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2018 (7) TMI 1493

Classification of goods - rate of GST - MIDEL eN 1204 - MIDEL eN 1275 - What is the correct Harmonized System of Nomenclature (HSN) code and the applicable GST rate for our products MIDEL eN 1204 (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 v .....

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g 1518 and thereby taxable @ 6% each of Central Goods and Services Tax and Maharashtra Goods and Services Tax. - No. GST-ARA-23/2017-18/B-31 - Dated:- 9-5-2018 - B.V. Borhade (Member) and 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 [ .....

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being under the "GST Act". 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- "Statement of relevant facts having a bearing on the question(s) raised 1. M&l Materials India Pvt. Ltd (hereinafter referred to as M&l India' or the 'company' or 'we' or 'us' ) is a wholly owned subsidiary of M&l Materials Ltd. based in UK (hereinafter referred to as 'M&I UK'). 2. The company c .....

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ariff 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 .....

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from time to time (hereinafter referred to as "the Notification"). 4.1 Under the Notification, the HSN code 1518 appears under "Schedule I - 2.5%" as well as "Schedule 2 - 6%". The relevant extract is reproduced hereunder for ease of reference: 4.2 S. No. Chapter / Heading / Sub-heading / Tariff item Description of goods Schedule I - 2.5% 90. 1518 Vegetable fats and oils and their fractions, boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in va .....

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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, .....

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ar as may be, apply to the interpretation of this notification. " 1.3 At this stage, we would also like to reproduce the relevant extract of the Rules for the interpretation of the First Schedule' for ease of reference: … 3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) the heading which provides the most specific description shall be preferred to headings .....

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tern India Plywoods Ltd. versus Collector of Customs, Cochin [2005 (188) E.L.T 365 (S.C.)] (attached as Annexure I), wherein the question pertained to classification of "motor vibrator with actuator" under the Customs Tariff. In this case, the Hon'ble Supreme Court held that, " ... it is well settled that the application of the residuary tariff entry must always be made with a good deal of caution as it is attracted only when no other provision expressly or by necessary implic .....

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oms 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 vegetable fats and oils and animal fats and oil by including vegetable fats and oil under Schedule I of the Notification which provides for lower GST rate of 2.5%. 2.2 The Constitution Bench of the Hon'ble Supreme Court of India in Dattatraya Govind Mahajan versus State of Maharashtra [1977 AIR 9 .....

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classified under entry at S. No. 90 of Schedule I - 2.5%, 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%. 3.2 In this regard, we would like to reproduce the entry at S. No 88 of Schedule 1 - 2 5% for ease of reference: S. No. Chapter / Heading / Subheading / Tariff item Description of goods Schedule I - 2 .....

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ation 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 a .....

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rse of the hearing, we were requested to submit certain additional information and documents in connection with our advance ruling application. Accordingly, without prejudice to the contentions raised by us in our previous submissions we would like to submit as under: 1. Principle of equivalence under GST 1.1 Under the erstwhile excise law, the tariff rate of excise duty applicable to items covered under entry 15180039 of the Central Excise Tariff was 6%. However, the Government vide Notificatio .....

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cts being supplied to an essential sector, the incidence of tax was kept at a minimum i.e. 5%, to avoid any undue tax burden on the ultimate customers of essential sector of electricity. 1.5 At this juncture 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 o .....

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15% and less than 21 %): iv. 26 % (to cover those goods presently attracting combined tax rates of Central Excise and VAT equal to or more than 21 %)" [emphasis supplied] - 4th GST Council meeting "10. Initiating the discussion, the Secretary to the Council briefly recapitulated the discussion on this issue in the 3rd GST Council Meeting on 18-19 October, 2016. He recapitulated the proposal to have a four rate GST structure and the rates could be 6%, 12%, 18% and 26%. He explained tha .....

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been framed with the objective of maintaining principle of equivalence, revenue neutrality and ensuring that no unnecessary burden is imposed on the weaker sections of the society. 1.9 It is evident that in the course of fixing GST rates of various commodities under GST, the GST Council in its wisdom was of the view that introduction of GST should not exert any additional burden on the people by increasing the rate of tax on goods which were subjected to beneficial rates of tax under the erstwhi .....

