2019 (3) TMI 434 – APPELLATE AUTHORITY FOR ADVANCE RULING MAHARASHTRA – TMI – Classification of goods – marine paints supplied by the Appellant – whether the goods are to be considered to be part of ship and accordingly, be then classified under S. No. 252 of the Schedule I of the Notification No. 1/2017? – rate of tax – N/N. 1/2017-Central Tax (Rate) dated 28.06.2017 – Held that:- Notification No.1/2017 dt.28.06.2017 prescribes the applicable rate of CGST. The paints supplied by the appellant are classifiable under Chapter heading 3208 and 3209 which are covered under Schedule IV of the said Notification and liable to GST @ 28%. However, under the same rate notification, Schedule-I which covers goods taxable @ 2.5% CGST has entry No.252 which covers parts (classifiable under any chapter) of goods, falling under heading 8901,8902,8904, 8905,8906 and 8907.
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In common parlance, paints generally means any liquid which is commonly applied to a number of surfaces and is used to provi
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appellant is that as per the provisions of the Merchant Shipping Act, paints are mandatorily required on all ships and therefore they should be considered as part of ships. This may be mandatory requirement for the sail worthiness of the ship but that does not indicate that they are parts of the ship. The mandatory requirement under some other law cannot be an adequate ground for classifying a product as ‘part’.
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Thus, the impugned product would not be a part of ship – AAR decision upheld. – MAH/AAAR/SS-RJ/17/2018-19 Dated:- 5-2-2019 – SMT. SUNGITA SHARMA, AND SHRI RAJIV JALOTA, MEMBER PROCEEDINGS (Under Section 101 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 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 m
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marine paint being manufactured by Appellant makes it suitable for ship during building stages and even during maintenance. C. In the erstwhile indirect tax regime, Appellant has been discharging applicable indirect taxes on supply of such paints and availing exemptions when granted under respective legislation. D. With the introduction of GST, Appellant has analyzed classification and applicability of CGST, SGST and IGST in light of new legislation. For classification, it has been clarified in the rate notification of respective legislation that rule of interpretation of the First Schedule to the Customs Tariff Act, 1975 including Section Notes and Chapter Notes and general explanatory notes of the said first schedule would be applicable for the purpose of the classification under GST. E. Accordingly, Appellant has sought to classify paints being supplied under HSN 3208 and 3209 basis the nature of the product and after considering relevant chapter notes and Section notes. Notificatio
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e I of the Notification No. 1/2017 of Central Tax (Rates) dated 28.06.2017. H. The Authority for Advance Ruling, Maharashtra passed the advance ruling wherein the Appellant s contentions of classifying marine paints under Sl. No. 252 of Schedule I has been rejected. Hence, the Appellant has preferred an appeal before this Appellate Authority against the impugned Advance Ruling. GROUNDS OF APPEAL 1. The Appellant submitted that marine paint is a specific type of paints suitable for use principally for ships during building stage and even during maintenance. The sailing ship needs protection from corrosive environment in which they operate. Such marine corrosion has a significant impact on sea carriers and their longevity. Therefore, effective corrosion control strategies are chosen considering appropriate selection of coating for a marine environment. Marine coatings have special functionality to protect marine vessels and other carriers above and below the waterline. Accordingly, marin
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r Customs Tariff Act, it would be pertinent to refer to extract of description of goods falling under Customs Heading 3208: Paints and varnishes (including enamels and lacquers) based on synthetic polymers or chemically modified natural polymers or chemically modified natural polymers dispersed or dissolved in a non-aqueous medium; solutions as defined in Note 4 to this Chapter 5. It is submitted that based on the technical specification of the product, marine paints appear to be classifiable under heading 3208. Since, marine paint is suitable for use for ships, it could also get classified as part of ship. For the purpose of this analysis, Appellant referred to chapter 89 for Ships, boats and floating structure . They further submitted that there is no specific entry in Chapter 89 for parts of ships covered therein. In the absence of any entry for part of ship, Appellant had adopted classification of marine paint under chapter heading 3208. 6. The Appellant has also been adopting simi
