2018 (7) TMI 1493 – AUTHORITY FOR ADVANCE RULING – MAHARASHTRA – 2018 (15) G. S. T. L. 423 (A. A. R. – GST) – Classification of goods – rate of GST – MIDEL eN 1204 – MIDEL eN 1275 – What is the correct Harmonized System of Nomenclature (HSN) code and the applicable GST rate for our products MIDEL eN 1204 (rapeseed oil based dielectric transformer fluid) and MIDEL eN 1275 (soya oil based dielectric transformer fluid) in terms of Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017?
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Held that:- The products are not vegetable fats and vegetable oils per se – The products do not remain mere vegetable fat or mere vegetable oil. The impugned products are a distinct product which is known in the market as a dielectric transformer fluid – The products also contain additives, the information about which has also not been shared with this Authority. But the manufacturing process of these ingredients and the addition of additives leads to a distinct product being formed.
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tion 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as "the CGST Act and MGST Act"] by M&I MATERIALS INDIA PRIVATE LIMITED, the applicant, seeking an advance ruling in respect of the applicability of GST on: What is the correct Harmonized System of Nomenclature (HSN) code and the applicable GST rate for our products MIDEL eN 1204 (rapeseed oil based dielectric transformer fluid) and MIDEL eN 1275 (soya oil based dielectric transformer fluid) in terms of Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act 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 the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of th
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usiness in India 2.4 Provide local first line support for any technical queries. 3. The details of the products for which the Advance Ruling is being sought is as follows: 3.1 MIDEL eN 1204 3.1.1 It is a vegetable oil based dielectric transformer fluid It is a chemically modified rapeseed oil based natural ester 3.1.2 It is used as electric insulator in transformers Its function is to provide electrical insulation, suppress corona and arcing, and to serve as a coolant. 3.1.3 We have classified MIDEL eN 1204 as per the Harmonized System of Nomenclature (HSN) code under the First Schedule of the Customs Tariff Act, 1975 (hereinafter referred to as "the Customs Tariff') under the entry 15180039 The relevant extract of the entry is reproduced hereunder for ease of reference: "1518.00 animal or vegetable fats and oils and their fractions , boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified, excluding
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y of various goods is notified vide Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017, as amended from time to time (hereinafter referred to as "the Notification"). 4.1 Under the Notification, the HSN code 1518 appears under "Schedule I – 2.5%" as well as "Schedule 2 – 6%". The relevant extract is reproduced hereunder for ease of reference: 4.2 S. No. Chapter / Heading / Sub-heading / Tariff item Description of goods Schedule I – 2.5% 90. 1518 Vegetable fats and oils and their fractions, boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 1516 [emphasis supplied] Schedule II – 6% 27. 1518 Animal fats and animal oils and their fractions, boded, oxidised, dehydrated, sulphurised, blown, polymerised by heal in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 1516; inedible mixtures or preparations of animal or
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o. 90 of Schedule – 1 [applicable rate of Central Goods and Services Tax (CGST) – 2,5%]. To support our view, we would like to put forth our contentions, without prejudice to each other, as follows: 1. Specific entry should prevail over general entry 1.1 Chemically modified vegetable oils are more specifically covered under Entry at S No 90 of Schedule – I of the Notification. Hence, both our products viz, MIDEL eN 1204 and MIDEL eN 1215 should be classified under the said entry. 1.2 Further, explanations (iii) and (iv) to Notification No 1/2017-Central Tax (Rate) dated 28 June 2017, as amended from time to time, state as under "iii "Tariff item ", "sub-heading" "heading " and "Chapter'' shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). iv. The rules for the interpretation of the first Schedule to the Customs Tariff Act, 1975 (51 of 1975
