TaxTMI 
TaxTMI 
2021 (4) TMI 562
X X X X Extracts X X X X
X X X X Extracts X X X X
....armonized System of Nomenclature ('HSN') except for specific/few goods, classification adopted by Applicant was a subject matter of dispute between VAT authorities and the Applicant; that under the classification mechanism provided under Gujarat VAT legislation, there were two predominant rates of VAT in force viz. 5% (4% + 1% additional tax) and 15% (12.5% + 2.5% additional tax) and for the former category, goods were specifically enlisted whereas the latter tax rate applied as a residual tax rate on all other goods; that in the erstwhile regime, the applicant had classified each product under its specific category provided under 5% tax rates but this classification was disputed by the VAT Department, without providing sufficient grounds for substantiation; that subsequent to the change in the Indirect tax legislation and considering the way in which the manner for classifying goods and services has undergone a change, they seek to understand the correct classification of their products under the GST regime. The applicant has stated that in view of this, they wish to have clarity on classification of certain products dealt in by the Applicant and based on the above facts, they hav....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dure to be followed on the receipt of an advance ruling application by the Authority for Advance Ruling and the proviso to this Section, specifically states a situation when the advance ruling application will not be admitted. The relevant portion of the Act is reproduced hereunder: Provided that the Authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of an applicant under any of the provisions of this Act: 3.1 The applicant has submitted that the term 'this Act' is the CGST Act 2017, is stated in Section 1 and it is also quite clear from the perusal of the aforementioned proviso that a combination of three elements would mean that the application will not be admissible. The criteria are: * Subject matter of advance ruling application should be pending or concluded in a proceeding * The proceedings should be in relation to the same applicant * The proceedings should be pending or concluded under the GST Act 3.2 The applicant has stated that the logic behind this refusal for admissibility is purely based upon the fact that when one authority has l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y of the provisions of this Act. Since there is no issue pertaining to the GST Act which is pending or decided in any proceedings in the case of an applicant under any of the provisions of this Act, the Advance Ruling application filed by the Respondent before the Advance Ruling Authority is clearly maintainable." 4. The applicant has submitted that the advance ruling application is maintainable and admissible; that VAT matters are not connected to HSN classification of the given products and hence, they also submit that the questions for which Ruling is sought is different from the question under consideration in those cases. The Applicant has stated that they are engaged in trading of goods which are used at ports as support infrastructure and the list of goods being traded by them are as under and for ease of understanding, the brochures of the products are enclosed herewith as Annexure B. * Bollards * Bolts, nuts, screw etc. known as fixtures * Frontal Frames * Fascia Pads * Buoys * Chains / Swivel / D-Shackle/ Chain Tensioner * Rubber Fender (both types) 5. Apart from above, the applicant has submitted as und....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n integral part of the Harmonized System Convention; that however, as approved by the World Customs Organisation Council, they constitute the official interpretation of the Harmonized System at the international level and are an indispensable complement to the System; that from the official website of the World Customs Organization, they find the following explanation and stated that even though it does not form part of Indian Customs classification system, the Explanatory Notes and the provisions given thereunder can be referred to for clarity in classification.: The Explanatory Notes provide a commentary on the scope of each heading, giving a list of the main products included and excluded, together with technical descriptions of the goods concerned (their appearance, properties, method of production and uses) and practical guidance for their identification. Where appropriate, Explanatory Notes also clarify the scope of particular sub-headings. 