TMI Blog2020 (10) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... In the instant case, the Purchase Order is raised for Prints and the media/material in which the output is required are spelt in. The value of the PO is arrived at based on the number of such advertisings required and the value of the unit number is calculated per dimensions - The recipient has undertaken this transaction with applicant mainly to get the printing services of the applicant. Without the printing activities, the blank PVC flex cannot be used as advertisement materials by the recipients. Even if the blank PVC material is made into banners/ hoardings/ billboard/ standees etc. by adding eyelets, metal rods etc., the transaction would not be complete as per the purchase order placed on the applicant by the recipient. Only if the digital content provided by the recipient is digitally printed onto the PVC material would the transaction be complete. Further, in this case, the nature of the inputs, rolls of PVC Flex materials, is changed in the final supply by the process of cutting to required dimensions, digital printing on that and making that printed sheet into banners/hoardings/billboard/standees etc. by adding eyelets, metal rods etc. Therefore, the predominant suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the printer and other Printing services attracts CGST 9% as per entry 27(ii) - In the case at hand, only content is supplied to the applicant and the physical inputs are that of the applicant, hence it is required to correctly classify the printed materials as the GST rate notifications seek to tax differently the printing services based on the classification and applicable rate of such goods on which the printing is done - in the case at hand, the goods on which the applicant provides the printing activities Trade advertisings are classifiable under Chapter 49 attracting CGST @ 6%. In the case at hand, the supply of printing services on PVC materials (goods classifiable under CTH 4911) are classifiable under SAC 998912. Therefore the applicable rate of CGST for the period effective from 13.10.2017 on the supply of services of Printing is covered under entry No. 27(i) of Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 as amended. Thus, the supply of printing services by the applicant are classifiable under SAC 998912 . The applicable rates are CGST @ 9% and SGST C9% from 01.07.2017 to 22.08.2017 and 22.08.2017 to 13.10.2017 vide entry at Sl.No. 27 27(ii) respectively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that printing of trade advertisements is carried out on Poly Vinyl Chloride (PVC) material. The various types of PVC material on which printing is carried out by the applicant along with the classification are listed as under: SI.No. PVC Material Name HSN Classification 1 Vinyl(Self Adhesive) 3919 90 50/3919 90 90 2 Back Lit Flex 3921 90 26 3 Blockout Flex 3921 90 26 4 Foam Board 3920 61 90 The applicant has stated that the customers desirous of getting images/written text/trade monograms printed from the applicant place a purchase order on them. The said purchase order spells out the type and specifications of the material on which trade advertisement (provided by customer) is to be printed. The scope of work of the applicant on any purchase order placed by the customer is as under: a. To p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant were classifiable under Chapter Heading 4911, under which all products were exempt from payment of duty of excise as the rate of duty in column 4 of Heading 4911 was NIL . 2.4 On their interpretation of applicable Law, the applicant claims that supply of trade advertisement to customers is supply of goods in terms of Section 2 (52) of CGST Act 2017. They have stated that, the essential condition to classify anything as goods is that it should be a movable property and Printed trade advertising material, being a movable property, is to be treated as goods . The Applicant has contended that Section 9 of the Act read with Schedule II SI.No. 1 (a) provides that any transfer of the title in goods is a supply of goods and in the case at hand, they are transferring the title in the goods, printed materials and therefore, the instant supply amounts to the supply of goods. The applicant has referred to TRU Circular No.11/ 11/2017-GST dated 20.10.2017 issued on taxability of printing contracts wherein vide para 5 it was clarified that printing contracts similar to the instant case, constitute supply of goods . To substantiate their claim further, the applicant has elabora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port the above conclusion, the applicant has placed reliance on the following judgements. The State of Punjab V. M/s Associated Hotels of India Ltd. (1972) 1 SCC 472 = 1972 (1) TMI 80 - SUPREME COURT The Assistant Sales Tax Officer and others v. B.C.Kame-(1997) 1 SCC 634 = 1976 (12) TMI 164 - SUPREME COURT Kone Elevators India Pvt Ltd. Vs. State of Tamilnadu, 2014 (304) ELT 0161 S.C = 2014 (5) TMI 265 - SUPREME COURT State of Gujarat (Commissioner of Sales Tax, Ahmedabad) Vs. M/s Variety Body Builders-(1976) 3 SCC 500 = 1976 (4) TMI 190 - SUPREME COURT The applicant has stated that the scope of work, as evident from the recipient s purchase orders, has always been supplying the trade advertisement material, which includes both the PVC material and printing. Together they constitute one unified economic supply of trade advertisement. They have also stated that the products supplied by them to the customers in the market are not known as printed flex boards but as trade advertisements. Given this, the applicant states that the sole intention of customer which can be inferred from the terms and conditions of contract is to procure the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to