In Re : Cargill India Private Limited
GST
2018 (5) TMI 810 – AUTHORITY FOR ADVANCE RULING – MAHARASHTRA – 2018 (12) G. S. T. L. 585 (A. A. R. – GST), [2018] 2 GSTL (AAR) 71 (AAR)
AUTHORITY FOR ADVANCE RULING – MAHARASHTRA – AAR
Dated:- 20-3-2018
GST-ARA-08/2017/B-12
GST
Shri B.V. Borhade, Joint Commissioner of State Tax and Shri Pankaj Kumar, Joint Commissioner of Central Tax
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 CARGILL INDIA PRIVATE LIMITED, the applicant, seeking an advance ruling in respect of the applicability of GST on:
Whether Natural Easter Dielectric Fluid (hereinafter referred to as ' Envirotemp FR3') fall under Serial no. 90 of Schedule
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provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the “GST Act”
02. FACTS AND CONTENTION – AS PER THE APPLICANT
The submissions, as reproduced verbatim could be seen thus-
STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTION(S) ON WHICH THE ADVANCE RULING IS REQUIRED.
The present Advance Ruling application is being filed by M/s. Cargill India Private Limited (“hereinafter referred to as the “The Applicant'), a company incorporated under the laws of India, having its registered office at Y-65, Ground Floor, Hauz Khas, New Delhi- 16. The applicant is registered in the State of Maharashtra under Maharashtra Goods and Service Tax Act. 2017 having GST registration number 7AAACC3269JIZK with its principal place of business at 7th, 701, South Block, Sacred World, Wanawadi, city Pune MCORP, T
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food manufacturers and food service industry
* Origination, processing, storing, Trading and marketing a wide range of agricultural commodities such as grains, oilseeds, sugar and cotton
* Offering premix, compound feed and therapeutic care products to nourish and treat animals
1.3 In India, under food segment of Applicant's business there are three manufacturing units at Kandla, Gujarat, Kurkumbh, Maharashtra and Devengere, Karnataka. In addition to the manufacturing plants, the Applicant has depots, warehouses and branches across 23 states in India.
2. ABOUT THE PRODUCT-NATURAL ESTER DIELECTRIC FLUID
2.1 One of the products manufactured by the Applicant is Natural Ester Dielectric Fluid, commonly known as Envirotemp FR3. The said product is manufactured by the Applicant in its Kurkumbh plant in Maharashtra and thereafter sold from there.
2.2 Natural ester dielectric fluid is a proficiently emerging product/technology
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end customer by reducing the overall cost.
2.5 Envirotemp FR3 has immensely helped utility companies and end consumers globally by increasing cost savings and efficiency without requiring major operational changes or capital investments. In India, the procurement of Natural Ester fluid is done through the tendering process. In most cases, the fluid is procured by the Original Equipment Manufacturers (OEMs) who further supply the fluid to the end user along with the transformer. The end user is generally a utility or an industrial client. In certain cases, these utilities directly procure the fluid as well. Due to this reason, the end customer buying or placing the purchase order to the Applicant varies from different transformer manufacturers present in the market to the different categories of end users.
3. MANUFACTURING PROCESS
3.1 The starting point in the production of vegetable oil based dielectric fluid is the
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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 ”
4.2 As per First schedule of Central Excise Tariff Act, 1985, Excise duty was levied at the rate of 6% on all the products falling under Chapter heading 1518. Further, the said tariff heading was exempted by way of Notification no. 12/2012 – Central Excise dated 17th March 2012, implying that the effective Excise duty rate on this product was Nil under Excise law.
4.3 It is further submitted that under the erstwhile Maharashtra Value Added Tax Act, 2002 tariff heading 1518 was classified under serial no. 54 of the Schedule C as an Industrial input read with MVAT notification no. VAT-1505/CR-234/Taxation-I dated 1st September 2005, (Sl. No, 14). Thus, the effective rate of VAT on the
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6
Animal fats and oils and their fractions, partly or wholly hydrogenated, inter-esterified, re-esterified or elaidinised, whether or not refined, but not further prepared.
27.
1518
Animal fats and animal 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; 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 of included
4.5 The product in question, i.e., natural ester dielectric fluid is nothing but vegetable oil which is chemically modified to make it fit for transformers and other electricity storage devices. From a reading of the above entries, it appears that the product in question falls under Entry 90 of Schedule I of the MGST Act and taxable at 2.5%.
