGAN DISPENSING SYSTEMS INDIA PRIVATE LIMITED

Supply or not – transfer of machines & moulds (capital goods), from the premises of the job-worker to another job-worker, which were originally received by said job-worker – Circular No. 637/28/2002-CX., dt. 08.05.2002 – Held that:- From a reading of the Circular quoted by the applicant it is seen that nowhere it is mentioned that provisions of Rule 4(5)(b) of erstwhile Cenvat Credit Rules, 2004 for receipt back of such capital goods/ moulds by principal manufacturer within stipulated time lime of two years are not applicable.

Transitional provisions – Section 141 of the CGST Act, 2017 – Held that:- Applicant have contravened the above provisions of the Erstwhile CCR, 2004. The goods were not received back by them within the time frame mentioned above and they had also not reversed the credit availed in such case. Now that GST has been introduced in the year 2017, they want to avail the benefit of sending the said capital goods from their first job worker to their second job worker.

As per the Cenvat Credit Rules, 2004, if the capital goods were not received back within two years from the job worker, the manufacturer had to pay an amount equivalent to the CENVAT credit attributable to the capital goods by debiting the CENVAT credit account – In this case, the capital goods have not been received back from the first job worker even after three years and it is felt that the first principal manufacturer has not paid the Central Excise duty or debit the CENVAT account. Since, the duty has not been paid, the applicant is liable to pay GST while transferring the capital goods from the first job worker to the second job-worker namely M/s. Vasanth Tools Crafts Pvt. Ltd.

The provisions of Rule 117 (Transitional Provisions) of the CGST Rules, 2017 provide for tax or duty to be carried forward under any existing law or on goods held in stock on the appointed day. The applicant has not brought on record any details to show that either the first Principal manufacturer or the applicant has submitted the declaration electronically in FORM GST TRAN-I and included the said capital goods in his TRAN-I, as provided under Rule 117 of the CGST Rules, 2017 – Since the details regarding the subject goods have not been carried forward by the applicant or the first principal manufacturer from the earlier law to GST laws, the goods cannot now be brought Into the GST fold.

It appears that neither they, nor the first principal manufacturer have carried forward the capital goods into the GST regime by following the procedure prescribed by Section 117 – Hence the subject transaction Of transferring the capital goods from the first job worker to the second job worker would be an independent and fresh transaction for which the same would be treated as supply of goods and will be liable to tax under the GST Laws.

Ruling:- The transfer of machines & moulds (being capital goods), from the premises of the job-worker to another job-worker, which were originally received by said job-worker under the erstwhile Central Excise Act, 1944 will constitute as “supply” under GST.

No.- GST-ARA-26/2018-19/B-89

Dated.- August 14, 2018

Citations:

  1. BALWANT SINGH Versus JAGDISH SINGH – 2010 (7) TMI 556 – Supreme Court
  2. JAYPEE REWA CEMENT Versus COMMISSIONER OF CENTRAL EXCISE, MP – 2001 (8) TMI 1332 – Supreme Court
  3. Carew & Co. Ltd. Versus Union of India – 1975 (8) TMI 91 – Supreme Court
  4. M/s Uni Cast Pvt. Ltd., Commissioner of Central Excise Versus Commissioner of Central Excise, M/s Balmer Lawrie & Co. Ltd. – 2015 (10) TMI 375 – ALLAHABAD HIGH COURT
  5. M/s. Metal Weld Electrodes, M/s. Metro Trading Company (Electrodes) P. Ltd. Versus The Customs, Excise and Service Tax Appellate Tribunal And Others – 2013 (11) TMI 240 – MADRAS HIGH COURT
  6. NIRMA LIMITED Versus SAINT GOBAIN GLASS INDIA LTD. – 2012 (10) TMI 832 – MADRAS HIGH COURT
  7. INDUSTRIAL DEVELOPMENT BANK OF INDIA LTD. AND OTHERS (IDBI LTD.) Versus DY. COMMR. (ARREARS RECOVERY CELL) OF CE. & C., HYDERABAD – 2012 (10) TMI 873 – ANDHRA PRADESH HIGH COURT
  8. Commissioner of Custom Versus Goyal Traders – 2011 (8) TMI 720 – Gujarat High Court
  9. M/s Gwalior Alcobrew Pvt. Ltd. Versus CC, Indore – 2014 (8) TMI 880 – CESTAT NEW DELHI
  10. M/s BALMER LAWRIE & CO LTD Versus CCE BELAPUR – 2014 (2) TMI 545 – CESTAT MUMBAI
  11. GERMAN REMEDIES LTD. Versus COMMISSIONER OF CENTRAL EXCISE, GOA – 2002 (4) TMI 140 – CEGAT, MUMBAI

SHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, (MEMBER)

PROCEEDINGS

(Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)

The present application has been filed under section 97 of the Central Goods and Services Tax Act 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by SILGAN DISPENSING SYSTEMS INDIA PRIVATE LIMITED the applicant, seeking an advance ruling in respect of the following issue.

whether on transfer of machines & moulds (being “capital goods”), from the premises of the job-worker to another job-worker, which were originally received by said job-worker under the erstwhile Central Excise constitute as supply” under GST.

At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act /MGST Act would be mentioned as being under the “GST Act”

02 FACTS AND CONTENTION – AS PER THE APPLICANT

The submissions, as reproduced verbatim, could be seen thus-

STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTIONS:

That originally machines & moulds were transferred to M/s. Shaily Engineering Plastics limited directly by the supplier of the principal manufacturer namely M/s. MWV India Pvt. Ltd.

That further in August 2017 M/S. MWV India Pvt. Ltd. sold part of business under Slump Sale vide BTA dt. 31.08.2016 to Aphrodite Packaging Solutions Pvt. Ltd including subject item of capital goods. Thereafter, the name of the company was changed to M/s. Silgan Dispensing Systems India Pvt. Ltd. form Aphrodite Packaging Solution Pvt. Ltd. Your reference kindly find attached herewith the Name Change Certificate dated. 13.11.2017 marked as ANNEXURE-I.

That accordingly, the present application is being filed by M/s. Silgan Dispensing Systems India Private Limited (hereinafter referred to as Appellant). That as informed above the principal manufacturer M/s. MWV India Pvt. Ltd. during the period 2012 had sent machines/ moulds for job work to M/s. Shaily Engineering Plastics Limited (hereinafter referred to as “job-worker”). Brief description the goods sent is attached herewith marked as ANN-II.

That subsequently, the Appellant now propose to transfer said machines/moulds under the GST regime from the premises of Shaily Engineering Plastics Limited to another job-worker namely M/s. Vasanth Tools Crafts Pvt. Ltd. (hereinafter referred to as “subsequent job-worker”)

Accordingly, the present Advance Ruling is sought in respect of GST application on said transfer of machines/moulds to subsequent job-worker.

Annexure C: Description of Goods

S.No.

Description

Project

Amount in INR

1.

Custom Shroud Molds

TS-800

27,27,424

2.

Custom Shroud Molds

TS-800

4,58,266

3.

Nozzle

TS-800

17,39,892

4.

Triger

TS-800

6,28,809

5.

Closure

TS-800

8,78,594

6.

Tube Retainer

TS-800

12,37,325

7.

Piston Molds

TS-800

17,55,998

8.

Ergo

TS-800

42,74,074

9.

Controller for Mold

TS-800

10,28,668

10.

Cavity Insert

TS-800

14,07,673

11.

O Ring & Nozzle

TS-800

1,77,905

12.

Nozzel Mold Cavities

TS-800

1,77,133

13.

Core Pins

TS-800

47,319

14.

Controller for Mold

TS-800

5,05,961

15.

Zara-1-AM

Zara-1

1,34,45,080

16.

Zara-1-MM

Zara-1

2,85,42,717

17.

Zara-1 Other

Zara-1

45,77,633

18.

Zara-1 PM

Zara-1

61,746

19.

Zara-1 Tooling

Zara-1

7,29,39,043

20.

Cavity Insert

TS-800

14,31,255

21.

Ergo valve Body Mold

TS-800

69,95,374

22.

Ergo valve Body Mold Spare Parts

TS-800

26,176

23.

Injection Mould

TS-800

70,86,456

24.

Injection Mould Spare Parts

TS-800

11,71,351

25.

Mannual Assembly Fixture

Zara-1

1,23,165

26.

U Tube Fixture

Zara-1

32,130

27.

Refurbishment of standard value bod (Injection) Mold

TS-800

9,53,927

28.

Modification in fully automatic assembly machine for pump assembly

Zara-1

19,42,707

29.

Core insert for ZARA CAP-40 nos

Zara-1

6,19,618

30.

Air leak test mechanism

Zara-1

7,98,244

31.

23 MM FAL cap fixture for T 1146

Zara-1

35,786

32.

23 MM FAL CAP Nozzle fixture for T 1147

Zara-1

25,562

33.

Outlet Switch Fixture for T 1148

Zara-1

51,124

34.

Base fixture for T 1149

Zara-1

30,674

35.

Zara-1 -Tooling

Zara-1

1,04,070

36.

16 Cavity Injection Mould for Nozzle for T-1117

Plant & Machinery

48,83,987

37.

Menuel Nozzle for T-1117

Plant & Machinery

6,79,670

Total

16,36,02,936

Certificate of Incorporation pursuant to change of name

[Pursuant to rule 29 of the Companies (Incorporation) Rules, 20141

Corporate Identification Number (CIN): U74999MH2017PTC291226

I hereby certify that the name of the company has been changed from APHRODITE PACKAGING SOLUTIONS PRIVATE LIMITED to SILGAN DISPENSING SYSTEMS INDIA PRIVATE LIMITED with effect from the date of this certificate and that the company is limited by shares. Company was originally incorporated with the name APHRODITE PACKAGING SOLUTIONS PRIVATE LIMITED.

Given under my hand at Mumbai this Thirteenth day of November two thousand seventeen.

Registrar of Companies,

Mumbai

STATEMENT CONTAINING APPLICANTS INTERPRETATION OF LAW IN RESPECT OF THE QUESTIONS RAISED

Legal Grounds:

i. That prima facie the machines & moulds were originally transferred by M/s. MWV India Pvt. Ltd. to the job-worker under erstwhile Central Excise Act, 1944. That further due to change in the constitution as detailed in annexure A to this application, M/S. Silgan Dispensing Systems India Private Limited is intending to transfer the machines/ moulds to M/s. Vasanth Tools Crafts Pvt. Ltd.

ii. That in light of the said factual background, we draw reference to section 141 of the CGST Act, 2017 which provides for transitional provisions relating to job work. That sub-section 1 of section 141 deals with goods removed to job worker. For your reference the extracts of the relevant provisions are detailed below:

141. (1) Where any inputs received at a place of business had been removed as such or removed after being partially processed to a job worker for further processing, testing, repair, reconditioning or any other purpose in accordance with the provisions of existing law prior to the appointed day and such inputs are returned to the said place on or after the appointed day, no tax shall be payable if such inputs, after completion of the job work or otherwise, are returned to the said place within six months from the appointed day:

Provided that the period of six months may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding two months:

Provided further that if such inputs are not returned within the period specified in this sub-section, the input tax credit shall be liable to be recovered in accordance with the provisions of clause (a) of sub-section (8) of section 142.

That on bare reading it can be construed that the provisions detailed hereinabove confine themselves to inputs only, whereas goods under consideration are capital goods in the nature of machines and moulds. Accordingly, in absence of any specific provision under the transitional provisions in respect of receipt of capital goods by job-worker under erstwhile Central Excise Law & lying with him as on appointed date of GST, present transfer of capital goods will not entail any GST liability.

iii. That in support of the said contention we crave leave to refer and rely upon below detailed case laws:

2014 (299) ELT 3 (Mad.)- Metal Weld Electrodes = 2013 (11) TMI 240 – MADRAS HIGH COURT Held: Interpretation of statutes – Legislative intent – It has to be gathered from plain language of particular provision of law when there is no ambiguity in reading it – There is no presumption that particular language used in particular provision of law is without having any meaning for same.

2012 (283) ELT 188(A.P.)- IDBI ltd. = 2012 (10) TMI 873 – ANDHRA PRADESH HIGH COURT Held: Interpretation of statutes – Taxing statute – It has to be strictly constructed – Introducing or omitting any words from it is not permissible – When language of statute is plan and clear, any exercise to know intention of legislature is not called for nor taxing officer travel beyond power to levy and collect tax.

(2012) 281 ELT 321 (Mad.)- Nirma Limited = 2012 (10) TMI 832 – MADRAS HIGH COURT Held: The law is not a brooding omnipotence in the sky’ but a pragmatic instrument of social order, as was opined by the Larger Bench of the Apex Court in Carew & Co. Ltd. v. Union of India, (1975) 2 SCC 791 = 1975 (8) TMI 91 – SUPREME COURT OF INDIA. It was further held in that case that if the language of the statute does not admit of the construction sought, wishful thinking is no substitute for that, thereby holding that purposive interpretation is always progressive in nature.