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rs, floating cranes and other vessels the navigability of which is subsidiary to their main function; floating docks; floating or submersible drilling or production platforms 250 8906 Other vessels, including warships and lifeboats other than rowing boats 251 8907 Other floating structures (for example, rafts, tanks, coffer-dams, landing-stages, buoys and beacons) 8. It is submitted that on conjoint reading of above entries, it could be construed that the aforementioned goods along with its parts (covered under entry 252) would be taxed at the rate of 2.5%. It is to be noted here that Entry 252 reproduced above is applicable to goods falling under any chapter but which are parts of goods falling under headings 8901, 8902, 8904, 8905, 8906 and 8907. Accordingly, a product which is classifiable under any chapter, if could be construed as part of these prescribed goods then the same would fall within the purview of entry 252 and hence would be liable to 2.5% CGST. 9. It is submitted that
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ed to tax at 2.5%. 11. Accordingly, for marine paints to be classified under this entry, it should be construed as part of the ship covered under entry 252. 12. It is submitted that there is no separate tariff item as parts of ship under chapter 89 of the First Schedule to Customs Tariff Act, 1975. Thus, meaning of the term parts of goods , could then be adopted from its meaning in common parlance. 13. It is submitted that the said term Part means an essential ingredient of the main product. The said word i.e. part has been defined in various dictionaries as under: The term Part as defined under The Black s Law Dictionary an integral portion, something essentially belonging to a larger whole, that which together with another or others makes up a whole. Definition of Part from Thesaurus an essential or integral attribute or quality The meaning of the term part in common parlance is that component part of an article is an integral part necessary to the constitution of the whole article a
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ost equal measures of something etc. Further, we also find the definition of Spare Part as per Wikipedia A spare part, spare, service part, repair part or replacement part is an interchangeable part that is kept in an inventory and used for the repair or replacement of failed units. Spare parts are an important feature of Logistics Engineering and Supply Chain Management. 16. It is submitted that also as per the above definitions referred by the Ld. AAR, it is clear that part is one of the piece or ingredient of the main machine. In the present case, ship is main machine and marine paint is essential part of the same. 17. It is further submitted that the Ld. AAR has observed that anchor, bow etc. are very essential parts of the ship or vessel and are quite clearly part of the vessel. However, in addition to the above there are some additional equipment that are required to be made available on a ship as a measure of statutory compliance under the various marine acts. Though these parts
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0. The Merchant Shipping Act, 1958, fosters development and ensures the efficient maintenance of an Indian mercantile marine in a manner best suited to serve the national interests. This Act provides registration, certification, safety and security provisions for Indian ships and generally deals with amendments law relating to merchant shipping. 21. It is submitted that as per the provisions of Merchant Shipping Act, 1958 ( MS Act ), marine paint is essential part of the ships. Relevant provisions of the said act which would help in demonstrating that marine paint is integral and essential component of ship as referred below for ease of reference. Section 356P(1) of MS Act: Application of chapter XIB-Control Of Harmful Anti-Fouling Systems On Ships Save as otherwise provided in this Part, this Part shall apply to- a. every Indian ship, wherever it is; b. ships not entitled to fly the flag of India, but which operate under the authority of India; and c. ships that enter a port, shipyard
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the requirements, as may be prescribed from time to time. 2. All other vessels to which this Part applies shall comply with requirements of the anti-fouling systems as prescribed from time to time. Section 356X of MS Act Information regarding contravention of the provisions of Convention 1. If, on receipt of a report from a surveyor or other person authorised to inspect a ship, the Director-General is satisfied that any provision of this Part has been contravened by such ship within the coastal waters, the Director General or any officer authorised by him in this behalf, may- a. detain the ship until the causes of such contravention are removed to the satisfaction of the Director-General or the officer authorised by him; and b. levy penalty on such ship as specified in section 436 22. It is submitted that from conjoint reading of the above provisions, it is evident that every ship has to adhere to the anti-fouling provisions as prescribed under MS Act. Basis the same, a layer of coatin
