TaxTMI 
TaxTMI 
2019 (3) TMI 434
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....2018 (9) TMI 1105 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA. BRIEF FACTS OF THE CASE A. Jotun Group is a leading supplier of paints and powder coatings. Jotun India Private Limited (herein after referred to as 'Appellant') is a supplier, exporter and manufacturer of paints and powder coatings. The Appellant supplies paints and coatings that are specially designed for unique conditions. B. Broadly, the paints supplied by the Appellant can be categorized in solvent based paints and water based paints. One of the major supplies by Appellant are marine paints. Composition of such marine paint being manufactured by Appellant makes it suitable for ship during building stages and even during maintenance. C. In the erstwhile indirect tax regime, Appellant has been discharging applicable indirect taxes on supply of such paints and availing exemptions when granted under respective legislation. D. With the introduction of GST, Appellant has analyzed classification and applicability of CGST, SGST and IGST in light of new legislation. For classification, it has been clarified in the rate notification of respective legislation that rule of interpretation of the First Schedule to....
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....line. Accordingly, marine paints supplied by them 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 2. It is submitted that vide notification no 1/2017 of Central Tax (Rate) dated June 28, 2017, the Government of India has notified CGST rates for goods. The said notification has classified goods into 4 digit HSN Codes. Further under the said notification, it has been specified that section notes, chapter notes and General explanatory notes mentioned under Customs Tariff Act, 1975 shall apply to the goods classified therein under GST. 3. It is submitted that the notification refers to the classification of goods under the Customs Tariff Act, 1975. 4. As regards, classification of the marine paints under Customs Tariff Act, it would be pertinent to refer to extract of description of goods fall....
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....hat on conjoint reading of above entries, it could be construed that the aforementioned goods along with its parts (covered under entry 252) would be taxed at the rate of 2.5%. It is to be noted here that Entry 252 reproduced above is applicable to goods falling under any chapter but which are parts of goods falling under headings 8901, 8902, 8904, 8905, 8906 and 8907. Accordingly, a product which is classifiable under any chapter, if could be construed as part of these prescribed goods then the same would fall within the purview of entry 252 and hence would be liable to 2.5% CGST. 9. It is submitted that similar view was adopted by the Hon'ble Court in the case of Mahindra & Mahindra Ltd. vs Commissioner of C. Ex., Nagpur [2007 (210) E.L.T. 579 (Tri. - Mumbai)] = 2006 (12) TMI 289 - CESTAT, MUMBAI, wherein it was held that we also note that the recent Circular No. 839/16/06-CX dated 16-11-2006 issued by the Board has clarified that inasmuch as Notification No. 6/2002 exempts parts, falling under any Chapter, used within factory of production for manufacture of goods of Heading 8701, the benefit cannot be denied to the product which may not fall under said chapter. The goods fal....
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.... of television or radio programme or Division of a story. ----one of two or more equal or almost equal measures of something etc. ------Further, we also find the definition of 'Spare Part' as per Wikipedia A spare part, spare, service part, repair part or replacement part is an interchangeable part that is kept in an inventory and used for the repair or replacement of failed units. Spare parts are an important feature of Logistics Engineering and Supply Chain Management." 16. It is submitted that also as per the above definitions referred by the Ld. AAR, it is clear that part is one of the piece or ingredient of the main machine. In the present case, ship is main machine and marine paint is essential part of the same. 17. It is further submitted that the Ld. AAR has observed that anchor, bow etc. are very essential parts of the ship or vessel and are quite clearly part of the vessel. However, in addition to the above there are some additional equipment that are required to be made available on a ship as a measure of statutory compliance under the various marine acts. Though these parts are very essential, cannot come under the essential parts or equipment of a vessel....
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.... of 'anti-fouling system' "anti-fouling system" means a coating, paint, surface treatment, surface, or device that is used on a ship to control or prevent attachment of unwanted organisms Section 356R of MS Act - Control of anti-fouling system 1. Every Indian ship and other ships which are not entitled to fly Indian flag but operating under the authority of India, shall comply with the requirements set forth in this Part, including the applicable standards and requirements as prescribed from time to time as well as effective measures to ensure that such ships comply with the requirements, as may be prescribed from time to time. 2. All other vessels to which this Part applies shall comply with requirements of the anti-fouling systems as prescribed from time to time. Section 356X of MS Act Information regarding contravention of the provisions of Convention 1. If, on receipt of a report from a surveyor or other person authorised to inspect a ship, the Director-General is 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. det....
