9911796707
TMI Blog2021 (4) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... except for specific/few goods, classification adopted by Applicant was a subject matter of dispute between VAT authorities and the Applicant; that under the classification mechanism provided under Gujarat VAT legislation, there were two predominant rates of VAT in force viz. 5% (4% + 1% additional tax) and 15% (12.5% + 2.5% additional tax) and for the former category, goods were specifically enlisted whereas the latter tax rate applied as a residual tax rate on all other goods; that in the erstwhile regime, the applicant had classified each product under its specific category provided under 5% tax rates but this classification was disputed by the VAT Department, without providing sufficient grounds for substantiation; that subsequent to the change in the Indirect tax legislation and considering the way in which the manner for classifying goods and services has undergone a change, they seek to understand the correct classification of their products under the GST regime. The applicant has stated that in view of this, they wish to have clarity on classification of certain products dealt in by the Applicant and based on the above facts, they have raised the following questions seeking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g and the proviso to this Section, specifically states a situation when the advance ruling application will not be admitted. The relevant portion of the Act is reproduced hereunder: Provided that the Authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of this Act: 3.1 The applicant has submitted that the term 'this Act' is the CGST Act 2017, is stated in Section 1 and it is also quite clear from the perusal of the aforementioned proviso that a combination of three elements would mean that the application will not be admissible. The criteria are: * Subject matter of advance ruling application should be pending or concluded in a proceeding * The proceedings should be in relation to the same applicant * The proceedings should be pending or concluded under the GST Act 3.2 The applicant has stated that the logic behind this refusal for admissibility is purely based upon the fact that when one authority has looked into a subject matter or is under the process of concluding upon it, there is no reason that the advance ruling authority shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant under any of the provisions of this Act, the Advance Ruling application filed by the Respondent before the Advance Ruling Authority is clearly maintainable." 4. The applicant has submitted that the advance ruling application is maintainable and admissible; that VAT matters are not connected to HSN classification of the given products and hence, they also submit that the questions for which Ruling is sought is different from the question under consideration in those cases. The Applicant has stated that they are engaged in trading of goods which are used at ports as support infrastructure and the list of goods being traded by them are as under and for ease of understanding, the brochures of the products are enclosed herewith as Annexure B. * Bollards * Bolts, nuts, screw etc. known as fixtures * Frontal Frames * Fascia Pads * Buoys * Chains / Swivel / D-Shackle/ Chain Tensioner * Rubber Fender (both types) 5. Apart from above, the applicant has submitted as under, the details of major or important raw-material used in making of these products. Sr.No. Products Major/important raw-material used in making 1 Bollards Cast iron, SG iron & cast steel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the official website of the World Customs Organization, they find the following explanation and stated that even though it does not form part of Indian Customs classification system, the Explanatory Notes and the provisions given thereunder can be referred to for clarity in classification.: The Explanatory Notes provide a commentary on the scope of each heading, giving a list of the main products included and excluded, together with technical descriptions of the goods concerned (their appearance, properties, method of production and uses) and practical guidance for their identification. Where appropriate, Explanatory Notes also clarify the scope of particular sub-headings. 8. In light of the above, the applicant has submitted that even though it does not form part of Indian Customs classification system, the Explanatory Notes and the provisions given thereunder can be referred to for clarity in classification. The applicant has provided a brief description of the products and their potential classification as under. (A) Bollards 1. Bollard is a sturdy, vertical post used principally as an anchoring point for boats/ vessels. Ropes from vessel/ship are tied on the bollard ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ashers. The sample copies of purchase & sales invoices are attached as Annexure D for reference. Further, the photos are reproduced hereunder for easy understanding of products. 2. The Heading 7318 covers screws, bolts, nuts, coach screws, screw hooks, rivets, cotters, cotterpins, washers (including spring washers) and similar articles, of iron or steel. For better understanding, it would be relevant to comprehend general meaning of the each of the terms: * A bolt is mechanical fastener used with a nut for connecting two or more parts. It consists of a head and a cylindrical body with screw threads along a portion of its length * A nut is a piece of metal, usually square or hexagonal in shape, with a hole through it having machined internal threads, intended to be screwed onto a bolt * A screw is a type of fastener, similar to a bolt, with a thin pointed piece of metal with a raised edge twisting round its length and a flat top with a cut in it, used to join things together * A fastener is a hardware device that mechanically joins or affixes two or more objects together 3. The Explanatory Notes of the Harmonised Commodity Description and Coding System provides the descrip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 237 7318 Screws, bolts, nuts, coach screws, screw hooks, rivets, cotters, cotter-pins, washers (including spring washers) and similar articles, of iron or steel 8. Therefore, the Applicant submits that the fixtures would clearly merit classification under 'Screws, bolts, nuts etc.' under Chapter Heading 7318 and would attract GST at a rate of 18%. (C) Frontal Frames 1. Frontal frames are closed box structure of steel pneumatically leak tested to make sure that there are no punctures on it. It is made out of horizontal and vertical steel beam sections of steel which is self-buoyant and a floating structure. Use of this structure is to reduce the impact pressure on the ship/hull as per requirement. 