2010(262) ELT 50(SC)- Balwant Singh = 2010 (7) TMI 556 – SUPREME COURT OF INDIA Held: Interpretation of statutes – Legislative intention – Provisions of statute including every word to be given full effect keeping legislative intent in mind to ensure achieving projected object – No provision treatable as enacted purposelessly – Court not to give interpretation to provisions to render them ineffective or odious.

iv. That accordingly when the statue fails to provide any mechanism then intention of the legislature cannot be assumed. Implying thereby that when the legislature fails to provide for an enactment the subordinate legislation cannot not introduce enactment which was otherwise not provided in law.

Hence when the transitional provisions have not detailed any provision in respect of capital goods/ moulds then admittedly the same deserve to be cleared without payment of duty when essentially the duty was paid at the time of recipiet of the said goods under the erstwhile Central Excise Act, 1944.

v. That further we crave leave to refer and rely upon the CGST Circular no: 38/12/ 2018 dated 26.03.2018. That the said Circular is Issued to bring clarification in respect of job work and related compliance requirement for the principal and the job-worker.

vi. That specifically para. 8.4 of Circular dated 26.03.2018 provides that where goods are sent from one job worker to another job worker, the goods may move under Challan issued either by the principal or the job worker. In the alternative, the challan issued by the principal may be endorsed by the job worker sending the goods to another job worker, indicating therein the quantity and description of goods being sent.

vii. On bare perusal of the above detailed clarification a clear understanding can be attained that if the job worker intends to move goods to another job worker the same can be done by issuing a Challan either by the principal or the job-worker on endorsement of the challan by the principal. Implying thereby that the goods can be transferred by the principal manufacturer from one job-worker to another job-worker without any GST. Accordingly, in absence of any transitional provisions for receipt of capital goods by job worker under erstwhile Central Excise Law & lying with job worker as on appointed date of GST Law, the transactions of subsequent transfer of said items of machines & moulds (being Capital Goods) to another job worker upon request of principal manufacturer under job work process” would not constitute as “Supply” & accordingly GST is not payable on such transfer.

Additional submissions on 27.06.2018

This is in reference to the above mentioned subject matter. That the short issue Involved under the present dispute is that whether GST is payable on transfer of capital goods/moulds from one job worker to another job worker, where originally the said goods were transferred by Principal to the job worker under erstwhile Central Excise Act, 1944.

That accordingly it is most humbly submitted that originally the capital goods/moulds were transferred by M/s. Meadwestvaco India Pvt. Ltd. (hereinafter referred to as “MWV”) to M/s. Shaily Engineering Plastics Ltd. (hereinafter referred to as “Shaily” for sake of brevity), and Shaily had availed credit on the said capital goods/ moulds.

That subsequently the business of Meadwestvaco was transferred as a going concern to M/S. Aphrodite Packing Solutions Pvt. Ltd. with effect from 31.08.2016. Thereafter the name of the company was changed to M/s. Silgan Dispensing Systems India Pvt. Ltd (hereinafter referred to as “SiIgan”) vide name change certificate dt-13.11.2017

That Sec 143 of the CGST Act, 2017 provides that any inputs or capital goods can be sent to a job worker for job-work & from there subsequently to another job worker without payment of tax. Accordingly when the capital goods/ moulds Will be transferred from Shaily (1st Job worker) to Vaganth Tools Crafts Pvt. Ltd (2nd Job worker), hence in light of the said provision of law & factual matrix no GST shall be leviable on such transfer of capital goods/ moulds.

That further section 141 of the CGST Act, 2017 provides for transitional provisions in respect of inputs specifically, whereby it was provided that if the job worked inputs are returned after six months, the input tax credit shall be required to be returned. That admittedly the goods in questions are capital goods and moulds and in absence of anything specifically c provided in the law for transfer/return of capital goods/mould, provisions of Section 14 of CGST Act,2017 cannot be made applicable to capital goods/mould and the same can be removed even after expiry of six months without payment of any duty.

That in light of above factual as well as legal background a ruling is sought in respect of Whether GST is payable when capital goods/moulds are transferred from one job worker to another job worker when originally said capital goods/ moulds were transferred by principal to the 1st job worker under delivery challan under erstwhile C. Ex. Law.

Additional Submissions on 25.07.2018

Facts:

A. The issue involved under the present dispute is that whether on transfer of machines (being capital goods) & moulds from the premises of the first job-worker to another job-worker under the CGST Act, 2017, which were originally received by the first job-worker under the erstwhile Central Excise Act, 1994 will constitute as “supply”.

B. That factual background as involved under the present application is that originally the capital goods/moulds were transferred by M/S. Meadwestvaco India Pvt. Ltd. (hereinafter referred to as “M/s. MVVV” for sake of brevity) to M/s. Shaily Engineering Plastics Ltd. (hereinafter referred to as “Shaily” for sake of brevity), and Shaily had availed credit on the said capital goods/ moulds in light of CBEC Circular No. 637/28/2002-CX dt. 08.05.2002.. That for your reference kindly find attached herewith Circular dt. 08.05.2002 marked as ANNEXURE-A.

C. That subsequently the business of MWV was transferred as a going concern to M/s. Aphrodite Packing Solutions Pvt. Ltd. with effect from 31.08.2016. Thereafter the name of the company was changed to M/s. Silgan Dispensing Systems India Pvt. Ltd (hereinafter referred to as “M/s. Silgan”) vide name change certificate dt. 13.11.2017. That for your reference kindly find attached herewith name change certificate marked as ANNEXURE-B.

D. That presently, vide Challan no. 1,2,3 and E-way Bill dt. 5.06.2018 M/s. Silgan has transferred the capital goods/moulds from 1st Job worker (i.e) M/s. Shaily to 2nd Job worker (i.e) M/s. Vasanth Tools Crafts Pvt. Ltd (hereinafter referred to “M/s. Vasanth for sake of brevity). That for your reference kindly find attached herewith copy of Challan and E-way bill duly marked as ANNEXURE-C.

That accordingly, the present application is being filed by M/s. Silgan in order to seek clarity in respect of the legal position that whether transfer of capital goods/moulds by the 1st Job worker to 2nd job worker will constitute as “‘Supply” under CGST Act, 2017 or not.

Legal Submissions:

i. That in light of the above factual position, we prima facie crave leave to refer and rely upon section 143 of the CGST Act, 2017 which provides as below:

A registered person (hereinafter in this section referred to as the “principal l’) may under intimation and subject to such conditions as may be prescribed, send any inputs or capital goods, without paymen t of tax, to job workerfor job-work andfrom there subsequently to another job worker and likewise:

ii. That accordingly capital goods/ moulds transferred from M/s. Shaily (i.e.) 1st Job worker to M/s. Vasanth Tools Crafts Pvt. Ltd (2nd Job worker) are squarely covered by provisions of Section 143 of CGST Act & GST on such transfer of capital goods/ moulds is not payable.

iii. That further reference is drawn to section 141 of CGST Act, 2017, the extract of the same detailed below for reference:

Section 141: Transitional provisions relating to job work: Where any inputs received at a place of business had been removed as such or removed after being partially processed to a job worker for further processing, testing, repair, reconditioning or any other purpose in accordance with provisions of existing law prior to the appointed day and such inputs are returned to the said place on or after the appointed day, no tax shall be payable if such inputs, after completion of the job work or otherwise , are returned to the said place within six months from the appointed day;

That in appreciation of the provision of law detailed supra, it is affirmed that transitional provisions relating to job work were limited to inputs only and the same cannot be made applicable to capital goods/ moulds and hence even if the capital goods/ moulds are transferred after expiry of 6 months as provided, still no GST shall be applicable on the said transfer of capital goods/ moulds.

iv. That in support of the above detailed contentions, we again crave leave to refer and rely upon section 143 of the Act, wherein certain conditions are stipulated for transfer of inputs or capital to job worker without payment of tax, the same are detailed below for your reference:

(a) bring back inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out, to any of his place of business, without payment of tax;

(b) supply such inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out from the place of business of a job worker on payment of tax within India, or with or without payment of tax for export, as the case may be:

Provided that the principal shall not supply the goods from the place of business of a job worker in accordance with the provisions of this clause unless the said principal declares the place of business of the job worker as his additional place of business except in a case

(i) where the job worker is registered under section 25; or

(ii) where the principal is engaged in the supply of such goods as may be notified by the Commissioner.

v. That under the present application, the capital goods/ moulds were originally transferred by M/s. MWV, principal manufacture to M/s. Shaily, 1st Job worker, and Cenvat Credit on such transfer of capital goods/ mould was availed by M/S. Shaily as consignee/ recipient of goods as provided/ permitted under erstwhile Cenvat Credit Rules. It is most humbly submitted that when Capital Goods/ Moulds belonging to principal manufacturer are transferred from the premises of supplier of principal manufacturer directly to job worker of principal manufacturer as “Consignee & Cenvat credit on such transfer is availed by job worker of principal supplier, provisions of Rule 4(5)(b) of erstwhile Cenvat Credit Rules,2004 for receipt back Of such capital goods/ moulds by principal manufacturer within stipulated time lime of two years are not applicable as provided in light of Circular No. 637/28/2002-CX., dt. 08.05.2002. Accordingly in appreciation of the Circular dt. 08.05.2002, the stipulated time of two years as provided under rule 4(5)(b) is admittedly not applicable in case where cenvat Credit was availed by M/s. Shaily(being job worker) as consignee/ recipient of goods on behalf of principal manufacturer.

vi. That subsequently, the time limit of three years for receipt back of capital goods by principal manufacturer on transfer of the capital goods/moulds under CGST by M/s. Shaily 1st Job worker to M/s. Vasanth 2nd Job worker of the principal manufacturer M/s. Silgan would not be applicable in absence of any restriction stipulated under erstwhile Cenvat Law. Thus, aforesaid transactions of transfer of goods by 1st job worker to 2nd jobworker would be termed as ‘Transfer of Goods under Job Work Procedure” & should not constitue as ‘Supply” That in support of the said contention we wish to draw reference to section 174 of the CGST Act, 2017 which provides as below detailed:

Repeal and saving.

174. (1) Save as otherwise provided in this Act, on and from the date of commencement of this Act, the Central Excise Act, 1944 (1 of 1944.) (except as respects goods included in entry 84 of the Union List of the Seventh Schedule to the Constitution), the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, (16 of 1955.) the Additional Duties of Excise (Goods of Special Importance) Act, 1957, (58 of 1957.) the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, (40 of 1978.) and the Central Excise Tariff Act, 1985 (5 of 1986.) (hereafter referred to as the repealed Acts) are hereby repealed.