4.6 Further, it also appears that Entry 27 of Schedule
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ster Dielectric Fluid can be said to be a mixture of inedible vegetable oil which is not elsewhere classified, hence, classifiable under Entry 27 of Schedule II of Notification No. 01/2017 – State Tax (Rate), under the MGST Act, and taxable at the rate of 6%. State Tax?
5.3 Pass such other Ruling as it may be deemed fit in the interest of equity and good conscience. It is submitted that the Applicant is of the humble view that the product in question should be classified under Entry 90 of Schedule I of the said Notification and not under Entry 27 of Schedule II. In support of its view, the Applicant, hereby humbly submits its interpretation of the relevant Entries of Schedule I and II.
It is submitted that the Applicant is of the humble view that the product in question should be classified under Entry 90 of Schedule I of the said Notification and not under Entry 27 of Schedule II. In support of its view, the Applicant, hereby humbly submits its interpretation of the relevant E
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hich is used as fuel for power transformers, In this regard, it is pertinent to analyze Entry 90 of Schedule II. The said Entry is reproduced below for ease of reference –
“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”
1.3 The above Entry essentially has three aspects namely –
I.3.1 The Entry covers only vegetable fats and oils:
1.3.2 The vegetable fat and oil should have undergone one of the processes mentioned in the said entry, i.e., boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas
1.3.3 The vegetable fat or oil may otherwise be chemically modified
1.4 It is submitted that the said Entry no. 90 is wide enough to cover all vegetable oils and fats which are chemically modified, Chemical modification is a process whereby, certain properties
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or, clearly falling within the ambit of the Entry 90 of Schedule I of the Notification No. 01/2017 – State Tax (Rate) under the MGST Act.
2. THE PRODUCT IN QUESTION DOES NOT FALL IN ENTRY 27 OF SCHEDULE II
2.1 It is submitted that Entry 27 of Schedule II is not the proper classification for Natural Ester Dielectric Fluid. For the ease of reference, Entry 27 has been reproduced below –
” Animal fats and animal oils and their fractions, boiled oxidised, dehydrated suphaurised, blown, polymerised 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 the this chapter not eleswher specified of included”
2.2. From a reading of the above entry, it appears the following points emerge –
2.2.1. The said Entry has two parts', the first part covers animal fats and animal oils and
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this chapter, not elsewhere specified of included.
2.4. In this regard, it is imperative to understand the meaning of inedible mixtures or preparation of vegetable fats or oils. The term inedible mixture or preparation of vegetable fats or oils will mean that the mixture or preparation shall be of different vegetable fats or oils. In other words. two or more vegetable fats or oils must be combined together to form an inedible mixture.
2.5. In the present case, it is submitted that there is no mixing or preparation of vegetable oil which is taking place. The process in the present case if purely of chemical modification of only soybean oil to convert it into a biodiesel fuel. Given the above. it is humbly submitted that in Natural Ester Dielectric Fluid. there is no mixture of or preparation of multiple vegetable oils or fats or their fractions. Hence, the product in question ought not to be classified in this Entry.
2.6. Without prejudice to the a
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ore specific entry as compared to Entry 27 of Schedule II which covers Only preparation and mixtures of vegetable fats and oil.
3.2. Natural Ester Dielectric Fluid is derived by chemically modifying soybean oil by adding special additives. The process of conversion of the product in question is completely different as compared to mere mixing of two or more vegetable fats or oil.
3.3. In this regard, it is pertinent to refer to Explanation 4 of Notification No: 1/2017-Central Tax (Rate) which provides the classification and rate of various products under GST. As per the said Explanation, the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes or the First Schedule shall, so far as may be, apply to the interpretation of the said Notification No. 01/2017.