8. In light of the above, the applicant has submitted that even though it does not form part of Indian Customs classification system, the Explanatory Notes and the provisions given thereunder can be referred to for clarity in c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the Bollards would merit classification under Chapter Heading 7325 99 and would attract GST at a rate of 18%. (B) Fixtures 1. The Applicant submits that fixtures would generally mean something that is used to set an article firmly in a place. It includes all kinds of fixtures and fasteners i.e. Bolts, Anchors, Nuts & washers. The sample copies of purchase & sales invoices are attached as Annexure D for reference. Further, the photos are reproduced hereunder for easy understanding of products. 2. The Heading 7318 covers screws, bolts, nuts, coach screws, screw hooks, rivets, cotters, cotterpins, washers (including spring washers) and similar articles, of iron or steel. For better understanding, it would be relevant to comprehend general meaning of the each of the terms: • A bolt is mechanical fastener used with a nut for connecting two or more parts. It consists of a head and a cylindrical body with screw threads along a portion of its length • A nut is a piece of metal, usually square or hexagonal in shape, with a hole through it having machined internal threads, intended to be screwed onto a bolt • A screw is a type of fastener, si....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 7318 23 00 -- Rivets 7318 24 00 -- Cotters and cotter-pins 7318 29 -- Other : 7318 29 10 --- Circlips 7318 22 00 --- Other 7. Considering the above classification, the Applicant would like to draw reference to Schedule III of CGST Notification No. 01/2017 - Central Tax (Rate) that prescribes GST rate of 18% for product falling under Chapter Heading 7318. The relevant extract has been provided hereunder for easy reference: S.No. Chapter / Heading / Subheading / Tariff item Description of goods 237 7318 Screws, bolts, nuts, coach screws, screw hooks, rivets, cotters, cotter-pins, washers (including spring washers) and similar articles, of iron or steel 8. Therefore, the Applicant submits that the fixtures would clearly merit classification under 'Screws, bolts, nuts etc.' under Chapter Heading 7318 and would attract GST at a rate of 18%. (C) Frontal Frames 1. Frontal frames are closed box structure of steel pneumatically leak tested to make sure that there are no punctures on it. It is made out of horizontal and vertical steel beam sections of steel which is self-buoyant and a floating structure. Use of this s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hes to understand the classification of supply of independent pads to the customer wherein the pads would not be affixed with frames. 5. Considering the fact that the pads are made of plastic, it would be essential to refer the Chapter 39 - 'Plastics and articles thereof' of the Tariff provided under Customs Tariff Act, 1975. The most appropriate heading to be referred to in this instance is heading 3920 which is reproduced hereunder for your easy reference: Tariff Item Description of goods 3920 Other plates, sheets, film, foil and strip, of plastics, non-cellular and not reinforced, laminated, supported or similarly combined with other materials 3920 10 - Of polymers of ethylene: --- Sheets of polyethylene 3920 10 11 ---- Rigid, plain 3920 10 12 ---- Flexible, plain 3920 10 19 ---- Other --- Other 3920 10 91 ---- Rigid, plain 3920 10 92 ---- Flexible, plain 3920 10 99 ---- Other 6. From the tariff entry reproduced above, the Applicant submits that the pads are made from polyethylene and therefore, it is important to understand the meaning of the term 'po....
X X X X Extracts X X X X
X X X X Extracts X X X X
....held that HDPE (High-density polyethylene) tapes or strips would be classifiable under 3920. 9. Considering the above classification, the Applicant would like to draw reference to Schedule III of CGST Notification No. 01/2017 - Central Tax (Rate) that prescribes GST rate of 18% for product falling under Chapter Heading 3920. The relevant extract has been provided hereunder for easy reference: S.No. Chapter / Heading / Sub-heading / Tariff item Description of goods 106 3920 Other plates, sheets, film, foil and strip, of plastics, non-cellular and not reinforced, laminated, supported or similarly combined with other materials 10. Hence, the Applicant believes that fascia pads made from polyethylene would merit classification under Heading 392010and therefore, the same would be subject to GST at the rate of 18%. (E) Buoys 1. Buoys are floating structure of steel used in the middle of seas as locators or as warning points for the ships/ vessels. Mooring buoys are a type of buoy, to which, ships can be moored in the deep oceanic areas. 