2019 (7) TMI 1136 - AAAR - GST

Pen tips and balls taxed at 18% under GST, not 12% as argued. Appeal dismissed.

The appellate authority upheld the ruling by the West Bengal Authority for Advance Ruling, confirming that pen tips and balls used in manufacturing ball ... Classification of goods under HSN 9608 - Residuary sub heading 9608 99 (parts classified as 'Other') - Taxability of parts under Schedule III - Rate of tax determined by specific sub heading - Advance ruling and its finality - Inapplicability of beneficial interpretation where not sustainableClassification of goods under HSN 9608 - Residuary sub heading 9608 99 (parts classified as 'Other') - Rate of tax determined by specific sub heading - Taxability of parts under Schedule III - Tips and balls used in ball point pens are classifiable as parts under heading 9608 and, lacking a specific sub heading, fall under residuary sub heading 9608 99 90 and attract the rate applicable to that residuary entry. - HELD THAT: - The Appellants' pen tips and balls are essentially parts of refills, and refills themselves are parts of ball point pens. Ball point pens are covered by sub heading 9608 10 (12%) while refills are covered by sub heading 9608 60 (18%). There is no specific tariff item for tips and balls at the 8 digit level; accordingly, by the system of classification they are classifiable under the residuary provision 9608 99 as 'Other'. The residuary classification places these items within the entry corresponding to Sl. No. 453 of Schedule III of Notification No. 01/2017 Central Tax (Rate), and therefore the rate applicable to that residuary entry (18%) applies to the tips and balls. The Authority's reasoning that the parts fall under the residuary sub heading and attract the higher rate is therefore sustained. [Paras 12]Tips and balls are classifiable under sub heading 9608 99 90 as parts and attract tax at the rate specified for that residuary entry (Schedule III).Advance ruling and its finality - Application of tariff entries to parts and refills - The advance ruling issued by the West Bengal Authority for Advance Ruling was examined and found to be a reasoned speaking order; there is no infirmity warranting interference. - HELD THAT: - The Appellant's challenge to the WBAAR opinion was considered on the scope and application of the tariff entries. The Appellate Authority reviewed the WBAAR's reasoning regarding classification and rate and found the WBAAR had addressed the relevant entries and applied the system of classification appropriately. Consequently, the AAAR found no ground to set aside or modify the advance ruling. [Paras 14]The advance ruling is upheld; the appeal fails.Invoice HSN code mentioning guidance - Inapplicability of beneficial interpretation where not sustainable - Notification No. 12/2017 (relating to HSN code mention on invoices) does not restrict classification to 4 digit HSN codes, and the principle of beneficial interpretation relied upon by the appellant is not applicable to alter the classification. - HELD THAT: - The Notification relied upon by the Appellant governs the manner and extent to which HSN codes are to be mentioned on invoices depending on turnover; it does not determine classification of goods. The AAAR rejected the Appellant's contention that classification must be confined to 4 digit headings because that notification addresses invoice disclosure and not the tariff classification exercise. Likewise, the Appellant's plea to apply a beneficial interpretation to accord the lower rate was not accepted because classification under the HSN structure and applicable notifications does not support that interpretation in this instance. [Paras 10, 11]The invoice HSN notification does not limit classification to 4 digit headings; the Appellant's contention for applying a beneficial interpretation to secure a lower rate is rejected.Precedential applicability of earlier exemption rulings - The decision in Nalanda Pen Mfg. Co. Pvt. Ltd. is not applicable to the present matter under the GST regime. - HELD THAT: - The AAAR observed that the cited CEGAT decision pertained to the extension of an exemption notification in a pre GST regime and therefore does not govern classification and rate issues under the GST legal framework. Consequently, the precedent was held inapposite to the facts and statutory scheme before the Authority. [Paras 13]The Nalanda Pen decision does not apply to the present classification and rate questions under the GST Act.Final Conclusion: The appeal is dismissed. The advance ruling of the West Bengal Authority for Advance Ruling is upheld: pen tips and balls are classifiable under residuary sub heading 9608 99 90 as parts and attract the rate applicable to that entry (included in Sl. No. 453 of Schedule III), and the other grounds raised by the appellant are rejected. Issues Involved:- Classification and tax rate of pen tips and balls used in manufacturing ball point pens under GST.Issue-wise Detailed Analysis:1. Classification and Tax Rate of Pen Tips and Balls:The appellant, M/s. Shiva Writing Company Pvt. Ltd., filed an appeal against the ruling of the West Bengal Authority for Advance Ruling (WBAAR) regarding the classification and tax rate of pen tips and balls used in the manufacturing of ball point pens. The appellant sought clarification on whether these items are taxable at the rate of 12% under HSN Chapter Head 9608 or if a different rate applies.2. Appellant's Arguments:The appellant argued that the WBAAR had incorrectly classified pen tips and balls under HSN 9608 99 90, making them taxable at 18%. They contended that according to Notification No. 12/2017-CT, HSN codes should be mentioned only up to the first 4 digits on a tax invoice, implying that items should be classified at the 4-digit level unless specified otherwise. They stressed that as a manufacturer of ball point pens, the pen tips and balls should be taxable at 12%, the same rate as ball point pens, since these parts are exclusively used in ball point pens and not in fountain pens, which are taxed at 18%.3. Respondent's Counterarguments:The respondent countered that the appellant misinterpreted Notification No. 12/2017-CT, which pertains to the mentioning of HSN codes on invoices based on annual turnover and not the classification of goods. They further explained that ball point pens are classified under sub-heading 9608 10 at 12%, while refills for ball point pens fall under sub-heading 9608 60 at 18%. Tips and balls, being parts of both ball point pens and refills, do not have a specific 8-digit HSN code and thus fall under the residuary sub-heading 9608 99, taxable at 18%.4. Examination and Conclusion:Upon examination, it was observed that the appellant's interpretation of the notification for classification up to 4 digits was incorrect. The relevant chapter headings and descriptions were reviewed, confirming that ball point pens are classified under 9608 10 at 12%, and refills under 9608 60 at 18%. Tips and balls, being parts of refills, should be classified under the residuary sub-heading 9608 99, attracting an 18% tax rate. The cited judgment of the Hon'ble Customs, Excise and Gold Tribunal in Nalanda Pen Mfg. Co. Pvt. Ltd. vs. Collector of Central Excise was found inapplicable as it pertained to a period before the GST Act.5. Final Decision:The appellate authority found no infirmity in the ruling pronounced by the WBAAR, which classified pen tips and balls under GST Tariff Heading 9608 99 90, included under Sl.No. 453 of Schedule III of Notification No. 01/2017-Central Tax (Rate), making them taxable at 18%. The appeal was thus dismissed, and the original ruling was upheld.Disposition:The appeal was dismissed, and the original ruling by the WBAAR was upheld, confirming that pen tips and balls are taxable at 18% under HSN 9608 99 90.