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2018 (7) TMI 1493

4 (rapeseed oil based dielectric transformer fluid) and MIDEL eN 1275 (soya oil based dielectric transformer fluid) in terms of Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017? - Held that:- The products are not vegetable fats and vegetable oils per se - The products do not remain mere vegetable fat or mere vegetable oil. The impugned products are a distinct product which is known in the market as a dielectric transformer fluid - The products also contain additives, the information about which has also not been shared with this Authority. But the manufacturing process of these ingredients and the addition of additives leads to a distinct product being formed. - There are no doubts that entry 88 and 90 of Schedule I of the Notification No. 1/2017-Central / State Tax (Rate) would not cover the impugned products - The impugned products are not covered by any entry of the Schedule in the Notification No. 2/2017- Central / State Tax (Rate) for goods exempted from GST. It is only the question of entry 90 or any other entry of the Notification No. 1/2017- Central / State Tax (Rate) which would cover the impugned products. - Ruling:- The product would fall in sch .....

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t activity with a focus on assisting in the development of the Midel Dielectric Fluids business in India 2.4 Provide local first line support for any technical queries. 3. The details of the products for which the Advance Ruling is being sought is as follows: 3.1 MIDEL eN 1204 3.1.1 It is a vegetable oil based dielectric transformer fluid It is a chemically modified rapeseed oil based natural ester 3.1.2 It is used as electric insulator in transformers Its function is to provide electrical insulation, suppress corona and arcing, and to serve as a coolant. 3.1.3 We have classified MIDEL eN 1204 as per the Harmonized System of Nomenclature (HSN) code under the First Schedule of the Customs Tariff Act, 1975 (hereinafter referred to as "the Customs Tariff') under the entry 15180039 The relevant extract of the entry is reproduced hereunder for ease of reference: "1518.00 animal or vegetable fats and oils and their fractions , boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 1516 ; inedible mixtures or preparations of animal or vegetable fats or oils or of fractions o .....

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the appropriate classification for both of our above mentioned products Statement containing the applicant's interpretation of law and/or facts, as the case may be, in respect of the aforesaid question(s) (i.e. applicant's view point and submissions on issues on which the advance ruling is sought) We submit that both our products viz. MIDEL eN 1204 and MIDEL eN 1215, are chemically modified vegetable oil based transformer fluids which should be classified under Entry at S. No. 90 of Schedule - 1 [applicable rate of Central Goods and Services Tax (CGST) - 2,5%]. To support our view, we would like to put forth our contentions, without prejudice to each other, as follows: 1. Specific entry should prevail over general entry 1.1 Chemically modified vegetable oils are more specifically covered under Entry at S No 90 of Schedule - I of the Notification. Hence, both our products viz, MIDEL eN 1204 and MIDEL eN 1215 should be classified under the said entry. 1.2 Further, explanations (iii) and (iv) to Notification No 1/2017-Central Tax (Rate) dated 28 June 2017, as amended from time to time, state as under "iii "Tariff item ", "sub-heading" "heading &q .....

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ion applies to the goods in question. " 1.6 Further, the Hon'ble Supreme Court of India in the case of Superintendent of Central Excise and Others versus Vac Met Corpn. Ltd. [1985 (22) E.L.T 330 (S.C.)] (attached as Annexure 2) held that, ".... Where an article falls within a specific entry like Entry 15A(2) which covers plastic articles of all sorts, in different shapes or even of strips, whether laminated or not, they must necessarily be excluded from the general Entry 18 which relates to rayon and synthetic fibres and yarn i.e. manmade fibres." 1.7 Given the above, we submit that a combined reading of relevant entries along with the general rules of interpretation [supra] and the decisions of the Apex Court on the matter, it is evidently clear that both our products should fall under Schedule I - 2.5% as it provides a more specific description applicable to both our products 2. Intention of the legislature 2 .1 It is pertinent to note that whereas under the Customs law, animal or vegetable fats and oils are part of the same entry i.e. 1518.00 (supra), under the GST regime a conscious decision has been made by the GST Council to split the said entry between veg .....

