TaxTMI 
TaxTMI 
2018 (5) TMI 810
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.... Central Tax (Rate) dated 28th June, 2017 issued under the Central Goods and Services Tax Act, 2017 is taxable at the rate of 2.5% (State tux and Central tax) OR Whether Envirotemp FR3) fall under Serial no, 27 of Schedule II of Notification No. 1/2017-State Tax (Rate) dated 29th June, 2017 issued under the Maharashtra Goods and Services Tax Act, 2017 and Notification No. 1/2017Central Tax (Rate) dated 28^th June, 2017 issued under the Central Goods and Services Tax Act, 2017 is taxable at the rate of 6% (State tax and Central tax)? 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 mean a reference to the same 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....
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....actured 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 in the field of transformer dielectric application in the global power industry, It is based on renewable resources and produced from vegetable seeds. The product is made up of refined soya beans oil after mixing some additives with the same, However the basic characteristics, nature of product remains the same even after mixing of additives. 2.3 In addition to being derived from renewable resources, it has numerous other advantages in terms of dielectric application. The said product has very high fire point which in turn provides high fire safety for transformers. It is best suitable for densely populated areas where a transformer fire can lead to a huge loss of life and property 2.4 Envirotemp FR3 is an FM Global Approved. Besides a much higher fire safety, this fluid improves the life of the insulation paper of the transformer ....
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.... " 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 said goods was 6%. 4.4 Under the Maharashtra Goods and Service Tax Act, 2017, Chapter heading 1518 is appearing under Schedule I and Schedule II of Notification No. 01/2017 - State Tax (Rate) dated 29th June 2017. The relevant extract of both the said Schedules are as under A. Schedule I - Taxable at the rate of 2.5% State Tax S. No. Chapter/Heading/ Sub-heading / Tariff item Description of Goods 88. 1516 Vegetable fa....
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..../soybean oil is classifiable under Entry 90 of Schedule I of the Notification No. 01/17-State Tax (Rate)under the MGST Act and taxable at the rate of 2.5% State Tax? 5.2 Whether Natural Ester 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 Entries....
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....nd are thus promising candidates as base fluids in environment-friendly lubricants. 1.5 It is further submitted that the chemically modified base fluids which is soya bean in the present case, exhibit superior oxidation stability in comparison with unmodified vegetable oils. These base fluids in combination with suitable additives exhibit equivalent oxidation stability compared with mineral oil-based formulations. 1.6 In view of the above, it is amply clear that the product in question, namely, Natural Ester Dielectric Fluid is nothing but vegetable Oil Which is chemically modified to be used as lubricant for power sector, 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 ....
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....ught not to be classified in this Entry. 2.6. Without prejudice to the above, it is humbly submitted that the said entry covers only animal fats and oils which are chemically modified. When it comes to vegetable fats and oil, the said entry covers only mixtures and preparations of the same. Chemically modified vegetable fats and oil is only covered in Entry no. 90 of Schedule I of the Notification No. 01/2017 State Tax (Rate) under the MGST Act. Given the above, it is humbly submitted that Entry no. 27 of Schedule II of the Notification No. 01/2017 - State Tax (Rate) under the MGST Act does not cover chemically modified vegetable oil or fats and hence, the product in question should not be classified under the said Entry 3 SPECIFIC ENTRY SHOULD PREVAL OVER GENERAL ENTRY 3.1 Without prejudice to the above, even assuming that the product in question, i.e., Natural Ester Dielectric Fluid may be termed as a mixture or preparation of vegetable fat and oil, it is submitted that Entry no. 90 of Schedule I which covers chemically modified vegetable oil is much more specific entry as compared to Entry 27 of Schedule II which covers Only preparation and mixtures of veget....
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....pecific 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, which onus, in my opinion, has not been discharged by the Department. Thus, it is evident that the impugned Circular is blatantly contrary to the said Rule and is thus, not sustainable." B. In the Case of Flora Agrotech versus The Commissioner of Central Excise, Vapi reported in 2015 (319) E.L.T. 333 (Tri. - Ahmd.) = 2014 (11) TMI 114 - CESTAT AHMEDABAD it was held as under "A specific entry in the CETA, 1985 has to be the proper classification than a general entry in Chapter 39 of the CETA, 1985, as per the Rules of interpretation to the CETA, 1985. The Synthetic & Art Silk Mills Research Association (SASMIRA), Mumbai SASMIRA is linked ....
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.... 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 be done as such and such specific entry shall be considered over the general entry In this regard, reference can be drawn from the case of H.P.L. Chemicals Ltd. versus Commissioner of Central Excise, Chandigarh, reported in 2006 (197) E.L.T. 324 (S.C.) ....
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....t, the expression "all other goods, not elsewhere specified" appearing in tariff item No. 68 would only mean goods which have not been specified under tariff item Nos. 1 to 67 either for the imposition of duty or for the purpose of granting exemption from duty." 3.8. It is submitted that in view of the above judicial pronouncements, It is a settled law 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 k....
