TaxTMI 
TaxTMI 
2018 (8) TMI 975
X X X X Extracts X X X X
X X X X Extracts X X X X
....ilar 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 seen thus - "STATEMENT OF RELEVANT FACTS HAVING BEARING ON THE QUESTION(S) ON WHICH ADVANCE RULING IS REOUIRED. 1. M/s. A.W. Faber-Castell (India) Pvt. Ltd. (hereinafter referred to as 'Applicant') having its corporate head office at 801, Kamla Executive Park, Near Vazir Glass Works, J. B. Nagar, Andheri (east), Mumbai and having various regional offices located at Bhiwandi (Maharashtra), Chennai, Delhi, Kolkata and Goa, is inter-alia engaged in the manufacture of various products taxable under GST law. 2. The present application is filed in respect of one of its products - "Modelling Dough" which is a specially manufactured semi-solid, clay-like structure to be used as a toy tor kids to make various shapes, things, caricatures of animals etc. It is made up of 'maida'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion is because of the aforementioned factors and the mismatch usage and composition of the applicant product in relation to Chapter Heading No. 34.07 of the Customs Tariff The applicant's product may fall under Chapter 34.07 which covers 'modelling pastes'. However, the same product is actually used as a 'toy' for kids and maybe more aptly covered under Chapter 95 of the Customs Tariff which covers Toys, games and sports requisites; parts and accessories thereof. 7. The prevailing ambiguity has led to two separate Tariff Item Nos. being used for the product in question with contradictory usages thereby levying two different rates of CGST applicable on them. While some cautious sellers are charging CGST @ 9% on the product in question whereas some registered persons are using the ambiguity to charge CGST 6% only. The above ambiguity results in unfair market practices being adopted by certain registered persons in an attempt to reduce effective price of product and increase their market share and profits. Further, it shall be noted that many unorganized and un-registered players (having meager marker share) are also taking undue advantage of the above and clearing similar products....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(Emphasis Supplied) A.4 The above referred section -can be vivisected into following essentials: - a. A supplier shall be liable to be registered under CGST Act in the State or Union Territory, from where he makes taxable supply of goods or services or both; b. If the aggregate turnover in the financial year exceeds rupees twenty lakh. A.5 The Applicant submits that as on date, it is registered in Maharashtra and also making taxable supplies of goods from the same to its customers located in State of Maharashtra, Further, the turnover of the Applicant exceeds rupees twenty lakhs in the financial year. Given this, it is submitted that Applicant clearly satisfies to be 'applicant' in terms of sub-section (c) of the Section 95 of the CGST Act. A.6 That sub-section (1) of the Section 95 of the CGST Act defines the term 'advance ruling' as under:- (a) "advance ruling" means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applica....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion Territory Goods and Service Tax Act, shall be the deemed to be the Advance Ruling Authority for the purpose of CGST Act. The Section 96 of the Maharashtra Goods and Service Tax Act, 2017, reads as under: "96. (1) The Government shall, by notification, constitute an Authority to be known as the Maharashtra Authority for Advance Ruling : Provided that the Government may, on the recommendation of the Council, notify any Authority located in another State to act as the Authority for the State. (2) The Authority shall consist of- (i) one member from amongst the officers of central tax; and (ii) one member from amongst the officers of State tax, to be appointed by the Central Government and the State Government, respectively. (3) The qualifications, the method of appointment of the members and the terms and conditions of their services shall be such as may be prescribed." Emphasis Supplied A.11 The Applicant submits that in terms of the above referred section 96 of the Maharashtra Goods and Service Tax Act, 2017, the Government of Maharashtra has issued a Notification No. MGST-1017/CR 193/Taxation dated 24.10.2017, which constitutes this a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Preferential Areas 1 2 3 4 5 3407 MODELLING PASTES, INCLUDING THOSE PUT UP FOR CHILDREN 'S AMUSEMENT; PREPARATIONS KNOWN AS "DENTAL WAX" OR AS "DENTAL IMPRESSION COMPOUNDS", PUT UP IN SETS , IN PACKINGS FOR RETAIL SALE OR IN PLATES, HORSESHOE SHAPES , STICKS OR SIMILAR FORMS; OTHER PREPARATIONS FOR USE IN DENTISTRY , WITH A BASIS OF PLASTER (OF CALCINED GYPSUM OR CALCIUM SULPHATE ) 3407 00 - Modelling pastes, including those put up for children's amusement; preparations known as "dental wax" or as "dental impression compounds", put up in sets, in packings for retail sale or in plates, horseshoe shapes, sticks or similar forms; other preparations for use in dentistry, with a basis of plaster (of calcined gypsum or calcium sulphate): 3407 00 10 --- Modelling pastes , including those put up for children 's amusement 3407 00 90 --- Other Chapter Heading No. 95.03 Tariff Item Description of goods Unit Rate Standard Preferential Area....