3.4. In terms of Rule 3(a) of Interpretative Rules of the Customs Tariff Act, 1
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the General Rules for interpretation of the First Schedule to the Customs Tariff Act makes it very clear that the heading which provides the most specific description shall be preferred to headings providing a more general description. The decision of the Hon'ble Supreme Court in the case of HPL Chemicals Ltd. v. Commissioner of Central Excise, Chandigarh (supra) is squarely on the point. In that case, the Hon'ble Apex Court held that since the goods in question were covered by a specific heading, the same could not be classified under the residuary heading. The Hon'ble Apex Court further held that if the Department intends to classify the goods in question under a heading which is different from the heading under which an assessee classifies such goods, the burden of proof is on the Department which has to be discharged by adducing proper evidence. In the instant case, the onus was on the Department to justify the change of classification sought to be made by the impugned Circular, wh
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n 5 mm. As per F. No. 1(11)/2011/TTC/Vol.XX, dated 7-2-2012 written to the appellant by Assistant Director, Govt. of India, Ministry of Textiles, Office of the Textile Commissioner, Mumbai appellant's unit has been registered as a technical textile unit in the records of the office of Textile Commissioner and has been allotted registration No. 05152007. As per the Technical Textile literature issued by office of Textile Commissioner, Ministry of Textile, Govt. of India “Agrotex'' includes technical textile products used in Agriculture, horticulture (incl. floriculture), fisheries and forestry. Example of Agrotex technical textile include Shed nets, mulch mats, crop covers, anti-hail nets, brid protection nets, fisheries nets, etc.” Further office of Joint DGFT Surat while issuing Authorisation No. 5230009764, dated 15-11-2011 has held their product Warp Knitted Fabrics to be classifiable under ITCHS Code 60059000. As per Indian Standard ICS 59.080.70; 65.020.20 Agro Textiles-Shed Nets,
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es are specifically covered by Chapter 69 of the Tariff. This was also the view expressed by the Tribunal in the case of Emco Lenze Pvt. Ltd. v. CC [2003 (156) E.L.T. 905]. We, therefore, do not agree with the view of the Tribunal in the case of NTB Hitech Ceramics (supra) and hold that ceramics nozzles are classifiable under Heading 69.01 of the Central Excise Tariff. Reference is answered accordingly.”
3.6. Basis the above judicial precedents, it is clear that in case a specific entry exists, the goods must be classified in the said entry, even though there is a general/residual entry as well. It is further submitted that the Entry no.27 of Schedule II is a residual or a general entry as the said entry ends with the words – 'not elsewhere specified or included. It is humbly submitted that by adding these words in the Entry, the intention of the legislature is to render this entry as a residual entry. Thus, if the products can be classified in any other more specific entry, it should
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onceived and untenable. Tribunal has missed the words “not elsewhere specified or included”. In the present case, we find that “Denatured Salt” is specifically included in Chapter Heading No. 25.01.”
3.7. Further reliance be placed on the case of Gopal Hosiery versus Assistant Collector Of Central Excise, reported in 1989 (41) E.L.T. 35 (Cal.) = 1988 (4) TMI 79 – CALCUTTA HIGH COURT , wherein the Hon'ble High Court of Calcutta held as under –
“The words “elsewhere” must mean elsewhere in the First Schedule. There is no dispute on this point. Some goods have been specified for the purpose of taxation under item nos. 1 to 67. In those categories of goods some goods have been specified as exempt from duty. The goods which have been specified for the purpose of exemption do not cease to stand as specified in the First Schedule only because those goods have been mentioned for the purpose of exemption. In other words, the residuary item No. 68 only deals with goods have not been
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w that classification in residuary entry can be done only if the goods cannot be classified in any entry of the schedule. In the present case, Natural Ester Dielectric Fluid is a chemically modified soybean oil is classifiable under Entry 90 of Schedule I of the said Notification. Hence, it is humbly submitted that the said product cannot be classified in the residuary entry no. 27.
4. COMMON TRADE PARLANCE MEANING SHOULD BE CONSIDERED
4.1 Without prejudice to the above, it is humbly submitted that while classifying goods under any entry, how the product is known in common trade parlance should be given due consideration. In the present case, Natural Ester Dielectric Fluid is known as chemically modified biodiesel which is used as transformer fuel in general trade parlance. It is not known as mixture or preparation of vegetable fats or oils.
4.2. In this regard, reference may be made to the case of Atul Glass Industries Ltd. Vers
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mirror only, because the word 'glass' is descriptive of the mirror in that glass has been used as a medium for manufacturing the mirror. The basic and fundamental character of an article lies in its being a mirror. Therefore, glass mirror is not treated as glass and glassware ever in trade parlance”
4.3 It is humbly submitted that in common trade parlance the product in question is known as an alternative fuel for transformer derived by chemically modifying certain properties of vegetable / Soybean oil. Hence, going by the general trade understanding the said product ought to be classified under Entry 90 of Schedule I as chemically modified vegetable oil.