2. In this case, the Applicant procures frames made up of steel for further sale. As a process, the Applicant either procures steel plates on their own or requests fabricator to procure steel plates of desired quality and provide it to the fabricator for fabrication as per specification and design. Apart from fabrication, the Applicant would also get the final products painted from different vendor. 3. Moreover, the Applicant receives orders from the customers wherein the custome ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced, laminated, supported or similarly combined with other materials 3920 10 - Of polymers of ethylene: --- Sheets of polyethylene 3920 10 11 ---- Rigid, plain 3920 10 12 ---- Flexible, plain 3920 10 19 ---- Other --- Other 3920 10 91 ---- Rigid, plain 3920 10 92 ---- Flexible, plain 3920 10 99 ---- Other 6. From the tariff entry reproduced above, the Applicant submits that the pads are made from polyethylene and therefore, it is important to understand the meaning of the term 'polymer'. From dictionary meaning, the Applicant understands that the term 'polymer' means a substance which has a molecular structure built up chiefly or completely from a large number of similar units bonded together. Hence, the Applicant would like to submit that polymers of ethylene would mean things mainly made from ethylene. Therefore, the Applicant submits that facia pads made from polyethylene would merit classification of tariff code 3920 1099. 7. In order to be classified under the aforementioned entry, the following conditions need to be satisfied: (i) The product should be one of plates, sheets, film, foil or strip (ii) It should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ads made from polyethylene would merit classification under Heading 392010and therefore, the same would be subject to GST at the rate of 18%. (E) Buoys 1. Buoys are floating structure of steel used in the middle of seas as locators or as warning points for the ships/ vessels. Mooring buoys are a type of buoy, to which, ships can be moored in the deep oceanic areas. 2. As a process, the Applicant would procure materials separately from different vendors such as PUF chemicals, rubber fenders, steel ring, stud link chain etc. These items would be given to another vendor for the purpose of fabrication. The ready to use or completely fabricated item, known as buoys, would be sold to customers. The same process and raw material would be required to manufacture buoys subject to specifics and requirement of the customers. 3. The photos of the buoys are reproduced hereunder for easy understanding of the products. 4. Buoys are mainly made from steel and it is nothing but round shaped structure of steel. In order to maintain buoyancy or to enable the structure to float on water, foam is filled up in the structure. Once, this is done, it is painted with bright color so as to ensure its vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t appears to be limited to articles which are moored to the bottom of a body of water to mark something. That provision only covers items which can be described as floating structures. The net buoys are not moored to the bottom of a body of water when in use nor do they perform a function similar to those of buoys as previously described. 9. In the given case, the buoy is moored to the bottom of the water body to which ships are moored too and also offer a warning point thereby serving navigational purposes, and are not classifiable as net buoys which essentially assist in fishing activities. 10. Considering the above, the Applicant believes that buoys would merit classification of other floating structures under heading 8907 90. Accordingly, the Applicant would like to draw reference to Schedule I of CGST Notification No. 01/2017 - Central Tax (Rate) that prescribes GST rate of 5% for product falling under Chapter Heading 8907. The relevant extract has been provided hereunder for your easy reference: S.No. Chapter / Heading / Sub-heading / Tariff item Description of goods 251 8907 Other floating structures (for example, rafts, tanks, coffer-dams, landingstages, buoys and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by some as 'rubber buffers'. The primary objective of the rubber fenders on the dock is to absorb collision energy during the berthing process. This in return protects both the ship and the dock after collision. Generally, there are two types of rubber fender viz. pneumatic rubber fender and foam rubber fender. The sample copy of bill of entry and sales invoice is enclosed as Annexure F 2. Pneumatic rubber fenders are made out of rubber and strengthening cord layers. This rubber fender is filled with air. Solid rubber fenders have been used for ages since they are readily available and are considered long lasting. Pneumatic Rubber fenders come in different forms including cell rubber fender, cone rubber fender, arch type, unit element fender, cylindrical type CY, "D" type fender, square shaped, keyhole version, cylindrical tug fender, "W" version, "M" version etc. The photos are reproduced hereunder for easy understanding of the product: 3. Foam rubber fenders, made out or rubber and foam, are also used to absorb collision energy during contact between the vessel and docks (or even other vessels). Foam rubber fenders are manufactured from high quality foam and thereafter covere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading / Sub-heading / Tariff item Description of goods 123A 4016 Other articles of vulcanised rubber other than hard rubber [other than erasers, rubber bands} 7. Considering that same description as in the Customs Tariff has been provided in the GST notification for Heading of 4016, the Applicant believes that the pneumatic rubber fenders would be classified with HSN 4016 94 00 and attract a GST @ 18%. 