advertising. Such publications are to be classified in heading 4911. Moreover, heading 4911 specifically includes trade advertising material. To support the same, the applicant has also placed reliance on the General Rules of Interpretation provided under the First Schedule of Customs Tariff Act, which lay down various rules pertaining to classification of Goods. The applicant has stated that since heading 4911 specifically provides for trade advertising material , thus on application of Rule 1 of GI Rules, it becomes sufficiently clear that printed trade advertisement material provided by them would be classified under Heading 4911. The applicant has referred to the following judicial precedents to substantiate their above claim. The Applicant s own ruling given by Hon ble Authority for Advance Ruling, Hyderabad- reported as 2018 (6) TMI 519-Authority for Advance Ruling Hyderabad Telangana Forbes and company limited v Commissioner of Central Excise, Mumbai-II- 2018 (3) TMI 60-CESTAT Mumbai Hon ble Supreme Court in the case of CCE v Classic Strip Pvt Ltd reported at 2015 (318) ELT 20 (SC) = 2015 (3) TMI 590 - SUPREME COURT Hon ble Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , they have furnished synopsis of the activities of the applicant and their submissions along with the application. They also submitted copies of the relevant statutory provisions, circulars and relied upon case laws including the decision of Advance Ruling Authority of State of Telangana and West Bengal in their own case. 3.3 Further, to the above hearing, the applicant vide their letter dated 09.01.2020 submitted the following documents: Write up on business activities and process undertaken by them-wherein it is stated that o they are engaged in the business of Wide format digital printing which commences with checking the digital inputs like images and digital designs for printability and terminates on printing the advertisement material in the requisite formats o The process which includes receiving ready to print design from customer, pre-press proofing, scheduling, printing, finishing and dispatch of the trade advertisement materials is common for all inputs o The Departments under Standard Operation Process are 1. Pre-Press; 2. Print Process;3. Finishing; 4. Inventory; 5. Logistics o In the stage of Prepress, Proofing, Proof reading, convertin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave written submissions and submitted that they are supplying goods which were flex materials on which they print advertising material. They stated that the advertisement content is provided by their customer in digital form. In the event it is to be held as composite supply, they stated that the principal supply is goods as per para 5 of Boards Circular 11/11/2017 dated 30.10.2017and Circular F.No.332/2/2017 TRU dated December 2017. The central jurisdictional officer gave a written submission stating that the principal supply is supply of services which is printing of advertisement material. The authorised representative stated that they will submit sample copies of communications through which they receive their content and samples of contract in a weeks time. 4.2 The following were submitted as written submissions: List of outputs and their corresponding inputs List of major inputs procured(in terms of value and %) for the period April 2019 to December 2019 Sample Tax invoices Order of Appellate Authority of Advance Ruling, West Bengal and Andhra Pradesh in their own case. 4.3 The applicant vide their letter dated 06.02.2020 received on 07.02.2020 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial if the transaction is that of supply of services? 7.1 The facts of the case as available before us are that the applicant is engaged in the business of Wide format digital printing of Billboards, Building wraps, Fleet Graphics, Window Graphics, Trade Show Graphics; Office Branding; Instore Branding; Banners; Free Standing Display units and Signage Graphics(hereinafter referred as Trade advertisements ). It is stated that the content for such trade advertisements are provided by the customer in the digital format along with the requirements of such trade advertisements. 7.2 The applicant in the write-up on the process undertaken by them has elaborated the process which is common for all the inputs. The process undertaken are (1) receipt of ready to print design from the customer; (2) Pre-Press proofing which involves proof reading, digital quality check and generation of Print Order/Job ticket; (3) Print process which involves raising indent with the inventory department for specified material/inputs, receipt of the same, allocation of machinery time, printing procedure consisting of converting the print ready files into digital print format through v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Supply of Service is predominant in this composite supply and AAR, Telangana has held the supply as Supply of Goods under HSN 4911. 8.1 Section 2(30) of CGST/TNGST ACT states : composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; In the case at hand, the recipient gives the design, text and images that they want to advertise on specific sheets of Poly Vinyl Chloride (PVC) materials such as Vinyl, Flex that the applicant print son and together they are supplied to the recipient. In this case the materials are procured by the applicant independently. The printing process involves proofing of the contents, converting the provided digital content into the correct format etc. After printing, the printed PVC material is made into the final product such as banners, billboards, standees, foam boards etc. based on the requirement of the customer. This involves adding eyelets, metal rods, ropes etc. to the PVC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction would not be complete as per the purchase order placed on the applicant by the recipient. Only if the digital content provided by the recipient is digitally printed onto the PVC material would the transaction be complete. Further, in this case, the nature of the inputs, rolls of PVC Flex materials, is changed in the final supply by the process of cutting to required dimensions, digital printing on that and making that printed sheet into banners/hoardings/billboard/standees etc. by adding eyelets, metal rods etc. Therefore, the predominant supply i.e. the principal supply in the composite supply is the services of printing. 