(2) The repeal of the said Acts and the amendment of the Finance Act, 1994 (32 of 1994.)(hereafter referred to as “such amendment” or “amended Act”, as the case may be) to the extent mentioned in the sub-section (1) or section 173 shall not-

(a) revive anything not in force or existing at the time of such amendment or repeal; or

(b) affect the previous operation of the amended Act or repealed Acts and orders or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts or orders under such repealed or amended Acts:

Provided that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded on or after the appointed day; or

vii. That in light of section 174 (2)(a)(b)(c), the time limit of 3 years for receipt back of capital goods by principal manufacturer after completion of job work cannot be extended retrospectively to a transaction which was principally & originally undertaken under the erstwhile Central Excise Act, 1944 as the CGST Act, 2017 neither can receive anything which was not in force at the time of repeal nor affect any privilege accrued under repealed act and especially in absence of any transitional provisions which governed the transition of the erstwhile law to the present law.

viii. That moreover, Hon’ble Mumbai Bench in the case of Balmer Lawrie & Co. Ltd. as reported in 2014(301) ELT 573 = 2014 (2) TMI 545 – CESTAT MUMBAI has held that Every statutory provision is prospective unless explicitly provided to be retrospective by legislature – Interest liability upheld – Rule 14 of Cenvat Credit Rules, 2004 read with Section 11AB of Central Excise Act, 1944.

ix. That similarly, the Hon’ble Gujarat High Court in the case of Goyal Traders as reported in 2014(302) ELT 529 = 2011 (8) TMI 720 – GUJARAT HIGH COURT has explained that Amendments, either creating fresh liability hitherto not existing, or extinguishing accrued rights would be considered prospective unless the statute either specifically or by necessary implication gives such provision retrospective effect.

x. That the Principal bench, New Delhi under similar situation in the case of Gwalior Alcobrew Pvt. Ltd as reported in 2017(309) ELT 692 = 2014 (8) TMI 880 – CESTAT NEW DELHI has held that Interest on differential duty levied on finalization of provisional assessment – Sub-section (3) of Section 18 of Customs Act, 1962 was not in force on the date of filing of Bills of entry nor existing even on the date of finalisation of provisional assessments but was enacted on 13-7-2006, hence not applicable to the case of appellant because it is, by now, well settled that statutory amendments, either creating fresh liability hitherto not existing or extinguishing accrued rights would be considered prospective unless statute either specifically or by necessary implication gives such provision retrospective effect.

xi. That accordingly, the condition of 3 years to bring back the capital goods as provided under section 143 of the CGST Act, 2017 cannot retrospectively be made applicable to a transaction which per se was not subjected to restriction of 2 years provided under the erstwhile Central Excise Act, 2017. Accordingly, the said transaction has to be viewed prospectively and the condition of 3 years to bring back the capital goods has to prospectively introduced from the date of transfer of capital goods from the 1st Job worker to 2nd job worker. Hence, all the conditions stipulated under section 143 stands complied with in present case for transfer of capital goods by 1st job worker to 2nd job worker under “job work procedure”.

xii. That notwithstanding anything contained above, no time limit is prescribed in case of moulds and dies, jigs and fixtures, or tools either under the erstwhile law or the present law and hence conditions prescribed under section 143 in case of moulds and dies also stans complied with.

xiii. That further we crave leave to refer and rely upon the CGST Circular no: 38/12/ 2018 dated 26.03.2018. That the said Circular is issued to bring clarification in respect of job work and related compliance requirement for the principal and the job-worker.

xiv. That specifically para. 8.4 of Circular dated 26.03.2018 provides that where goods are sent from one job worker to another job worker, the goods may move under Challan issued either by the principal or the job worker. In the alternative, the challan issued by the principal may be endorsed by the job worker sending the goods to another job worker, indicating therein the quantity and description of goods being sent.

xv. On bare perusal of the above detailed clarification a clear understanding can be attained that if the job worker intends to move goods to another job worker the same can be done by issuing a Challan either by the principal or the job-worker on endorsement of the challan by the principal, Implying thereby that the goods can be transferred by the principal manufacturer from one job-worker to another job-worker without any GST.

xvi. Accordingly, in absence of any transitional provisions for receipt of capital goods by job worker under erstwhile Central Excise Act, 1944, the transactions of subsequent transfer of capital goods/ moulds from 1st job worker to 2nd job worker upon request of principal manufacturer under “job work process” would not constitute as” Supply” & accordingly GST is not payable on such transfer.

Additional Submissions on 26.07.2018

This is reference to above subject matter. That in light of the hearing dt.26.07.2018, Your Honour had insisted upon clarification in respect of Cenvat credit in relation to capital goods availed by job worker. That accordingly, we carve leave to refer and rely upon the case of Uni Cast Pvt Ltd. as reported in 2016 (331) E.L.T. 369(All.) = 2015 (10) TMI 375 – ALLAHABAD HIGH COURT, whereby the Hon’ble Allahabad High Court has held and clarified that Cenvat credit can be availed by the Job-worker, the extract of the said case law is annexed herewith and marked as ANNEXURE-A.

Further in support of the contention we also wish to refer to case of German Remedies Ltd. as reported in 2002(144) ELT 606 (Tri.-Mumbai) = 2002 (4) TMI 140 – CEGAT, MUMBAI, extract of the same is annexed herewith and marked as ANNEXURE-B.

That notwithstanding the above, it is further submitted that Rule 3(5) of the erstwhile Cenvat Credit Rules, 2004 specifically provided that “When inputs or capital goods, on which Cenvat Credit has been taken are removed as such from the factory of premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in Rule 9.

That further when capital goods are removed after being used, the manufacturer or provider of output service shall pay an amount equal to the Cenvat credit taken on the said capital goods reduced by the percentage points calculated by straight line method, Implying thereby that when capital goods were removed as such or after being used under the erstwhile Cenvat Credit Rules, 2004 there they were required to reverse the credit.

That simultaneously, sec 141 of the CGST Act, dealing with transitional provisions is detailed below for your reference:

141. (1) Where any inputs received at a place of business had been removed as such or removed after being partially processed to a job worker for further processing, testing, repair, reconditioning or any other purpose in accordance with the provisions of existing law prior to the appointed day and such inputs are returned to the said place on or after the appointed day, no tax shall be payable if such inputs, after completion of the job work or otherwise, are returned to the said place within six months from the appointed day:

That on bare reading of the said provision and affirmed understanding can be attained that the transitional provisions solely covered inputs and their removal as such and further there exist no provision of law under CGST Act, 2017 providing for any ITC reversal mechanism in respect of removal of capital goods as such or after use hence in the scenario when the said provision failed to provide any explanation in respect of capital goods then no reversal on as such removal can be Subjected to capital goods and molds and tools in light and appreciation of the Section 141 dealing with transitional provisions and section 174 being the repeal and savings clause emphasizing that once the act is repealed no right, privilege, obligation or liability acquired can be made applicable to the present Act. That in light of the said submission we make a humble request before your Honour to kindly appreciate the factual as well as legal position as involved under the present application and pass an appropriate order.

03. CONTENTION – AS PER THE CONCERNED OFFICER

The submission, as reproduced verbatim, could be seen thus-

It is submitted that, Issue on which advance ruling is required:

M/s. Silgan Dispensing Systems India Pvt. Ltd., 37/1966, Omkaram, Gandhi Nagar, Service Road, Kherwadi, Bandra(East), Mumbai 400051, (here in after referred to as ‘the applicant’) has filed above detailed application under Section 97 of the Central Goods and Service Tax Act, 2017 read with Rule 104 (1) of the CGST Rules, 2017 seeking advance ruling on.

(i)  Whether on transfer of machines & moulds (being “capital goods”), from the premises of the job-worker to another job-worker, which were originally received by said job worker under the erstwhile Central Excise Act, 1944 will constitute as “supply” under GST.

2. M/s. Silgan Dispensing Systems India Pvt. Ltd., registered under GSTIN NO.27AAPCA1687D171 is engaged in Trading Business. The applicants in Point No.15 (enclosed as Annexure ‘A’), have stated that originally during the period 2012-13 & 2013-14, the machines & moulds were transferred to M/s. Shaily Engineering Plastics Limited hereinafter referred to as job worker’) directly by the supplier of the principal manufacturer namely M/s. MWV India Pvt. Ltd.(hereinafter referred to as ‘first principal manufacturer’) Further in August, 2017, M/s. MWV India Pvt. Ltd., sold part of business under Slump Sale vide BTA dated 31.08.2016 to M/s. Aphrodite Packaging Solutions Pvt. Ltd., (herein after referred to as ‘second principal manufacturer’) including the subject item of capital goods. Thereafter, the name of the company was changed to M/s. Silgan Dispensing Systems India Pvt. Ltd., from M/s. Aphrodite Packaging Solutions Pvt. Ltd., w.e.f. 13.11.2017. Subsequently, the applicant now propose to transfer the said machines/ moulds under the GST regime from the premises of M/s. Shaily Engineering Plastics Limited (hereinafter referred to “job-worker”) to another job-worker namely M/s. Vasanth Tools Crafts Pvt. Ltd.(hereinafter referred to “subsequent job-worker”. Accordingly, the present Advance Ruling is sought in respect of GST application on said transfer of machines/ moulds to subsequent job-worker.

3. Further, the applicant in Point No.16 of the application (in Annexure-B), has submitted their interpretation of law which is as under:

The applicant has submitted that sub-section 1 of section 141 of the CGST Act, 2017 deals with goods removed to job worker and mentioned that on bare reading it can be construed that the provisions detailed in Section 141(1) of the CGST Act, 2017, confine themselves to inputs only, whereas goods under consideration are capital goods in the nature of machines and moulds and in absence of any specific provision under the transitional provisions in respect of receipt of capital goods by job-worker under erstwhile Central Excise Law & lying with him as on appointed date of GST, present transfer of capital goods will not entail any GST liability. In support of the above said contention, the applicant relied upon the following judgements.

a. 2014 (299) ELT 3 (Mad.) = 2013 (11) TMI 240 – MADRAS HIGH COURT – Metal Weld Electrodes.

b. 2012 (283) ELT 188 (A.P.) = 2012 (10) TMI 873 – ANDHRA PRADESH HIGH COURT – IDBI Ltd.

c. 2012 (281) ELT 321 (Mad.) = 2012 (10) TMI 832 – MADRAS HIGH COURT – Nirma Ltd.

d. 2010 (262) ELT 50 (SC)  = 2010 (7) TMI 556 – SUPREME COURT OF INDIA – Balwant Singh.

4. Further, the applicant relied upon Para 8.4 of the CGST Circular No.38/12/2018 dated 26.03.2018, which provides that where goods are sent from one job worker to another job worker, the goods may move under challan issued either by the principal or the job worker. In the alternative, the challan issued by the principal may be endorsed by the job worker sending the goods to another job worker, indicating therein and quantity description of goods being sent.

5. Further, the applicant submitted that on bare perusal of the above detailed clarification a clear understanding can be attained that if the job worker intends to move goods to another job worker the same can be done by issuing a Challan either by the principal or the job-worker on endorsement of the challan by the principal. Implying thereby that the goods can be transferred by the principal manufacturer from one job-worker to another job-worker without any GST. Accordingly, in absence of any transitional provisions for receipt of capital goods by job worker under erstwhile Central Excise Law & lying With job worker as on appointed date of GST law the transactions of subsequent transfer of said items of machines & moulds (being Capital Goods) to another job worker upon request of principal manufacturer under “job work process” would not constitute as “Supply” & accordingly GST is not payable on such transfer.

FINDINGS

6. The basic issue to be decided in the application is whether on transfer of machines & moulds (being licapital goods”), from the premises of the job-worker to another job-worker, which were originally received by said job-worker under the erstwhile Central Excise Act, 1944 will constitute as “‘supply” under GST.

The applicant in Point No.15 of the application, have stated that the originally the capital goods i.e. machines & moulds (pertaining to M/s. MWV India Pvt. Ltd., ie. first principal manufacturer) were sent for job work to M/s. Shaily Engineering Plastics Limited (job worker) during the period 2012-13 & 2013-14. Further, the applicant has stated that they proposes to transfer the said capital goods under the GST regime (August, 2017) from the premises of M/s. Shaily Engineering Plastics Limited (job worker) to another job-worker namely M/s. Vasanth Tools Crafts Pvt. Ltd. (hereinafter referred to “subsequent job-worker”. However, it is not clear from the above information whether:

a) The Cenvat Credit on the said Capital Goods have been availed/ taken by the Principal Manufacturer (M/s. MWV India Pvt. Ltd.,) or by the Job Worker (M/s. Shaily Engineering Plastics Limited)

b) The Job Worker had been paying Central Excise Duty while clearing the finished goods/ semi finished goods to the Principal Manufacturer (M/s. MWV India Pvt. Ltd.,), The provisions regarding Job work under the Central Excise is as under:

Rule 4(5)(b)(ii) & (iii) of Cenvat Credit Rules, 2004

(ii) As per the above Rule, the Cenvat Credit on capital goods shall be allowed even if any capital goods as such are sent to a job worker for further processing, testing, repair, reconditioning etc., for the manufacture of final products or any other purpose, and it is established that the capital goods are received back by the manufacturer or the provider of output service, as the case may be, within two years of their being so sent:

(iii) If the capital goods are not received back within the time specified (i.e. two years) by the manufacturer, the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to the capital goods by debiting the CENVAT credit.

In this case, M/s. MWV India Pvt. Ltd., (ie. first principal manufacturer) sent capital goods for job work to M/s. Shaily Engineering Plastics Limited (job worker) during the period 2012-13 & 2013-14. The applicant has taken over the business (including the capital goods) of first principal manufacturer in August, 2017. Till such time the capital goods was there with the Job worker viz. M/s. Shaily Engineering Plastics Limited (i.e. from 2012-13, 2013-14 to August, 2017, more than 3 years). As per the above Cenvat Credit Rules, 2004, if the capital goods are not received back within two years from the job worker, the manufacturer has to pay an amount equivalent to the CENVAT credit attributable to the capital goods by debiting the CENVAT credit account, In this case, the capital goods are not received back from the job worker i.e. M/s. Shaily Engineering Plastics Limited even after three years and it appears that the first principal manufacturer has not paid the Central Excise duty or debit the CENVAT account. Since, the duty is not paid, the applicant is liable to pay GST while transferring the capital goods from the job worker viz. M/s. Shaily Engineering Plastics Limited to another job-worker namely M/s. Vasanth Tools Crafts Pvt. Ltd. The case laws mentioned by the applicant are not applicable in this case.