9. The applicant has submitted their interpretation of law in respect of the second question seeking Advance Ruling i.e. Question-2 as under: Question-2(PART-B) Whether supply of few products such as frontal frames with fascia pads along with fixture as a complete set, would qualify as a composite supply or not? If the supplies would qualify as composite supply, what would be the classification of this bundle and applicable tax rate thereon in accordance with Notification No. 01/2017 dated June 28, 2017 (as amended). 1. Many a times, the applicant receives orders from the customers wherein the customer wishes to purchase frames along with fascia pads and fixtures. Entire set is known as fender panel system within trade & industry. The sample copy of purchase order issued by c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se in reference: (i) The perception of the consumer or the service receiver. If large number of service receivers of such bundle of services reasonably expect such services to be provided as a package, then such a package could be treated as naturally bundled in the ordinary course of business. (ii) Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines. (iii) The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service.... (iv) Other illustrative indicators, not determinative but indicative of bundling of services in the ordinary course of business are: * There is a single price or the customer pays the same amount, no matter how much package they actually receive or use * The elements are normall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case The perception of customer is to obtain all goods as a package Yes Whether trade & industry has similar practice to supply fender panel system including all goods Yes The nature of bundle should be such that they are bundled in ordinary course of business Yes There is single price for package and advertised in the same manner Yes Different products / goods are integral part of overall system Yes 11. Based on above, the applicant submits that the fender penal system is naturally bundled and in conjunction with each other and therefore, third condition is also satisfied. 12. In order to determine the classification and taxability, it is important to refer Section 8 of the CGST Act which is reproduced hereunder: 8. The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:- (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. 13. Further, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses and BRTS bus stations is the same i.e. fare collection and providing seamless travel with a single smart card/ticket. Hence, it can be seen that the fixation/ attachment of the hardware to bus station/ terminal is not mandatory for the whole system to operate. 27. In view of the above, we agree with the applicant's contention that the contract for supply of the AFC system to the local authority does not qualify as a 'Works contract' under Section 2(119) of the CGST Act, 2017, since the installed AFC system cannot be said to result in the emergence of an immovable property." 15. Further, considering the facts in above ruling, it was upheld that the supply of AFC system would be composite supply and AFC system is the principal supply. 16. Based on above discussion, the Applicant believes that this is composite supply of fender panel system wherein entire system is principal supply which is required by the customer. 17. From perusal of Customs Tariff Act, we find that Heading 7308 specifically covers structures. Furthermore, persuasive evidence can be derived from a ruling by the National Commodity Specialist Division of United States, dated July 02, 2009 which provides ample ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Heading 7308 90 and be taxed at GST at the rate of 18%. 10. The applicant has submitted their interpretation of law in respect of their question seeking Advance Ruling i.e. Question-3 as under: Question-3(Part C) - Whether supply of goods i.e. fender panel system along with services such as assembly, installation & supervision service would qualify as composite supply or not? If the supplies would qualify as composite supply, what would be the classification of this bundle and applicable tax rate thereon in accordance with Notification No.1/2017 dated June 28, 2017 (as amended)? 1. The applicant requires to supply fender panel system along with services such as assembly, installation &supervision as per the requirements of the customer. Further, the Applicant would like to submit that the price /consideration for fender panel system and services would be separate and individual invoices would be issued for supply of goods and supply of service. Considering this, the Applicant wishes to understand whether the present case qualifies to be composite supplies. 2. Before discussing the composite supply, the Applicant would like to submit that the present supply would not qualif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1991 Supp (2) SCC 18], the Supreme Court has held that the test was one of permanency, if chattel is movable to another place as such for use, it is movable property but if it has to be dismantled and reassembled and re-erected at another place for such use, such chattel would be immovable property. 