8.3 CBIC vide Circular No.11/ 11/2017-GST dated 20.10.2017, has clarified as to what constitutes the Principal supply in composite supply of printing contracts. The same is reproduced as under, for ease of reference: Subject: Clarification on taxability of printing contracts Requests have been received to clarify whether supply of books, pamphlets, brochures, envelopes, annual reports, leaflets, cartons, boxes etc., printed with design, logo, name, address or other contents supplied by the recipient of such supplies, would constitute suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of goods as in the cases of Para 4. The customer transfers the right to use the intangible inputs (digital images, text etc.) temporarily so that they can be used solely for printing. The applicant does not have the right of usage of such intangible inputs for any purpose nor do they own such inputs. Further, the nature of the physical inputs is not changed with the process of printing as in Para 5 and in that case printing is ancillary supply. In the considered transaction, the supply undertaken by the applicant involves printing of the content which is Art work or in other words, intangible inputs, whose rights are with customer and which are shared with the applicant for printing in the required material/media and supply as advertisement of the customer in the required format. The nature of the physical inputs is transformed with the printing activities and without the printing, the final product cannot be used as a trade material as required by the recipient. Thus the predominant activity is printing the intangible inputs of the customer in the required tangible inputs sourced by the applicant as per Para 4 and going by the clarification above, the principal supply is Supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27 Heading 9989 (i) Services by way of printing of newspapers, books (including Braille books), Journals and periodicals, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer. 6 - (ii) Other manufacturing services: publishing, printing and reproduction services, materials recovery services, other than (i) above. 9 - , The above entry was further amended with Notification No. 31/2017-C.T.(Rate) dated 13.10.2017 and the amended entry at S1.No. 27 of Notification No. 11/2017-C.T.(Rate) as under: (i) against serial number 27, for item (i), in columns (3), (4) and (5) and the entries relating thereto in, the following shall be substituted, namely: - (3) (4) (5) (i) Services by way of printing of all goods falling under Chapter 48 or 49 (including newspapers, books (including Braille books), journals and periodicals], which attract CGST @ 6 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 Foam Board 3920 61 90 Note 2 to Section VII of Customs Tariff states: 2. Except for the goods of heading 3918 or 3919, plastics, rubber, and articles thereof printed with motifs, characters or pictorial representations, which are not merely incidental to the primary use of the goods, fall in Chapter 49. Chapter 49 of Customs Tariff states: 4911 OTHER PRINTED MATTER, INCLUDING PRINTED PICTURES AND PHOTOGRAPHS 4911 10 - Trade advertising material, commercial catalogues and the like: From the Section note to Section VII of Customs Tariff, it is seen that Foam Board (HSN 3920), Back Lit Flex, Blockout Flex (HSN 3921), after being printed upon will fall under CTH 4911 as trade advertising material. In regard to Vinyl (Self Adhesive) (HSN 3919), we find that, the Apex Court in the case of Holostick India Ltd vs CCE [2015 (318) (11) ELT 529(SC)] = 2015 (4) TMI 357 - SUPREME COURT , has examined as to when the self-Adhesive materials will be classified under Chapter 39 and when the same will be considered as Printed Material to be classifiable under Chapter 49. The relevant portion is extracte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of Terms has a different purpose and, therefore, the specific purpose of tariff classification for which the internationally accepted nomenclature in HSN has been adopted, for enacting the Central Excise Tariff Act, 1985, must he preferred, in case of any difference between the meaning of the expression given in the HSN and the meaning of that term given in the Glossary of Terms of the ISI. 18. When one goes to the HSN Explanatory Notes to other printed matter , Item No. 10 which has already been referred to hereinabove states that self-adhesive printed stickers designed to he used, for example, for publicity, advertising or mere decoration, e.g. comic stickers and window stickers would he included. 19. It also goes on to say that goods of Entry 39.19 (inter alia) because they are merely incidental to the primary use of the products, would not he so included. This test again provides a useful application of what is includable and what is left out by applying the primary and incidental test outlined in Note 2 above. Obviously, a comic sticker would have as its primary use the comic part , the adhesive or sticker part being only incidental to its primary use. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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