TMI Blog2021 (3) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... item as Printing and Supply of Trade Advertisement Material . From the write-up on business activities and process-Scope of Macromedia furnished by the appellant, it is seen that their Scope in the supply is to get the ready- to- print design from customer, check quality of design and printability on the specified sizes and applications like outdoor print, indoor print or signage print and printing the finalized drafts and delivering the same either to the corporates/agencies or the vendors. Thus, it is seen that the appellant owns the media(material) in which the digital content received by them for printing is printed and the supply of such printed goods is made to the client. Reliance has been placed in the case of STATE OF TAMIL NADU VERSUS ANANDAM VISWANATHAN [ 1989 (1) TMI 359 - SUPREME COURT] - the decision has been pronounced to decide whether the printing of the content received from the clients on the material Of the respondents and supply of such printed material is sale of goods under the sales tax provisions. The definition of Goods remains the same in the Sale Tax provisions and the GST Law and therefore the ratio of the above decision can be applied to the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho had sought it in respect of any matter referred to in subsection (2) of Section 97 for advance ruling; (b) . On the concerned officer or the jurisdictional officer in respect of the applicant. 3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the said advance ruling have changed. 4. Under Section 104(1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void sb-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rints the images on the PVC material. In cases where desired size of the trade advertisement is more than the size of PVC material that can be accommodated in the image printer, the Appellant prints the images/ written text in patches and later joins the said patches to make the full trade advertisement. c) Supply of such printed trade advertisement to the shipping address mentioned in the purchase order. 2.2 The Appellant made an Application to AAR vide Application NO. 47 dated 18.11.2019 seeking advance ruling on the 1. Whether the transaction of printing of content provided by the customer on PVC banners and supply of such printed trade advertisement is supply of goods? 2. What is the classification of such trade advertisement material if the transaction is a supply of goods? 3. What is the Classification and applicable rate of GST on the supply of such trade advertisement material if the transaction is that of a supply of Services? 3. The original authority has ruled as follows: 1. The printing of content provided by the recipient on the PVC materials of the appellant and supply of printed trade advertising material to the recipient is a composite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 998912 which is incorrect and the transaction of printing of content provided by the respective customers, on PVC banners and supply of such printed trade advertisement material constitutes supply of goods for the reasons furnished herein below: Perusal of the definition of goods indicates that any property which is movable in nature and is not in the form of money or securities, shall qualify to be goods . To determine if a particular supply constitutes supply of service , it is of paramount importance to rule out that such supply is not a supply of goods. In other words, it would be considered as supply of service , only when it does not qualify as supply of goods as defined in Section 2(52) of the CGST Act. Thus, each and every transaction, will first have to be adjudged on the touch stone of Section 2(52) of the CGST Act to determine if such transaction tantamount to supply of goods ; and it is only if the transaction fails the yardstick of Section 2(52) of the CGST Act, such transaction will qualify as service . Therefore, in the impugned ruling, the Hon ble AAR erred by not determining primarily whether the transaction of printing and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason that the definition of services is worded in a manner to provide that anything which is excluded from being goods, shall qualify to be services. Obvious corollary of the same is that once the trade advertisements are classified as goods , they can in no manner be classified as service . They have referred to the ruling of the Hon ble Supreme Court in the case of CCE-IV v. Fitrite Packers, 2015 (324) E.L.T. 625 (S.C.) = 2015 (10) TMI 1047 - SUPREME COURT . In other words, once the activity amounts to manufacture, then, the supply necessarily has to be treated as that of goods and not services. In case of activity amounting to manufacture, the supply can be services only in case where the inputs/ raw materials are supplied by the customer, as is evident from the S. No. 3 to Schedule II of the CGST Act. In the present case, since the goods, which have been subjected to the process of manufacture (printing), are procured by them only, the above referred entry 3 to Schedule II do not apply to the said case. In light of above discussions, they submit that the activity of printing images/ designs and supply of trade advertisement material is a supply of goods and therefore can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ruling given by the lower Authority was set aside. In the said ruling, considering the factual matrix involved, it was specifically observed that paragraph 5 of Circular No. 11/11/2017 - GST dated 20.10.2017 will apply and the printing and supply of access cards by the Appellant is a supply of goods. In the present case, the activity of printing brings into existence a specific new product I-mown in trade parlance as trade advertisement material . In fact, this is not disputed by the Hon ble Authority which has specially noted that the activity of printing has resulted in transformation in the nature of physical inputs and without printing, the final product cannot be used as trade advertisement material as required by the recipient (paragraph 8.3. of the impugned ruling). Having observed such, the Hon ble