2. As a process, the Applicant would procure materials separately from different vendors such as PUF chemicals, rubber f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ject floating in a body of water and anchored to the bottom of a body of water to mark a channel or to point out various navigation hazards. A mooring buoy is defined as an anchored buoy fitted to receive a ship's mooring chain or hawser. A bell buoy is defined as a buoy with a bell that rings by the action of waves and usually marks a shoal or rocks. The term "buoy", as used in heading 8907, thus seems to be limited to articles which are moored to the bottom of a body of water to mark something. The buoys of heading 8907 do not include life buoys, i.e., buoyant rings used as life preservers, recreational rafts, or personal floatation devices (life belts or jackets). The term "buoy", as used in heading 8907, is not so broad as to include everything that floats but appears to be limited to articles which are moored to the bottom of a body of water to mark something. That provision only covers items which can be described as floating structures. The net buoys are not moored to the bottom of a body of water when in use nor do they perform a function similar to those of buoys as previously described. 9. In the given case, the buoy is moored to the bottom of the water bo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f 18% for product falling under Chapter Heading 7315. The relevant extract has been provided hereunder for easy reference: S.No. Chapter / Heading / Sub-heading / Tariff item Description of goods 229 7315 Chain and parts thereof, of iron or steel falling under 7315 20, 7315 81, 7315, 82, 7315 89, 7315 90 5. Therefore, the Applicant submits that the Chain, swivel, d-shackle and chain tensioner would merit classification under Chapter Heading 7315 89 and would attract GST at a rate of 18%. (G) Rubber Fender 1. Rubber fenders are primarily used as "bumpers" to absorb collision energy during contact between the vessel and docks (or even other vessels). The massive sea vessels are embedded with rubber fenders on the outer surface of the vessel or installed on the docks in some cases. These fenders are also known by some as 'rubber buffers'. The primary objective of the rubber fenders on the dock is to absorb collision energy during the berthing process. This in return protects both the ship and the dock after collision. Generally, there are two types of rubber fender viz. pneumatic rubber fender and foam rubber fender. The sample copy of bill of entry and sale....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ber - Other 4016 91 00 -- Floor coverings and 4016 92 00 -- Erasers 4016 93 -- Gaskets, washers and other seals : 4016 93 10 --- Patches for puncture repair of self-vulcanising rubber or a rubber backing 4016 93 20 --- Rubber rings (O-ring) 4016 93 30 --- Rubber seals (Oil seals and the like) 4016 93 40 --- Gaskets 4016 93 50 --- Washers 4016 93 60 --- Plugs 4016 93 90 --- Other 4016 94 00 -- Boat or dock fenders, whether or not inflatable 6. Accordingly from the above description, the Applicant believe that pneumatic rubber fenders as well as foam rubber fenders would be classified with HSN 4016 94 00. Accordingly, the Applicant believes that rubber fenders would be leviable @ 18% by virtue of following line entry of Schedule III which has been reproduced hereunder for you easy reference: S.No. Chapter / Heading / Sub-heading / Tariff item Description of goods 123A 4016 Other articles of vulcanised rubber other than hard rubber [other than erasers, rubber bands} 7. Considering that same description as in the Customs Tariff has been provi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... determine whether the supply of a fender panel system qualifies as a composite supply. 5. There are certain conditions which need to be satisfied in order to be considered as a composite supply which are summarized below: (i) Supplies to be made by a taxable person (ii) Supply should consist of two or more taxable supplies of goods or services (iii) The various components of such supply should be naturally bundled and in conjunction with each other (iv) One of supply is principal supply 6. Since the Applicant is a taxable person who supplies two or more taxable supplies by way of supplying fender panel system, the first two conditions are satisfied. It will now be necessary to determine the fulfillment of the latter two conditions. An e-flyer issued by the CBIC on 'Composite supply and mixed supply' provides insights on few indicators which can be used to determine that supplies are bundled in the course of business. The factors are reproduced hereunder, for ease in reference: (i) The perception of the consumer or the service receiver. If large number of service receivers of such bundle of services reasonably expect such services ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The copy of rulings are enclosed herewith as Annexure H. • In the case of Card Protection Plan v. Customs and Excise Commissioners, [1998] EUECJ C-349/96, the ECJ held that a service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied. • In the case of Levob Verzekeringen BV, OV Bank NV v. Staatssecretaris