TaxTMI 
TaxTMI 
2018 (9) TMI 1105
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.... 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. FATC AND CONTENTION - AS PER THE APPLICANT The submission (Brief facts of the case), as reproduced verbatim, could be seen thus - • "Jotun Group is a leading supplier of paints and powder coatings. The Applicant, Jotun India Private Limited is a supplier, exporter and manufacturer of paints and powder coatings, The Applicant supplies paints and coatings that are specially designed for unique conditions. • Broadly, the paints supplied by the applicant can be categorized in Solvent based paints and Water based paints. One of the major supplies by Applicant are marine paints, Composition of such marine paint being manufactured by Applicant makes it suitable for ships during building stage and even during maintenance. Details of such products along with its description are enclosed as Annexure ....
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....Applicant in detail. Technical features of marine paints are relevant for such analysis. A2. Accordingly, Applicant submits that marine paint is a specific type of paints suitable for use principally for ships during building stage and even during maintenance. The sailing ship needs protection from corrosive environment in which they operate. Such marine corrosion has a significant impact on sea carriers and their longevity. Therefore, effective corrosion control strategies are chosen considering appropriate selection of coating for a marine environment. Marine coatings have special functionality to protect marine vessels and other carriers above and below the waterline. Accordingly, marine paints supplied by Applicant has following technical features: • Protects the body Of Ship from highly corrosive environment • Blocks barnacles and other marine organisms from adhering to the hulls of ships • Lessens fuel consumption as it controls damage to the ship. • Prevents impact on water eco-systems by reducing emission of Green House Gases. • Transportation of marine organisms to other areas • Vide notificat....
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....A4. As IGST Rate Notification directs to adopt classification in terms of Customs Tariff Act, 1975, Applicant has adopted classification of paints under heading 3208 to determine applicable rate. Entry number 20 of Schedule IV of IGST Rate Notification reads as under: Sr.No. Chapter/Heading/ Sub-heading/ Tariff item Description of Goods 20. 3208 Paints and varnishes (including enamels and lacquers) based on synthetic polymers or chemically modified natural polymers, dispersed or dissolved in a non-aqueous medium; solutions as defined in Note 4 to this Chapter However, marine paints are suitable for principally use of ships and hence, it is also pertinent to analyse Entry 252 to Schedule I of Notification No 1/2017 Integrated Tax (Rates) dated June 28, 2017 liable to 5% IGST: Sr.No. Chapter/Heading/ Sub-heading/ Tariff item Description of Goods 252. Any Chapter Parts of goods of heading 8901, 8902, 8904, 8905, 8906 and 8907' Description of goods falling under above referred heading, are mentioned below: Sr.No. Chapter/Heading/ Sub-heading/ Tariff item Description of Goods 246 8901 Cruise ships, excursion boats, ferry-bo....
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.... as 'part of the ship' covered under entry 252. B. Marine paint is mandatorily to be applied on all ships under Merchant Shipping Act, 1958 and hence the same should be considered as part of Ship B1. As highlighted above, there is no separate tariff item as 'parts of ship' under chapter 89 of First Schedule to Customs Tariff Act, 1975. Thus, meaning of the term 'parts of goods', could then be adopted from its meaning in common parlance. Consequently, we have referred to the definition of the term 'Part', legal jurisprudence on the term 'Parts / Components' under erstwhile Indirect Tax regime, the Merchant Shipping Act, 1958 and UK VAT Guidelines. B.2 Meaning of 'PART' • The term 'Part' as defined under The Black's Law Dictionary 'an integral portion, something essentially belonging to a larger whole, that which together with another or others makes up a whole.' • Definition of 'Part' from Thesaurus 'an essential or integral attribute or quality' • The meaning of the term 'part' in common parlance is that component part of an article is an integ....
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.... satisfied that any provision of this Part has been contravened by such ship within the coastal waters, the Director-General or any officer authorised by him in this behalf, may- a. detain the ship until the causes of such contravention are removed to the satisfaction of the Director-General or the officer authorised by him; and b. levy penalty on such ship as specified in section 436 B4. From conjoint reading of the above provisions, it is evident that every ship has to adhere to the anti-fouling provisions as prescribed under MS Act. Basis the Same, a layer of coating or paint, has to be applied on the hull of the ship to control or prevent attachment of unwanted organisms. Further in the Concise Oxford English Dictionary, the term 'hull' is defined as follows- The main body of a ship or other vessel, including the bottom, sides, and deck but not the masts, superstructure, rigging, engines, and other fittings B5. Furthermore, if any Indian ship fails to comply with the provisions of this chapter, the Director - General or any officer authorised by him in his behalf can detain the ship until the causes of such contravention are removed or levy a penalty on such ship....