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emphasis supplied) 1.4 The entry at S. No 27 of Schedule II – 6% is a general entry mainly referring to animal fats and oils while vegetable fats and oils are mentioned only cursorily. Further, it should be noted under the said entry only those vegetable fats or oils can be covered which are not specified elsewhere. 1.5 It is a well established principle of taxation jurisprudence for resolving classification disputes that a specific entry shall prevail over a general entry. In this regard, we would like to bring to your attention the judgement of the Hon'ble Supreme Court of India in the case of Western India Plywoods Ltd. versus Collector of Customs, Cochin [2005 (188) E.L.T 365 (S.C.)] (attached as Annexure I), wherein the question pertained to classification of "motor vibrator with actuator" under the Customs Tariff. In this case, the Hon'ble Supreme Court held that, " … it is well settled that the application of the residuary tariff entry must always be mad
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to both our products 2. Intention of the legislature 2 .1 It is pertinent to note that whereas under the Customs law, animal or vegetable fats and oils are part of the same entry i.e. 1518.00 (supra), under the GST regime a conscious decision has been made by the GST Council to split the said entry between vegetable fats and oils and animal fats and oil by including vegetable fats and oil under Schedule I of the Notification which provides for lower GST rate of 2.5%. 2.2 The Constitution Bench of the Hon'ble Supreme Court of India in Dattatraya Govind Mahajan versus State of Maharashtra [1977 AIR 915] (attached as Annexure 3) has held that, "…. ultimately it is the intention of the legislature which is paramount and mere use of a label cannot control or deflect such intention. It must be remembered that the legislature has different ways of expressing itself and in the last analysis the words used by the legislature alone are the true repository of the intent of the legisla
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for ease of reference: S. No. Chapter / Heading / Subheading / Tariff item Description of goods Schedule I – 2.5% 88. 1516 Vegetable fats and oils and their fractions, partly or wholly hydrogenated, inter-esterified, re-esterified or elaidnised, whether or not refined, but not further prepared. " 3.3 Both our products being vegetable oil based esterified transformer fluids, we submit that they should fall within the ambit of the said entry and classified accordingly. 4. Beneficial rate under the Maharashtra Value Added Tax (MVAT) Act, 2002 4.1 Most of the customers of the Company to whom these products are supplied include government and non-government entities operating in the essential sector of electricity generation, transmission and distribution. 4.2 Under the erstwhile MVAT regime, Sec 8 (5) of the MVAT Act empowered the State Government for partial or full exemption from Value Added Tax (VAT) on sales made by a registered dealer, inter cilia, to entities involved in generat
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on is taken in this matter and also crave leave to produce documents / records / case law at the hearing granted to us." Additional submission dt.16.03.2018 We, M/s. SKP Business Consulting LLP, in our capacity as authorised representatives of M/s. M&I Materials India Private Limited (hereinafter referred to as "the Company" or "us" or "we") refer to the preliminary hearing held for admission / rejection of our advance ruling application on 7 March 2018 We thank you for admitting our application and granting us another opportunity to present our case During the course of the hearing, we were requested to submit certain additional information and documents in connection with our advance ruling application. Accordingly, without prejudice to the contentions raised by us in our previous submissions we would like to submit as under: 1. Principle of equivalence under GST 1.1 Under the erstwhile excise law, the tariff rate of excise duty applicable to it
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eration, transmission and distribution of electrical energy. 1.4 Given the above, it is evident that our products being supplied to an essential sector, the incidence of tax was kept at a minimum i.e. 5%, to avoid any undue tax burden on the ultimate customers of essential sector of electricity. 1.5 At this juncture we would like to reproduce the relevant extract from the minutes of the 3rd and the 4th GST Council meetings held on 18-19 October 2016 and 3-4 November 2016 respectively, wherein the principles for fixation of GST rates were debated upon: – 3rd GST Council meeting "37. The principles on the basis of which the proposed GST rate structure was worked out was elucidated and these included: (i) proposed rate slabs should be closest to the present combined tax incidence of 'Excise and VAT (including cascading): (ii) protecting existing revenues of Centre and States: (iii) impact on inflation i.e.. on items in the Consumer price Index (CPI) basket is minimal, (iv) propos