Authority has arrived at a diametrically contrary conclusion that activity of printing is the principal supply. Further, in the case of Pattabi Enterprises, supra the Hon ble Appellate Authority has observed that Access Cards is a product emerging out of printing activity and the printing is a service rendered by the Appellant to himself in order to execute the supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime be ancillary. To determine what is the pre-dominant component in the supply is subjective and dependent upon the terms and conditions of the contract between the parties. The said concept was prevalent in the erstwhile sales tax regime as well and has been a subject matter of many disputes before various judicial forums, wherein it has been held time and again that there is no straightjacket formula to determine which is the dominant supply and which is ancillary supply. The only test to determine dominant component of supply is to have regard to the terms and conditions of contract. They have placed reliance to the case State of Punjab v. M/s. Associated Hotels of India Ltd. (1972) 1 SCC 472 = 1972 (1) TMI 80 - SUPREME COURT , wherein the Constitution Bench of the Hon ble Supreme Court, while dealing with the construction of a contract of work and labour on the one hand and contract for sale on the other, opined that the difficulty which the Courts often meet in such contracts is owing to the fact that the distinction between me two contracts is very often a fine one and it is particularly so when the contract is a composite one involving both a contract of work labo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have purchased PVC material (blank) from external source itself to avoid commercial margin of Appellant and provided the same to them for merely printing. However, such is not the case in the transactions effected by the Appellant. Undisputedly, they are supplying complete trade advertisement which includes PVC material and printed images/ text/ trade monograms on such PVC material. This fact also goes on to establish that transactional arrangement between the Appellant and customer was always to supply and receive goods in form the of trade advertisements. Pre-dominant supply in the composite supply of trade advertisement is supply of goods by them to their customers. The element of printing is ancillary to the composite supply of trade advertisements. The design of image/ text/ trade monograms to be printed on the concerned trade advertisement is provided by the customer and they have no role to play in designing/ alteration of the same. Mere work to be carried out by them is to load such image/ text/ trade monograms on the computer controlled digital image printer and to take out prints on the PVC material (blank). They do not employ any skill for provision of service of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and logo of the customers, are more akin to wall papers mentioned in paragraph 5 of the Circular mentioned above. Thus, it is submitted that the case of Appellant is squarely covered under paragraph 5 of the above referred Circular, which inter alia provides that wallpaper printed with design, logo etc. supplied by the recipient of goods qualifies as supply of goods. Accordingly, the transaction of supply of trade advertisement material merit being treated as supply of goods . Further, paragraph 4 of the above Circular applies to books, annual reports etc. where the content is voluminous and the owner of this content merely intends printing services thereof. Thus, the Hon ble AAR by referring to paragraph 4 of the said Circular has mis-applied the same to the facts of the present case. Since the activities undertaken by them has been clarified as supply of goods by the Board Circulars referred supra, the impugned ruling being contrary to the same, is legally untenable. It is well settled law that circulars are binding on the Department and the Department cannot go against what is already clarified by them in their own circulars. Thus, they are of the view that the impugned ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e customer, it is submitted that the Authority has failed to understand and appreciate the true nature and substance of the contract entered into by the Appellant with its customers and the consequent underlying deliverable/ supply being made. It is submitted that the pith and substance of the transaction in the present case is clear from the fact that the customer intends to purchase tailor made goods in the form of trade advertisement as a whole (as one economic supply) for which the required inputs are procured by the Appellant himself. This is also substantiated from the fact that the respective customers desire to get their products advertised and marketed and such advertisement and publicity can only be done by the supply of complete trade advertisement material as agreed. Thus, the principal supply in this case is the supply of goods (trade advertisement material) and the activity of printing is undertaken for the enhancement and better enjoyment of the supply of goods. 2 The Authority in paragraph 8.3 of the impugned ruling has observed that the Appellant does not own the usage rights of the intangible inputs provided by the customer an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (by e-mail). They also furnished a Synopsis of their submissions (by e-mail), which were taken on record. The contention of the appellant is that the Lower Authority has not considered the plea that their activity is only Supply of Trade Advertisement , which are goods and that it is a Single Supply but has considered their activity to be a Composite Supply . They stated that they agreed with the classification of the supply dealt in Para 10 of the Ruling of the LA. 5.2 The appellant vide their letter dated 20.10. 