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....hat it was an essential requirement to be goods, to be wrapped in paper. Anything required to make the goods marketable, must form part of the manufacture and any raw material or any materials used for the same would be component part for the end product. C5. From the above, it could be summarized that paper core, plastic spools and wrapping paper would be considered to be parts of paper rolls, adhesive plaster tapes and paper reams/reels respectively since without the former goods, the later goods couldn't be marketed or are commercially inexpedient. Thus an analogy could be drawn that anything which is required for making goods marketed or to be marketable, would be form component part of that end products. C6. Basis the provisions of The Merchant Shipping Act, ships are bound to adhere to the 'anti-fouling system' norms. Accordingly, ship would not be marketable unless the same has complied with anti-fouling system i.e. application of paints/coating to avoid growth of unwanted organisms. C7. Thus applying the ratio derived from aforementioned legal jurisprudence in the current situation, a view can be taken that since the ship is not commercially expedient w....
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..... In order to evaluate whether marine paint would be eligible for lower rate of GST, it is also relevant to understand history of indirect tax rate and exemptions, if any, under erstwhile Indirect Tax regime. E2. Under Central Excise Act, 1944, Notification No. 44/2015-CE dated 24 November 2015 has issued prescribing effective rate of central excise for specified goods (amending Notification 12/2012 dated 17 March 2002). Said notification inserted following entry for prescribing effective rate of excise for goods mentioned therein. Sr. No. Chapter or heading or sub-heading tariff item or of the First Schedule Description of excisable goods Rate Condition No. 306C Any Chapter Raw materials and parts NIL 2 and 3* *Condition 2 - Where such use is elsewhere than in the factory of production, the exemption shall be allowed if the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, is followed. Condition 3- The exemption shall be allowed if it has been proved to the satisfaction of an officer not below the rank of the Deputy Commissioner of Central Excise or the As....
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....n if the goods or services are a description for the time being specified in Schedule 8 or the supply is of a description for the time being so specified. b. Group 8 of Schedule 8 of Value Added Tax Act 1994 The supply of parts and equipment, of a kind ordinarily installed or incorporated in, and to be installed, or incorporated in,- a. the propulsion, navigation or communication systems, or b. the general structure, of a qualifying ship or, as the Case may be, aircraft c. VAT Notice 744C ships, aircraft and associated services published on July 20, 2011 7.5. Which parts and equipment are excluded from zero rating? Any raw or bulk materials. partly processed parts or equipment and also non-specialist goods or appliances are excluded from zero rating. The list below gives examples of other parts and equipment which are not zero-rated. It is not exhaustive. • Binoculars • catering equipment (domestic) • crockery • cutlery • diving equipment • furniture (unfixed) • laundering equipment (domestic) • missiles, shells etc • ship's st....
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.... could be drawn from Customs Tariff Act. Hence the meaning of the term 'parts of goods of heading 8901, 8902, 8904, 8905, 8906 and 8907' has to be adopted in general parlance. 3. Thus we have referred to definitions of 'Part' in various Dictionaries. Accordingly, part of an article is an integral part necessary to the constitution of the whole article and without it, the article will not be complete. 4. Further as per MS Act, anti-fouling system has to be mandatorily followed by every Ship since non-adherence of the same would be liable to severe penal actions. Therefore paints form an essential part of the ship without which ship couldn't be marketed. 5. Furthermore applying the analogy drawn from the germane legal jurisprudence it is said that anything which is required for making goods marketed or to be marketable, would be form component part of that end products and hence paints would form part of the ship. 6. In addition to the above, we have also scrutinized the concerned issue under UK VAT, wherein paints is mentioned under the list of 'Parts and equipments of ship' which are excluded from zero rated goods. However in absence of an....