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Tax (Rate) shows that in order to determine the rate of CGST leviable on the product in question, it is paramount to determine the classification or the product in question under Customs Tariff Act. 1975. C.7 The Custom Tariff is generally based on the tariff classification adopted by World Customs Organisation in its Harmonized Commodity Description of Coding System (hereinafter referred to as "HSN"). Hence, wherever a Chapter of Custom Tariff is fully aligned with the corresponding Chapter of HSN, then the HSN explanatory notes explaining the scope of headings of that Chapter would have persuasive value in the determination of scope of headings of correspondence Chapter of Central Excise Tariff. The aforesaid position has been laid down by the Hon'ble Supreme Court in the following decisions: (a) Camlin Limited vs. CCE -2008 (230) ELT 193 (SC) (b) Coen Bharat Limited vs. CCE--2007 (217) ELT 165 (SC) (c) CCE vs. Bakelite limited - 1997 (91) ELT 13 (SC) C.8 Explanatory Notes for Chapter Heading No. 34.07 of the HSN read as follows: "(A) Modelling pastes These ore plastics preparations generally used by artists or goldsmiths far making models and also by childre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....esent case, the product in question is made entirely out of maida i.e. preparations of wheat flour and none of the contents/materials as covered under Heading No. 3901 to 3914 are present. Thus, the question of product in question Falling under Heading 3407 is clearly ruled out. C.12 It is pertinent to note that the applicant's product i.e. Modelling Dough is a clay-like semi-solid product which is primarily made of 'maida' or refined wheat flour. Although it is made for the use of children as a growth stimulating, creativity toy and may be termed to be for the amusement of children; it is specifically made from edible substances including maida so as to make it safe for children and not have any harmful effects even if accidently consumed by the children. The ingredients of the product are specifically selected and no plastics are added to the product. Therefore, the product cannot be said to be classifiable under Chapter Heading No. 34.07 which specifically includes goods made of plastics only. C. 13 Further, Chapter 34 of the Customs Tariff includes "Shop; organic surface-active, washing preparations, lubricating preparations, artificial waxes, prepared waxes, polishing or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uestion- Modelling Dough. Applicants understanding D.2 That the correct classification of the product in question i.e. Modelling Dough should be under the Chapter Heading No. 95.03 of the Customs Tariff Act, 1975 attracting CGST on supply ot- such goods @ 6% by virtue of Sl. No. 228 of Schedule-II to Notification No. 1/2017-CentraI Tax (Rate) dated 30.06.2017 as amended by Notification No. 41/20 17- Central Tax (Rate) dated 14.11.2017." 03. CONTENTION - AS PER THE CONCERNED OFFICER The relevant portion of the submission, as reproduced verbatim, could be seen thus- "2. It is submitted at the outset that the applicant ought to have furnished all the relevant information and details in his application necessary to decide the classification issue. For determination of classification number of factors are required to be examined like raw materials/inputs used and their proportion; desired characteristics of the final product and in turn function, essential characteristics of different raw materials used /the purpose of using each input, manufacturing process, intended as well as alternate use of the product, manufacturing process, machinery and equipments used etc. Howeve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mation available that for preparation of such modelling dough any grain flour which is not sticky can be used e.g. corn flour. Vegetable oil is used to make the dough easier to work i.e. for pliability and elasticity. 'Alum' is added which act 'alum' as preservative. From the article at Wikipedia about (https://en.wikipedia.org/wiki/Alum) relevant information is reproduced below:- An alum ˈæləm' is a type of chemical compound, usually a hydrated double sulfate salt of aluminium with the general formula XAl(SO4) 2*12H 2O, where X is a monovalent cation such as potassium or ammonium. By itself, "alum" often refers to potassium alum, with the formula KAl(SO4) 2*12H 2^O. Other alums are named after the monovalent ion, such as sodium alum and ammonium alum. The name "alum" is also used, more generally, for salts with the same formula and structure, except that aluminium is replaced by another trivalent metal ion like chromium(III), and/or sulfur is replaced by other chalcogen like selenium. The most common of these analogs is chrome alum KCr(SO 4) 2*12H 2^O. In some industries, the name "alum" (or "papermaker's alum") is used to refer to al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....irav Karia, Advocate alongwith Sh. R. Nambirajan, Advocate and Sh. Ashish Philip Abraham, Advocate appeared and submitted copies of invoices of other resellers i.e. M/S. Crossword Bookstores Ltd., and Big Bazar in respect of products of Camlin, Funskool, etc. Further they requested that the issue be decided on merits please. Jurisdictional Officer, Sh. S. S. Bhide stated that the issue be decided on merits. 