van Financiën, [2005] EUECJ C-41/04, the ECJ held that where two or more elements or acts supplied by a taxable person to a customer are so closely linked that they form objectively, from an economic point of view, a whole transaction, which it would be artificial to split, all those elements or acts constitute a single supply for the purposes of application of VAT. 10. Considering above discussion, the Applicant submits that in order to qualify various services as naturally bundled, it is essential to have following ingredients in any transaction and same are present in the arrangement in hand. Ingredients Whether present in this case The perception of customer is to obtain all goods as a package Yes Whe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....said contracts are movable property. The flap gates, POS machines and manual swing gates are attached with screws and bolts at the entry gates of the bus station. These flap gates can be easily removed without damaging such gates and re-attached to some other locations. Hence, it cannot be said that such gates are permanently embedded to the bus stations and, hence, should be considered as an immovable property. Further, the flap gates are just a part of the AFC system and is not the main equipment of the AFC system. Even if, it is argued that the flap gates are permanently fastened to the earth and form part of the immovable property, it cannot be construed that the whole AFC system would form part of the immovable property. 26. The applicant further submitted that in case of city buses, hand held ETM machines with electronic payment integration are provided for the AFC system. In certain cases, Pole Validators with the AFC system are installed on the buses. Considering that the buses are movable properties, such equipment would not be construed as immovable property. Further, the purpose and function of the AFC system installed on the city buses and BRTS bus stations is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of duty will be free. 18. From the perusal of above, the applicant also believes that even when the frames and fascia pads are supplied i.e. the supply is made for fender panel system excluding the fixtures, the supply would still merit classification under Heading 7308. Accordingly, the Applicant would like to draw reference to Schedule III of CGST Notification No.01/2017 - Central Tax (Rate) that prescribes GST rate of 18% for product falling under Chapter Heading 7308. The relevant extract has been provided hereunder for easy reference: S.No. Chapter /Heading /Sub-heading/ Tariff item Description of goods 251 7308 Structures (excluding prefabricated buildings of heading 94.06) and parts of structures (for example, bridges and bridge sections, lock - gates, towers, lattice masts, roofs, roofing frame - works, doors and windows and their frames and thresholds for doors, and shutters, balustrades, pillars, and columns), of iron or steel; plates, rods, angles, shapes, section, tubes and the like, prepared for using structures, of iron or steel [other than transmission towers] 19. On conjoint reading of above, the Applicant believes that the supply of fender ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... or permanently fastened to anything attached to the earth;", Attached to the earth condition not getting fulfilled" 4. As the expression 'attached to the earth' has not been defined in the General Clause Act, reference can be drawn from Section 3 of Transfer Property Act which gives the following meaning to the expression "attached to the earth": "(a) rooted in the earth, as in the case of trees and shrubs, (b) embedded in the earth, as in the case of walls or buildings, and (c) attached to what is so embedded for permanent beneficial enjoyment of that to which it is attached." 5. From above, the Applicant understands that immovable property would mean anything that is permanently fastened to the earth. Considering this, it would be important to discuss whether the supplies in present case result into 'immovable property'. In such a scenario, the Applicant would like to refer to certain decisions of the erstwhile regime wherein it has been discussed as to what constitutes immovable property. Although these decisions relate to the erstwhile regime, the fundamental principles laid down in these decisions would still hold good. 6. In the case of Municipal C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p; Yes, fender panel system 11. Therefore, the Applicant believes that the present case would qualify to be composite supply wherein the supply of fender panel system is the principal supply which provides essential character to the entire bundle of supply of goods as well as installation service by the Applicant. Therefore, the Applicant believes that the supply of fender panel system would merit classification under Heading 