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electricity generation, transmission and distribution. 4.2 Under the erstwhile MVAT regime, Sec 8 (5) of the MVAT Act empowered the State Government for partial or full exemption from Value Added Tax (VAT) on sales made by a registered dealer, inter cilia, to entities involved in generation, transmission and distribution of electricity. 4.3 In view of the above, the State government vide Notification No VAT-1507/CR/-93/Taxation - I dated 21 January 2008, had provided for a beneficial VAT rate of 5% on sale of goods by the Company to the said suppliers. 4.4 Given the above, it can be seen that the intention of the law makers has always been to provide for a lower rate of tax on the goods supplied to entities involved in the essential sector of electricity generation, transmission and distribution. 4.5 Accordingly, we submit that, both our products should fall within the ambit of entry at S. No 90 of Schedule I - 2.5%. Prayer 1. In light of the above, we pray that both our products viz. MIDEL eN 1204 and MIDEL eN 1215 be classified under Entry at S. No. 90 of Schedule - I i.e. at the applicable rate of CGST of 2.5%. 2. We crave leave to add, to alter, amend and/or modify all or any o .....

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cture we would like to reproduce the relevant extract from the minutes of the 3rd and the 4th GST Council meetings held on 18-19 October 2016 and 3-4 November 2016 respectively, wherein the principles for fixation of GST rates were debated upon: - 3rd GST Council meeting "37. The principles on the basis of which the proposed GST rate structure was worked out was elucidated and these included: (i) proposed rate slabs should be closest to the present combined tax incidence of 'Excise and VAT (including cascading): (ii) protecting existing revenues of Centre and States: (iii) impact on inflation i.e.. on items in the Consumer price Index (CPI) basket is minimal, (iv) proposed GST rate structure should not be regressive in nature: (v) items of mass consumption should not be taxed at higher rate; (vi) revenue for compensation should be raised through cess. On this basis, the following four slabs of GST rates were proposed- i. 6% (to cover those goods presently attracting combined tax rate of Central Excise and VAT between 3% and less than 9%): ii. 12% (to cover those goods presently attracting combined tax rate of Central Excise and VAT between 9% and less than 15%)'. iii. .....

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ed to beneficial rate of tax under the erstwhile indirect tax regime, should be classified under Entry at S. No. 90 of Schedule -I of the Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017, as amended from time to time, i.e chargeable to GST at the rate of 5%. 2. Non-classification as 'mixtures' 2.1 The quantity of additives in our products viz. MIDEL eN 1204 and MIDEL eN 1215 is minimal i.e. 0.3% of the total weight of the product. Therefore, the said products cannot be considered as 'mixtures' covered under Entry at S. No. 27 of Schedule II - 6%. 2.2 In order to corroborate our explanation, a copy of test report by 'Electrical Research and Development Association' of our product MIDEL eN 1215 is attached herewith as "Annexure 6". 3. Further, as required, a flow chart exhibiting the transaction flow of the products has been attached herewith as "Annexure 7" We request your good self to take the above on record and oblige." 03. CONTENTION - AS PER THE CONCERNED OFFICER The submissions, as reproduced verbatim, could be seen thus - 1) "The dealer is importing products "MIDEL eN 1204 & Ml DEL eN 1215" from .....

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s tendered a written submission in the matter and stated that the product merits tax @ 12% under Schedule II and not under Schedule I as claimed by the applicant. 05. OBSERVATIONS We have gone through the facts of the case. We have been called upon to decide the classification of the products MIDEL eN 1204 (rapeseed oil based dielectric transformer fluid) and MIDEL eN 1215 (soya oil based dielectric transformer fluid). Before we ascertain the applicability of the schedule entries, at the cost of repetition, let us have a look at the information about the products as provided by the applicant- MIDL eN1204 It is a vegetable oil based dielectric transformer fluid. it is chemically modified rapeseed oil based natural ester. It is used as electric insulator in transformers. Its function is to provide electrical insulation, suppress corona and arcing, and to serve as a coolant. The applicable Indian Standards (IS) of the Bureau of Indian Standards (BIS) under the Bureau of Indian Standards Act, 1986 is IS 16659:2017. MIDEL eN 1215 It is a vegetable oil based dielectric transformer fluid. It is a chemically modified soya based natural ester. It is used as electric insulator in transformer .....