5. PRINCIPLE OF EQUIVALENCE VIS-A-VIS THE ERSTWHILE INDIRECT TAX REGIME SHOULD BE FOLLOWED
5.1. It is submitted that while fixing the rates of goods and services under GST, the GST council largely followed the principle of equivalence vis-a-vis the rate structure under the pre-GST regime.
5.2 In this
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x Act, 2002 tariff heading 1518 was classified under serial no. 54 of the Schedule C as an industrial input read with MVAT notification no. VAT-1505/CR-234/Taxation-I dated 1st September 2005, (SL No. 14). Thus, the effective rate of VAT on the said goods was 6%
5.5. Given the above, since the effective tax rate on the product under the erstwhile indirect tax regime was 6%, the intention of the GST Council would be to tax the said product under the GST regime at 5% to keep it close to the existing rate, following the principle of equivalence which has farmed the basis of classification of various goods and services into different rate brackets under GST
5.6. Thus, it is humbly submitted that following the principle of equivalence, the said product ought to be classified in Entry 90 of Schedule I of the Notification No. 01/2017 – State Tax (Rate) under the MGST Act and be subject to 2.5% State tax.
PRAYER
IN VIEW OF THE FACTS OF THE CASE AND SUBMISSIONS
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their fractions Chapter heading 1518 Schedule I (Notification No. 01/2017 29/06/2017
SGST – 2.5%
CGST-2.5%
1. Used for human consumption
2. Commercial Identity in the common market as a edible products
3. chemicals ate not added
4. covered in Schedule I
2. Inedible mixtures or preparations of animal or vegetable fats or Oils or fractions of different fats. Chapter heading 1518 Schedule II (Notification No. 01/2017 dt, 29/06/2017
SGST – 6 % CGST-6%
1. It is nonedible mixture used as coolant in Transformer
2. It is chemically modified fluid
3 Additives are added into veg Oil thereby the basic characteristics of the vegetable Oils not remains same.
4. covered in Schedule II
5. Raw material is beg. Oil but in the process it loses its identity and character and final product does not remain veg. oil but a coolant. Hence the claim of the applicant is not acceptable.
The Product – Natural Ester Dielectric fluid commonly known as Envirotemp FR3 is basically ine
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arcotic or psychotropic substances:
Provided that the Central Government may declare, by notification in the Official Gazette, any other article as food for the purposes of this Act having regards to its use, nature, substance or quality;
The product EFR3 is Non edible Product i.e. it is mixture of veg oil & certain additive. Mainly following additives are used in EFR3 Product – as can be seen from another manufacturer's website information.
1. Blend of Natural Esters, Methacrylate resin, Phenol compounds and coloring
As per Provisions of Section 3 clause 'k' of FDA Act 2006 Definition of Food additive is as given below:
(k) “food additive” means any substance not normally consumed as a food by itself or used as a typical ingredient of the food, whether or not it has nutritive value, the intentional addition of which to food for a technological (including organoleptic) purpose in the manufacture, processing, preparation, treatment, packing, packaging, transport or holding
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/ transmission/ distribution establishments and not dealer in food products.
For classification of goods following theories are commonly resorted to arrive at correct conclusion.
A Common Parlance Test –
The applicant's product, though claimed as vegetable oil, is commonly known as 'Trans former Coolant” in the trade and not a vegetable oil, Further, it can be seen from the leaflet of the product, it is termed as “fire Resistant natural Ester Dielectric coolant.” Thus, it is basically Dielectric coolant- a soya oil based transformer fluid and not a vegetable- edible oil
B End Use Theory –
Going by this theory also, the product cannot be termed as vegetable oil falling under HSN 1518, The end users of the product are Electricity generation/ transmission' distribution utilities. The product is never intended to be put to use as vegetable oil.