7. In the case of Triveni Engineering & Industries Ltd Vs. Commissioner of Central Excise [(2000) 120 ELT 273 (SC)], the Apex Court observed that while determining whether an article is permanently fastened to anything attached to the earth, both the intention as well as the factum of fastening has to be ascertained from the facts and circumstances of each case. 8. Considering above judicial precedents with the present facts, the Applicant would like to submit as under. * The fenders panel system can be easily shifted at another location without any complex dismantling process and hence the supplies are not resulting in any immovable property * Normally, the fender panel system are dismantled on a periodical basis as these would suffer wear and tear after a certain period. Accordingly, these are not permanently fixed to earth of jetty and as per the permanence theory, the supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the third question seeking Advance Ruling i.e. Question-4 as under: Question-4(Part D) - Whether supply of installation service where usage of chemical is essential to provide effective service would qualify as composite supply or not? If the supplies would qualify as composite supply, what would be the classification of this bundle and applicable tax thereon in accordance with Notification # 11/2017 dated June 28, 2017 (as amended)? 1. The Applicant, as per the requirements of the customer, enters into a contract to provide installation services for marine fendering systems or fender panel system. In this case, though the customer desires the Applicant to provide installation services, the customer also specifies the chemical of particular brand to be used for installation services. 2. The value of chemical is not separately mentioned in contract or sale invoice. It is important to note that customers do not intend to procure chemical or the chemical would not be handed over to customers. Further, the customer simply states usage of chemical of particular brand for providing effective service and the consideration has no nexus with quantity of chemical to be used. In nutshell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing under heading 9989 of the scheme of classification of services." 7. Moreover, in the case of G.E. Diesel Locomotive (P) Ltd, the applicant had made a bid for a tender floated by the Indian Railways for supply of locomotive engines and their comprehensive maintenance. While discussing whether supply of comprehensive annual maintenance service involving incidental supply of spare parts/goods should be classified as a composite supply or mixed supply, the Uttar Pradesh AAR observed the following: "Since the supply of maintenance service is for a one and fixed price with or without supply of spare parts/goods and supply of service and goods is made in conjunction with each other in the ordinary course as per maintenance contracts, this maintenance service to the extent of presence of all the necessary ingredients cited in the legal provisions quoted supra, is naturally bundled with the incidental supply of goods, it is case of composite supply of service" 8. Additionally, in the case of Khedut Hat [2018-TIOL-173-AAR-GST], the Applicant procured explosives for blasting activity and based on the information received from the client as to the number of holes to be charged at the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 22 of the Central Goods and Services Tax Act, 2017 2.5 Provided that credit of input tax charged on goods and services has not been taken [Please refer to Explanation no. (iv)]. (ii) Maintenance, repair and installation (except construction) services, other than (i) above [and serial number 38 below] 9 - DISCUSSION & FINDINGS: 12. We have considered the submissions made by the applicant in their application for advance ruling as well as the arguments/discussions made by their representative Shri Kumar Parekh at the time of personal hearing. We have also considered the issues involved on which Advance Ruling is sought by the applicant. 13. At the outset, we would like to state that the provisions of both the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017 are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to similar provisions of the GGST Act. 14. Based on the submission of the applicant as well as the arguments/discussions made by the representative of the applicant during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in tensioner 7315 18% 7 Rubber Fender (both types) 4016 18% 16. Before taking up the discussion of each of the aforementioned products, we find it necessary to refer to the Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 containing the headings, sub-headings as well as the rates of Central Tax GST applicable to various goods which are covered under 6 schedules as under: (i) 2.5 per cent. in respect of goods specified in Schedule I, (ii) 6 per cent. in respect of goods specified in Schedule II, (iii) 9 per cent. in respect of goods specified in Schedule III, (iv) 14 per cent. in respect of goods specified in Schedule IV, (v) 1.5 per cent. in respect of goods specified in Schedule V, and (vi) 0.125 per cent. in respect of goods specified in Schedule VI Further, Explanation (iii) and (iv) of the said Notification reads, 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), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mm. GENERAL This chapter covers a certain number of specific articles in headings 73.01 to 73.24 and in heading 73.25 and 73.26 a group of articles not specified or included in Chapter 83 or 83 and not falling in other Chapters of Nomenclature, of iron (including cast iron as defined in Note 1 to this Chapter) or steel. For the purposes of this Chapter, the expressions "tubes and pipes" and "hollow profiles" have the following meanings hereby assigned to them: (1) Tubes and pipes: Concentric hollow products, of uniform