7308 90. Accordingly, the Applicant would like to draw reference to Schedule III of CGST Notification No. 01/2017 - Central Tax (Rate) that prescribes GST rate of 18% for product falling under Chapter Heading 7308 90. The relevant extract has been provided hereunder for easy reference: S.No. Chapter /Heading /Sub-heading/ Tariff item Description of goods 251 7308 Structures (excluding prefabricated buildings of heading 94.06) and parts of structures (for example, bridges and bridge sections, lock - gates, towers, lattice masts, roofs, roofing frame - works, doors and windows and their frames and thresholds for doors, and shutters, balustrades, pillars, and columns), of iron or steel; plates, rods, angles, shapes, section, tubes and the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... retreading of tyres is a supply of goods or services? In retreading of tyres, which is a composite supply, the pre-dominant element is the process of retreading which is a supply of service. Rubber used for retreading is an ancillary supply. Which part of a composite supply is the principal supply, must be determined keeping in view the nature of the supply involved. Value may be one of the guiding factors in this determination, but not the sole factor. The primary question that should be asked is what is the essential nature of the composite supply and which element of the supply imparts that essential nature to the composite supply. 6. Similarly, in Circular No.11/11/2017-GST dated October 20, 2017, clarification has been provided with respect to printing contracts wherein the paper used by the printer is also supplied by the printer. The relevant extract of the Circular has been reproduced hereunder: "4. In the case of printing of books, pamphlets, brochures, annual reports, and the like, where only content is supplied by the publisher or the person who owns the usage rights to the intangible inputs while the physical inputs including paper used for printi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....supra) as well as the supply of service in the form of the blasting work. Therefore, the situation as narrated by the applicant is a composite supply of goods and services and shall be covered by Section 2(30) and Section 8(a) of the CGST Act, 2017." 9. Considering the above advance rulings and circulars, the Applicant wishes to submit that in cases where materials are consumed during provision of a service, such cases would qualify to be composite supply of goods as well as service wherein the supply of service would be the principal supply. Accordingly, the Applicant believes that the present case qualifies to be a composite supply wherein installation service would be principal supply and supply of chemical is an ancillary supply. 10. Considering the present supply would qualify to be a supply of service, the Applicant believes that the present supply would qualify under SAC 998739 - 'Installation services of other goods n.e.c.' leviable to GST @ 18%. The relevant extract of Notification No.11/2017 dated June 28, 2017 (as amended) has been provided hereunder: Sl.No. Chapter, Section or Heading Description of Service Rate (per cent.) Condition 25 Hea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....licable tax rate thereon in accordance with Notification No. 01/2017 dated June 28, 2017 (as amended). Question-3(Part-C): Whether supply of goods i.e. fender panel system along with services such as assembly, installation & supervision service would qualify as composite supply or not? If the supplies would qualify as composite supply, what would be the classification of this bundle and applicable tax rate thereon in accordance with Notification No.1/2017 dated June 28, 2017 (as amended)? Question-4(Part-D): Whether supply of installation service where usage of chemical is essential to provide effective service would qualify as composite supply or not? If the supplies would qualify as composite supply, what would be the classification of this bundle and applicable tax thereon in accordance with Notification No.11/2017 dated June 28, 2017 (as amended)? 15. We will take up all the above questions for discussion one by one. The first question pertains to 7 different products supplied by the applicant. The names of these products, their classification as well as the corresponding rate of GST as per the view of the applicant are mentioned hereunder: Sr.No. Pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tationery position in the seabed which prevents the ship/ vessel from being carried away by the waves. This product is manufactured from ductile iron, SG iron and cast steel which are pre-dominant inputs to make marine bollards which are made in various shapes as per the specific requirements of the customer like tee bollard, horn bollard and kidney shaped bollard. Since, the applicant has submitted that the major/important