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e. Accordingly, such marine paint has to be considered as part of ship and should get covered under 2.5% CGST Rate schedule. A PRODUCT ESSENTIAL TO COMPLETE THE MAIN PRODUCT AND MAKE IT MARKETABLE IS CONSTRUED AS PART OF THE MAIN PRODUCT 25. Reliance is placed in this regard on the decision of the Hon ble Supreme Court, in case of Star Paper Mills Ltd. Vs. Collector of Central Excise, Meerut [1990] 76 STC 312 (SC) = 1989 (8) TMI 78 – SUPREME COURT OF INDIA, wherein it has been ruled that if it is found that the use of paper core is necessary in any process incidental or ancillary to the completion of paper as marketable goods and it would consequently be commercially inexpedient to sell paper without the use of paper core, it would certainly be a constituent part of paper and would thus fall within the purview of the term component parts used in the notification. 26. Reliance is also placed on the decision of Hon ble Gujarat High Court, in case of Surgichem Vs. State of Gujarat [1992]
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in the appeals, that it was an essential requirement to be goods, to be wrapped in paper. Anything required to make the goods marketable, must form part of the manufacture and any raw material or any materials used for the same would be component part for the end product. 28. It is submitted that from the above cases, it could be summarized that paper core, plastic spools and wrapping paper would be considered to be parts of paper rolls, adhesive plaster tapes and paper reams/reels respectively since without the former goods, the later goods couldn t be marketed or are commercially inexpedient. Thus an analogy could be drawn that anything which is required for making goods marketed or to be marketable, would be form component part of that end products. 29. It is submitted that, as explained above, basis the provisions of The Merchant Shipping Act, ships are bound to adhere to the anti-fouling system norms. Accordingly, ship would not be marketable unless the same has complied with anti
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cation 6/2002 – Central Excise dated March 1, 2002, while deciding on whether wires and cables manufactured for aircrafts / helicopters would be considered as parts of aircraft, the Hon ble Court in case of Sanghvi Aerospace (P) Ltd Vs. Commissioner of Central Excise Ahmedabad[2009 (247) E.L.T. 578 (Tri. – Ahmd.)] = 2009 (6) TMI 808 – CESTAT, AHMEDABAD stated that following: he has also submitted a list of goods in respect of which exemption has been allowed to manufacturers supplying the goods to National Aerospace Laboratories, HAL etc. as detailed below : 9.1 Aircraft cables (manufacturer – Radiant Cables Pvt. Ltd.) 9.2 Paints (manufacturer – South Field Paints & Chemicals Pvt. Ltd.) 9.3 Expoxi Yellow Primer (manufacturer – South Field Paints & Chemicals Pvt. Ltd.) 9.4 Thinner for yellow primer (manufacturer – South Field Paints & Chemicals Pvt. Ltd.) 9.5 Rivets (manufacturer – M/s. Ankit Forgings) 9.6 Epoxi black paint (manufacturer – South Field Paints & Chemicals
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ribing effective rate of central excise for specified goods (amending Notification 12/2012 dated 17 March 2012). Said notification inserted following entry for prescribing effective rate of excise for goods mentioned therein. Sr. No. Chapter or heading or sub-heading or tariff item of the First Schedule Description of excisable goods Rate Condition No. 306C Any chapter Raw materials and parts NIL 2 and 3* * Condition 2 – Where such use is elsewhere than in the factory of production, the exemption shall be allowed if the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, is followed. *Condition 3 – The exemption shall be allowed if it has been proved to the satisfaction of an officer not below the rank of the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction that such goods are cleared for the intended use 36. It is submitted
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252 has been inserted for parts of these goods. Thus, the intention appears to be to avoid inverted duty rate structure for vessel manufacturers. They should be able to procure all the parts at 5% IGST and then would also be charging same rate on their outward supply of different types of vessels. Hence, entry 252 of IGST Rate notification should be read to cover all raw materials and parts which are meant for use in manufacture of different types of vessels. VAT legislation of United Kingdom also considers paint as part of ship 39. It is submitted that Value Added Tax (VAT) was introduced in the UK on April 1, 1973. Although Value Added Tax Act 1994 (VATA) provides the main framework of the tax, the detailed interpretation of the same are found in statutory instruments either in the form of Orders made by Treasury or Regulations made by Her Majesty s Revenue and Customs (HMRC). HMRC has published several Notices and Leaflets affecting law. Though these Notices are not part of the law