cross-section with only one enclosed void along their whole length, having their inner and outer surfaces of the same form. Steel tubes are mainly of circular, oval, rectangular (including square) crosssections but in addition may include equilateral triangular and other regular convex polygonal cross-sections. Products of cross-section other than circular, with rounded corners along their whole length, and tubes with upset ends, are also to be considered as tubes. They may be polished, coated, bent (including coiled tubing), threaded and coupled or not, drilled, waisted, expended, cone shaped or fitted with flanges, collars or rings. (2) Hollow profiles: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; --- Other : 7325 99 91 ---- Rudders for ships or boats 7325 99 92 ---- Drain covers kg. 15% - 7325 99 93 ---- Plates and frames for sewage water or similar system - 7325 99 99 ---- Other 19. On going through the above, and comparing the same with the description of the aforementioned product and the photographs provided by the applicant, we find that 'bollards' would be rightly covered under Tariff heading 73259999. Having decided the classification of the product 'bollard' we are required to find out the rate of GST liability of the said product for which we will be required to refer to the Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 (as amended from time to time). On going through the same, we find that Sub-heading 7325 finds mention at Entry No.237 of Schedule-III of the said notification wherein the GST liability is 18% (9% SGST + 9% CGST) which reads as under: Sr.No. Chapter /Heading / Subheading /Tariff item Description of goods 237 7325 Other cast articles of iron or steel; such as Grinding balls and similar articles for mills, Rudders for ships or boats, Drain covers, Plates and frames for sewage water or simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 23 00 -- Rivets 7318 24 00 -- Cotters and cotter-pins 7318 29 -- Other : 7318 29 10 --- Circlips 7318 29 90 --- Other 22. On going through the above, and on comparing the same to the description of the products and photographs provided by the applicant, we find that fixtures such as bolts, nuts, screws and washers are specifically covered under the aforementioned sub-heading 7318 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975). Further, the specific tariff headings of the said products would be as under: Sr.No. Name of the product Tariff heading as per Customs Tariff Act, 1975 01. Bolts 73181500 02. Nuts 73181600 03. Screws 73181500 04. Washers 73182200 23. Having decided the classification of the above products, we need to find out the GST liability on the same for which we need to refer to Notification No.01/2017-Central Tax(Rate) dated 28.06.2017 (as amended from time to time) and find that Sub-heading 7318 finds mention at Entry No.232 of Schedule-III of the said notification on which GST liability is 18%(9% SGST + 9% CGST). The same reads as under: Sr.No. Chapter / Heading / Subheading / Tariff item Description of goods 232 7318 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion No.01/2017-Central Tax(Rate) dated 28.06.2017(as amended from time to time) and find that Sub-heading 7326 finds mention at Entry No.238 of Schedule-III of the said notification on which GST liability is 18%(9% SGST = 9% CGST). The same reads as under: Sr.No. Chapter / Heading / Sub-heading / Tariff item Description of goods 238 7326 Other articles of iron and steel, forged or stamped, but not further worked; such as Grinding balls and similar articles for mills, articles for automobiles and Earth moving implements, articles of iron or steel Wire, Tyre bead wire rings intended for use in the manufacture of tyres for cycles and cycle-rickshaws, Belt lacing of steel, Belt fasteners for machinery belts, Brain covers, plates, and frames for sewages, water or similar system, Enamelled iron ware (excluding utensil & sign board), Manufactures of stainless steel (excluding utensils), Articles of clad metal. Sr.No.238 of Schedule-III of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 was amended vide Notification No.41/2017-Central Tax(Rate) dated 14.11.2017 vide which the above column under 'Description of goods' was amended to read as 'Other articles of iron or ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lassifiable under 3920. Further, keeping in view the above description of the product as well as the photographs provided by the applicant, we find that the 'Fascia pads' which are sheets of polyethylene(made from polymers of ethylene) would be rightly classifiable under the Tariff heading 39201099 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). Having decided the classification of 'Fascia pads', we need to find out the GST liability of the said product for which a reference will be required to be made to Notification No.01/2017-Central Tax(Rate) dated 28.06.2017(as amended from time to time). On going through the said notification, we find that Sub-heading 3920 finds mention at Sr.No.106 of Schedule-III of the said notification on which GST liability is 18%(9%SGST + 9% CGST). The same reads as under: Sr.No. Chapter / Heading / Sub-heading / Tariff item Description of goods 106 3920 Other plates, sheets, film, foil and strip, of plastics, noncellular and not reinforced, laminated, supported or similarly combined with other materials. 28. The next product whose classification needs to be determined is Buoys. As per the submission of the applicant, the main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till and they are mainly made from steel. They have stated that on referring the explanatory notes for World Customs Organization, they observed that it is clearly stated that chains of cast iron, irrespective of dimensions, process of manufacture or, in general, their intended use will be classified under the given heading. They have referred to the explanatory notes of subheading 7315 that provide clarity on the classification of swivels and shackles and related accessories and have reproduced the relevant portion of the same as under: All these chains may be fitted with terminal parts or accessories (e.g. hooks, spring hooks, swivels, shackles, sockets, rings and split rings and tee pieces). They may or may not be cut to length, or obviously intended for particular use. Iron or steel parts of chains specialized as such e.g. side links, rollers, spindles etc., for articulated chain, links and shackles for non - articulated chain also fall in this heading. 