raw materials used in the making of the said product as Cast iron, SG iron and cast steel, we find that the product should ideally be covered under Chapter 73 of the Customs Tariff Act, 1975 (51 of 1975) i.e. "Articles of Iron and Steel". Also, as per the applicant, the said product is classifiable under Sub-heading 7325. On going through the said Chapter, we do not find any specific mention of the product 'Bollards' in any of the sub-headings of Chapter 73. Therefore, we find it necessary to go through the Chapter notes of Chapter 73 as well as the Explanatory notes to HSN in respect of Chapter 73. We also find that the Explanatory notes to Chapter 73 also includes the Chapter Notes of Chapter 73 of the Customs Tariff Act, 1975. Explanatory notes to Chapter 73 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not elsewhere specified or included. The heading includes inspection traps, gratings, drain covers and similar castings for sewage, water etc. systems; hydrant pillars and covers; drinking foundations; pillar boxes, fire alarm pillars, bollards etc; gutters and gutter spouts; mine tubbing; balls for use in grinding and equipment; counterweights; imitation flowers, foliage etc. (except articles of heading 83.06); mercury bottles. This heading does not cover castings which are products falling in other headings of the Nomenclature (e.g. recognisable parts of machinery or mechanical appliances) or unfinished castings which require further working but have the essential character of such finished products. The heading also excludes: (a) Articles of a kind described above obtained by processes other that casting (e.g. sintering) (heading 73.26). (b) Statues, vases, urns and crosses of the type used for decoration (heading 83.06). 18. On going through the above explanatory notes to HSN of sub-heading 7325, we find that there is specific mention of the product 'bollards'. We therefore, need to find out the specific tariff sub-heading under which the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iron and steel and would generally mean something that is used to set an article firmly in a place and it includes all kinds of fixtures and fasteners i.e. Bolts, Anchors, Nuts & washers; that the Heading 7318 covers screws, bolts, nuts, coach screws, screw hooks, rivets, cotters, cotterpins, washers (including spring washers) and similar articles, of iron or steel and for better understanding, it would be relevant to comprehend general meaning of each of the terms: • A bolt is mechanical fastener used with a nut for connecting two or more parts. It consists of a head and a cylindrical body with screw threads along a portion of its length • A nut is a piece of metal, usually square or hexagonal in shape, with a hole through it having machined internal threads, intended to be screwed onto a bolt • A screw is a type of fastener, similar to a bolt, with a thin pointed piece of metal with a raised edge twisting round its length and a flat top with a cut in it, used to join things together • A fastener is a hardware device that mechanically joins or affixes two or more objects together 21. In view of the above, we find it necessary ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ontal frames are steel structures which are fabricated & painted, that they are closed box structure of steel pneumatically leak tested to make sure that there are no punctures on it and it is made out of horizontal and vertical steel beam sections of steel which is self-buoyant and a floating structure and the use of this structure is to reduce the impact pressure on the ship/hull as per requirement. Since the applicant has submitted that the 'Frontal frames' are covered under Sub-heading 7326 of the Customs Tariff Act, 1975(51 of 1975), we will refer to Sub-heading 7326 which reads as under: 7326 OTHER ARTICLES OF IRON OR STEEL - Forged or stamped, but not further worked : 7326 11 00 -- Grinding balls and similar articles for mills 7326 19 -- Other : 7326 19 10 --- For automobiles and earth moving equipments 7326 19 90 --- Other 7326 20 - Articles of iron or steel wire : 7326 20 10 --- Tyre bead wire rings intended for use in the manufacture of tyres for cycles and cyclerickshaws 7326 20 90 --- Other 7326 90 - Other : 7326 90 10 --- Belt lacing of steel 7326 90 20 --- Belt ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er the submission of the applicant, Fascia pads are also known as UHMW PE Pads wherein UHMW PE stands for Ultrahigh-molecular-weight polyethylene which means that pads are made of high quality of plastics and are applied on the frame structure on which vessels/ship hull touches; that they are applied to reduce frictional load between ship/vessel and frame structure during berthing the vessels/ship; that they are made from polyethylene i.e. polymers of ethylene which would mean things mainly made from ethylene and