7. Further, as per Rule 117(1) & (2) of CGST Rules, 2017, it has to be checked whether

(a) first principal manufacturer has submitted the declaration electronically in FORM GST TRAN-1 and included the said capital goods in his TRAN-1;

(b) When the applicant took over the business of first principal manufacturer in August, 2017, it has to be seen whether the said capital goods are shown in his books of accounts i.e. shown the capital goods as his assets;

(c) the applicant after takeover of business from first principal manufacturer, has filed the declaration electronically in FORM GST TRAN-1 and included the said capital goods in his TRAN-1.

8. The claim of the applicant that Section 141(1) of the CGST Act,2017 does not include Capital Goods and hence GST need not be paid while transfer of capital goods from one job worker to another job worker, does not stand. The Section 141(1) of the CGST Act,2017, itself is not applicable to the applicant. The same is only for inputs sent to job worker and not the capital goods where in this case of applicant.

9. Further, the Board vide Circular No. 38/12/2018 dated 26.03.2018, had issued clarification on issues related to Job Work under GST. In para No.2 of the above Circular, it is mentioned that on completion of the job work, the principal shall bring back the goods to his place of business within three years in case of capital goods (except moulds and dies, jigs and fixtures or tools). In para No.3 of the above Circular, it is mentioned that if the time frame of three years for bring back capital goods is not adhered to the activity of sending the goods for job work shall be deemed to be a supply by the principal on the day when the said capital goods were sent out by him.

PRAYER

In this case the following information is not available:

a) The Cenvat Credit on the said Capital Goods have been availed/ taken by the Principal Manufacturer(M/s. MWV India Pvt. Ltd.,) or by the Job Worker (M/s. Shaily Engineering Plastics Limited) in 2012-13 and 2013-14.

b) The Job Worker had been paying Central Excise Duty while clearing the finished goods/semi finished goods to the Principal Manufacturer (M/s. MWV India Pvt. Ltd.,) or otherwise.

c) the first principal manufacturer has submitted the declaration electronically in FORM GST TRAN 1 and included the said capital goods in his TRAN-I (as on 30.06.2017) or otherwise;

d) When the applicant took over the business of first principal manufacturer in August, 2017, it has to be seen whether the said capital goods are shown in his books of accounts i.e. shown the capital goods as his assets or otherwise;

e) the applicant after takeover of business from first principal manufacturer, has filed the declaration electronically in FORM GST TRAN-I and included the said capital goods in his TRAN-1 or otherwise.

(i) Considering the facts discussed in foregoing paragraphs, the question framed by the applicant in Point No.14, whether on transfer of machines & moulds (being “capital goods”), from the premises of the job-worker to another job-worker, which were originally received by said job worker under the erstwhile Central Excise Act, 1944 will constitute as “supply l under GST, inspite of the information not available as mentioned above, the answer is “Yes” and will constitute as ‘Supply” in terms of Section 7 of the CGST Act,2017 which prescribes that all forms of supply of goods or services or both such as sale, Transfer, barter, exchange, licence, rental, lease or disposal are included in the expression “Supply”.

04. HEARING

The case was scheduled for 27.06.2018 for Preliminary hearing when Ms. Harpinder Sandhu, Advocate along with Sh. Bharat Rawal, C.A. appeared and contended for admission of application as per details in their application. Jurisdictional Officer Sh. Manoj Ohekar, Dy. Commr., State Tax, appeared and stated that they will be making their submissions in due course. Jurisdictional Officer, from the Central Tax, Ms. Sharmila Bokey, Supdt., appeared and made written submissions.

The application was admitted and called for final hearing on 25.07.2018, Ms. Harpinder Sandhu, Advocate along with Sh. Bharat Rawal, C.A., appeared and made oral and written submission. The issue with respect to capital goods and moulds in the case was not clear and they stated that they would be making further submissions shortly. The Jurisdictional Officer was not present.

05. OBSERVATION

We have gone through the facts of the case, documents on record and submissions made by both, the applicant and the department. The basic issue before us is “whether on transfer of machines & moulds (being “capital goods”), from the premises of the job-worker to another job-worker, which were originally received by said job-worker under the erstwhile Central Excise Act, 1944 will constitute as “supply” under GST.”

The applicant has submitted that they proposed to transfer said machines/ moulds under the GST regime from the premises of Shaily Engineering Plastics Limited (their earlier job worker) to another job-worker namely M/s. Vasanth Tools Crafts Pvt. Ltd. The said capital goods were transferred to their earlier job worker in the year 2012, under the Erstwhile Central Excise Rules and prior to the introduction of GST. They have also submitted that when the capital goods/ moulds were originally transferred by them to the first job worker, on such transfer of capital goods/mould cenvat credit was availed by the first job worker as provided/ permitted under provisions of Rule 4(5)(b) of erstwhile Cenvat Credit Rules,2004, provisions of Rule 4(5)(b) of erstwhile Cenvat Credit Rules,2004 for receipt back of such capital goods/ moulds by principal manufacturer within stipulated time lime of two years are not applicable as provided in light of Circular No. 637/28/2002-CX., dt. 08.05.2002. Hence in terms the Circular dt. 08.05.2002, the stipulated time of two years as provided under rule 4(5)(b) was not applicable in case where cenvat Credit was availed by the first job worker as consignee/ recipient of goods on behalf of principal manufacturer.

We reproduce the said Circular No. 637/28/2002-CX., dt. 08.05.2002 which is as below:-

Circular No.637/28/2002-CX 8th May, 2002

F.No. 267/12/2002-CX-8

Govt of India, MOF, Department of Revenue CBEC

Subject: Admissibility of CENVAT credit to inputs and capital goods used by the manufacturer outside the factory premises.

Board’s attention has been drawn to the Supreme Court judgement in Civil Appeal No.5340-5341 of 2000 in the case of M/s. Jaypee Rewa Cement = 2001 (8) TMI 1332 – SUPREME COURT OF INDIA wherein the Apex Court has held that MODVAT credit on explosives used in mines (which are outside the factory premises) for mining of lime stone (intermediate product) shall be available to the manufacturing unit under Rule 57 J of the erstwhile Central Excise Rules, 1944. Accordingly, the matter of admissibility of Cenvat credit on inputs and capital goods when these are used outside the factory of manufacture of final product has been reviewed by Board in the light of new CENVAT Rules which came into force w.e.f. 1.7.2001

2. It has been observed by the Board that ‘inputs’ have been defined under Rule 2(f) of Cenvat Credit Rules, 2001 as below:

……………………………….

3. Similarly, Capital goods have been defined under Rule 2(b) of said Rules as those items which are used in the factory of the manufacturer of final products. Moreover, as per Rule 3(1) of the said Rules, credit on inputs is also admissible when inputs are used in the manufacture of intermediate products by a job worker availing the benefit of notification No.214/86-CE dated 25.3.86. Further, in terms of Rule 4(5), capital goods may be sent to a job worker’s premises for production of goods. Therefore, in view of the said statutory provisions contained in Cenvat credit Rules, 2001 cited above, Cenvat Credit is admissible only when the inputs or Capital goods are used by the manufacturer within the factory premises [except when inputs or capital goods are used/sent for job work outside factory]. This position remains unchanged in the present Cenvat Credit Rules, 2002.

From a reading of the Circular quoted by the applicant it is seen that nowhere it is mentioned that provisions of Rule 4(5)(b) of erstwhile Cenvat Credit Rules,2004 for receipt back of such capital goods/ moulds by principal manufacturer within stipulated time lime of two years are not applicable.

The applicant has cited Section 141 of the CGST Act, 2017, which deals with the Transitional Provisions and have submitted that on bare reading it can be construed that the said provisions are confined only to inputs, whereas goods under consideration are capital goods. Hence they have come to a conclusion that when the transitional provisions have not detailed any provision in respect of capital goods/moulds then admittedly the same deserved to be cleared without payment of duty since essentially the duty was paid at the time of receipt of the said goods under the erstwhile Central Excise Act, 1944. Here they seem to have slipped on the fact that the cenvat credit of the said capital goods had been availed by the first job worker, as stated by them earlier in their submissions.

They have also relied upon the CGST Circular no: 38/12/2018 dated 26.03.2018 and have submitted that para. 8.4 of Circular dated 26.03.2018 provides that where goods are sent from one job worker to another job worker, the goods may move under Challan issued either by the principal or the job worker. In the alternative, the challan issued by the principal may be endorsed by the job worker sending the goods to another job worker, indicating therein the quantity and description of goods being sent. Hence according to them, in absence of any transitional provisions for receipt of capital goods by job worker under erstwhile Central Excise Law & lying with job worker as on appointed date of GST Law, the transactions of subsequent transfer of said items of machines & moulds (being Capital Goods) to another job worker upon request of principal manufacturer under job work process” would not constitute as” Supply” & accordingly GST is not payable on such transfer.

Under Rule 4(5)(a) of the erstwhile CCR, 2004, the cenvat credit was allowed even if any inputs or capital goods as such or after being partially processed were sent to job worker for further processing, testing, repair, re-conditioning (or for the manufacture of intermediate goods necessary for the manufacturing of final products) or any other purposes, and it was established from the records, challans or memos or any other document produced by the manufacturer or the provider of output service, taking the cenvat credit that the goods were received back in the factory within one hundred and eighty days of their being sent from the factory or premises of the provider of output service, as the case may be. And if the inputs or the capital goods were not received back within one hundred eighty days, the manufacturer or provider of output service was required to pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debating the CENVAT credit or otherwise, but the manufacturer or provider of output service could take the cenvat credit again when the inputs or capital goods were received back in his factory. However, the above referred Rule was substituted vide the Budget, 2015 and which read as follows:-

“(a)(i) The CENVAT credit on inputs shall be allowed……….., as the case may be:

Provided that credit shall also be allowed even if any inputs are directly sent to a job worker…………………..;

(ii) the CENVAT credit on capital goods shall be allowed even if any capital goods as such are sent to a job worker for further processing, testing, repair, re-conditioning or for the manufacture of intermediate goods necessary for the manufacture of final products or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or the provider of output service taking the CENVAT credit that the capital goods are received back by the manufacturer or the provider of output service, as the case may be, within two years of their being so sent:

Provided that credit shall be allowed even if any capital goods are directly sent to a job worker without their being first brought to the premises of the manufacturer or the provider of output service, as the case may be, and in such a case, the period of two years shall be counted from the date of receipt of the capital goods by the job worker;

(iii) if the inputs or capital goods, as the case may be, are not received back within the time specified under sub-clause (i) or (ii), as the case may be, by the manufacturer or the provider of output service, the manufacturer or the provider of output service shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods, as the case may be, by debiting the CENVAT credit or otherwise, but the manufacturer or the provider of output service may take the CENVAT credit again when the inputs or capital goods, as the case may be, are received back in the factory or in the premises of the provider of output service.”

From the submissions made by the applicant we find that they have contravened the above provisions of the Erstwhile CCR, 2004. The goods were not received back by them within the time frame mentioned above and they had also not reversed the credit availed in such case. Now that GST has been introduced in the year 2017, they want to avail the benefit of sending the said capital goods from their first job worker to their second job worker.

We find that in the subject case, M/s. MWV India Pvt. Ltd., (ie. first principal manufacturer) sent capital goods for job work to Ms. Shaily Engineering Plastics Limited (first job worker) during the period 2012-13 & 2013-14. The applicant took over the business (including the capital goods) of first principal manufacturer in August, 2017. Till such time the capital goods was there with the first Job worker (ie. for more than 3 years). As per the above Cenvat Credit Rules, 2004, if the capital goods were not received back within two years from the job worker, the manufacturer had to pay an amount equivalent to the CENVAT credit attributable to the capital goods by debiting the CENVAT credit account. In this case, the capital goods have not been received back from the first job worker even after three years and it is felt that the first principal manufacturer has not paid the Central Excise duty or debit the CENVAT account. Since, the duty has not been paid, the applicant is liable to pay GST while transferring the capital goods from the first job worker to the second job-worker namely M/s. Vasanth Tools Crafts Pvt. Ltd.

We find that the provisions of Rule 117 (Transitional Provisions) of the CGST Rules, 2017 provide for tax or duty to be carried forward under any existing law or on goods held in stock on the appointed day. The applicant has not brought on record any details to show that either the first Principal manufacturer or the applicant has submitted the declaration electronically in FORM GST TRAN-I and included the said capital goods in his TRAN-I, as provided under Rule 117 of the CGST Rules, 2017. Since the details regarding the subject goods have not been carried forward by the applicant or the first principal manufacturer from the earlier law to GST laws, the goods cannot now be brought Into the GST fold.