C. Dictionary Meaning –
Edible oil – Edible oils defined by govt as food substance composition manufactu
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f of the applicant and made submissions as well as orally argued and explained the difficulty that they were facing in classification of their product in the GST regime. The final hearing was had on dt.07.02 2018 when Sh. Rajat Bose, Advocate appeared and reiterated the contention as made in the written submission and further submitted case laws, copy of relevant HSN part to support their contentions. Sh. Rajat Bose was specifically informed that in this matter, the Authority intends to know as to what are the other chemicals or oils mixed with soyabean oil to make it their final product. He was requested to submit by dt.25.02.2018, a certified test report in this regard from an authorized Laboratory about the exact contents of their product. On hearing dt.28.02.2018, Sh. Rajat Bose, Advocate appeared and submitted manufacturing process flow of their products (self-certified), without revealing the exact contents of the final product. He was reminded about the specific request on dt.07
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roduct, as informed, is made up of refined soya beans oil after mixing some additives with the same. The process of manufacture, as informed is thus –
Step I
Hot water is added to crude soya bean oil for degumming. In water degumming, a sticky viscous oil-water emulsion or gum is removed by using water and a centrifuging process. By way of this process, gums, phospholipids, proteins etc., is separated from the crude oil. These are insoluble in oil when hydrated.
Step 2
After degumming, caustic soda is added to remove the free fatty acid This process neutralizers fatty free acids in the oil using caustic soda, thereby converting the acids into soaps, These soaps are easily removed by decantation or by centrifugal force.
Step 3
After Neutralization, bleaching earth is added for bleaching. In this process Clay adsorbent is mixed intimately With the Oil under specified conditions to remove unwanted color bodies and other contaminants. Through this process, Carotenoids are removed, ch
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do filtration.
Step 8
After filtration, quality check is done to see whether the oil is fit for further processing. If found fit, the oil is put through the next process.
Step 9
We add some further chemicals which is proprietary in nature.
Step 10
We remove moisture and other volatile component.
After the above process, another quality check is done to see whether the oil is fit for sale as transformer fuel.
Step 11
Once the quality check is cleared, the product Envirotemp FR3 is produced which is ready to be sold in the market.
As can be seen, various processes are involved in the manufacture of the impugned product. In step 6, some additives are added. But the applicant has not informed the details of these additives. In step 9, there is addition of some chemicals and again, the applicant has preferred not to divulge the details. To have a correct understanding of the product which would aid in ascertaining the correct classification, the applicant was asked to give a re
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e seen, the test report also gives no details of the additives and chemicals which are added while manufacturing the impugned product,
Let us see how the inference and the incomplete particulars could help classifying the impugned product.
The website of the applicant describes the product as –
Envirotemp FR3 fluid is a natural ester derived from renewable oils providing improved fire safety transformer life loadability and environmental benefits that are superior to mineral oil and unsurpassed by any other dielectric coolant.
The applicant themselves advertise the impugned product thus –
FR3 fluid is a soybean-oil based product for use as a coolant and insulator in high-voltage electric transformers. For the past 30 years, mineral oil has been the dominant dielectric fluid used in transformers. However, mineral oil is flammable and can be toxic to the environment.
FRB fluid is much less flammable than mineral oil; it biodegrades easily and is carbon neutral, nontoxic and non-haz
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her information can also be had a look at –
http://www.netaworld.org/sites/default/files/public/neta-journals/NWfa04-Chem%20Per.pdf-'Natural Ester Dielectric Fluids” by Lance R. Lewand Doble Engineering Company
The newest versions of natural ester dielectric fluids have been in use in the electrical apparatus industry since approximately 1998 and are becoming more popular. Unlike transformer mineral oil, which is refi ned from petroleum derived from compressed plant and animal tissue (mostly microorganisms from 70 to 440 million years ago), these liquids are produced from renewable resources such as vegetable oils and seeds.
…………………………………….
The main purpose for development of many of these dielectric liquids was to create an environmentally friendly product that was not only stable when used as an insulating liquid in electrical apparatus but also readily biodegraded when exposed to the environment.
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h may be used independently or combined, include: soya, sunflower, and rapeseed (canola).
Cooper Power Systems
Coconut Oil
Coconut Oil
University of Moratuwa, Sri Lanka
What is a Natural Ester?
Esters can be natural, such as those derived from vegetable oils as discussed in this article, or they can be made synthetically from a group of chemicals chosen to yield certain properties. “Ester” is a term applied to chemical compounds with a certain structure.
Refining of a Natural Ester Dielectric Liquid?