therefore, they submit that fascia pads made from polyethylene would merit classification of tariff code 3920 1099. We therefore, feel the need to refer to the relevant portion of Sub-heading of the Customs Tariff Act, 1975 (51 of 1975) which reads as under: 3920 OTHER PLATES, SHEETS, FILM, FOIL AND STRIP, OF PLASTICS, NONCELLULAR AND NOT REINFORCED, LAMINATED, SUPPORTED OR SIMILARLY COMBINED WITH OTHER MATERIALS 3920 10 - Of polymers of ehtylene : --- Sheets of polyethylene : 3920 10 11 ---- Rigid, plain 3920 10 12 ---- Flexible, plain 3920 10 19 ---- Other  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in raw materials which are used in the manufacture of the said product are steel, foam and wall protection fender. They have stated that Buoys are floating structure of steel used in the middle of seas as locators or as warning points for the ships/vessels and mooring buoys are a type of buoy, to which, ships can be moored in the deep oceanic areas; that Buoys are mainly made from steel and it is nothing but round shaped structure of steel and in order to maintain buoyancy or to enable the structure to float on water, foam is filled up in the structure and once this is done, it is painted with bright color so as to ensure its visibility. The applicant has also submitted that the said product would merit classification under Sub-heading 8907 of the Customs Tariff Act, 1975(51 of 1975). On referring to sub-heading 8907, the same reads as under: 8907 OTHER FLOATING STRUCTURES (FOR EXAMPLE, RAFTS, TANKS, COFFERDAMS, LANDING-STAGES, BUOYS AND BEACONS) 8907 10 00 - Inflatable rafts 890790 00 - Other 29. Looking to the description of 'Buoys' as well as the photographs provided by the applicant , and comparing the same to the above, we find that the said product rightl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Customs Tariff Act, 1975(51 of 1975) reads as under: 7315 CHAIN AND PARTS THEREOF, OF IRON OR STEEL - Articulated link chain and parts thereof : 7315 11 00 -- Roller chain 7315 12 -- Other chain : 7315 12 10 --- Lifting and hoisting chain 7315 12 20 --- Ship chain 7315 12 90 --- Other 7315 19 00 - Parts 7315 20 00 - Skid chain - Other chain : 7315 81 00 -- Stud-link 7315 82 00 -- Other, welded link 7315 89 00 -- Other 7315 90 00 - Other parts 32. Since, there is no specific entry for the products i.e. swivel, shackles and chain tensioner under the said sub-heading, we find it prudent to refer to the Explanatory notes to Sub-heading 7315 of the Customs Tariff Act, 1975 which reads as under: "This heading covers chains of cast iron (usually malleable cast iron) wrought iron or steel, regardless of their dimensions, process of manufacture or, in general, their intended use. It includes articulated link chain (e.g. roller chain, inverted tooth ("sile....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n to enable continuous and proper chain operation.." 34. From the above description, it appears that the said product is a device which forms a part or accessory to a chain which adjusts slackness in the chain to enable continuous and proper chain operation and would therefore be rightly classifiable under Tariff heading 73159000 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975). Now, having decided the classification of the products i.e. chains, d-shackles, swivels and chain tensioners, we need to find out the GST liability on the same for which we need to refer to Notification No.01/2017-Central Tax(Rate) dated 28.06.2017(as amended from time to time). On going through the said notification, we find that Sub-heading 7315 finds mention at Sr.No.229 of Schedule-III of the said notification on which GST liability is 18%(9%SGST + 9% CGST). The same reads as under: Sr. No. Chapter / Heading / Subheading / Tariff item Description of goods 229 7315 Chain and parts thereof, of iron or steel falling under 7315 20, 7315 81, 7315, 82, 7315 89, 7315 90 35. The next product whose classification is required to be determined is Rubber fenders. As per the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns performance even if a fender's skin is punctured. The closed cell internal structure prevents water ingress into the foam. It is important to note that in pneumatic rubber fender, air is contained in fender whereas in foam rubber fender, foam is contained in fender. 