CLASSIFICATION & RATE OF GST ON PEN PARTS

[Dr. Sanjiv Agarwal]

Appellate Advance Ruling Authority (AAAR) has recently held that pen nibs and nib points as per HSN Entry 9608 91 are very different from ball point tips and balls. Primarily ‘Tips and balls’ are parts of refill, and since there is no specific Sub-heading allotted to these parts, these should be classified under residuary Sub-heading as ‘Others’ in 9608 99, attracting tax 18%. [IN RE: M/S. SHIVA WRITING COMPANY PVT. LTD. 2019 (7) TMI 1136 - APPELLATE AUTHORITY FOR ADVANCE RULING, WEST BENGAL ].

In the instant case, the appellant filed on appeal before AAAR, West Bengal against ruling dated 15.03.2019 of AAR, West Bengal [  IN RE : SHIVA WRITING COMPANY PVT. LTD. 2019 (3) TMI 705 - AUTHORITY FOR ADVANCE RULING - WEST BENGAL ].

The applicant was engaged in the business of manufacturing and supplying of ball point pens, for which pen tips and balls to be used inside the tips are required in order to make the same tips working, and also trades and supplies ball point pen tips and refills to various dealers.

The applicant sought ruling on the following questions:

1. Whether tips and ball, both being pen parts under HSN Chapter Head 9608, used in manufacturing process of ball point pens, are taxable at the rate of 12%?
2. If the tips and balls used in the manufacturing of ball point pens are not taxable at the rate of 12% under HSN 9608, then at what rate shall they be taxable and under which HSN?

The Authority for Advance Ruling ruled that ‘tips and balls’ of ball point pens are to be classified under GST Tariff Heading 9608 99 90 and included under Sl. No. 453 of Schedule III of Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017 (corresponding State Notification No. 1125-FT, dated 28-6-2017).

Being aggrieved, an appeal was preferred on the grounds that :

1. AAR has erred in its judgment and classified tips and balls at a higher rate of tax. It has arbitrarily stated that pen tips and balls were to be classified under HSN 9608 99 90 and taxable at the rate of 18%
2. The Appellant is only in the business of manufacturing ball point pens and does not manufacture fountain pens and other pens which are taxable at the rate of 18%. Ball point pens are taxable at the rate of 12%.
3. It is no longer res integra that if a particular entry or a provision has two interpretations, the interpretation which is beneficial to the assessee shall be taken into consideration. Based on this very judicial precedent, the rate of tax of pen tips and balls should be taxable at the rate of 12%.

AAAR observed that pen nibs and nib points as per HSN Entry 9608 91 are very different from ball point tips and balls as used by the Appellant. Primarily ‘Tips and balls’ are parts of refill, and since there is no specific Sub-heading allotted to these parts, these should be classified under residuary Sub-heading as ‘Others’ in 9608 99, attracting tax 18%. It is clear from the Notification No. 1/2017 that the tips and balls dealt with by the Appellant fall under Entry No. 453 of Schedule III.

It was therefore, held that AAR had pronounced a speaking order and the classification and rate as determined by the AAR was affirmed. The Appeal was dismissed.