TMI Blog2018 (7) TMI 1493X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned 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 schedule entry 27 of Schedule II of the Notification No. 1/2017-Central /State Tax (Rate) under Tariff Heading 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 [hereinafter referred to as the CGST Act and MGST Act ] by M I MATERIALS INDIA PRIVATE LIMITED, the applicant, seeking an advance ruling in respect of the applicability of GST on: What is the correct Harmonized System of Nome ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of different fats or oils of this chapter , not elsewhere specified or included: 1518 00.39 - Other [emphasis supplied] 3.1.4 The applicable Indian Standards (IS) of the Bureau of Indian Standards (BIS) under the Bureau of Indian Standards Act, 1986 is IS 16659:2017. 3.2 MIDEL eN 1215 3.2.1 It is a vegetable oil based dielectric transformer fluid. It is a chemically modified soya based natural ester. 3.2.2 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. 3.2.3 We have classified MIDEL eN 1215 as per HSN code under the First Schedule of the Customs Tariff Act, 1975 under the entry 15180039. 3.2.4 The applicable Indian Standards (IS) of the Bureau of Indian Standards (BIS) und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral 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 and Chapter'' shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). iv. The rules for the interpretation of the first Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General explanatory Notes of the first Schedule shall, so far 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 Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 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 915] (attached as Annexure 3 ) has held that, .... ultimately it is the intention of the legislature which is paramount and mere use of a label cannot control or deflect such intention. It must be remembered that the legislature h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the foregoing submissions 3. We pray that a hearing be granted to us before any decision is taken in this matter and also crave leave to produce documents / records / case law at the hearing granted to us. Additional submission dt.16.03.2018 We, M/s. SKP Business Consulting LLP, in our capacity as authorised represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 18% (to cover those goods presently attracting combined tax rate of Central Excise and VAT between 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 M/s. M I Material Ltd.. UK. which is manufacturer of these products. The safety data sheet on website of Manufacturer M/s. M I Material Ltd. is available and downloaded. In this safety data sheet, the details description of product is mentioned which is as under - (i) MIDEL eN 1215- In this sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 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 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 1272/2008 (CLP): No symbol or signal word 2.3 Other hazards None. 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. 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s should be available for emergency use Respiratory protection: None required. Skin protection: Wear coveralls Hand protection: Wash hands after use. For prolonged or repeated skin contact gloves are recommended Eye protection If splashes are likely to occur wear safety glasses. 8.1 Control parameters No relevant control parameters. 8 2 Exposure controls Eye washes should be available for emergency use. Respiratory protection: None required. Skin protection: Wear coveralls. Hand protection: 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 inhalati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention as to the applicable classification. From all above, we have only the following information for deliberation as to the classification of the products - The only thing we can clearly see is that the impugned products have a distinct identity as being a transformer fluid . They are also given distinct names to establish their identity. We only learn that the impugned products are vegetable oil based. Neither the exact ingredients nor the exact additives, and the composition of each of these are available before us. The information shows that the products are a blend of natural triglyceride esters. They also contain additives. The applicant has argued that the quantity of additives in their products is minimal i.e. 0.3% of the total weight of the product. Therefore, the said products cannot be considered as 'mixtures'. Having seen thus, 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 app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditives, the information about which has also not been shared with this Authority. But we see that the manufacturing process of these ingredients and the addition of additives leads to a distinct product being formed. The ingredients or additives are added so as to formulate a certain product which could be used as a transformer fluid. So the processes are intended to manufacture a new commodity in which rapeseed oil or soya would be the prime ingredient. Owing to this, the products are described as rapeseed oil based or soya based and not being rapeseed oil per se or 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 PREPARATIONS OF ANIMAI. OR VEGETABLE FATS OR OILS OR OF FRACTIONS OF D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of the part 1 (as reproduced above) of Heading 1518 says- This part covers animal or vegetable fats and oils and their fractions which have been subjected to processes which modify their chemical structure thereby improving their viscosity, drying power (i.e., the property of absorbing oxygen when exposed to the air and forming elastic films) or modifying their other properties, provided they retain their original fundamental structure and are not more specifically covered elsewhere, e.g.: Thus, the Notes make it clear that the animal or vegetable fats and oils and their fractions should retain their original fundamental structure. e. The part 1 (as reproduced 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 and international ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned products and hence, 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 chemical or allied industries. However as the exact composition of the product is not revealed to us by the applicant and therefore on the basis of the facts at hand, we find them insufficient to arrive at any decision as to the classification of the product under Chapter 38 and accordingly, taking into consideration only the details revealed to us, we find that the product is classifiable under Chapter 15 of the Customs Tariff Heading/GST Tariff. 6. We are not in 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. We are also convinced that the impugned products are not covered by any entry of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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