In Re : M & I Materials India Private Limited
GST
2018 (7) TMI 1493 – AUTHORITY FOR ADVANCE RULING – MAHARASHTRA – 2018 (15) G. S. T. L. 423 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING – MAHARASHTRA – AAR
Dated:- 9-5-2018
No. GST-ARA-23/2017-18/B-31
GST
B.V. Borhade (Member) and Pankaj Kumar (Member)
PROCEEDINGS
(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
The present application has been filed under section 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 oi
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
Ltd. based in UK (hereinafter referred to as 'M&I UK').
2. The company commenced its operations in the month of April 2014 and is, inter alia. engaged in the following activities:
2.1 Import of 'Midel Dielectric Fluids' from M&l UK and subsequent sale in India
2.2 Establishing local warehousing and distribution capability.
2.3 Marketing and business development activity with a focus on assisting in the development of the Midel Dielectric Fluids business 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 pe
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
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.
3.2.3 We have classified MIDEL eN 1215 as per HSN code under the First Schedule of the Customs Tariff Act, 1975 under the entry 15180039.
3.2.4 The applicable Indian Standards (IS) of the Bureau of Indian Standards (BIS) under the Bureau of Indian Standards Act, 1986 is IS 16659:2017.
4. The rate of GST applicable on supply 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, boil
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
classification for both of our above mentioned products
Statement containing the applicant's interpretation of law and/or facts, as the case may be, in respect of the aforesaid question(s) (i.e. applicant's view point and submissions on issues on which the advance ruling is sought)
We submit that both our products viz. MIDEL eN 1204 and MIDEL eN 1215, are chemically modified vegetable oil based transformer fluids which should be classified under Entry at S. No. 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
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even If one of them gives a more complete or precise description of the goods
(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'
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
e general Entry 18 which relates to rayon and synthetic fibres and yarn i.e. manmade fibres.”
1.7 Given the above, we submit that a combined reading of relevant entries along with the general rules of interpretation [supra] and the decisions of the Apex Court on the matter, it is evidently clear that both our products should fall under Schedule I – 2.5% as it provides a more specific description applicable 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
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
e above, if it is assumed that either or both of 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%.
3.2 In this regard, we would like to reproduce the entry at S. No 88 of Schedule 1 – 2 5% 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
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
rdingly, we submit that, both our products should fall within the ambit of entry at S. No 90 of Schedule I – 2.5%.
Prayer
1. In light of the above, we pray that both our products viz. MIDEL eN 1204 and MIDEL eN 1215 be classified under Entry at S. No. 90 of Schedule – I i.e. at the applicable rate of CGST of 2.5%.
2. We crave leave to add, to alter, amend and/or modify all or any of the foregoing submissions
3. We pray that a hearing be granted to us before any decision 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 anoth
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ost of the customers of our products include government and non-government entities operating in the essential sector of electricity generation, transmission and distribution.
1.3 Similarly, the Tamil Nadu government vide Notification-III. G O Ms. No. 77, No II(1)/CTR/12(R-I7)/2011 dated 11 July 2011 had reduced the tax payable by any dealer to 5% on the sale of any goods except petrol, diesel and cement to certain entities engaged in generation, 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 upo
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ing combined tax rate of Central Excise and VAT between 15% and less than 21 %):
iv. 26 % (to cover those goods presently attracting combined tax rates of Central Excise and VAT equal to or more than 21 %)”
[emphasis supplied]
– 4th GST Council meeting
“10. Initiating the discussion, the Secretary to the Council briefly recapitulated the discussion on this issue in the 3rd GST Council Meeting on 18-19 October, 2016. He recapitulated 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 bra
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
cted to beneficial rates of tax under the erstwhile law.
1.10 We submit that the above discussion supplies further credence to our earlier submissions that our products viz. MIDEL eN 1204 and MIDEL eN 1215 being products consumed by entities operating in the essential sector of electricity generation, transmission and distribution, and being subjected to beneficial rate of tax under the erstwhile indirect tax regime, should be classified 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 rep
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
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%.
(ii) MIDEL eN 1204- In this sheet product use is mentioned as dielectric fluid. It is blend of natural triglyceride esters (vegetable oil). It clearly shows that the product is intended to 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
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
under Schedule II and not under Schedule I as claimed by the applicant.