2020, furnished the ruling of the Karnataka Appellate Authority in their case in Order No. KAR/AAAR 05/2020-21 dated 28.09.2020 = 2020 (10) TMI 856 - APPELLATE AUTHORITY FOR ADVANCE RULING, KARNATAKA and stated that the same may also be taken into consideration while passing the order in the present case. The Karnataka Appellate Authority has held that the digital printing on PVC material gives rise to a distinct trade advertisement product and supply of such products by the Appellant is a supply of goods. DISCUSSIONS: 6. We have carefully considered the submissions of the Appellant and the applicable statutory provisions. We find that the issue bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the case of this appellant since the contract given by the customers is not a printing contract but a contract for supply of trade advertising material wherein printing is involved in the making of the trade advertisement. They have held the supply as Supply of Goods . AAR West Bengal has held the supply as Composite Supply with Supply of Service as Principal Supply. AAAR West Bengal has upheld the LA Ruling. 7.3 Apart from the above, appellant has relied on the following decisions and contend that their supply is Supply of Goods only and not a composite supply of goods and service in which the principal supply is that of Printing Service . Commissioner of Sales Tax M.P. Vs. Purshottam Premji 1970 (26) STC 38 SC = 1970 (4) TMI 127 - SUPREME COURT OIO No.HYD-EXCUS-003-com-020-14-15 dated 18.07.2014 in their own case OIO No. 42/43/JC/CGST CX/North/Kol/2017-18 dated 23.02.2018 in their own case A.P. State Electricity Board Vs Collector of C.Ex., Hyderabad 1194 (70) E.L.T.3 (S.C) = 1994 (2) TMI 56 - SUPREME COURT CCE vs. Fitrite Packers 2015 (324) ELT 625 (SC) = 2015 (10) TMI 1047 - SUPREME COURT J.J Enterpris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndors. Thus, it is seen that the appellant owns the media(material) in which the digital content received by them for printing is printed and the supply of such printed goods is made to the client. The contention of the appellant is that they undertake the Printing for own-use to supply the Trade advertisement material which is goods and therefore, the transaction is supply of goods. From the Purchase Order it is seen that the appellant is to undertake printing of the content in the media. Therefore the first issue to be clarified is whether the contract by way of the P.O.is a contract for sale of Trade Advertisement material , i.e., goods or a contract of Work or services of printing of the content in the desired media. 8.2 We find that Hon ble Apex Court in the case of State of Tamilnadu Vs. Anandam Viswanathan = 1989 (1) TMI 359 - SUPREME COURT has stated the difference between a contract for work or service and a contract of sale as follows; 15. The primary difference between a contract for work or service and a contract for sale is that in the former there is in the person performing or rendering service no property in the thing produced as a whole, notwiths ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods so used passes to the other party i.e., in other words, the supply to be treated as sale of goods, the seller should have property in the wholly produced product supplied by them. Just because, the product is a movable property and is a goods , the supply cannot be called as simple supply of goods , when the seller do not have the whole proprietary right on the finished product. 8.3 Applying the above, to the case at hand, it is evident that the Purchase Order is issued for Printing the Copyrighted Digital Content of the client in the desired material. The material blanks owned by the appellant are transferred to the client as Trade Advertisement material after undertaking Printing of the Content of the client on the blanks. The appellant is vested with and undertakes the printing of the content, the copyright of which rests with the recipient and the copyright always rests only with the client and the appellant do not have any propriety rights to the content. The content is never owned by the appellant, while the property in blanks held by the appellant, on printing of the received content is transferred to the client. Thus the appellant do not have the whole p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendering service no property in the thing produced as whole notwithstanding that a part or even the whole of the materials used by him may have been his property. In the case of a contract for sale, the thing produced as a whole has individual existence as the sole property of the party who produced it, at some time before delivery, and the property therein passes only under the contract relating thereto to the other party for price. Printed Trade advertisement material always remains the property of the Appellant and the property in the same passes on to the customer only subsequently. At no point does the property in the trade advertisement material directly vest in the customer before the sale is concluded. They are selling Trade Advertisement Material' as a single economic entity. Hence, these trade advertisements are tailor made to the specifications of the customers. The content extended by the customer is made into the Trade Advertisement Material' in the required media by the appellant. At no point of time the appellant holds the right to the content and it is solely held by the customer. For the Trade Advertising Material' to exis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the final supply is a single supply of 'Goods' or 'composite supply' for which the 6 J.J. Enterprises vs CCE, Meerut 2013 (295) E.L.T. 324 (Tri-Del.) = 2013 (8) TMI 95 - CESTAT NEW DELHI printed sheets are classifiable as product of printing industry under Chapter 49 of the Tariff relied upon decisions has no application 7. Forbes Company Ltd v CCE, Mumbai-II-2018 (3) TMI 60-CESTAT Mumbai 'Printed Plastic Cards' are classifiable under Chapter 49 and not under Chapter 39 8. Venus Albums Co. Pvt Ltd v CCE, Chandigarh - 2019 (22) GSTL 386 (Tri-Chan) = 2018 (11) TMI 754 - CESTAT CHANDIGARH The Appellate Tribunal in its impugned order had held that the activity of printing photograph provided in soft form, binding them and selling them as photo books, such activity amounts to manufacture and the resultant item is classifiable under Heading 4911 Of Central Excise Tariff and not liable to Service Tax particularly when the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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