The definition of “supply” as per the Section 7 CGST Act, 2017 is as follows:-

7. (1) For the purposes of this Act, the expression “supply” includes––

(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

(b) …………………………………..;

(c) the activities specified in Schedule I, made or agreed to be made without a consideration; and

(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.

(2) Notwithstanding anything contained in sub-section (1),––

(a) activities or transactions specified in Schedule III; or

(b)…………………………………….

(3) Subject to the provisions of sub-sections (1), and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as-

(a) a supply of goods and not as a supply of services; or

(b) a supply of services and not as a supply of goods.

From the submissions made by the applicant it appears that neither they, nor the first principal manufacturer have carried forward the capital goods into the GST regime by following the procedure prescribed by Section 117 mentioned above. Hence the subject transaction Of transferring the capital goods from the first job worker to the second job worker would be an independent and fresh transaction for which the same would be treated as supply of goods and will be liable to tax under the GST Laws.

05. In view of the extensive deliberations as held hereinabove, we pass an order as follows:

ORDER

(Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)

NO.GST-ARA-26/2018-19/B-89

Mumbai, dt. 14/08/2018

For reasons as discussed in the body of the order, the questions are answered thus –

Question :- Whether on transfer of machines & moulds (being “capital goods”), from the premises of the job-worker to another job-worker, which were originally received by said job-worker under the erstwhile Central Excise Act, 1944 will constitute as “supply” under GST.

Answer:-Answered in the affirmative

M/S. UTTARA IMPEX PRIVATE LIMITED

Classification of goods – various poultry feed products – whether covered under the HSN CODES 2301, 2302, 2308, 2309 and effectively exempted or not – Held that:- A feed additive is a food supplement for farm animals that cannot get enough nutrients from regular meals. Such additives include vitamins, amino acids, fatty acids, and minerals.

Animal feed is food given to animal which is essential to the development, sustenance, maintenance etc. On the contrary supplement is added to animal feed in order to improve it or make it complete feed. Similarly additive is a food supplement for farm animal that cannot get enough nutrients from regular meals. Therefore there are large number of products that are added to feed and which are capable of providing nutrient required for animal based upon the nature of husbandry such as meat, milk, egg etc. – the entry 102 of the exemption notification is not open ended. It cover those goods that are falling under chapter Heading 2301, 2302,2304,2305,2306,2308 and 2309 and which satisfy the description of goods as animal feed, supplement, concentrate and additives. These imported goods alone are eligible to avail the benefit of tax exemption under the GST ACT.

The description of goods against chapter Heading 2835 as mentioned at Sr. No. 105 of exemption notification 2/2017 Integrated Tax (Rate) dated 28/6/2017 covers only Di calcium Phosphate (DCP) of animal feed grade confirming to IS specification No. 5470:2002 – As such applicant product Mono calcium phosphate is not covered by the scope of exemption notification No. 2/2017-Integrated Tax (Rate).

The products referred by the applicant in the application will not be covered under Entry- 102 but would be covered under chapters like 28 and 29. Those chapters are related to Organic and inorganic chemicals. Chapter 28 and 29 are not covered under exemption notification no 2/2017 date .28.6.2017 except the HSN Code of 2835.

Ruling:- The products referred under application are not covered under entry 102 of the notification 2/2017-lntegrated Tax (Rate) dated 28th June, 2017, except Di Calcium phosphate(28352610) of animal feed grade, which is covered under Entry No. 105 of Notification No. 02/2017-(lntegrated Tax) (Rate) The rest of products would fall under Schedule III and would be liable to tax @ 18 % IGST.

No.- GST-ARA-25/2018-19/B-88

Dated.- August 14, 2018

Citations:

  1. COMMISSIONER OF CENTRAL EXCISE, NEW DELHI Versus M/s CONNAUGHT PLAZA RESTAURANT (P) LTD., NEW DELHI – 2012 (12) TMI 149 – Supreme Court
  2. COMMISSIONER OF CENTRAL EXCISE Versus M/s WOCKHARDT LIFE SCIENCES LTD – 2012 (3) TMI 40 – Supreme Court
  3. Commissioner of Central Excise Versus Shree Baidyanath Ayurved Bhawan Ltd. And vice versa – 2009 (4) TMI 6 – Supreme Court
  4. Commissioner of Sales Tax, UP. Versus Ram Chandra Asha Ram (Decd.) Through L. Rs. – 2000 (3) TMI 975 – Supreme Court
  5. SUN EXPORT CORPORATION Versus COLLECTOR OF CUSTOMS, BOMBAY – 1997 (7) TMI 117 – Supreme Court
  6. Munnalal Agarwal and another Versus State of Madhya Pradesh and another – 2006 (3) TMI 696 – MADHYA PRADESH HIGH COURT
  7. State of Andhra Pradesh Versus Balaji Poultry Agencies – 1991 (3) TMI 345 – ANDHRA PRADESH HIGH COURT
  8. GK. Chickanarasimhiah Versus State of Mysore and Another – 1970 (7) TMI 64 – MYSORE HIGH COURT
  9. Commissioner of Customs (Imports) , Chennai Versus Alpharma (Belgium) BVBA – 2016 (1) TMI 906 – CESTAT CHENNAI

SHRI B.V. BORHADE AND SHRI PANKAJ KUMAR MEMBER)

PROCEEDINGS

(Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)

The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by UTTARA IMPEX PRIVATE LIMITED, the applicant, seeking and advance ruling in respect of the following issue.

  • Classification of our products under GST regime.

At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the “GST Act”.

FACTS AND CONTENTION – AS PER THE APPLICANT

The submissions, as reproduced verbatim, could be seen thus-

STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTIONS AS PROVIDED IN ANNEXURE 1

Uttara IPMEX Private Limited is mainly engaged in trading of various poultry feed products.

Aforementioned products were covered under the description “Aquatic feed, cattle feed, poultry feed, their concentrates, animal feed supplements and animal feed additives, grass, hay, straw, cotton seed oil cakes excluding other oil cakes and all varieties of de-oiled cakes” covered under entry No. 4 of Schedule A to the MVAT Act, 2002. The products under this heading were exempted.

Under GST also there is similar description “Aquatic feed including shrimp feed and prawn feed, poultry feed & cattle feed, including grass, hay & straw, supplement & husk of puIses, concentrates & additives, wheat bran & de-oiled cake” in the exemption Notification No. 2/2017-lntegrated Tax (Rate) dated 28th June, 2017, Notification No. 2/2017-Central Tax (Rate) dated 28th June, 2017 and Notification No. 2/2017-Union Territory Tax (Rate) dated 28th June, 2017 under HSN codes 2301, 2302, 2308, 2309. However, we are facing some ambiguity in correct classification of our products. In our view it shall be covered under the aforesaid HSN codes and effectively the products will be exempted. However, due to different technical description of the products, there can be another school of thought and the tax may be levied at different rates, by revenue authorities on the said products.

STATEMENT CONTAINING APPLICANTS INTERPRETATION OF LAW IN RESPECT OF THE QUESTIONS RAISED

The commodities namely DL Methonine, Bicarbonate, Phytase, Betaine, Monodicalcium, Trytophane, UT Vit 50, Threonine, Lysine and Creamino are feed supplements for consumptions of poultry only and are not put to any other use.

Entries in the First Schedule to the Act are enactment of the legislature and the State Government which is a sub-ordinate legislative body cannot take away the exemption granted by law by issuance of a notification. Copy of the judgement of the Hon’ble High Court of Madhya Pradesh in the case of Munnalal Agarwal and Another Vs State of Madhya Pradesh and Another reported in (2006) 148 STC 388 = 2006 (3) TMI 696 – MADHYA PRADESH HIGH COURT is enclosed in support of the said argument.

Enclosing the copies of the judgement of the Hon’ble High Court of Karnataka in the case of G.K. Chickanarasimhaiah Vs State of Mysore reported in (1971) 28 STC 94 = 1970 (7) TMI 64 – MYSORE HIGH COURT and that of the Hon’ble High Court of Andhra Pradesh Vs Balaji Poultry Agencies reported in (1991) 82 STC 353 = 1991 (3) TMI 345 – ANDHRA PRADESH HIGH COURT it is argued that the opinion of experts is a safe guide and a valuable source in interpreting and deciding as to whether the commodities are animal feed supplement. Copies of the opinion of the following experts are enclosed herewith in support of the contention of the applicant:-

1. Guangdong VTR Bio-tech Co. Ltd., China.

2. Sinochem Yunlong Co. Ltd., China.

3. Hulunbeier Northeast Fufeng Biotechnologies Co. Ltd., China.

4. Ajinomoto Eurolysine S.A.S., USA.

5. Alzchem Nutrition Gmbh, Germany.

The expression, “Animal feed and feed supplement”, used in the entry 5(i) of the First Schedule to the Act has not been defined or assigned any meaning under the said Act and Rules made thereunder. Therefore, any commodity which is sold as feed and feed supplement for specific class of animals, namely poultry, cattle, pig, fish, prawns and shrimps is covered by the entry of the First Schedule and qualifies for exemption from payment of tax under the Act. Copies of the judgments of the Hon’ble Supreme Court of India in the case of Commissioner of Sales Tax, Uttar Pradesh v/s Ram Chandra Asha Ram, reported in (2001) 123 STC 415 = 2000 (3) TMI 975 – SUPREME COURT OF INDIA and in the case of Sun Export Corporation v/s Collector of Customs, Bombay and Another, reported in (1998) 111 STC 69 = 1997 (7) TMI 117 – SUPREME COURT OF INDIA, are enclosed in support of the said contention.

The description “Aquatic feed including shrimp feed and prawn feed, poultry feed & cattle feed, including grass, hay & straw, supplement & husk of pulses, concentrates & additives, wheat bran & de-oiled cake” is provided in the exemption Notification No. 2/2017-lntegrated Tax (Rate) dated 28th June, 2017, Notification No. 2/2017-Central Tax (Rate) dated 28th June, 2017 and Notification No.2/2017Union Territory Tax (Rate) dated 28th June, 2017 under HSN codes 2301, 2302, 2308, 2309.

It is evident from the above description that only those animal feed and feed supplements that are named therein are to be treated as covered by this HSN codes and those not named therein are to be excluded from the above HSN codes. A Feed supplement is a commodity that supplements animal feed.

Also it can be noted from import documents that the products are imported and commercially traded as animal feed and feed supplements.

The certificates issued by various companies clearly state that the aforementioned products are used as animal feed and feed supplements and these are not for medicinal use or human consumption. The certificates issued by quality control department of following above said companies are submitted on record.

In the case of Commissioner of Commercial Taxes, Uttar Pradesh Vs Ram Chandra Asha Ram, reported in (2001) 123 STC 415 = 2000 (3) TMI 975 – SUPREME COURT OF INDIA, the Hon’ble Supreme Court of India has held that damaged wheat unfit for human consumption and meant for use after processing as food for cattle is classifiable as “cattle fodder”. Applying the ratio of the said ruling of the Apex Court the products in which the applicant deals are meant for use as animal feed and feed supplements. That these commodities are covered under any other chapter due to its technical description cannot have effect of excluding these products from the purview of chapter 23 of CGST Act, 2017.

On similar lines various case laws under the Central Excise Act, 1944 was also there. Some of these are described below in brief:-

1. CCEx. v. Cannought Plaza Restaurant (Pvt) Ltd. 2012 (286) ELT 321 (SC) = 2012 (12) TMI 149 – SUPREME COURT (The copy of said judgment is enclosed herewith):- The apex court observed that in the absence of a statutory definition or technical description, interpretation ought to be in accordance with common parlance principle and not according to scientific and technical meanings. It was held that even though softy serve have dairy content but in common parlance it known as ‘ice cream’ and shall not be classified as ‘other dairy produce’, The same principal may be applied in the applicant’s case also. That even if as per the technical description the products can be classified under any other heading but the products are finally used as poultry feed supplements.

2. Shree Baidyanath Ayurved Bhawan Ltd. 2009 (SC) = 2009 (4) TMI 6 – SUPREME COURT (The copy of said judgment is enclosed herewith):- It was held that Lal Dantmanjan is used routinely for dental hygiene. It is not ‘medicament/medicine’ as ordinarily medicine is prescribed by medical practitioner and is for limited use only. The same principal may be applied in the applicant’s case also. That even if as per the technical description the products can be classified under any other heading but the products are finally used as poultry feed supplements.

3. CCE v. Wockhardt Life Sciences Ltd. 2012 (277) ELT 299 (SC) = 2012 (3) TMI 40 – SUPREME COURT OF INDIA (The copy of said judgment is enclosed herewith):- The apex court observed that the factors to be considered for the purpose of the classification of the goods are the composition, the product literature, the label, the character of the product and the use to which the product is put to use.

