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TMI Blog2018 (7) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, admitted. 2. The Applicant states that :- a) As Manufacturer the intention is to supply "Rakhi", including but not limited to, Decorative "Rakhi", Designer "Rakhi", & Fancy "Rakhi" (hereinafter referred to, collectively, as "Rakhi") and these "Rakhi"s consist of, inter alia, Cotton thread, Zari thread, Silk Thread, Nylon Thread, Glass Beads, Plastic Beads, Coloured Stones, Metal Pendants and Rudraksha; b) The "Rakhi"s shall be manufactured in-house as well on job-work basis. Most of the people employed in the "Rakhi" industry belong to economically weaker sections and inter alia include housewives and widows who manufacture "Rakhi's to earn a livelihood. Traditionally "Rakhi" has been considered a handicraft item and the manufacture or making of ""Rakhi"" invariably involves skilful pasting or attaching decorative items to threads; c) "Rakhi" is an ancient festival; d) Traditionally "Rakhi" used to be made up only of Kalava (i.e. cotton threads of red/orange colour); e) "Rakhi" was exempt from payment of VAT under several States, as well as from Central Excise duty under the earlier Tax Structure since it was considered as "handicraft"; f) The Exemption Notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation that M/s M D Mohta Rakhi Pvt Ltd with an annual turnover of 10-25 crores is the controlling Partner of M/s M D Mohta. On being specifically asked the Applicant has stated that till F/Y 2017-18 M/s M D Mohta was in the business of trading and the Turnover for the F/Y 2017-18 was less than Rs. 150 lakhs. The Applicant also informed that their majority partner, M/s M D Mohta Pvt Ltd clears "Rakhi" under Tariff Heading 6307. 5. The Applicant has stated that traditionally "Rakhi" has been considered as a handicraft item and invariably involves skilfully pasting or attaching decorative items to threads and that "Rakhi" was exempt from payment of VAT under several States, as well as from Central Excise duty under the earlier Tax Structure since it was considered as "handicraft". The Applicant, here, refers to "Rakhi" being traditionally referred to as "handicraft". Applicability of Notifications and Taxability of supplies are to be considered in the context of GST. Any reference to Notifications and Taxability of the earlier Tax regimes are to be considered only insofar as they have relevance in the GST regime. Notification No 32/2017-Central Tax dated 15.09.2017, later amended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engths of identical material joined end to end and piece goods composed of two or more textiles assembled in layers, whether or not padded); or (f) Knitted or crocheted to shape, whether presented as separate items or in the form of a number of items in the length. Clearly, "Rakhi" cannot be described as a "made up article" under Chapter 63 as per the above Section Note 7. The Applicant has referred to Rule 3(b) of the Interpretation Rules. Rule 3(b) of the Interpretation Rules states that "Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable". "Rakhi" is an independently identifiable item. It is neither a mixture, nor a composite goods nor goods put up in sets for retail sale.. Rule 3(b) is not applicable in this case. Unlike a chemical formula where the ingredients and their ratio are fixed and/or pre-determined "Rakhi" can be made up of innumerable materials in as many permutations and com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ", or the ritual of "Rakhi" be linked to religious ceremonies or rituals involving deities. References have been found to Sri Radha tying "Rakhi" on Shri Krishna. But here again, the reference is to the symbolic gesture of the need of protection. "Rakhi", in other words, is not an essential part of any Puja or Religious Ceremony to pay obeisance to any deity. Mere inclusion of "Rakhi" in a Puja Thali at the discretion of either the Customer or the Supplier does not make it an integral and essential part of Puja Samagri. Serial number 148 of the Exemption Notification lists the items to be considered as Puja Samagri and "Rakhi" is not listed therein. "Rakhi", therefore, cannot attract NIL rate of duty under Serial No 9(1) of FAQ dated 03.08.2017 (later, Serial No 92(1) of F. No 332/2/2017-TRU issued by the Tax Research Unit, Govt of India, Ministry of Finance, Department of Revenue) (hereinafter referred to as the "TRU Clarification"). Nor can it be considered exempt in terms of Serial no. 148 of the Exemption Notification. 9. Serial No 92(2) of the TRU Clarification states that "Rakhi" in form of Kalava will attract NIL GST. Kalava is the sacred Hindu thread also called mauli or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein. Moreover, the main focus of the GST Act is to tap in all the points of supply and the characteristic which defines an item at the point of supply is of paramount importance. In the case of "Rakhi", the item is supplied by the Applicant, as Decorative/Designer/Fancy/Kids "Rakhi" and customers are being motivated to buy the "Rakhi"s due to the specific characteristic which makes the "Rakhi" Decorative/Designer/Fancy/Kid's and not merely to put round the wrist. 12. The various components which go into the making of "Rakhi" are innumerable of no fixed or predetermined ratio and both, the variety and the proportion in which they are used do not follow any fixed formula but are at the Manufacturer's will. The resultant products are identifiable as new items, independent in manner and form of its constituent materials, and cannot be stated to be a mere assemblage of its constituent materials. In other words, "Rakhi" retains its specific identity as a symbol of a bond involving the potential care of the sister by the brother, and not merely a conglomeration of discrete materials, is clearly not classifiable under a single Tariff code. Moreover, under the GST Act the identity of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 975, the Tariff code of the "Rakhi" will be related to the item who's Tariff occurs last in the numerical order of all the constituent materials. For example, with reference to the pictures of the "Rakhi"s intended to be manufactured as provided by the Applicant, Fancy "Rakhi" of item number: RR-L 788 (OR1318) the declared constituent materials are glass beads, stone, cotton thread and plastic beads which fall under Chapter 70, Chapter 70/71 (depending on the nature of the stone), Chapter 52, Chapter 39, respectively. Assuming that there are no other constituent materials undeclared in the literature submitted by them, under Rule 3(c), this "Rakhi" will be classifiable under Chapter 70/71 and will attract GST accordingly. Again, in item number RR-757, the declared constituent materials are metal pendant, stone ring, metal moti, cotton thread and plastic beads falling under Chapter 71 to 81 (depending on the metal), Chapter 70/71 (depending on the nature of the stone), Chapter 52, Chapter 39. Assuming that there are no other constituent materials undeclared in the literature submitted by them, under Rule 3(c) this "Rakhi" will be classifiable under Chapter 71 to 81 (depending on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of material or component that gives the product its essential character. As has been discussed in the earlier paragraphs the essential character of "Rakhi" though traditionally may be for putting round the wrist, descriptions like Decorative/Designer/Fancy/Kids' clearly state that the embellishments used will play an important role in determining the characteristics of the "Rakhi". Hence, this judgement is not squarely applicable. The judgment in the case of Karamchand Appliances Pvt Ltd vs Commr of C Ex, Chandigarh [2012 (284) ELT 692 (Tri-Del)] is not relevant because "Rakhi" is not a combination pack but an independently identifiable product. In the case of Collector of Central Excise vs Fusebase Eltoto Ltd [1993 (67) ELT 30 (SC)] it was held that in the absence of statutory definition of an article its classification is to be based on understanding in common parlance. This is squarely applicable with the case of "Rakhi". 16. As is evident from the above discussion and considerations, "Rakhi" is an independently identifiable product which may be made up of innumerable materials of no fixed or predetermined ratio, and yet retain its specific identity as a symbol of a bond inv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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