31. The applicant feels that in light of the above, chains, swivels, d-shackle and chain tensioner should be classified under heading 7315. Sub-heading 7315 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975) re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.15). 33. On going through the details provided under Sub-heading 7315 as per the Customs Tariff Act, 1975, the explanatory notes of HSN in respect of subheading 7315, the description of the aforementioned products given by the applicant and comparing the same to the issue in hand, we find that chains would be rightly classifiable under Tariff heading 73158900 whereas dshackles and swivels would be rightly classifiable under Tariff heading 73159000 (being parts or accessories). However, since we do not find any specific mention of chain tensioners any where, we find it necessary to know what a chain tensioner is. We therefore, find it prudent to refer to the definition of a 'chain tensioner' as per the dictionary. The same reads as under: "Excessive chain sag can cause vibration and excessive noise and prevent the chain from properly engaging the sprocket, which prevents the chain from operating smoothly. Chain Tensioners adjust slackness in the chain to enable continuous and proper chain operation.." 34. From the above description, it appears that the said product is a device which forms a part or accessory to a chain which adjusts slackness in the chain to enable continuous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lision energy during contact between the vessel and docks (or even other vessels). Foam rubber fenders are manufactured from high quality foam and thereafter covered by reinforced polyurethane elastomer i.e. rubber. The performance of foam filled rubber fenders can be modified by changing the grades of foam. This also gives more flexibility to foam filled rubber fenders in meeting different requirements of berthing energy and reaction force as compared to same size of fenders. Foam filled rubber fenders can also be equipped with a chain and tire net for rough applications. Since there is no air pressure inside this fender similar to pneumatic rubber fender, there is no risk of deflating, bursting or sinking. As there are no end fittings like safety valves, ball valves etc., there is less maintenance required for Foam filled rubber fenders compared to Pneumatic rubber fenders. (c) The closed-cell foam structure retains performance even if a fender's skin is punctured. The closed cell internal structure prevents water ingress into the foam. It is important to note that in pneumatic rubber fender, air is contained in fender whereas in foam rubber fender, foam is contained in fender. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2017-Central Tax(Rate) dated 28.06.2017 as under: Sr. No. Chapter / Heading / Subheading / Tariff item Description of goods 123A 4016 Rice rubber rolls for paddy de-husking machine" Notification No.01/2017-Central Tax(Rate) dated 28.06.2017 was further amended vide Notification No.41/2017-Central Tax(Rate) dated 14.11.2017 wherein Entry No.123A of Schedule-III was amended to read as under: Sr.No. Chapter / Heading / Sub-heading / Tariff item Description of goods 123A 4016 Other articles of vulcanised rubber other than hard rubber [other than erasers, rubber bands} Further, vide the aforementioned notification, Entry No.49 of Schedule-IV of Notification No.01/2017-Central Tax(Rate) dated 28.06.2017 was omitted w.e.f. 15.11.2017. In view of the above, the aforementioned product will be covered under Entry No.49 of Schedule-IV of the Notification No.01/2017-Central Tax(Rate) dated 28.06.2017 (upto 14.11.2017) and under Entry No.123A of Schedule-III of the said Notification w.e.f. 15.11.2017. Therefore, the rate of GST in respect of the aforementioned sub-heading i.e. 4016 will be 28% (14% SGST + 14% CGST) upto 14.11.2017 and 18%(9% SGST + 9% CGST) w.e.f. 15.11.2017. 38 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on(the applicant), all these goods are naturally bundled and in conjunction with each other and all the three together(in combination) form the principal supply. (c) The applicant has referred to an e-flyer issued by the CBIC on 'composite supply' and 'mixed supply' which provides insights on few indicators which can be used to determine that supplies are bundled in the course of business to support his above contention. The factors are reproduced hereunder: (i) If large number of service receivers of such bundle of services reasonably expect such services to be provided as a package, then such a package could be treated as naturally bundled in the ordinary course of business. (ii) Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines. (iii) The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other services combined with such service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naturally bundled and in conjunction with each other. In present case, in order to identify principal supply, the Applicant has placed reliance on the Advance Ruling of NEC Technologies India Pvt. Ltd. vide Advance Ruling No. GUJ/GAAR/R/2020/07 dated May 19, 2020 by the Gujarat Advance Ruling Authority to support their contention. (j) Based on above discussion, the Applicant believes that this is composite supply of fender panel system wherein entire system is principal supply which is required by the customer. As