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d the proposal to have a four rate GST structure and the rates could be 6%, 12%, 18% and 26%. He explained that a slab of 6% was needed for such goods where VA T was being charged at 5% and Central Excise duty on the same goods was Nil. He stated that if such goods put in the 12% rate band, it would adversely affect the poorer sections of the society." [emphasis supplied] 1.6 Applying the principles emanating from the discussions and observations made by the GST Council it is incontrovertible that our products should be classified under the GST rate bracket which is closest to the combined rate of tax applicable under Central Excise and VAT – i.e. 5% 1.7 Therefore, we submit that the intention of the GST Council provides a compelling view that our products should be classifiable under Entry at S No. 90 of Schedule – I – 2.5% of the Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017, as amended from time to time. 1.8 Further, the Hon'ble Finance Minister Arun Jaitley
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ed under Entry at S. No. 90 of Schedule -I of the Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017, as amended from time to time, i.e chargeable to GST at the rate of 5%. 2. Non-classification as 'mixtures' 2.1 The quantity of additives in our products viz. MIDEL eN 1204 and MIDEL eN 1215 is minimal i.e. 0.3% of the total weight of the product. Therefore, the said products cannot be considered as 'mixtures' covered under Entry at S. No. 27 of Schedule II – 6%. 2.2 In order to corroborate our explanation, a copy of test report by 'Electrical Research and Development Association' of our product MIDEL eN 1215 is attached herewith as "Annexure 6". 3. Further, as required, a flow chart exhibiting the transaction flow of the products has been attached herewith as "Annexure 7" We request your good self to take the above on record and oblige." 03. CONTENTION – AS PER THE CONCERNED OFFICER The submissions, as reproduced verbatim, cou
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be used as only dielectric fluid. The dealer is in his application admit that use of the product is transformer fluid, which means it is inedible and hence covered by Schedule II. Chapter heading 1518 and rate of tax applicable is 6%. 2) The above submission is made in the light of Notification No. 1/2017-State Tax(Rate) No. MGST-1017/C.R. 104/Taxation 1 dated 29/06/2017. Hon. Forum is humbly requested to admit the application for Advance Ruling and decide the issue as per above mentioned notification. " 04. HEARING The case was taken up for hearing on dt.07.03.2018 when Sh. Jigar Doshi, Sh. Shivendra Dwivedi, Sh. Harshal Fifadra, Sh. Prathamesh Shende along with Sh. Nitin Satija, Director and Country head attended and made oral submissions for admission of their application as per submission made in the Advance Ruling application. They were requested to provide copies of Bill of Entries of import of their products for last one year and it was also requested to provide exact cont
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the cost of repetition, let us have a look at the information about the products as provided by the applicant- MIDL eN1204 It is a vegetable oil based dielectric transformer fluid. it is chemically modified rapeseed oil based natural ester. It is used as electric insulator in transformers. Its function is to provide electrical insulation, suppress corona and arcing, and to serve as a coolant. The applicable Indian Standards (IS) of the Bureau of Indian Standards (BIS) under the Bureau of Indian Standards Act, 1986 is IS 16659:2017. MIDEL eN 1215 It is a vegetable oil based dielectric transformer fluid. It is a chemically modified soya based natural ester. It is used as electric insulator in transformers. Its function is to provide electrical insulation, suppress corona and arcing, and to serve as a coolant. The applicable Indian Standards (IS) of the Bureau of Indian Standards (BIS) under the Bureau of Indian Standards Act, 1986 is IS 16659:2017. The above information does not throw a
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tified uses of the substance or mixture and uses advised against Product Use: Dielectric fluid Uses advised against: None. 1.3 Details of the supplier of the substance or mixture Company: M&I Materials Ltd. Hibernia Way, Trafford Park, Manchester, M32 0ZD, UK. 1.1 Product Identifier Material Name: MIDEL eN 1215. 1.2 Relevant identified uses of the substance or mixture and uses advised against Product Use: Dielectric fluid Uses advised against: None 1.3 Details of the supplier of the substance or mixture Company: M&I Materials Ltd., Hibernia Way, Trafford Park, Manchester. M32 0ZD, UK 2. Hazards Identification This product is not classified as hazardous and this document has been compiled for information purposes, in accordance regulation 1907/EC/2006, Annex II, as amended by Regulation (EU) No. 453/2010 and OSHA hazard communication guidelines. 2.1 Classification of the substance or mixture Regulation (EC) No 1272/2008 (CLP) Not classified. 2.2 Label elements Regulation (EC) No
