Supply of Electro Ink considered a mixed supply by AAAR under CGST Act, 2017

The Appellate Authority for Advance Ruling (AAAR) upheld the original decision that the supply of Electro Ink and other consumables by the Appellant does not constitute a composite supply but rather a mixed supply under the CGST Act, 2017. Despite the Appellant's arguments and additional submissions, the AAAR found that there was no principal supply among the bundled items, leading to the classification as a mixed supply. The AAAR emphasized the independence of the items and their non-dependence on each other for supply. The original order was maintained, confirming the classification of the supplies as a mixed supply.

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Issues Involved:
1. Non-consideration of additional submissions by the Appellate Authority.
2. Determination of whether the supply of Electro Ink and other consumables constitutes a "composite supply" or "mixed supply" under the CGST Act, 2017.
3. Identification of the principal supply in the bundle of supplies.

Detailed Analysis:

1. Non-consideration of Additional Submissions by the Appellate Authority:
The Appellant contended that the AAAR order dated 17.02.2019 did not consider their additional submissions dated 11.02.2019, which were crucial for their case. This non-consideration was argued to be an "error apparent on the face of the record," warranting rectification under Section 102 of the CGST Act, 2017. The Appellant cited various judicial pronouncements to support their claim that ignoring or not recording submissions amounts to an error that needs rectification.

2. Determination of Composite Supply vs. Mixed Supply:
The Appellant is engaged in supplying HP Indigo printers and consumables to resellers, who then supply them to end customers. The transactions under scrutiny include:
- Sale of Indigo press machines.
- Supply of Electro Ink and other consumables.
- Sale of spare parts for maintenance services.

The primary contention was whether the supply of Electro Ink and consumables is a composite supply, which requires the supplies to be "naturally bundled" and to have a "principal supply." The Appellant argued that the supplies are naturally bundled and integral to each other, necessary for the printing process. They cited various business models (Tier "Click" Model and A la carte model) to illustrate how these supplies are consumed together.

3. Identification of Principal Supply:
The Appellant argued that Electro Ink is the principal supply among the bundled items, supported by a Chartered Engineer's certificate and consumption patterns showing that Electro Ink constitutes 41% of the total consumption. However, the AAAR found that all components of the bundle (Electro Ink, blanket, photo imaging plate, etc.) are equally important and indispensable for the printing function, ruling out the possibility of any principal supply. The AAAR emphasized that none of the components are ancillary; all are necessary for the printing process.

Discussion and Findings:
The AAAR reviewed the additional submissions and found that the earlier decision was correct. The AAAR reiterated that the supply of Electro Ink and other consumables does not constitute a composite supply due to the absence of a principal supply. Instead, the supply was classified as a mixed supply under Section 2(74) of the CGST Act, 2017, as the items can be supplied separately and are not dependent on each other.

Conclusion:
The AAAR concluded that the additional submissions did not significantly alter the outcome of the case. The supply of Electro Ink along with other consumables remains classified as a mixed supply. The original order dated 17.02.2019 was upheld, confirming that the supply of these items by the Appellant is a mixed supply and not a composite supply.

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