per Customs Tariff Act, Heading 7308 specifically covers structures. They have relied upon ruling by the National Commodity Specialist Division of United States, dated July 02, 2009 which provides that the applicable subheading for the plastic faced steel panel and rubber fender imported together will be 7308.90.9590. (k) From the perusal of above, the applicant also believes that even when the frames and fascia pads are supplied i.e. the supply is made for fender panel system excluding the fixtures, the supply would still merit classification under Heading 7308. Accordingly, the supply would be considered as falling under Sub-heading 7308, falls at Sr.No.251 of Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or otherwise, we will be required to refer to the definition of 'Composite Supply' as appearing in Section 2(30) of the CGST Act, 2017. Section 2(30) of the CGST Act, 2017 reads as under: (30) "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; Illustration.- Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; Further, definition of principal supply as per Section 2(90) of the CGST Act, 2017 reads as under: "(90) "principal supply" means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary;" 43. From the above, it can be seen that for being a composite supply, all the following conditions are required to be necessarily satisfied: (i) The said supply should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above, since all the above conditions have not been satisfied, we conclude that the aforementioned supply of goods does not constitute a 'composite supply' 44. Having concluded that the aforementioned supply of goods and services is not a composite supply, the next thing required to be verified is whether the said supply gets covered under the definition of 'mixed supply' of services or otherwise. For the said purpose, we need to refer to the definition of 'mixed supply' as defined in Section 2(74) of the CGST Act, 2017 which reads as under: "(74) "mixed supply" means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. Illustration.- A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately;" 45. From the above, it can be seen that for being a mix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. all of them attract equal rate of tax. Hence the said 'Mixed supply' of goods can be considered to be the supply of any of the three supplies i.e. Frontal frames (Tariff heading 73269080) OR Fascia pads (Tariff heading 39201099) OR Fixtures (Tariff heading-73181500 / 73181600 / 73182200) and the GST leviability on the said supply will be 18%(9% SGST + 9% CGST). 49. Now, we are required to discuss the third question of the applicant seeking Advance Ruling which reads as under: Question-3(Part C) - Whether supply of goods i.e. fender panel system along with services such as assembly, installation & supervision service would qualify as composite supply or not? If the supplies would qualify as composite supply, what would be the classification of this bundle and applicable tax rate thereon in accordance with Notification No.1/2017 dated June 28, 2017 (as amended)? 50. The applicant has submitted his view point for the aforementioned supply being a composite supply as under: (a) The applicant requires to supply fender panel system along with services such as assembly, installation &supervision as per the requirements of the customer for which the price /consideration for fend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument. We find that the applicant has mentioned in his submission that the present supply would not qualify as 'works contract' service by referring to the definition of work contract under Section 2(119) stating one of the essential conditions to qualify as works contract supply is that the fabrication, erection, fitting out, modification, alteration work is carried out for an immovable property. He has also stated that the resultant structure arising in the present case is not an immoveable property for the reasons that: (i) the fenders panel system can be easily shifted at another location without any complex dismantling process (ii) the fender panel system is dismantled on a periodical basis as these would suffer wear and tear after a certain period and therefore, are not permanently fixed to earth of jetty, hence not immoveable property as per the permanence theory. However, in the event of non-submission of copy of any work order/contract etc. it would not be possible for us to decide whether the present supply is 'Work Contract' or otherwise. We, therefore, have no option but to rely on the submission of the applicant and available records to decide the type of supply. 52. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first condition is satisfied. (ii) The Fender Panel System as referred to by the applicant itself consists of supply of three different taxable supply of goods i.e. frontal frames, fascia pads and fixtures and is accompanied by taxable supply of services such as assembly, installation and supervision. It therefore consists of two or more taxable supplies of goods or services or a combination of both. Hence this condition is also satisfied. (iii) The supply of goods i.e. frontal frames, fascia pads and fixtures are not naturally bundled nor supplied in conjunction with each other in the ordinary course of business as discussed in the foregoing paras. Similarly, the supply of the aforementioned goods need not necessarily be supplied alongwith services such as assembly, installation and supervision as these services need not be obtained by the recipient from the applicant but can be obtained from some other supplier also. We, therefore, find that the supply of goods mentioned above and the aforementioned supply of services are not naturally bundled nor supplied in conjunction with each other in the ordinary course of business. Hence this condition is not satisfied. (iv) None ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition is also satisfied. (iii) The said supply does not constitute a 'composite supply'. Hence, this condition is also satisfied. (iv) The supply of goods i.e. frontal frames, fascia pads and fixtures as well as the supply of services are not supplied in conjunction with each other for a single price, as the applicant themselves have stated that the price/consideration for fender panel system and services would be separate, and individual invoices would be issued for supply of goods and supply of service. Hence, this condition is not satisfied. 