It is pertinent to note that on the import invoices as well as local procurement invoices, it is specifically mentioned that “NOT FOR HUMAN/MEDICINAL USE, FOR USE IN ANIMAL FEED ONLY”

Also NOC has been obtained from Government of India for importing these products. The NOC is issued on the basis that these imported products are to be used in poultry feed supplements. The NOC issued by Government of India has specific restriction that before releasing the consignment by the port office, each container /drum of these products shall be labeled as “Animal Feed Supplement Only & Not For Medicinal Use”.

We urge you to please take above facts on record and provide us the clarity on classification of our products under GST regime.

In addition to submissions made earlier, applicant also intends to submit the following:

We Uttara Impex Private Limited (“UIPL” or “Company” or “Applicant” or ‘We”) holding GSTIN 27AABCU0589J120, mainly engaged in trading of various poultry feed products have filed above mentioned application for advance ruling.

In the course of its business the products namely DL Methonine, Bicarbonate, Phytase, Betaine, Monodicalcium, Tryptophan, UT Vit 50, Threonine, Lysine and Creamino are imported by us. The said products are feed supplements for consumptions as poultry feed only and are not capable of being used for any other use.

With respect of above products, the Company has made an application for obtaining advance ruling under section 96 of the CGST Act 2017 to sought the ruling on classification of the goods vide an application dated 17 May 2018 and have also made additional submission on 07 June 2018 and 25 July 2018 providing necessary documents as requested by your good office.

In relation to above, we request you to kindly remove the name of following products in above referred our advance ruling application.

1. Phytase

2. UT VIT 50

3. Creamino

4. Monodicalcium

Further, we herewith request you to kindly add below mentioned products which are also poultry feed additives in the above referred our advance ruling application.

1. Monno Calcium Phosphate Sulphate

2. Lysind Sulphate

3. Sodium Sulphate

In Continuation of above, we herewith submit the following information as required by your office.

Applicant submitted the Details of nature. characteristics and usage of the goods imported by the Company on 23.7.2018.

In the below table we have provided nature, characteristics and probable usage of the goods imported by the Company. We have examined the same and do hereby certify that the goods as per below table are such which can be used in preparation of poultry feed. These are additives and supplements to poultry feed.

Details of goods, its ingredients and nutrition value is as tabled below –

Sr.No.

Name of the product

Ingredients

Nutritional value

Remarks as to why it can be used in poultry feed

1.

DL-Methionine (Feed Grade)

Methionine

Act as methyl donor and used in protein synthesis. Essential Amino acid. Methionine is a limiting and essential amino acid in poultry. so, need to supply through feed as feed supplement to meet standard requirement of birds for their body maintenance and egg/meat production.

2.

Sodium Bicarbonate (Feed Grade)

Sodium

To maintain Acid- balance in body (NRC, 1994) Sodium bicarbonate used as source of sodium to maintain acid-base balance in poultry feed. Sodium required for maintains of dietary electrolyte balance in poultry feed.

3.

L-lysine (Feed Grade)

Lysine

Essential Amino acid and used in protein synthesis. Lysine is a limiting and essential amino acid in poultry so need to supply through feed as feed supplement to meet standard requirement of birds for their body maintenance and egg/meat production.

4.

Betaine (Feed Grade)

Betaine

To recycles the Homocysteine (NRC, 1994) Betaine act as osmolyte and maintains acid-base balance. It is used in poultry feed to avoid environmental stress.

5.

Mono calcium Phosphate (Feed Grade)

Calcium and Phosphorus

To shell formation and bone growth. MCP used as source of calcium and phosphorus to meet the requirement of poultry birds in poultry feed. Poultry birds require calcium and phosphorus for egg shell formation and bone development so need to give more supplements through feed. While formulating feed formula, need to maintain Calcium: Phosphorus ratio to get desired result.

6.

L-Tryptophan (Feed Grade)

Tryptophan

Essential Amino acid and used in protein synthesis. Tryptophan is a limiting and essential amino acid in poultry to meet standard requirement of birds for their body maintenance and egg/meat production.

7.

L- Threonine (Feed Grade)

Threonine

Essential Amino acid and used in protein synthesis. Threonine is a limiting and essential amino acid in poultry to meet standard requirement of birds for their body maintenance and egg/meat production.

8.

Sodium sulphate (Feed Grade)

Sodium

To maintain Acid-balance in body Sodium Sulphate used as source of sodium to maintain acid-base balance in poultry feed. Sodium required for maintains of dietary electrolyte balance in poultry feed.

9.

Lysine Sulphate (Feed Grade)

Lysine

Essential Amino acid and used in protein synthesis. Lysine is a limiting and essential amino acid in poultry so need to supply through feed as feed supplement to meet standard requirement of birds for their body maintenance and egg/meat production.

Source: Requirement of above nutrients are adapted from Applied Nutrition by DV Reddy and research papers.

Further we have attached herewith following documents for your reference purpose

1. Advance ruling order passed by Government of Karnataka in the case of M/s. Max Chem Pharma. Attached herewith as an annexure 10.

2. Case of Commissioner of cus. (Imports), Chennai vs. Alpharma (Belgium) BVBA’ = 2016 (1) TMI 906 – CESTAT CHENNAI in which it is clarified that, “Animal Feed Supplements items are to be classified under Tariff Item 2309 90”. Attached herewith as an annexure 11.

We have attached relevant documents for each materials herewith for your reference purpose.

Prayer:

On the basis of above request you to kindly classify the product mentioned above in chapter no. 23 and provide an exemption.

Request you to acknowledge the submission of the aforesaid documents and allow opportunity in person in case of any clarification or concern.

03. CONTENTION – AS PER THE CONCERNED OFFICER SUBMITTED-

The submission, as reproduced verbatim, could be seen thus-

It is submitted that, Issue on which advance ruling is required:

QUESTION FOR ADVANCE RULING – CLASSIFICATION OF GOODS.

UTTRA IMPEX PRIVATE LTD is engaged in trading of various poultry feed products But company is facing some ambiguity in correct classification of Products (which are those products is not specified in question). In companies view products shall be covered under the HSN CODES 2301, 2302, 2308, 2309 AND effectively products will be exempted. However due to technical description of the products, there can be another school of thought and the tax may be levied at different rates by revenue authorities on the said products.

SUBMISSION AND VIEW OF JURISDICTIONAL OFFICER–

From the reading of application/ANNEXTURES submitted by the dealer, it is observed that;

1) The dealer is trading in Poultry feed products which are covered by CGST notification No. 2/2017. On which whole of central tax is exempted. The relevant entry is as follows:

Sr.No.

Chapter Heading

Description of goods.

102  2303, 2304, 2305, 2306, 2308, 2309 Aquatic feed including shrimp feed and prawn feed, poultry feed and cattle feed, including grass, hey and straw, supplement and husk of pulses, concentrate and additives, wheat bran and de-oiled cake.

2) But there are other related/similar commodities which are imported by dealer on which GST is levied. These commodities are:

commodities

HSN CODE

GST RATE

REMARK BY OFFICER

DL METHONINE

29304000

12

It is oregano sulphur compound, covered under HSN CODE 2930. NOT INCLUDED UNDER POULTRY FEED.

BICARBONATE

30049032

12

It is a medicaments covered under HSN 3004. NOT INCLUDED UNDER POULTRY FEED

UT VIT 50

NOT INCLUDED UNDER POULTRY FEED

LYSINE

29224100

12

IT IS AMINO COMPOUND COVERED UNDER HSN 2922. NOT INCLUDED UNDER POULTRY FEED

PHYTASE

3567

IT IS PHOSPHATASE ENZYME AND INORGANIC COMPOUND MAY BE COVERED UNDER HSN 3567 NOT INCLUDED UNDER POULTRY FEED.

MONODICALCIUM

28352610

MONOCALCIUM IS FEED GRADE PHOSPHATE MAY COVERED UNDER HSN 2835. NOT INCLUDED UNDER POULTRY FEED

3) According to the dealer, he is importing and supplying these goods on which GST is Ievied, which are related/similar to Poultry feed. These goods though not included in above mentioned poultry feed CGST notification No. 2/2017, GST shall not be levied on these goods also. According to dealer on the import documents, it is specified that these products are not for food or not for human consumption and those are of feed grade category, hence shall be classified under poultry feed and shall get exemption from GST.

4) Tax under GST levied as per commodity classified under HSN CODE and as per notification under the law only commodities covered by HSN CODE NO. 2302, 2304, 2305, 2306, 2308 and 2309 are classified as POULTRY FEED and exempted from GST. Thus while classifying poultry feed, law has excluded some entries like 2303/2307 from same HSN CHAPTER NO 23. On this background commodities which are classified and declared as taxable under HSN NO 2930/2922/3004 CANNOT BE CLASSIFIED AS POULTRY FEED.

5) The dealer’s contention is not tenable. There are specific HSN codes and specific tax Rate entries for all these products. The products which are mentioned in the above table are not poultry feed and shown under separate entry which are taxed accordingly. Simply due to the reason of not for human consumption or not of food grade quality, these products cannot be classified under POULTRY FEED and cannot be exempted from GST.

04. HEARING

The case was scheduled for 27.06.2018 for Preliminary hearing, Sh. Bhadresh Vyas, Advocate along with Sh. Nagesh Jadhav, Advocate, Sh. Milind Phatak, G.M. Accounts and Sh. Sharad Kumawat, PGM Operations and Sh. Rushabh Gondha, C.A. appeared and requested for admission of application as per details in their application. During hearing Jurisdictional Officer Sh. Prakash Pote, Commr. Of S.T. (E-701), Pune appeared and made written submissions.

The application was admitted and called for final hearing on 25.07.2018, Sh. Bhadresh Vyas, Advocate along with Sh. Milind Phatak, G.M. Accounts and Sh. Sharad Kumawat, PGM Operations and Sh. Rushabh Gondha, C.A. and Sh. Arjun Madnurkar, Sr. Technical Manager appeared and made oral and written submissions. They were requested to give detailed write-up, Catalogue and composition of the products under present proceedings and whether they are of chemical origin or otherwise individually latest by 12.08.2018 without fail. The Jurisdictional Officer was not present but telephonically informed that their earlier submissions may be relied upon.

05. OBSERVATIONS–

We have gone through the facts of the case and the submissions made by the applicant and the department. We find that –

1) “Applicant” is mainly engaged in trading of various poultry feed products. In the course of its business the products namely DL Methionine, bicarbonate, Phytase, Betaine, Monodicalcium, Tryptophan, UT Vit 50, Threonine, Lysine and Creamino are imported by the applicant. Applicant submits the said products are feed supplements for consumption as poultry feed only and are not capable of being used for any other use. As per the contention of the applicant, above products are feed supplements for poultry and therefore covered under entry Sr. No. 102 of exemption notification issued under GST. The relevant notification is as below,

Entry Sr.No. 102 of Notification No 2/2017 of the -IGST read as below:

“Aquatic feed including shrimp feed and prawn feed, poultry feed & cattle feed, including grass, & straw, supplement & husk of pulses, concentrates & additives, wheat bran & de-oiled cake”.

Applicant has submitted list of products including products in the nature of additives for decision by Advance Ruling Authority. The list of such products is already mentioned in this order at statement of facts and additional submission. From the detailed scrutiny of aforesaid entry and the products covered by the application, we are required to decide whether these products can be considered as poultry feed, cattle feed, supplement, concentrate and additives. We have to take call on whether impugned products are covered by the description of goods mentioned in the entry – 102 and in particular poultry feed, cattle feed, supplement, concentrate and additives. We also find that other products covered by the said entry are self-explanatory and require no discussion. Further we find that the expression which are central point of discussion i.e. poultry feed, animal feed, supplement, concentrate and additives are not defined in the statute or in the notification issued under the Act. As such we may refer the Wikipedia or dictionary to understand these expressions:

Definition of feed – as per dictionary to furnish something essential to the development, sustenance, maintenance, or operation of reading feeds the mind

CAMBRIDGE DICTIONARY

to give food to a person, group, or animal

As per WIKIPEDIA

Animal feed

Animal feed is food given to domestic animals in the course of animal husbandry. There are two basic types: fodder and forage. Used alone, the word “feed” more often refers to fodder.

Fodder

“Fodder” refers particularly to foods or forages given to the animals (including plants cut and carried to them), rather than that which they forage for themselves. It includes hay, straw, silage, compressed and pelleted feeds, oils and mixed rations, and sprouted grains and legumes.

Wikipedia, the free Encyclopedia

Forage

“Forage” is plant material (mainly plant leaves and stems) eaten by grazing livestock.

SUPPLEMENT

CAMRIDGE ENGLISH DICTIONARY

Something that is added to something else in order to improve it or complete it; something extra

OXFORD LIVING DICTIONARY:

A thing added to something else in order to complete or enhance it.