Natural esters are refined in a totally different manner than transformer mineral oils. The first major difference is the source of the material for refining. In the case of transformer mineral oils, crude oil is extracted from the ground by drilling and goes through a series of air and vacuum distillation steps, followed by treatment with hydrogen, pressure, and catalyst. In the case of natural esters, the source materials are crops that are grown and then harvested. In this respe
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ss that is part of a neutralization process, also subjects the oil to clay treatment to remove polar compounds. Deodorizing the oil is accomplished via steam distillation under vacuum up to 200 degrees Centigrade to remove unwanted volatile compounds. The last step, winterizing, which may be optional and depends on the starting material and the degree of refining, involves chilling the oil to remove excessive saturates. Because these refining techniques can be carefully controlled, a more consistent product is produced. In addition, the new natural ester dielectrics differ from their predecessors not only in the refining process but also in the additives used. Whereas the early natural esters had no additives, the new ones have a variety of additives enhancing performance.
Additives
The natural ester dielectric liquids contain additive packages consisting of chemicals to reduce the pour point, aid in oxygen stability, and in some cases have an antimicrobial agent or copper deactivato
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d but the possibility for some or combination thereof to be used does exist. In some of the dielectric liquids listed in the table, the additive package can make up as much as three percent of the liquid.
Possible Additives in BIOTEMP (r), BIOTRANS (r) and Envirotemp (r) FR3 TM
Liquid
Additive and Function
BIOTEMP
Oxidation Inhibitors: Phenolic antioxidants such as: BHA (butylated hydroxy anisole), TBHQ (mono-tertiary butyl hydroquinone), DBPC (BHT, 2,6-ditertiary-butyl paracresol/butylated hydrotoluene), and aklyated diphenylamines
Copper Deactivator: Benzotriazole derivative
Pour Point Depressant: PMA (polymethacrylate)
BIOTRANS
Oxidation Inhibitors: citric acid (mostly used as sequester of metals to avoid catalytic effect of those metals), TBHQ (mono-tertiary butyl hydroquinone)
Pour Point Depressant: diethylhexyl adipate, polyalkyl methacrylate
Envirotemp FR3
Oxidation Inhibitors: Phenolic antioxidants such as: BHA (butylated hydroxy anisole), TBHQ (mono-tert
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s with their different chemical composition. This lack of standards could be seen as one of the limiting factors with regard to the initial rale of implementation of vegetable oils in PT (power transformers).
With the above information, we see that certain ingredients in the form of additives and chemicals are added to vegetable oils to make them function as a substitute for mineral oil in transformers and other apparatus. The impugned product with the processes undergone to produce the end product of coolant for transformer does not remain vegetable oil per se. with this understanding, we come to the classification under the Customs Tariff.
The applicant's invoice for the period prior to GST shows the product being cleared under the Tariff Heading 15180039, Under GST, the applicant seeks a confirmation as to whether the impugned product is covered under the Heading 1518 as found in Schedule I or Schedule Il of the Notification No. 1/2017- Central / State Tax (Rate). The rate of
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EIR FRACTIONS , BOILED, OXIDISED, DEHYDRATED, SULPHURISED, BLOWN, POLYMERISED 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
151800
–
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:
15180011
–
Edible grade
15180019
–
Other
Castor oil, dehydrated :
15180021
–
Edible grade
15180029
–
Other
Other Vegetable oil and its fats:
15180031
–
Edible grade
15180039
–
Other
15180040
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p; The schedule entry 27, additionally, covers the portion of the Tariff Heading 1518 pertaining to inedible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of Chapter of 15.
d. The HSN Notes in respect of the part 1 (as reproduced above) of Heading 1518 say thus-
“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. In the pres
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ected 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 coolant. Though the Test Report shows the percentage of the chemicals to be 1% or the vegetable oils to be at 98.5% would not mean that a new commodity has not been produced. We have seen above an extract from an article that while 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 coolant for transformer. That is precisely the reason that the applicant has not preferred to divulge the details, Thus, by addition of the needful additives and chemicals, we have different transformer coolants made from vegetable oils, each w
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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 product, as discussed above, is a preparation from vegetable oil. It is derived from soya bean oil. In addition, it is inedible. Therefore, it 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 “Fire Resistant Natural Ester Dielectric Coolant for transformers and related electrical apparatus”. We are not in doubts that entry 90 of Schedule I of the Notification No. 1/2017- Central / State Tax (Rate) would not cover the impugned product. It is felt that the description “inedible preparations of vegetable oils' perfectly fits the impugned product and hence, the entry 27 of Schedule II of the Notifica
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