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68-3 Description: Blend of natural triglyceride esters (vegetable oil) Composition: Constituent CAS Number Contents Blend of natural triglyceride esters 68956-68-3 >98.5% Performance enhancing additives Proprietary<1.5% All constituents are listed on the TSCA inventory. Additives used in this product are a trade secret, but do not lead to classification of the substance as hazardous. 4. First Aid Measures 4,1 Description of first aid measures Inhalation: None envisaged due to the low vapour pressure of the substance Skin: Wash with soap and water. Obtain medical attention if irritation develops. Eyes: Irrigate with copious amounts of water. Obtain medical attention if irritation develops. Ingestion: Do not induce vomiting, obtain medical attention. 4 2 Most important symptoms and effects, both acute and delayed No adverse effects expected 4.3 Indication of any immediate medical attention and special treatment needed No special treatment required. 4.1 Description of first aid meas
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nd use(s) Exposure to air should be minimised. Opened containers should be properly resealed 8. Exposure Controls/ Personal Protection 8 1 Control parameters No relevant control parameters. 8 2 Exposure controls Eye washes should be available for emergency use Respiratory protection: None required. Skin protection: Wear coveralls Hand protection: Wash hands after use. For prolonged or repeated skin contact gloves are recommended Eye protection If splashes are likely to occur wear safety glasses. 8.1 Control parameters No relevant control parameters. 8 2 Exposure controls Eye washes should be available for emergency use. Respiratory protection: None required. Skin protection: Wear coveralls. Hand protection: Wash hands after use. For prolonged or repeated skin contact gloves are recommended. Eye protection: If splashes are likely to occur wear safety glasses. 11. Toxicological Information 11.1 Information on toxicological effects Likely routes of exposure: Skin and eyes are the most lik
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oil based and as such non-toxic. Acute oral toxicity: Considered to be low toxicity, vegetable oil. Acute dermal toxicity: Considered to be low toxicity. Acute inhalation toxicity: Low volatility makes inhalation unlikely Skin corrosion/irritation: Considered to be not irritating Eye corrosion/irritation Considered to be not irritating. Respiratory or skin sensitisation: Considered to be not sensitising Aspiration hazard: Not considered an aspiration hazard Carcinogenicity/mutagenicity: Not considered a mutagenic hazard or carcinogen. This product is not considered to be a carcinogen by IARC, ACGIH, NTP or OSHA. What we can gather from the above is thus : Composition/lnformation on Ingredients Constituent CAS Number Contents MIDEL eN 1204 (rapeseed oil based dielectric transformer fluid) Blend of natural triglyceride esters 68956-68-3 >98.5% Performance enhancing additives Proprietary <15% MIDEL eN 1204 (soya based dielectric transformer fluid) Blend of natural triglyceride ester
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weight of the product. Therefore, the said products cannot be considered as 'mixtures'. Having seen thus, we look at the contention with regard to the applicability of the schedule entries thus – If it is assumed that either or our products cannot be classified under entry at S. No. 90 of Schedule I – 2.5%, we would like to submit that, entry at S. No. 88 of Schedule I – 2.5% also provides an appropriate description of our products, and that in no case the said products can be classified under the general entry at S. No. 27 of Schedule II – 6%. We shall look at each of the above entries as found in the Notification No. 1/2017-Central / State Tax (Rate) [as amended from time to time] thus – S. No. Chapter / Heading/ Subheading / Tariff item Description of Goods Rate [CGST + MGST] 88 1516 Vegetable fats and oils and their fractions, partly or wholly hydrogenated, inter-esterified, re-esterified or elaidinised, whether or not refined, but not further prepared. 5% [2.5 +2.5] 90 151