57. In view of the above, since all the above conditions have not been satisfied, we conclude that the aforementioned supply of goods and services does not constitute a 'mixed supply'. Now, since it has been established that the aforementioned supply is neither a 'composite supply' nor a 'mixed supply', we conclude that the applicant will have to supply the aforementioned goods as well as services separately and not as a combination. In view of the above, we conclude that the supply of goods i.e. fender panel system along with services such as assembly, installation & supervision service would not qualify as a composite supply or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng under heading 9989 of the scheme of classification of services. (e) The applicant has referred to the case of G.E. Diesel Locomotive (P) Ltd wherein it was held by Uttar Pradesh AAR that since the supply of maintenance service is for a one and fixed price with or without supply of spare parts/goods and supply of service and goods is made in conjunction with each other in the ordinary course as per maintenance contracts, this maintenance service is naturally bundled with the incidental supply of goods and is a case of composite supply of service" (f) The applicant has also referred to the judgement of Gujarat AAR in the case of Khedut Hat [2018-TIOL-173-AAR-GST], wherein it was held that in the said case applicant uses explosives in the blasting activity at their client's site for the client, thus, there is deemed supply of explosives in this case in view of the judgement of Hon'ble Supreme Court in the case of Bharat Pest Control (supra) as well as the supply of service in the form of the blasting work and is therefore a composite supply of goods and services covered by Section 2(30) and Section 8(a) of the CGST Act, 2017." (g) Considering the above advance rulings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary;" 61. From the above, it can be seen that for being a composite supply, all the following conditions are required to be necessarily satisfied: (i) The said supply should be made by a taxable person to a recipient. (ii) It should consist of two or more taxable supplies of goods or services or both or any combination thereof. (iii) They should be naturally bundled and supplied in conjunction with each other in the ordinary course of business. (iv) One of the supplies must be a principal supply. Comparing the above conditions to the issue in hand, we find as under: (i) The said supply is made by a taxable person i.e. the applicant, hence the first condition is satisfied. (ii) The aforementioned supply consists of Installation services along with supply of chemicals which will be used up during the course of supply of service. It therefore consists of two or more taxable supplies of goods or services or combination of both. Hence this condition is also satisfied. (iii) The supply of services i.e. Installation services along with su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one of which is a principal supply, shall be treated as a supply of such principal supply; and (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax." 64. On going through the above provisions and comparing the same to the issue in hand, we find that since the aforementioned supply is a 'Composite supply' in which the 'Installation Service' is the principal supply, the said supply will be treated as a supply of 'Installation Service' in terms of clause(a) of Section 8 above, and therefore, the GST liability will be the tax leviable on 'Installation Service'. In order to find the GST liability on 'Installation Service' we will be required to refer to the Notification No.11/2017-Central Tax(Rate) dated 28.06.2017 (as amended from time to time) which covers the classification of services as well as rate of GST liability on them. On going through the same, we find that 'Installation Service' appears at Sr.No.25 (ii)of the said notification on which GST liability is 18%(9% SGST + 9% CGST). The same reads as under: Sr.No. Chapter, Section or Heading Description of service. Rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Ruling pronounced by the Advance Ruling Authority or the Appellate Authority shall be binding only on the applicant who had sought it in respect of any matter referred to in sub-section(2) of Section 97 for Advance Ruling and the concerned officer or the jurisdictional officer in respect of the applicant. 66. In view of the above circumstances, we rule as under : RULING Question-1(Part-A) -What would be the classification of the following products under GST and applicable tax rate thereon in accordance with Notification No. 01/2017 dated June 28, 2017 (as amended). Sr.No. Products 1 Bollards 2 Bolts, nuts, screw, washer etc. known as fixtures 3 Frontal Frames 4 Fascia Pads - UHMW PE pads 5 Buoys 6 Chains/ Swivel/ D-Shackle/Chain tensioner 7 Rubber Fender (both types) Answer: The classification of the following products under GST and applicable tax rate thereon in accordance with Notification No.01/2017 dated 28.06.2017 (as amended from time to time) is as under: Sr.No. Name of the product Sub-heading / Classification as per the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) Rate of tax (GST) 01. Bollards 73259999 18%(9% SGST + 9% CGST) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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