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TMI Blog2019 (6) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... the M/s. Vedika Export Tea Pvt. Ltd. 2. M/s. Vedika Export Tea Pvt. Ltd, located at Karnani Estate, AJC Bose Road, Kolkata, (hereinafter referred as the Respondent), holding GSTIN 19AAACV8586B1Z1, stated to be a contract packer of tea bags sought an advance ruling under section 97 of the West Bengal Goods and Services Tax Act, 2017/ the Central Goods and Services Tax Act, 2017, (hereinafter collectively referred to as "the GST Act") on the following question: (i) Classification of the services provided in packing of tea bags; (ii) Rate of GST on the said service 3. The West Bengal Authority for Advance Ruling (hereinafter referred to as the WBAAR) pronounced its advance ruling by an order dated 28.01.2019 as under: "(i) The Respondent makes a composite supply to M/s. Hindusthan Unilever Ltd. (hereinafter referred to as HUL) where the service of manufacturing tea bags from the physical inputs owned by the latter is the principal supply; (ii) The Respondent's service is classifiable under SAC 9988 and taxable at 5% rate under Sl. No. 26 (f) of the Notification No. 11/2017-CT (Rate) dated 28.06.2017, as amended from time to time; (iii) Applicability of this ruling with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ike plucking, withering, wilting, disruption, oxidation, fixation, kill-green, rolling, shaping, drying, aging, curing or tea sorting. 5. During the course of hearing the Appellant reiterated the points as stated in the Grounds of Appeal. The Appellant emphasized on the point that the transaction is not a composite supply as there is only one type of supply of services involved, that being supply of packing services. Further no new product emerges from the process. 6. The Respondent submitted that the process of service undertaken by him involves assembly of materials on machine including blended tea leaves and other inputs received from HUL. The Respondent used to classify it as packaging service under SAC 998540 and charge GST under Sl. No. 23(iii) of Notification No. 11/2017-CT (Rate) dated 28.06.2017 (hereinafter referred to as "the Rate Notification") amended vide Notification No. 1/2018-CT (Rate) dated 25.01.2018. On 01.11.2018 the Respondent received communication from HUL informing that the services should be taxed under Sl. No.26(f) of the Rate Notification amended vide Notification No. 31/2017-CT (Rate) dated 13.10.2017. Sl. No.26(f) of the Rate Notification applies to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m filling and sealing, pouch filling, bottling and aerosol packaging. This service may also include the labelling or imprinting of the package. 11. The Appellant argued that making tea bags is nothing but filling pouches and as no new product emerges the service ought to be classified under SAC 9985. 12. If we look at entry at sl. no. 26(i)(f), tea falls under chapter 9 of the Tariff Act. Again the physical inputs (goods) provided to the Respondent are owned by others, in this case HUL. It needs to be examined whether the service provided by the Respondent qualifies to be a manufacturing service. 13. As per Ms. Smaraki Mahapatra, Member : Section 2(72) of the GST Act defines "manufacture" as the processing of raw materials or inputs in any manner that results in the emergence of a new product having a distinct name, character and use. In tea bags blended tea leaves are put into special porous pouches and then stitched so that for making tea the bag needs to be dipped in hot water only. Tea bags offer a quick and user friendly way of making the beverage. The tea bag pouch are made of specialized material so that it acts as a strainer for the leaves inside while allowing the beve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereas Heading 9988: Manufacturing services on physical inputs owned by others The services included under Heading 9988 are performed on physical inputs owned by units other than the units providing the service. As such, they are characterized as outsourced portions of a manufacturing process or a complete outsourced manufacturing process. Since this Heading covers manufacturing services, the output is not owned by the unit providing this service. Therefore, the value of the services in this Heading is based on the service fee paid and not the value of the goods manufactured. 998816: Other food product manufacturing services This service code includes grain mill product manufacturing services, starch and starch product manufacturing services, bakery product manufacturing services, sugar manufacturing services, cocoa, chocolate and sugar confectionery manufacturing services, macaroni, noodles, couscous and similar farinaceous products manufacturing services, prepared meals and dishes manufacturing services and other food product manufacturing services n.e.c. However, the activity of M/s. Vedica Exports Tea Pvt Ltd that is stuffing tea in pouches and supplying the said tea bags c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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