05. OBSERVATIONS We have gone through the facts of the case. The applicant seeks to have the classification of the product 'modelling dough'. From the oral and written submission, it is understood that the applicant seems to convey that there are two Custom Tariff Headings under which the impugned product could be said to fall. We have been informed that the impugned product is- • Is made up of 'maida' i.e. 'refined wheat flour' or 'white flour'. • a specially manufactured semi-solid, clay-like structure to be used as a toy for kids to make various shapes, things, caricatures of animals etc. • is usually supplied in packs containing multiple such dough in various colours to attract kids. During hearing, the applicant was asked to s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....IAGES; DOLLS; OTHER TOYS; REDUCED-SIZE ("SCALE") MODELS AND SIMILAR RECREATIONAL MODELS, WORKING OR NOT ; PUZZLES OF ALL KINDS 9503 00 - Tricycles, scooters, pedal cars and similar wheeled toys; dolls' carriages; dolls; other toys; reduced-size ("scale") models and similar recreational models, working or not; puzzles of all kinds: 9503 00 10 --- Of wood 9503 00 20 --- Of metal 9503 00 30 --- Of plastics 9503 00 90 --- Other As can be seen, the CTH 34.07 covers modelling pastes and includes modelling pastes for children's amusement. While Heading 9503 is about toys. A toy is an object for a child to play with. The modeling pastes are such that these help the children to make various shapes and remain amused while making the different objects from the modelling pastes. The present product is a dough from which various shapes can be modelled. A prima-facie reading would give but obvious an inference that the impugned product would be covered by the CTH 3407. However, we find that the applicant has pointed to the following, to claim inapplicability of the CTH 3407- • Chapter Heading No, 34.07 falls under Section VI of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ere is no question that anybody would purchase this product for being used as "maida" as so many other chemicals as given in table above are also added to it . Neither can "maida" alone be used for preparing the various shapes as various chemicals are needed to be added to "maida" for it to be used and reused as modelling dough for making the various shapes. These chemicals are needed to give the needful firmness, elasticity, plasticity and non perishability to the shapes. The dough needs to be mouldable and flexible to make the various shapes. There needs to be some safeguard against cracking, crumbling. [I GOT THIS FROM A PATENT RELATED ARTICLE - A MODELING DOUGH COMPRISING A POLAR POLYMERIC RESIN, WATER, A GELLANT, AND A FILLER PROVIDES A DOUGH RESISTANT TO FLAKING, CRACKING, AND CRUMBLING. SO NOT COPIED IT ENTIRELY]. In view thereof, the use of chemicals in the modelling dough is significant. And therefore, the product can very well fall in the Section VI for "Products of the Chemical or Allied Industries". Then we come to the Harmonized Commodity Description and Coding System Explanatory Notes (HSN) to heading 34.07 which say thus - "(A) Modelling Pastes These are pla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hite teeth and a plastic smile" synonyms: artificaial, false, synthetic, fake, superficial, pseudo, sham, bougs, ersatz, assumed, spurious, specious, unnatural, insincere, More antonyms: genuine 2. (of substances or materials) easily shaped or moulded. "rendering the material more plastic"........This is the second meaning synonyms: malleable, mouldable, shapable, pliable, pliant. ductile, flexible, soft, workable, supple, bendable; informal bendy; rare fictile "at very high temperatures, rocks may become plastics" antonyms: rigid • offering scope for creativity. "the writer is drawn to words as a plastic medium" • relating to moulding or modelling in three dimensions. or to produce three-dimensional effects. • "the plastic arts" In view of the above meanings of the word PIASTIC and PLASTICS we find that in the HSN Explanatory notes of the CTH 3407 under the heading "Modelling pastes" it is stated that these are "Plastic Preparations" generally used by Artists or goldsmiths for making models and also by children for amusement purposes. Here in these explanatory notes it is apparent that the wor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ugned product is a mixture of maida and other chemicals. It can be molded or given shapes for the amusement of children. And therefore, the description against the CTH which most accurately fits the bill is thus - Modelling pastes, including those put up for children's amusement; preparations known as "dental wax " or as "dental impression compounds up in sets, in packings for retail sale or in plates, horseshoe shapes. sticks or similar forms; other preparations for use in dentistry, a basis of plaster (of calcined gypsum or calcium sulphate): There being an apparent difference in the use of the word 'plastic' and 'plastics', we are not convinced by the arguments and case laws tendered by the applicant as to the inapplicability the CTH 3407. Now the other CTH that has created some confusion, as is informed, is the Heading 9503. We have observed earlier that the Heading 9503 is for 'toys', And CTH 3407 covers model ling pastes, for amusement of children. The impugned product being a dough used for amusement of children, the Heading 3407 would be the correct classification. The description against CTH 3407 being applicable to the impugned product, we refrain from engagin....