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erials, partly processed parts or equipment and also non-specialist goods or appliances are excluded from zero rating. The list below gives examples of other parts and equipment which are not zero-rated. It is not exhaustive. Binoculars catering equipment (domestic) crockery cutlery diving equipment furniture (unfixed) laundering equipment (domestic) missiles, shells etc ship s stores soft furnishings phones televisions tools underwater cameras videotapes/disks, electronic games and similar entertainment equipment crockery and cutlery raw materials such as: fibre board, plastics, and specialist metals bulk materials such as: adhesives, chemicals, fabrics, inhibitors, metals, oils, paints, solvents and thinners etc aircraft ground equipment flight simulators or their parts, and tooling and equipment used for manufacturing parts or equipment 41. It is submitted that as per section 30(2) of VATA, any supply of goods or services would be zero-rated if the supply of goods are covered under
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ero-rated. The said non-exhaustive list of parts and equipments includes paints, solvent and thinners. 43. It is submitted that from the above it is clear that paints, solvent and thinners have been considered to be parts and equipments of a ship since it is reported under a non-exhaustive list of parts and equipments. VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. 44. In support of its contentions, the Appellant replied upon the various cases. At the time of the passing of the impugned advance ruling, the Ld. AAR, relied upon various case laws different that the cases referred by the Appellant. However, the Appellant was not given chance of representing its case in light of those decisions referred by the Ld. AAR. Such act of the Ld. AAR is clearly violation of the principles of natural justice. 45. It is submitted that from the above, it is clear that the impugned advance ruling has been passed in violation of the principles of natural justice and hence the same is liable to be set asid
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ified under Chapter-32, The rate of tax is 12 % 6) Under GST the goods are classified under schedule – IV @ 14+14=28 %(SGST+CGST) 7) Going by the principle of RNR i.e VAT+ Excise =13.5+12=25.5 hence the goods are classified @ 28 %. 8) Dealer s contention is to classify the goods under SCH-I, serial no.252 parts of goods of heading-89 9) In the ARA Maharashtra application, the dealer has contended the above claims of 5% on following grounds i) Section 356 of Merchant shipping Act, 1958 – Anti-fouling paints just because it is mandatory under some law to be applied to ships does not essentially make it a part. On this issue, ARA Maharashtra has clearly clarified that paints can be consumables and not parts. As per this law although application of paints is mandatory but that doesn t mean that it can be classified as part of ship. ii) Central Excise exemption notification in 2012, 2015 – specified ships. This exemption is for the things used in ships. In this case, it is noticed that the
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of Ship. This conclusion which we have drawn as above gets support from the facts stated by the appellant and detailed discussions above as per which marine paints are clearly consumable items and not parts. v) Thus we would be stretching the definition of part greatly, if we intend to treat paints as parts of ship in view of the above discussions. vi) Basis 30(2) of UK VAT Act, the ARA has mentioned that the statutory provisions, conditions are in different context and therefore not relevant in the facts of the case in present matter. DISCUSSION AND FINDINGS 47. We have perused the record of the file and gone through the facts of the case and the submission made by the appellant and the department. The appellant have submitted that they are manufacturers and exporters of paint. M/S. Jotun India Pvt. Ltd. is a supplier, exporter and manufacturer of paint and powder coatings. The appellant has stated that they supply paints that are specially designed for unique conditions. One of the
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Schedule-I of the Notification No.1 of 2017 of Central Tax (Rates) dt.28.06.2017. 48. There is no dispute that the product is covered by Chapter heading 3208 and 3209 but the dispute pertains to the claim of the appellant that they are covered by Entry no.252 of Schedule I Notification No. 1 of 2017 dt.28.06.2017, which covers parts (classifiable under any chapter) of goods, falling under heading 8901,8902,8904, 8905,8906 and 8907 i.e. parts of ships . The appellant has submitted that the impugned product sold by them i.e. Marine Paint is a specific type of paint suitable for use principally for ship during the building stage and during maintenance. The ship needs protection from the corrosive environment in which they operate and the marine coatings are a special functionality to protect the marine vessel and other carriers above and below the water line. The marine paint has the following special features:- 1. It protects the body of the ship from highly corrosive environment. 2. Blo
