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2024 (3) TMI 671 - AUTHORITY FOR ADVANCE RULING, TAMILNADUNature of activity - replacing the old scrap received from the customers with the already processed Winding wire, then and there, at a fixed differential price - sale of goods or service? - composite supply or not - rate of tax - HSN code / SAC code - If RCM is applicable on the purchase old Copper Scraps from the Motor Mechanics, then what is the Tax rate? - If RCM is applicable, can they take Input Tax Credit on the RCM paid? - Tax Structure and the related procedures and documents to be followed for the movement of goods from Hub to Factory to Hub. HELD THAT:- The instant transaction of the applicant involving replacement of copper scrap, with the enameled copper winding wire cannot be considered as a supply of ‘service’, whatsoever, and that the same amounts to supply of goods. That is to say, the supply of enameled copper wire by the applicant to the customer is to be considered as an outward supply of goods by the applicant, and that the receipt of copper scrap from the customers is to be considered as an inward supply of goods to the applicant. Overall, it is clear that both the legs of this transaction (inward and outward) are independent of each other, and we hold that both relates to supply of ‘goods’. Having held that the supply of enameled copper wire by the applicant to the customer is an outward supply of goods by the applicant, the HSN code relating to the same is now required to be determined. From the submissions made by the applicant, it is observed that it is not just the winding wire of copper which is being supplied to the customers, but enameled copper winding wire. While plain copper wire of different specifications merit classification under 7408, we observe that an enameled winding wire of copper serves a specific purpose of insulation, as the enamel coating forms an electrical insulation film in order to provide thermal and chemical resistant properties. Therefore, enameled winding wire of copper which operates as an insulated electric conductor merits classification under chapter sub-heading 8544 11 10 of the GST Tariff which attracts IGST at 18%, or CGST at 9% plus SGST at 9%, as the rate of tax. Composite supply or not - HELD THAT:- Composite supply, as the name denotes, involves two or more taxable supplies which are naturally bundled and supplied in conjunction with each other - the supply of the fully finished manufactured product, viz., enameled copper winding wire to the customers is the one and only outward supply of goods made by the applicant. It can also be seen that the illustration attached to the definition of ‘composite supply’ explains the case in point. Therefore, as only one outward supply of goods is made by the applicant in the instant case, it does not get covered under the category of ‘composite supply’. Liability under reverse charge mechanism (RCM) applicable on the purchase old Copper Scraps from the motor mechanics (customers), the tax rate to be adopted and whether input tax credit (ITC) can be availed on the same by the applicant - HELD THAT:- RCM provisions on purchases from unregistered persons was applicable only on the class of registered persons to be notified in future, and hence the temporary blanket exemption from RCM provisions on such purchases was made permanent through the said amendment. It is observed that only one notification since then have been notified to specify Promoters and Builders, as the category of registered persons liable to pay taxes under RCM under this section, vide Notification No. 07/2019-Central Tax (Rate) dated 29.03.2019. As on date, except ‘Promoters’, no other registered person is liable to pay taxes under RCM in respect of the receipt of goods or services from an unregistered supplier, and therefore, the applicant is not liable to pay taxes under RCM on the purchase of copper scraps from Motor mechanics. Once the issue relating to discharge of liability under RCM by the applicant stands settled, i.e., answered in negative, the other related queries as to the tax rate to be adopted for such RCM payments, and whether ITC can be availed on the taxes under RCM paid by the applicant are rendered redundant and does not merit consideration.
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