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nd this document has been compiled for information purposes, in accordance regulation 1907/EC/2006, Annex II, as amended by Regulation (EU) No. 453/2010 and OSHA hazard communication guidelines. 2.1 Classification of the substance or mixture Regulation (EC) No 1272/2008 (CLP): Not classified. 2.2 Label elements Regulation (EC) No 1272/2008 (CLP): No symbol or signal word. 2.3 Other hazards None. 3. Composition/Information on Ingredients 3 Substance CAS No.: 68956-68-3 Description: Blend of natural triglyceride esters (vegetable oil) Composition: Constituent CAS Number Contents Blend of natural triglyceride esters 68956-68-3 >98.5% Performance enhancing additives Proprietary<1.5% All constituents are listed on the TSCA inventory. Additives used in this product are a trade secret, but do not lead to classification of the substance as hazardous. 3 Substance CAS No.: 68956-68-3 Description: Blend of natural triglyceride esters (vegetable oil) Composition: Constituent CAS Number Contents Blend of natural triglyceride esters 68956-68-3 >98.5% Performance enhancing additives Proprietary<1.5% All constituents are listed on the TSCA inventory. Additives used in this product are .....

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ion: Wash hands after use. For prolonged or repeated skin contact gloves are recommended. Eye protection: If splashes are likely to occur wear safety glasses. 11. Toxicological Information 11.1 Information on toxicological effects Likely routes of exposure: Skin and eyes are the most likely routes for exposure Accidental ingestion may occur. Inhalation is not expected to be a relevant route of exposure. Product is vegetable oil based and as such non-toxic. Acute oral toxicity: Considered to be low toxicity, vegetable oil. Acute dermal toxicity: Considered to be low toxicity. Acute inhalation toxicity: Low volatility makes inhalation unlikely. Skin corrosion/irritation: Considered to be not irritating Eye corrosion/irritation Considered to be not irritating. Respiratory or skin sensitisation: Considered to be not sensitising Aspiration hazard: Not considered an aspiration hazard Carcinogenicity/mutagenicity: Not considered a mutagenic hazard or carcinogen. This product is not considered to be a carcinogen by IARC, ACGIH, NTP or OSHA. 11.1 Information on toxicological effects Likely routes of exposure: Skin and eyes are the most likely routes for exposure Accidental ingestion may occ .....

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.5%, we would like to submit that, entry at S. No. 88 of Schedule I - 2.5% also provides an appropriate description of our products, and that in no case the said products can be classified under the general entry at S. No. 27 of Schedule II - 6%. We shall look at each of the above entries as found in the Notification No. 1/2017-Central / State Tax (Rate) [as amended from time to time] thus - S. No. Chapter / Heading/ Subheading / Tariff item Description of Goods Rate [CGST + MGST] 88 1516 Vegetable fats and oils and their fractions, partly or wholly hydrogenated, inter-esterified, re-esterified or elaidinised, whether or not refined, but not further prepared. 5% [2.5 +2.5] 90 1518 Vegetable fats and oils and their fractions, boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 1516 5% [2.5 + 2.5] 27 1518 Animal fats and animal oils and their fractions, boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 1516; inedible mixtures or preparations of animal or vegetable fats or oil .....

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otherwise chemically modified, excluding those of heading 1516; inedible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this Chapter, not elsewhere specified or included : - Lin seed oil: 1518 00 11 - Edible grade 151800 19 - Other - Castor oil, dehydrated: 1518 0021 - Edible grade 1518 00 29 - Other - Other Vegetable oil and its fats: 1518 00 31 - Edible grade 1518 00 39 - Other 151800 40 - Other From the Tariff Heading 1518 as reproduced above, we see that - a. There are 2 parts to Tariff Heading 1518 thus - • Part 1 - Animal or vegetable fats and oils and their fractions, boiled, oxidized, dehydrated, sulphurised, blown, polymerized by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 1516; • Part 2 - Inedible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this Chapter, not elsewhere specified or included: B. Of the Tariff Heading 1518, schedule entry 90 covers portion relating to vegetable fats and oils and their fractions AND schedule entry 27 covers portion relating to animal fats and oils and their fractions .....

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s a fluid same as an oil? A fluid is different from even a liquid, let alone oil. The products are not being sold as a modified vegetable oil but as products which result from the adaptation of the natural triglyceride esters to obtain a dielectric transformer fluid. In view thereof, we are convinced that the impugned products would not be covered by the part 1 (as reproduced above) of Hearting 1518. The same reasoning would apply to non-applicability of entry 88 of Schedule I. f. We now come to part 2 (as reproduced above) of Heading 1518. This part covers inedible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of the Chapter 15. The present products, as discussed above, are a preparation from natural triglyceride esters. They are based or derived from "rapeseed oil based" or "soya based". In addition, the products are inedible. And even though the applicant disputes about the products being a 'mixture', there being a combination of ingredients and additives, the impugned products could be classified as an 'inedible preparation'. Therefore, they could very well be covered by the description .....

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