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iation' 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" fro .....

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er fluid, which means it is inedible and hence covered by Schedule II. Chapter heading 1518 and rate of tax applicable is 6%. 2) The above submission is made in the light of Notification No. 1/2017-State Tax(Rate) No. MGST-1017/C.R. 104/Taxation 1 dated 29/06/2017. Hon. Forum is humbly requested to admit the application for Advance Ruling and decide the issue as per above mentioned notification. " 04. HEARING The case was taken up for hearing on dt.07.03.2018 when Sh. Jigar Doshi, Sh. Shive .....

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chedule 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 .....

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it a Test Report enlisting the contents of the product with the exact proportions. We find that a Test Report has been submitted but it sheds no light as to the exact ingredients or their composition. There is a mention of "additives" being contained in the product but no more information about what these additives than mentioned below - Test particulars Requirement as per specification Obtained value Remarks Total Additives, % by wt. Max.5 0.3 Conforms The jurisdictional officer had p .....

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Identification This product is not classified as hazardous and 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. This product is not classified as hazardous .....

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tents 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. 4. First Aid Measures 4,1 Description of first aid measures Inhalation: None envisaged due to the low vapour pressure of the substance Skin: Wash with soap and water. Obtain medical attention if irritation develops. E .....

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act 7.2 Conditions for safe storage, including any incompatibilities No special precautions required 7.3 Specific end use(s) Exposure to air should be minimised. Opened containers should be properly resealed 7.1 Precautions for safe handling Avoid eye and prolonged skin contact 7.2 Conditions for safe storage, including any incompatibilities No special precautions required 7.3 Specific end use(s) Exposure to air should be minimised. Opened containers should be properly resealed 8. Exposure Contr .....

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xposure. 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 Carcino .....

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or OSHA. What we can gather from the above is thus : Composition/lnformation on Ingredients Constituent CAS Number Contents MIDEL eN 1204 (rapeseed oil based dielectric transformer fluid) Blend of natural triglyceride esters 68956-68-3 >98.5% Performance enhancing additives Proprietary <15% MIDEL eN 1204 (soya based dielectric transformer fluid) Blend of natural triglyceride esters 68956-68-3 >98 5% Performance enhancing additives Proprietary <1.5% We are afraid to observe herein th .....

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us, we look at the contention with regard to the applicability of the schedule entries thus - If it is assumed that either or our products cannot be classified under entry at S. No. 90 of Schedule I - 2.5%, 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 .....

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2% [6 + 6] A look at the description as found in the entries and the product information, as reproduced above, we are constrained to observe thus - 1. The products are not vegetable fats and vegetable oils per se. 2. 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. 3. The applicant has argued that the products cannot be considered as 'mixtures'. However, we fin .....

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soya" per se. The end product has a distinct identity in the sense that when one desires to have vegetable oil, the impugned products would not be accepted. 5. We shall see herein the position as appearing in the Customs Tariff Heading 1518 - 1518 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 PREPARA .....

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lymerized 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 fractio .....

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ed above) of Heading 1518 speaks of certain processes which have been subjected to vegetable and animal oils. But the HSN Notes say that despite undergoing these processes, the vegetable or animal oils should retain their original fundamental structure. In the present case, we have a final product which is a transformer fluid. Though the Test Report shows the percentage of the natural triglyceride esters to be at 98.5%, it would not mean that a new commodity has not been produced. There are data .....

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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 .....

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ence, the entry 27 of Schedule II of the Notification No. 1/2017- Central / State Tax (Rate) which covers the aforesaid description would be applicable. In the present case, we are unaware of the exact composition in terms of the additives and the ingredients used in the "rapeseed oil based" or "soya based" preparations. This would, as per our considered opinion, affect our decision. We find that there is Chapter 38 of the Customs Tariff which covers residual products of the .....

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ied upon by the applicant. However, we find that they do not apply to the facts that we are faced with. Since we have formed an opinion on the facts at hand, we would not enter into any discussing or differentiating the case laws. 06. In view of the 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) ORDER NO.GST-ARA-23/2017-18/B-31, Mumbai dated, 9th May, 201 .....

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