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uid. 3. The applicant has argued that the products cannot be considered as 'mixtures'. However, we find a reference to the products being a 'substance' or 'mixture' in the Safety Data Sheet of these products as can be seen thus – 1.3 Details of the supplier of the substance or mixture 4. No information about the manufacturing process has been given. Neither any information has been shared as to the ingredients contained in the products. The products also contain additives, the information about which has also not been shared with this Authority. But we see that the manufacturing process of these ingredients and the addition of additives leads to a distinct product being formed. The ingredients or additives are added so as to formulate a certain product which could be used as a transformer fluid. So the processes are intended to manufacture a new commodity in which rapeseed oil or soya would be the prime ingredient. Owing to this, the products are described as &q
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parations of animal or vegetable fats or oils or of fractions of different fats or oils of this Chapter, not elsewhere specified or included : Lin seed oil: 1518 00 11 Edible grade 151800 19 Other Castor oil, dehydrated: 1518 0021 Edible grade 1518 00 29 Other Other Vegetable oil and its fats: 1518 00 31 Edible grade 1518 00 39 Other 151800 40 Other From the Tariff Heading 1518 as reproduced above, we see that – a. There are 2 parts to Tariff Heading 1518 thus – • Part 1 – Animal or vegetable fats and oils and their fractions, boiled, oxidized, dehydrated, sulphurised, blown, polymerized by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 1516; • Part 2 – Inedible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this Chapter, not elsewhere specified or included: B. Of the Tariff Heading 1518, schedule entry 90 covers portion relating to vegetable fats and oils and the
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s and their fractions should retain their original fundamental structure. e. The part 1 (as reproduced above) of Heading 1518 speaks of certain processes which have been subjected to vegetable and animal oils. But the HSN Notes say that despite undergoing these processes, the vegetable or animal oils should retain their original fundamental structure. In the present case, we have a final product which is a transformer fluid. Though the Test Report shows the percentage of the natural triglyceride esters to be at 98.5%, it would not mean that a new commodity has not been produced. There are data and international standards galore for mineral oils, there are as yet no IEC standards addressing the composition or testing of the natural ester oils with their different chemical composition. Each manufacturer has his own set of ingredients to obtain a transformer fluid. That is precisely the reason that the applicant has not preferred to divulge the details. Thus, by addition of the needful ad
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to part 2 (as reproduced above) of Heading 1518. This part covers inedible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of the Chapter 15. The present products, as discussed above, are a preparation from natural triglyceride esters. They are based or derived from "rapeseed oil based" or "soya based". In addition, the products are inedible. And even though the applicant disputes about the products being a 'mixture', there being a combination of ingredients and additives, the impugned products could be classified as an 'inedible preparation'. Therefore, they could very well be covered by the description "inedible preparations of vegetable oils'. Now the aspect which remains to be seen is "not elsewhere specified or included". We have not found any specific description which covers a "dielectric transformer fluid". To that extent, it is prima facie felt that the descr
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hapter 15 of the Customs Tariff Heading/GST Tariff. 6. We are not in doubts that entry 88 and 90 of Schedule I of the Notification No. 1/2017-Central / State Tax (Rate) would not cover the impugned products. We are also convinced that the impugned products are not covered by any entry of the Schedule in the Notification No. 2/2017- Central / State Tax (Rate) for goods exempted from GST. It is only the question of entry 90 or any other entry of the Notification No. 1/2017- Central / State Tax (Rate) which would cover the impugned products. 7. We have gone through the case laws and arguments relied upon by the applicant. However, we find that they do not apply to the facts that we are faced with. Since we have formed an opinion on the facts at hand, we would not enter into any discussing or differentiating the case laws. 06. In view of the deliberations as held hereinabove, we pass an order as follows: ORDER (under section 98 of the Central Goods and Services Tax Act, 2017 and the Mahara
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