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.... case of Surgichem Vs. State of Gujarat [1992] 87 STC 40 (Guj) = 1991 (7) TMI 303 - GUJARAT HIGH COURT wherein it has been observed that it is clear that anything that goes into the product till the product becomes marketable, such thing becomes part and parcel of that Product or article. Applying this test in the instant case, the plastic spools over which the adhesive plaster tapes are wrapped have to be considered as one of the component parts of the goods marketed, i.e., adhesive plaster tapes. It is not disputed that adhesive plaster tapes can be marketed only after wrapping them on plastic spools. Therefore, plastic spools are to be held component part of the adhesive plaster tapes, that is, the goods marketed. Hence plastic spools cease to be packing material. 27. The Apex Court, in case of Collector of Central Excise, Calcutta-II Vs. Eastend Paper Industries Ltd. [1990] 77 STC 203 (SC) = 1989 (8) TMI 81 - SUPREME COURT OF INDIA held that to be able to be marketed or to be marketable, it appears to us, in the light of facts in the appeals, that it was an essential requirement to be goods, to be wrapped in paper. Anything required to make the goods marketable, must form....
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....rospace Laboratories, HAL etc. as detailed below : 9.1 Aircraft cables (manufacturer - Radiant Cables Pvt. Ltd.) 9.2 Paints (manufacturer - South Field Paints & Chemicals Pvt. Ltd.) 9.3 Expoxi Yellow Primer (manufacturer - South Field Paints & Chemicals Pvt. Ltd.) 9.4 Thinner for yellow primer (manufacturer - South Field Paints & Chemicals Pvt. Ltd.) 9.5 Rivets (manufacturer - M/s. Ankit Forgings) 9.6 Epoxi black paint (manufacturer - South Field Paints & Chemicals Pvt. Ltd.) 9.7 Industrial Laminates Fabric (manufacturer - Lamtuf Plastics Ltd.)" 33. It is submitted that from the facts of above case, it is clear that paints when supplied to manufacturers of aircrafts / helicopter, are treated as parts of aircraft and thus would be eligible for claiming benefit of nil rated duty under the Notification 6/2002 - CE. Applying similar analogy, paint when supplied for manufacture of ship should be considered as part of ship. Under erstwhile Indirect Tax regime, Central Excise exemptions were granted to marine paints supplied to ship. Henc....
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....chedule I of IGST Rate notification vide entry 246 to 251. Whereas separate entry 252 has been inserted for parts of these goods. Thus, the intention appears to be to avoid inverted duty rate structure for vessel manufacturers. They should be able to procure all the parts at 5% IGST and then would also be charging same rate on their outward supply of different types of vessels. Hence, entry 252 of IGST Rate notification should be read to cover all raw materials and parts which are meant for use in manufacture of different types of vessels. VAT legislation of United Kingdom also considers paint as part of ship 39. It is submitted that Value Added Tax (VAT) was introduced in the UK on April 1, 1973. Although Value Added Tax Act 1994 (VATA) provides the main framework of the tax, the detailed interpretation of the same are found in statutory instruments either in the form of Orders made by Treasury or Regulations made by Her Majesty's Revenue and Customs (HMRC). HMRC has published several Notices and Leaflets affecting law. Though these Notices are not part of the law but they explain how HMRC interprets the law. 40. Appellant would also like to draw your attention to the VAT....
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....le 8 of the Act includes supply of parts and equipment, of a kind ordinarily installed or incorporated in, and to be installed, or incorporated in the propulsion, navigation, communication systems or the general structure of a qualifying ship. 42. It is submitted that as per section 30(2) read along with Schedule 8 of VATA, supply of parts and equipment of installed or incorporated in the propulsion, navigation or communication systems or the general structure of a qualifying ship would be considered as zero-rated supplies and accordingly no tax would be liable thereon. However in order to avail the benefit of above provisions, it would be pertinent to identify what would be considered to be parts and equipment of a ship. Therefore under VAT Notice 744C, the UK government has prescribed a non-exhaustive list of parts and equipments which are not zero-rated. The said non-exhaustive list of parts and equipments includes paints, solvent and thinners. 43. It is submitted that from the above it is clear that paints, solvent and thinners have been considered to be parts and equipments of a ship since it is reported under a non-exhaustive list of parts and equipments. VIOLATIO....