Feed additive

From Wikipedia, the free encyclopedia

A feed additive is a food supplement for farm animals that cannot get enough nutrients from regular meals. Such additives include vitamins, amino acids, fatty acids, and minerals.

Definition of concentrate feeds: AS PER FAO (Food and agriculture Organization)

Feeds may be broadly classified as concentrates and roughages, depending on their composition. Concentrates are feeds that contain a high density of nutrients, usually low in crude fiber content (less than 18% of dry matter (DM)) and high in total digestible nutrients. Roughages are feeds with a low density of nutrients, with a crude fiber content over 18% of DM, including most fresh and dried forages and fodders.

Concentrates may be high in energy, referred to as energy concentrates, such as cereals and milling by-products, or high in protein, with over 20% crude protein, referred to as protein concentrates. Concentrates may be fed in raw or milled forms as individual feeds (sometimes referred to as straights), or may be blended or formulated into balanced rations for particular production purposes (compound

CONCENTRATE MEANING

MERRIAM WEBSTER DICTIONARY

a feedstuff (such as grains) relatively rich in digestible nutrients

ADDITIVES MEANING.

CAMBRIDGE ENGLISH DICTIONARY

a substance that is added to food in order to improve its taste or appearance or to keep it fresh and stop it from decaying:

OXFORD ENGLISH DICTIONARY

A substance added to something in small quantities to improve or preserve it.

MERRIAM WEBSTER DICTIONARY

a substance added to another in relatively small amounts to effect a desired change in properties

Feed additive

From Wikipedia, the free encyclopedia

A feed additive is a food supplement for farm animals that cannot get enough nutrients from regular meals. Such additives include vitamins, amino acids, fatty acids, and minerals.

A sum of all above reveal that animal feed is food given to animal which is essential to the development, sustenance, maintenance etc. On the contrary supplement is added to animal feed in order to improve it or make it complete feed. Similarly additive is a food supplement for farm animal that cannot get enough nutrients from regular meals. Therefore there are large number of products that are added to feed and which are capable of providing nutrient required for animal based upon the nature of husbandry such as meat, milk, egg etc.

Further we find that entry 102 of the exemption notification is not open ended. It cover those goods that are falling under chapter Heading 2301, 2302,2304,2305,2306,2308 and 2309 and which satisfy the description of goods as animal feed, supplement, concentrate and additives. These imported goods alone are eligible to avail the benefit of tax exemption under the GST ACT. It is therefore imperative to examine in detail chapter 23 of the CET –

We find that Chapter 23 is related to the “Residual and Waste from the food Industries prepared Animal fodder” and therefore goods classifiable under the tariff codes as stated above are only covered and eligible for exemption benefit under entry no. 102 of the exemption notification mentioned above. Thus the benefit under Entry No. 102 is restricted as above:-

We find that the details of tariff code (HSN) and its description as per tariff are as under:

Sr. No.of Not.If.

Chapter/Heading/sub-heading/Tariff item

Description as per Notification

Heading Description in Customs Tariff

DETAILED HEADING/SUB-HEADING COVERED FOR

THE ENTRY

1

2

3

4

5

102.

2301,2302,2304,2305,2306,2308, 2309

Aquatic feed including shrimp feed and prawn feed, poultry feed & cattle feed, including grass, hay & straw, supplement & husk of pulses, concentrates & additives, wheat bran & de-oiled cake [other than rice-bran] 2301 FLOURS, MEALS AND PELLETS, OF MEAT OR MEAT OFFAL, OF FISH OR OF CRUSTACE ANS, MOLLUSCS OR OTHER AQUATIC INVERTEBR ATES, UNFIT FOR HUMAN CONSUMPTION; GREAVES
2301 FLOURS, MEALS AND PELLETS , OF MEAT OR MEAT OFFAL, OF FISH OR OF CRUSTACEANS, MOLLUSCS OR OTHER AQUATIC INVERTEBRATES , UNFIT FOR HUMAN CONSUMPTION; GREAVES
230110 Flours, meals and pellets, of meat or meat offal ; greaves :
23011010 Meat meals and pellets (including tankage)
23011090 Other (including greaves)
230120 Flours, meals and pellets, of fish or of crustaceans, molluscs or other aquatic invertebrates :
Fish meal, unfit for human consumption:
23012011 —- In powder form
23012019 —- Other
23012090 Other
2302 BRAN, SHARPS AND OTHER RESIDUES, WHETHER OR NOT IN THE FORM OF PELLETS, DERIVED FROM THE SIFTING, MILLING OR OTHER WORKING OF CEREALS OR OF LEGUMINOU S PLANT
2302 BRAN, SHARPS AND OTHER RESIDUES, WHETHER OR NOT IN THE FORM OF PELLETS, DERIVED FROM THE SIFTING, MILLING OR OTHER WORKING OF CEREALS OR OF LEGUMINOUS PLANTS
230210 Of maize (corn) :
23021010 Maize bran
23021090 Other
23023000 Of wheat
23024000 Of other cereals
23025000 Of leguminous plants

2304

Oil-cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of soya bean oil

2305

Oil-cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of ground-nut oil
2308 00 00 VEGETABLE MATERIALS AND VEGETABLE WASTE, VEGETABLE RESIDUES AND BY-PRODUCTS, WHETHER OR NOT IN THE FORM OF PELLEIS,OF A KIND USED IN ANIMAL FEEDING, NOT ELSEWHERE SPECIFIED OR INCLUDED 23080000 VEGETABLE MATERIALS AND VEGETABLE WASTE, VEGETABLE RESIDUES AND BY-PRODUCTS, WHETHER OR NOT IN THE FORM OF PELLETS, OF A KIND USED IN ANIMAL FEEDING, NOT ELSEWHERE SPECIFIED OR INCLUDED
2309-

PREPARATIONS OF A KIND USED IN ANIMAL FEEDING

102B

2306

Cotton seed oil cake OIL-CAKE AND OTHER SOLID RESIDUES, WHETHER OR NOT

GROUND OR IN THE FORM OF PELLETS, RESULTING FROM THE

EXTRACTION OF VEGETABLE FATS OR OILS, OTHER THAN THOSE OF HEADING

2304 OR 2305

2306 OIL-CAKE AND OTHER SOLID RESIDUES, WHETHER OR NOT GROUND OR IN THE FORM OF PELLETS, RESULTING FROM THE EXTRACTION OF VEGETABLE FATS OR OILS , OTHER THAN THOSE OF HEADING 2304 OR 2305
230610 Of cotton seeds :
23061010 Oil-cake and oil-cake meal, decorticated expeller variety
23061020 Oil-cake and oil-cake meal, decorticated, solvent extracted (defatted) variety
23061030 Oil-cake and oil-cake meal, undecorticated, expeller variety
23061040 Oil-cake and oil-cake meal, undecorticated, solvent extracted (defatted) variety
23061090 Other
230620 Of linseed :
23062010 Oil-cake and oil-cake meal, expeller variety
23062020 Oil-cake and oil-cake meal, solvent extracted (defatted) variety
23062090 Other

Further applicant as per instructions during the course of proceedings had made submission with respect to each of his products such as Name of supplier, origin, process under taken by the supplier and catalogue.

On the basis of above, it is evident from the description of animal feeds that only those products that merit classification in the corresponding to HSN code as per details above are eligible for exemption from payment of GST vide entry 102 of the exemption notification. On perusal of chapter 28 & 29 of the Customs Tariff Act we find that goods covered therein are Organic and in organic chemicals and further we find that the products requested for classification in ARA are squarely covered by chapter 28 and 29 of the Customs Tariff Act as below:

However as regard product Mono calcium Phosphate (MCP) (feed grade Monod calcium phosphate 21 %) and Mono-Di Calcium Phosphate, applicant submit that it is added to feed as supplement for better shell formation and bone growth. Applicant further submit on the basis of certificates issued by various companies/ Authorities and the quality control department that MCP is used as animal feed and feed supplement and that it is not for medical use or human consumption. And thus covered by Sr. No. 105 of exemption notification of 2/2017.

We reproduce the relevant HSN Chapter Heading as below:-

105

2835

Dicalcium phosphate (DCP) of animal feed grade conforming to IS specification No.5470 : 2002 PHOSPHINATES (HYPOPHOSPHITES),PHOSPHONATES (PHOSPHITES) AND PHOSPHATES; POLYPHOSPHATE, WHETHER OR NOT CHEMICALLY DEFINED
2835 PHOSPHINATES (HYPOPHOSPHITES), PHOSPHONATES (PHOSPHITES) AND PHOSPHATES; POLYPHOSPHATES, WHETHER OR NOT CHEMICALLY DEFINED
283510 Phosphinates (hypophosphites) and Phosphonates (phosphites) :
28351010 Calcium hypophosphite
28351020 Magnesium hypophosphite
28351090 Other
Phosphates :
28352200 Of mono-or disodium
28352400 Of potassium
28352500 Calcium hydrogenorthophosphate (“dicalcium phosphate”)
283526 Other phosphates of calcium :
28352610 Calcium monobasic phosphate
28352620 Calcium tribasic phosphate
28352690 Other
283529 Other :
28352910 Magnesium phosphate, monobasic
28352920 Magnesium phosphate, dibasic
28352930 Magnesium phosphate, tribasic
28352940 Sodium hexametaphosphate
28352990 Other
Polyphosphates :
28353100 Sodium triphosphate (sodium tripoly-phosphate)
28353900 Other

From the above table we find that the description of goods against chapter Heading 2835 as mentioned at Sr. No. 105 of exemption notification 2/2017 Integrated Tax (Rate) dated 28/6/2017 covers only Di calcium Phosphate (DCP) of animal feed grade confirming to IS specification No. 5470:2002. As such applicant product Mono calcium phosphate is not covered by the scope of exemption notification No. 2/2017-Integrated Tax (Rate).

In view of above discussion and on perusal of chapter 28 and 29 of Customs Tariff Act we are of opinion that the products referred by the applicant in the application will not be covered under Entry- 102 but would be covered under chapters like 28 and 29. Those chapters are related to Organic and inorganic chemicals. Chapter 28 and 29 are not covered under exemption notification no 2/2017 date .28.6.2017 except the HSN Code of 2835. We find that product referred in the application would fall under Heading description in Customs Tariff as follows:

DL Methionine(29304000), Sodium Bicarbonate (28363000), Betaine  29239000), Tryptophan (29224990), Threonine (29225090), Lysine HCL (29224100), Sodium Sulphate (28331990), Lysine sulphate (29224100) and Monocalcium Phosphate (28352610). These products are covered under schedule Ill and they would be liable to taxes @18 % IGST. However the product Di Calcium phosphate (2835 2610) would fall under Sr. no. 105 of notification no 2/2017-Integrated Tax (Rate) dated 28/06/2017.

06.  In view of the extensive deliberations as held hereinabove, we pass an order as follows:

ORDER

(Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)

NO.GST-ARA- 25/2018-19/B-88

Mumbai, dt. 14/08/2018

For reasons as discussed in the body of the order, the questions are answered thus –

Question: – Classification of our products under GST regime

Answer :- The products referred under application are not covered under entry 102 of the notification 2/2017-lntegrated Tax (Rate) dated 28th June, 2017, except Di Calcium phosphate(28352610) of animal feed grade, which is covered under Entry No. 105 of Notification No. 02/2017-(lntegrated Tax) (Rate) The rest of products would fall under Schedule III and would be liable to tax @ 18 % IGST.

M/S. EVERGREEN PUBLICATION (INDIA) LTD.

Classification of supply – Lab Manual comprising bulk of instructional /educational printed material – whether printing is merely incidental to the primary use or not?

Whether ‘Lab manual’ written by authors as prescribed by Educational Boards and which also contains, apart from chapter wise printed material and printed question and answers, some blank sheets / papers for exercise by students, would be classified under GST Tariff heading 4901 as ‘Printed Books’ which carries Nil rate of tax or would it be classified under the GST tariff heading 4820 which attracts tax @ of 12% (CGST + SGST) under the description ‘ Laboratory Notebooks’?

Held that:- ‘Lab Manual’ is primarily a printed book in the major part with a smaller, yet not insignificant part dedicated to providing blank space to the students to do his/her written exercises.

It is seen that this issue has been discussed in CBEC Circulars no- 1052/01/2017-cx dated 23.02.2017 and No. 1057/06/2017-cx dated 07.07.2017. As per Circular dated 07.07.2017, in case of Printed workbooks, where printing is not merely incidental to the primary use of the goods, it has been held such goods classified under printed workbooks fall in chapter 49, in contrast to cases where printing is incidental to the primary use i.e writing in which cases the goods have been held classified under the chapter heading 4820.