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es and is used to provide texture to an object as well as protect the surfaces. The paint supplied by the appellant is anti fouling paint which is generally applied to hulls of ships. In order to address the contention of the appellant, it is to be seen as what is understood by the meaning of the term parts . The terms parts has not been defined under CGST Act. It has been defined under the Black s Law Dictionary as an integral portion, something essentially belonging to a larger whole which together with another or others makes of a whole. In the Cambridge English Dictionary part is defined as a separate piece of something or a piece that combines with other piece to form something. Thus, what we understand from the term part is that it should be identified as something integral and mandatory to the completion of the whole article and without which the article will not be complete. By the application of the above, it cannot be said that marine paint is part of the ship. An essential p
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d are not perceived as a part of a setting on which they are applied and this would apply even to the special category of Marine paints . 52. The main contention of the appellant is that as per the provisions of the Merchant Shipping Act, paints are mandatorily required on all ships and therefore they should be considered as part of ships. This may be mandatory requirement for the sail worthiness of the ship but that does not indicate that they are parts of the ship. The mandatory requirement under some other law cannot be an adequate ground for classifying a product as part . 53. The Appellant has placed reliance on the Supreme Court decision in the case of Star Paper Mills v. Collector of Central Excise (1990) 76 STC 317 (SC) = 1989 (8) TMI 78 – SUPREME COURT OF INDIA, wherein it was ruled that if it is found that use of paper core as necessary in any process incidental or ancillary to the completion of paper as marketable goods and it would consequently be commercially inexpedient t
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03 – GUJARAT HIGH COURT where it was observed that, anything that goes into the product till the product become marketable such things becomes part and parcel of that article. Applying this test, the plastic pools over which plastic tapes are wrapped were considered as part of the goods marketed. A plastic tape could never have become marketable without a plastic pool and therefore the decision. The same cannot be said about paints. 55. The Bombay High Court in the case of Commissioner of Sales Tax Vs. Jayanand Khira & Co. Private Ltd. (36 STC 242 Bom) = 1975 (2) TMI 97 – BOMBAY HIGH COURT had to decide whether an oil tanker is a part of a motor vehicle. The Court observed , …We find some difficulty in accepting the test laid down in that case. According to us, the correct test would be to look both at the article which is said to be the component part and the completed article and then come to the conclusion whether the first article is a component part of the whole or not. If o
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old by the respondents was a component part of a motor vehicles. 56. In the case of Commissioner, Sales Tax v. Free India Cycle Industries [1970] 26 STC 428 = 1970 (2) TMI 107 – ALLAHABAD HIGH COURT the Allahabad High Court was concerned with an entry bicycles, tricycles, cycle rickshaws and perambulators and parts and accessories thereof other than tyres and tubes . The assessee was a dealer in cycle and cycle goods and the question arose whether rexine saddle covers manufactured and sold by it would fall within that entry. It was observed by the Division Bench that the expression parts and accessories qualified the word bicycles, tricycles, etc. The entry was regarded as referring to parts and accessories of the vehicles and did not include accessories of individual parts or accessories of the vehicle. Dealing with the question of rexine covers, it was held that rexine covers in question are used as a covering of the saddle or seat of a cycle. The seat or saddle of a cycle is, of cou
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Schedule Entry No.C-II-124 as an accessory of the Cable TV. Thus, having regard to the functional utility of the product, the Commissioner held that the Hybrid Amplifiers were covered by Schedule Entry No.C-II-124 and liable to tax at 13%. Schedule Entry C-ll-124 read thus :- Entry Description of the goods Television sets, television cameras, television receivers, to date television monitors, antennas and components, parts and accessories of any of them. The Court observed, . From all these facts, what becomes clear is that the Hybrid Amplifier basically boosts the signal, be it for the purpose of transmission of Cable TV or for several other purposes as set out by us earlier. This being the position, we agree with the finding of the MSTT that the impugned product viz. Hybrid Amplifier has got a totally different function and it has no function akin to an antenna as was held by the Commissioner in his DDQ order. We do not find that this Hybrid Amplifier can be classified under Schedul
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