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.... 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" 5.3. 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 item 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. 5.4. 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 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....
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....s 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 inedible mixture of vegetable oil & additive. This product is covered under schedule II and taxable rate of 6% state tax (SGST) and 6% central tax (CGST) i.e. covered in sr.no. 27 of schedule II on following material fact- 1. Definition of food as given in the Food Safety and Standard Act , 2006 is given below As per sec 3 clause 'J' of FDA Act 2006 (j) "food" means any substance, whether processed, partially processed or unprocessed, which is intended for human consumption and includes primary food, to the extent defined in clause (ZK) genetically modified or engineered food or food containing such ingredients, infant food, packaged drinking water, alcoholic drink, chewing gum, and any substance, including water used into the food during its manufacture, preparation or treatment but does not include any animal feed, live animals unless they are prepared or processed for placing on the market for human consumption, plants prior to harvesting, dr....
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....e 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 manufactured for human consumption only. It is categorically being pointed out that, the applicant's product is inedible mixture or preparation of vegetable fats or oil or fractions of different fats. As per applicant's say and information available for the same product of another manufacturer [Cooper Envirotemp FR 3] the product is derived by mixing some additives to soya bean oil. As per the competitor manufacturer's literature 5% mass fraction is related to additives & 95% mass fraction relates to Degummed soya bean oil. ....
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....al Ester Dielectric Coolant for transformers and related electrical apparatus. The product, 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, chlorophyll and its decomposition products are removed, Gossypol-like pigments are removed, Toxic agents, ....
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.... - 13th March, 2018 Method of Sampling Sample is provided by Cargill India Pvt. Ltd. Analysis Report S. No. Parameter Test Result Protocol 1. Vegetable Oil, % by wt. 98.5 AOCS Ea 8 -58 2 Number of Vegetable present Oils 1 FL/SOP/HPLC -09 3 Other Chemicals, % 1.0 FL/SOP/FC - 280 Inference : The sample is one single Vegetable oil only, there is no blending with any other oil is detected." As can be 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 di....
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....eadily biodegraded when exposed to the environment. ........................................................ Examples of current, commercially-known, natural ester dielectrics are shown in Table 1. Table 1 - Natural Ester Dielectric Liquids NAME TYPE MANUFACTURER BIOTEMP (r) Comprised mostly of mono-un­saturated high oleic acid triglyceride vegetable oils. The oleic acid group is defined as having one carbon double bond, part of the eighteen carbon atoms in the hydrocarbon chain of a carboxylic acid. Examples of high oleic oils are sunflower, safflower, and rapeseed (canola). ABB Inc. BIOTRANS (r) A mixture of partially hydrogenated soybean oil high in oleic acid con­tent, methyl esters produced from soybeans, palm or coconut oils used to thin the dielectric liquid Cargill Envirotemp (r) FR3 Edible-seed oil based dielectric liq­uid. It is a natural ester (triglyceride - fatty acid ester) containing a mixture of saturated and unsaturated fatty acids with 14 to 22 carbon length chains containing one to three dou­ble bonds. Suitable vegetable oils, which may be used independently or combined, include: soya, sunflower, and ....
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....niques 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 deactivators. This is in contrast to mineral oil, which has either no additives or simply oxidation inhibitors. Mineral oil produced to Doble TOPS or ASTM D 3487 specifications are only allowed to contain DBPC (2,6-ditertiary-butyl paracresol, BHT) or DBP (2,6-ditertiary-butyl phenol) in concentrations up to 0.3 percent. DBPC and DBP have had a lengthy history of use in transformer oil and no adverse effects have been documented. The U.S. patents for BIOTEMP (r), BIOTRANS (r) and Envirotemp (r) FR3 (r) incorporate enough variation into the descriptions of each liquid that the exact combination and concentration cannot be determined....
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....heir 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 tax for the purpose Of both the entries differs. For quick reference, we shall reproduce these entries thus - S. No. Chapter / Heading / Subheading / Tariff item Description of Goods Rate [CGS....
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....cally modified, excluding those of heading 1516; * Part 2 - 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. b. Of the Tariff Heading 1518, schedule entry 90 covers portion relating to vegetable fats and oils and their fractions AND schedule entry 27 covers portion relating to animal fats and oils and their fractions. c. 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 fil....
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.... requirement of retaining the original fundamental structure would not be possible by the use of the additives and chemicals. The vegetable oils are used as the base to manufacture the final product which is a distinct product. The applicant is also selling the product as a Fire Resistant Natural Ester Dielectric Coolant for transformers and related electrical apparatus. The packing of the applicant's product mentions the product as "Envirotemp FR3 Fluid". Thus, it is described as a "fluid". Is a fluid same as an oil? A fluid is different from even a liquid, let alone oil. The product is not being sold as a modified vegetable oil but as the product which is resulting from the adaptation of the vegetable oils to obtain a coolant for a transformer. In view thereof, we are convinced that the impugned product would not be covered by the part 1 (as reproduced above) of Heading 1518. 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 product, as discussed above, is a pr....