In the present case, perusal of sample lab manual supplied by the applicant, clearly shows that printing is not merely incidental to the primary use, but actually forms a major part of the book and fulfills the primary objective of imparting knowledge to the student. Rather writing becomes the incidental part in the case on hand as the blank pages providing space to the students to write form a lesser part of the Lab manual and enables the students to write in the context of what they have learnt in the major printed instructional material of the book.

The Lab Manuals being published by the applicant are rightly classifiable under the GST Tariff heading 4901 as ‘printed books’ and would consequently carry Nil rate of tax which is presently applicable to the said heading.

Ruling:- The Lab Manual being published by the applicant which comprises of a bulk of instructional /educational printed material as per syllabus of educational board and which also contains some blank pages for the students to practice or write, would be classified under GST Tariff heading 4901 as printed books which currently carry a Nil rate of tax.

No.- AAR/GST/PB/004

Dated.- August 13, 2018

Citations:

  1. The Central Press Private Limited Versus Union of India & Another – 2016 (9) TMI 323 – DELHI HIGH COURT

NAVDEEP BHINDER AND G.S. BAINS, MEMBER

Present for the Applicant: Sh. Naresh Chawla, Advocate

(Note: An Appeal against this order lies with the Appellate Authority in terms of Section 99 and Section 100 of the CGST Act, 2017 and Section 99 and Section 100 of the PGST Act, 2017 within a period of thirty days from the date of communication of this order.)

M/s. Evergreen Publication (India) Ltd, ND-200, Tanda Road, Jalandhar-144008, District Jalandhar (Punjab) hereinafter referred to as ‘applicant’ had submitted an application for advance ruling in form GST ARA-01 vide his letter dated 03.03.2018 received on 06.03.2018 seeking to know whether the Lab manuals generally for class 6th to 12th printed by printing/publishing industry as prescribed by education boards & written by author(s), is a tax free product falling under heading 4901 attracting nil duty. In this regard, comments from the concerned officer i.e. Assistant Commissioner of State Taxes, Jalandhar-2 have been sought. The concerned officer vide his letter dated 17- 05-2018 stated that the products supplied by the Tax Applicant are to be covered under chapter 4901 and not under 4820 in light of Circular No. 1052/01/2017-CX dated 23-02- 2017 and Circular No. 1057/06/2017-CX. A personal hearing of the applicant in this regard was held on 16.07.2018 before the Advance Ruling Authority, Punjab on which date Sh. Naresh Chawla, Advocate appeared on behalf of the applicant. The questions raised by the applicant have been discussed at length. The counsel for the dealer had submitted a detailed written submission, which is reproduced as under.

Written submissions & synopsis by the Applicant in respect of application for Advance Ruling

1. The applicant industry is manufacturing the Lab Manuals called “Books” printed/published in accordance with the specified syllabus issued by CBSE for class VI to class XII which is written by the authors as per prescription by Educational Boards. It comprises of the entire syllabus of the practical subject described and consists of the comprehensive study material covering syllabus, questions/answers part & some leafs for the use of the students. The printed material is in book form which is covered under chapter 4901 attracting nil duty at entry no. 119 of Schedule of Exempted goods in accordance with ntfn no. 12/2017.

2. Whereas ‘exercise books’/’writing books’ simply contain sheets of lined paper, commonly known as ‘note books’ for practising and are used by students for taking down notes or for practising written contents and/or solving problems. Thus ‘exercise books’ generally do not contain any instructions and are merely compilation of plain papers with lines printed on them. The printing of lines on the plain paper is merely for enabling the students to write in a straight manner. Merely printing of lines and binding these ruled sheets does no per-se qualify these ‘note books’ or ‘exercise books’ as ‘printed books’ whereas the Lab Manuals have been written by experienced authors, teachers and experts with the following objectives.

  • The Lab Manual is in book form & covers the entire syllabus of the subject to be exercised by the student.
  • The Lab manual printed by printing industry through an author as prescribed by Education Board consists of majority of printed material for education (Chapter-wise for student) & only few blank papers for exercise purpose are left.
  • These books are written by an author as per syllabus issued and as prescribed by the board(s) are only printed by the printing/publishing industry.
  • The printed material also comprises of the questions/answer part & the blank sheet is only meant for the exercise of the students.

3. The Lab Manual is designed in such form that it covers the text & the some vacant spaces for exercise. It is pertinent to mention here that the printed material in the form of text, question/answer is of the primary use whereas the vacant space of exercise is only incidental to the primary use of the book. The main object of the printed material is to provide the text of book as per syllabus to the student including the question/answer and this object is primary whereas the vacant sheet attached is only incidental for the formation of the books, Lab Manual is prescribed by CBSE for the student of class VI to class XII.

4. Vide Circular no. 1052/01/2017-CX issued on 23.02.2017 for the classification of articles for printing industry it has been categorically held that:

“The note book containing some text, question/answer & spaces for exercise has been classified under the heading 4901”

As per rule 4 of general rule for interpretation of the schedule, goods must be classified under the heading appropriate to the goods to which they are most akin.

5. Circular no. 1057/06/2017-CX dt, 07.07.2017 has classified the printed work books, exercise book as follow:-

2. The issue has been examined. Exercise Books have been explained in HSN under explanatory note (2) to Heading 48.20 as, “These may simply contain sheets of lined paper but may also include printed examples of handwriting for copying in manuscript”. Such exercise Books are specifically classified under heading 4820 of the erstwhile CETA, 1985. These are nothing but stationary items having blank pages with lines for writing and may also include printed texts for copying manually In common parlance they are more akin to handwriting “note books” for practicing rather than “work books” containing printed exercises. This definition of Exercise Books is in harmony with other items specified under Chapter Heading 4820 of erstwhile CETA, 1985 such as registers, note books, diaries, letter pads etc. where printing is incidental to their primary use i.e. writing. The fact that printing is incidental to their primary use is the guiding principle for classification of Exercise Books under heading 4820 of erstwhile CETA, 1985.

3. Printed work books on the Other hand are books where printing is not merely incidental to the primary use. HSN Explanatory notes (A) to the heading 49.01 reads as, “Books and booklets consisting essentially of textual matter of any kind, and printed in any language or characters…include…textbooks (including educational workbooks sometimes called writing books), with or without narrative texts, which contains questions or exercises (usually with spaces for completion in manuscript). …” Thus, printed work books containing questions followed by spaces for writing or other exercises would fall within the scope of Chapter 49. Further, since printing in case of printed workbooks is not merely incidental to the primary use of the goods, such goods are classifiable under Chapter 49, in terms of chapter note 12 to chapter 48 of erstwhile CETA, 1985.

6. Discussion on the ‘Printed book’ under Heading 4901 reads as under:

4901- Printed books, brochures, leaflets and similar printed matter, whether or not insingle sheets.

(A) Books and Booklets consisting essentially of textual matter of any kind, and printed in any language or characters, including Braille or shorthand. They include literary works of all kinds, text-books (including educational workbooks sometimes called writing books), with or without narrative texts, which contain questions or exercises (usually with spaces for completion in manuscript); technical publications; books for reference such as dictionaries, or without printed instructions, for completion by drawing or colouring; sometimes cultured illustrations for guidance are incorporated. They also include similar books with “invisible” outlines or colour which can be made visible by rubbing with a pencil or applying water with a paint brush, and also books in which the small amounts of water colour required for colouring are contained in the books (e.g., in the form of a palette).

The issue of classification of text books and printed work text books was subject matter of CWP No. 7198 of 2016 2016 (9) TMI 323 – DELHI HIGH COURT before the Hon’ble High Court of Delhi. It was claimed by the petitioner that the said goods are appropriately classifiable in Chapter 49 of the Central Excise Tariff Act, whereas the department was considering classification as exercise books in Chapter 48 (4820) of Central Excise Tariff Act. The Hon’ble High Court of Delhi vide order dated 31.08.2016 = 2016 (9) TMI 323 – DELHI HIGH COURT had directed CBEC to examine the matter and pass appropriate order. Accordingly, CBEC has clarified the issue vide Circular No. 1057/6/2017 – CX dated 07.07.2017.

The goods covered under the relevant headings have been distinguished by Circular No. 1057/6/2017 – CX dated 07.07.2017. The guiding principle for classification has also been laid down.

From the above, it is observed that the relevant headings 49.01 cover generally the following goods:

Heading 49.01: This heading generally covers textual reading material/books including text- books, catalogues, prayer books etc. The heading 49.01 specifically covers educational workbooks or writing books.

In the case of certain goods of heading 49.01 e.g. workbooks, there may be space for writing in addition to the printed text but printing is of primary use and space for writing is incidental. On the contrary, in case of certain goods of heading 48.20 e.g. diaries, exercise books, there may be considerable amount of printed matter but the printing is incidental to their primary use of writing by hand.

It is observed that the main feature which differentiates ‘Work Books’ of heading 4901 from the ‘Exercise Books’ of heading 4820 is that whereas the Work books’ of heading 4901 contain questions or exercise with space for writing the answers whereas, the ‘Exercise Books’ of heading 4820 contain printed texts with space for copying manually.

Discussion and Findings :

1. We have carefully gone through the facts of the case and the relevant legal and administrative instructions applicable in the present case. After going through the material supplied by the applicant , it is seen that the question which has been raised by the applicant can be framed as – whether ‘Lab manual’ written by authors as prescribed by Educational Boards and which also contains, apart from chapter wise printed material and printed question and answers, some blank sheets / papers for exercise by students, would be classified under GST Tariff heading 4901 as ‘Printed Books’ which carries Nil rate of tax or would it be classified under the GST tariff heading 4820 which attracts tax @ of 12% (CGST + SGST) under the description ‘ Laboratory Notebooks’.

2. The impugned ‘Lab Manual’, a sample of which was submitted by the applicant during personal hearing , is observed to be an educational book by two authors duly edited and published ( by the applicant) which has 203 pages of printed material of instructional nature in the beginning followed by about 158 blank pages for students to exercise and write. Therefore, it has been observed that the ‘Lab Manual’ is primarily a printed book in the major part with a smaller, yet not insignificant part dedicated to providing blank space to the students to do his/her written exercises.

3. It is seen that this issue has been discussed in CBEC Circulars no- 1052/01/2017-cx dated 23.02.2017 and No. 1057/06/2017-cx dated 07.07.2017. As per Circular dated 07.07.2017, in case of Printed workbooks, where printing is not merely incidental to the primary use of the goods, it has been held such goods classified under printed workbooks fall in chapter 49, in contrast to cases where printing is incidental to the primary use i.e writing in which cases the goods have been held classified under the chapter heading 4820, In the present case, perusal of sample lab manual supplied by the applicant, who has been described above, clearly shows that printing is not merely incidental to the primary use, but actually forms a major part of the book and fulfills the primary objective of imparting knowledge to the student. Rather writing becomes the incidental part in the case on hand as the blank pages providing space to the students to write form a lesser part of the Lab manual and enables the students to write in the context of what they have learnt in the major printed instructional material of the book. Hence it becomes clear after balancing the facts of the present case with the instructions related to classification given in the said Circular dated 07.07.2017, that the Lab Manuals being published by the applicant are rightly classifiable under the GST Tariff heading 4901 as ‘printed books’ and would consequently carry Nil rate of tax which is presently applicable to the said heading.

4. It is further seen that a similar clarification relating to classification of practical notebooks had also been issued earlier vide Circular no 1052/01/2017-CX dated 23.02.2017 wherein it had been categorically mentioned that notebooks containing some texts, questions and spaces for exercises would be classified under heading 4901. In the present case the Lab Manuals not only contain ‘some texts’ but a rather large part of these Manuals consists of instructional / educational text which would clearly make these Lab Manuals eligible for classification under tariff heading 4901.

5. It may be noteworthy that though the Circulars mentioned above are in the context of classification under the erstwhile Central Excise Tariff Act, 1985, the ratio of these Circulars would be equally applicable to classification under the GST Tariff as chapter 48 and 49 are based on the same lines in both these Tariffs.

6. In view of the above discussions and findings, we reach the conclusion that the Lab Manual being published by the applicant which comprises bulk of instructional /educational printed material as per syllabus of Educational Board and which also contains some blank pages for the students to practice or write, would be classified under GST Tariff heading 4901 as printed books which currently carry a Nil rate of tax.

7. Accordingly we pronounce the following Advance Ruling under section 98(4) of the CGST Act, 2017 and section 98(4) of the Punjab GST Act, 2017 to the question raised by the applicant:

The Lab Manual being published by the applicant which comprises of a bulk of instructional /educational printed material as per syllabus of educational board and which also contains some blank pages for the students to practice or write, would be classified under GST Tariff heading 4901 as printed books which currently carry a Nil rate of tax.