In Re: M/s. Vedika Exports Tea Pvt. Ltd.
GST
2019 (1) TMI 1489 – AUTHORITY FOR ADVANCE RULING, WEST BENGAL – 2019 (21) G. S. T. L. 286 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, WEST BENGAL – AAR
Dated:- 28-1-2019
Case Number 41 of 2018 and Order No. 36/WBAAR/2018-19
GST
SYDNEY D'SILVA AND PARTHASARATHI DEY, MEMBER
Applicant's representative heard: Sudeshna Chatterjee, Authorized representative
1. The Applicant, stated to be a contract packer of tea bags, seeks a ruling on the classification of the services provided in way of packing of tea bags and the rate of GST thereon.
Advance Ruling is admissible under Section 97(2)(a) of the CGST/WBGST Act, 2017 (hereinafter collectively called the GST Act).
The Applicant states that the questions raised in the Application have neither been decided by nor are pending before any authority under any provision of the GST Act. The concerned officer from the revenue has raised no objection to the admission of the applica
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iff Act, 1975 (hereinafter the Tariff Act).
It is, therefore, to be decided whether the Applicant's services to HUL are classifiable as packaging service or manufacturing service or both. In course of Hearing the Applicant has submitted a copy of his agreement with HUL (hereinafter referred to as “the Agreement”) w.e.f 01/01/2014, which has since been extended, and also a flow chart of the activities undertaken while providing the service to HUL.
As the ruling is sought with reference to the specific intervention as above by HUL, the discussion will be kept limited to the specific features of the Agreement.
Furthermore, the Applicant informs in course of Hearing that none of the other recipients have raised similar issues and the similar services provided to these other recipients continue to be classified as “packaging service” and taxed accordingly.
The question raised is, therefore, being answered only with respect to the service provided to HUL. The applicability of the service
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reasonable precaution to safeguard HUL's materials, work in progress and finished goods while in his custody (clause 13.2 of the Agreement)). HUL will also bear the cost of waste disposal (clause 12 of the Agreement). It is, therefore, evident that the processes undertaken are on physical inputs owned by HUL.
The flow chart of the processes undertaken at his manufacturing unit shows that the blended tea received from HUL, after quality control procedure, is passed through hoppers, magnetic grill and mesh, and ends with filling tea leaves into the tea bag pouches and stitching. The tea bags are then subjected to quality control before being packed in cartons, wrapped and put into boxes, stored and delivered to HUL after sample testing.
4. Section 2(72) of the GST Act defines manufacture as the processing of raw materials or inputs in any manner that results in the emergence of a new product having a distinct name, character and use. Packaging activity, on the other hand, makes the sam
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g tea bags is service for manufacturing a product classified under Tariff item 0902 40 40, where physical inputs are owned by the recipient.
The supply is, therefore, to be classified under SAC 9988 and taxed under Sl No. 26(f) of the Rate Notification.
The Applicant also provides service of packaging the manufactured tea bags in cartons, wraps them up and put them in specially designed boxes. HUL owns and provides all such packaging materials also.
These two services (service for manufacturing tea bags and the service for packaging of the manufactured tea bags) are supplied in terms of a single contract (refer to the Agreement) and at a single price (as may be ascertained from the invoices). The flow chart shows that the services are supplied as processes in a continuous assembly line, where packaging of tea bags in cartons and wrapping is ancillary to manufacturing tea bags. The tea bags, of course, cannot be delivered unless they are suitably packed. The Applicant is, therefore,
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