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....e consumables and not parts. As per this law although application of paints is mandatory but that doesn't mean that it can be classified as part of ship. ii) Central Excise exemption notification in 2012, 2015 - specified ships. This exemption is for the things used in ships. In this case, it is noticed that the dealer sales goods to housing societies also. So this contention of the dealer is also not tenable. At the same time, there is no exemption under VAT. In VAT, the goods are classified under residual entry. iii) Judgments relied by ARA : A) Saraswati Sugar Mills Vs. Commissioner of Central Excise Civil Appeal No.5295 of 2003 decided on 2nd Aug 2011 Hon. Supreme Court of India = 2011 (8) TMI 4 - SUPREME COURT OF INDIA B) 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 C) State of Uttar Pradesh vs. M/s. Kores (India) Ltd on 18 October, 1976, Equivalent citations: 1977 AIR 132, 1977 SCR (1) 837 = 1976 (10) TMI 131 - SUPREME COURT OF INDIA iv) The ARA has also stated as under: Considering the meaning of an expression....
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....ains to the claim of the appellant that they are covered by Entry no.252 of Schedule I Notification No. 1 of 2017 dt.28.06.2017, which covers parts (classifiable under any chapter) of goods, falling under heading 8901,8902,8904, 8905,8906 and 8907 i.e. 'parts of ships'. The appellant has submitted that the impugned product sold by them i.e. Marine Paint is a specific type of paint suitable for use principally for ship during the building stage and during maintenance. The ship needs protection from the corrosive environment in which they operate and the marine coatings are a special functionality to protect the marine vessel and other carriers above and below the water line. The marine paint has the following special features:- 1. It protects the body of the ship from highly corrosive environment. 2. Blocks barnacles and other organisms from adhering to the hulls of the ship. 3. Lessens fuel consumption as it controls the damage to the ship. 4. Prevents the impact on water eco system by reducing emission of greenhouse gases. 5. Transportation of marine organisms to other areas. 49. It was held by the AAR that marine paints supplied by the appellant is not an integr....
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....r than ideally required but it will be a little farfetched to say that the ship would be unable to sail without it. A marine paint adds to the life, convenience and efficiency but is certainly not a part of it. Paints have an identity of their own and are not perceived as a part of a setting on which they are applied and this would apply even to the special category of 'Marine paints'. 52. The main contention of the appellant is that as per the provisions of the Merchant Shipping Act, paints are mandatorily required on all ships and therefore they should be considered as part of ships. This may be mandatory requirement for the sail worthiness of the ship but that does not indicate that they are parts of the ship. The mandatory requirement under some other law cannot be an adequate ground for classifying a product as 'part'. 53. The Appellant has placed reliance on the Supreme Court decision in the case of Star Paper Mills v. Collector of Central Excise (1990) 76 STC 317 (SC) = 1989 (8) TMI 78 - SUPREME COURT OF INDIA, wherein it was ruled that if it is found that use of paper core as necessary in any process incidental or ancillary to the completion of paper as marketable goo....
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....tax and, if so, at what rate. Therefore, in order to determine whether a particular article is a component part of another article, one must first look at that article itself and consider what its uses are and whether its only use or its primary or ordinary use is as the component part of another article. We are here concerned with an article, which from the various uses to which it is ordinarily put and is capable of being put as found by the Tribunal, has both an independent existence and an independent use, apart from being a part of a complete motor oil-tanker. It is, therefore, not possible to hold on the facts as found by the Tribunal that the oil-tank sold by the respondents was a component part of a motor vehicles. 56. In the case of Commissioner, Sales Tax v. Free India Cycle Industries [1970] 26 STC 428 = 1970 (2) TMI 107 - ALLAHABAD HIGH COURT the Allahabad High Court was concerned with an entry "bicycles, tricycles, cycle rickshaws and perambulators and parts and accessories thereof other than tyres and tubes". The assessee was a dealer in cycle and cycle goods and the question arose whether rexine saddle covers manufactured and sold by it would fall within that entr....