05. OBSERVATIONS
We have gone through the facts of the case. We have been called upon to decide the classification of the products MIDEL eN 1204 (rapeseed oil based dielectric transformer fluid) and MIDEL eN 1215 (soya oil based dielectric transformer fluid). Before we ascertain the applicability of the schedule entries, at 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 tr
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
nal officer had pointed to a document called 'Safety Data Sheet', the relevant parameters from which can be seen below :
Particulars
MIDEL eN 1204 (rapeseed oil based dielectric transformer fluid)
MIDEL eN 1215 (soya based dielectric transformer fluid).
1. Identification of the Substance/Mixture and of the Company/Undertaking
1.1 Product Identifier Material Name: MIDEI. eN 1204.
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.
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. M3
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
56-68-3 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.
3 Substance
CAS No.: 68956-68-3 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 a
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
handling Avoid eye and prolonged skin contact
7.2 Conditions for safe storage, including any incompatibilities No special precautions required
7.3 Specific end use(s)
Exposure to air should be minimised. Opened containers should be properly resealed
7.1 Precautions for safe handling Avoid eye and prolonged skin contact
7.2 Conditions for safe storage, including any incompatibilities No special precautions required
7.3 Specific end 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 paramete
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ising
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.
11.1 Information on toxicological effects Likely routes of exposure: Skin and eyes are the most likely routes for exposure Accidental ingestion may occur. Inhalation is not expected to be a relevant route of exposure. Product is vegetable 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 carcino
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
inct identity as being a “transformer fluid”. They are also given distinct names to establish their identity.
* We only learn that the impugned products are vegetable oil based.
* Neither the exact ingredients nor the exact additives, and the composition of each of these are available before us.
* The information shows that the products are a blend of natural triglyceride esters. They also contain additives.
* The applicant has argued that the quantity of additives in their products is minimal i.e. 0.3% of the total 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
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ble mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this chapter, not elsewhere specified of included
12% [6 + 6]
A look at the description as found in the entries and the product information, as reproduced above, we are constrained to observe thus –
1. The products are not vegetable fats and vegetable oils per se.
2. 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.
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 ingredient
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
, BLOWN, POLYMERISED BY HEAT IN VACUUM OR IN INERT GAS OR OTHERWISE CHEMICALLY MODIFIED, EXCLUDING THOSE OF HEADING 1516 ; INEDIBLE MIXTURES OR PREPARATIONS OF ANIMAI. OR VEGETABLE FATS OR OILS OR OF FRACTIONS OF DIFFERENT FATS OR OILS OF THIS CHAPTER, NOT ELSEWHERE SPECIFIED OR INCLUDED
1518 00
–
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; 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 :
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
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
otes (HSN) in respect of the part 1 (as reproduced above) of Heading 1518 says-
“This part covers animal or vegetable fats and oils and their fractions which have been subjected to processes which modify their chemical structure thereby improving their viscosity, drying power (i.e., the property of absorbing oxygen when exposed to the air and forming elastic films) or modifying their other properties, provided they retain their original fundamental structure and are not more specifically covered elsewhere, e.g.:
Thus, the Notes make it clear that the animal or vegetable fats and oils 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
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
products as dielectric transformer fluid. The products are described as a “fluid”. Is a fluid same as an oil? A fluid is different from even a liquid, let alone oil. The products are not being sold as a modified vegetable oil but as products which result from the adaptation of the natural triglyceride esters to obtain a dielectric transformer fluid. In view thereof, we are convinced that the impugned products would not be covered by the part 1 (as reproduced above) of Hearting 1518. The same reasoning would apply to non-applicability of entry 88 of Schedule I.
f. We now come 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 t
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
affect our decision. We find that there is Chapter 38 of the Customs Tariff which covers residual products of the chemical or allied industries. However as the exact composition of the product is not revealed to us by the applicant and therefore on the basis of the facts at hand, we find them insufficient to arrive at any decision as to the classification of the product under Chapter 38 and accordingly, taking into consideration only the details revealed to us, we find that the product is classifiable under Chapter 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
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