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.... were having a specific entry and should be classified accordingly. 05. OBSERVATIONS We have perused the records on file and gone through the facts of the case and the submissions made by the applicant and the department. The applicant has submitted that they are a manufacturer, supplier and exporter of paints and according to their submissions, they supply paints and coatings that are designed for unique conditions. In the subject case they have made submissions with respect to paints supplied to the shipping industry. They have stated that the paints supplied by them in the subject case are classifiable under Chapter Heading 3208 and 3209 which are covered under Schedule IV of Notification No. 1/2017-lntegrated Tax (Rate) dated 28.06.2017 and are accordingly liable to 28% IGST. However further to their claim that their goods 'Marine paints' are classifiable under CTH 3208 and 3209 and individually as per tariff are liable to IGST @ 28%, but the applicant is claiming that in the present facts of the case wherein they are supplying their goods "marine paints" for use on ships and therefore their goods would get covered under Sr. No.252 of Schedule -I of Notif....
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....hapter/Heading/ Sub-heading/Tariff item Description of Goods 252. Any chapter Parts of goods of heading 8901, 8902, 8904, 8905, 8906 and 8907' We find that as per above details, the benefit of concessional rate of IGST @5% is available to parts of goods of headings 8901, 8902, 8904,8905,8906 and 8907. Thus it is very apparent that parts of goods of Heading 8901, 8902, 8904, 8905, 8906 and 8907 are eligible for concessional rate of IGST @ 5%. In view of the above, we first of all require to ascertain as to what are the goods that are covered under the above Tariff Headings. We find that these Headings cover the goods as under:- Sr.No. Chapter/Heading/Sub-heading Tariff item Description of Goods 246 8901 Cruise ships, excursion boats, ferry-boats, cargo ships, barges and Similar vessels for the transport of persons or goods 247 8902 Fishing vessels; factory ships and other vessels for processing or preserving fishery products 248 8904 Tugs and pusher craft 249 8905 Light-vessels, fire-floats, dredgers, floating cranes and other vessels the navigability of which is subsidiary to their main function; floating docks; ....
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....a ship as a measure of statutory compliances under various marine acts such as Merchant Shipping Act or Additional Safety measures such as Walkie-talkie, Binoculars, Life Jackets, Lifeboats, etc. Though these are also to be compulsorily made available on a vessel and ship but cannot be taken to be parts of a ship as per general understanding but are rather additional equipments on a ship.. In addition to the above there are other essential items like furniture, fans, air-conditioners, television, etc which are very essential for comfort of officers and crew of the ship but do not come under essential parts or equipments of a vessel/ship. In continuation of the same we find that the issue to be decided in the present case is whether marine paints can be considered as parts of a ship. We find that the items that are discussed as essential parts of a ship/ vessel are such essential components of a vessel/ ship without which the ship would not be complete and would not exist. These are very integral for the functioning of the ship and can be separated from the ship for repair/replacement. There are various consumable items like paints varnish, oils, grease, etc. which are esse....
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.... heading or sub-heading or tariff item of the First Schedule Description of excisable goods Rate Condition No. 306C Any chapter Raw materials and parts NIL 2 and 3* *Condition 2 - Where such use is elsewhere than in the factory of production, the exemption shall be allowed if the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, is followed. Condition 3 - The exemption Shall be allowed if it has been proved to the satisfaction of an officer not below the rank of the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction that such goods are cleared for the intended use. In fact the said notification gave exemption to all raw materials and parts for use in the manufacture of certain specified ships/vessels, subject to actual user conditions. While interpreting the issues like the one at hand, we may refer to certain judgements which throw light on the disputed issue. In case of Saraswati Sugar Mills Vs Commissioner of Central Excise Civil Appeal No.5295 of 2003 decided on 2nd Aug 2011 Hon....
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....fabric from atmospheric moisture and dust. This Court held that the PPLF was not a component of the machine itself. It was not a constituent part. It was used as a Liner Fabric not only in tyre production but also in similar other industrial processes. In case of Jindal Strips Vs Collector of Customs, Equivalent citations: 1997 ECR 98 Tri Delhi, 1997 (94) ELT 234 Tri Del. = 1997 (5) TMI 152 - CEGAT, NEW DELHI the Two Member Bench of the Tribunal referred the appeal before the larger bench on the following questions: (i) Whether the phrase "component parts" occurring in Notification 77/90 would cover spare parts" for the purpose of granting of benefit thereunder? The larger Bench of the Tribunal having regards to dictionary meaning of "part", and "Component" observed that in common parlance meaning of the expression "component" is also the same, that is, one of the parts or elements of which anything is made up or into which it may be resolved or a Constituent. The meaning in common parlance has to be looked into since the notification itself does not contain any definition of the expression. In the State of Uttar Pradesh vs M/S. Kores (India) Ltd on 18 October, 1976, Eq....