36. The applicant has stated that as per the above description, the aforementioned products are classifiable under Tariff heading 40169400. Subheading 4016 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975) reads as under: 4016 OTHER ARTICLES OF VULCANISED RUBBER OTHER THAN HARD RUBBER 4016 10 00 - Of cellular rubber - Other : 4016 91 00 -- Floor coverings and mats 4016 92 00 -- Erasers 4016 93 -- Gaskets, washers and other seals : 4016 93 10 --- Patches for puncture repair of self-vulcanising rubber or a rubber backing 4016 93 20 --- Rubber rings (O-ring) 4016 93 30 --- Rubber seals (Oil seals and the like) 4916 93 40 --- Gaskets 4016 93 50 --- Washers 4016 93 60 --- Plugs 4016 93 90 --- Other 4016 94 00 -- Boat or dock fenders, whether or not inflatable 4016 95 -- Other inf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated 28.06.2017 was omitted w.e.f. 15.11.2017. In view of the above, the aforementioned product will be covered under Entry No.49 of Schedule-IV of the Notification No.01/2017-Central Tax(Rate) dated 28.06.2017 (upto 14.11.2017) and under Entry No.123A of Schedule-III of the said Notification w.e.f. 15.11.2017. Therefore, the rate of GST in respect of the aforementioned sub-heading i.e. 4016 will be 28% (14% SGST + 14% CGST) upto 14.11.2017 and 18%(9% SGST + 9% CGST) w.e.f. 15.11.2017. 38. In view of the above discussions, the classification of the following products under GST and applicable tax rate thereon in accordance with Notification No. 01/2017 dated June 28, 2017 (as amended from time to time) is as under: Sr.No. Name of the product Sub-heading/ Classification as per the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) Rate of tax(GST) 01. Bollards 73259999 18%(9% SGST + 9% CGST) 02. Bolts (fixtures) 73181500 18%(9% SGST + 9% CGST) 03. Nuts (fixtures) 73181600 18%(9% SGST + 9% CGST) 04. Screw (fixtures) 73181500 18%(9% SGST + 9% CGST) 05. Washer (fixtures) 73182200 18%(9% SGST + 9% CGST) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ded as a package, then such a package could be treated as naturally bundled in the ordinary course of business. (ii) Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines. (iii) The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service.... (iv) Other illustrative indicators, not determinative but indicative of bundling of services in the ordinary course of business are: * There is a single price or the customer pays the same amount, no matter how much package they actually receive or use * The elements are normally advertised as a package * The different elements are not available separately * The different elements are integral to one overall ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n entire system is principal supply which is required by the customer. As per Customs Tariff Act, Heading 7308 specifically covers structures. They have relied upon ruling by the National Commodity Specialist Division of United States, dated July 02, 2009 which provides that the applicable subheading for the plastic faced steel panel and rubber fender imported together will be 7308.90.9590. (k) From the perusal of above, the applicant also believes that even when the frames and fascia pads are supplied i.e. the supply is made for fender panel system excluding the fixtures, the supply would still merit classification under Heading 7308. Accordingly, the supply would be considered as falling under Sub-heading 7308, falls at Sr.No.251 of Schedule III of CGST Notification No. 01/2017 - Central Tax (Rate) that prescribes GST rate of 18%. 41. On going through the copy of the amendment to Purchase order submitted by the applicant, we do find that frontal frames, fascia pads and fixtures find mention in the same order mentioning the value as well as the GST amount therein. We also find the applicant submitting that they get several such orders from customers but they have not s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h each other in the ordinary course of business, one of which is a principal supply; Illustration.- Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; Further, definition of principal supply as per Section 2(90) of the CGST Act, 2017 reads as under: "(90) "principal supply" means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary;" 43. From the above, it can be seen that for being a composite supply, all the following conditions are required to be necessarily satisfied: (i) The said supply should be made by a taxable person to a recipient. (ii) It should consist of two or more taxable supplies of goods or services or both or any combination thereof. (iii) They should be naturally bundled and supplied in conjunction with each other in the ordinary course of business. (iv) One of the supplies must be a principal supply. Comparing the above conditions to the issue in h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he definition of 'mixed supply' of services or otherwise. For the said purpose, we need to refer to the definition of 'mixed supply' as defined in Section 2(74) of the CGST Act, 2017 which reads as under: "(74) "mixed supply" means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. Illustration.- A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately;" 45. From the above, it can be seen that for being a mixed supply, all the following conditions are required to be necessarily satisfied: (i) The said supply should be made by a taxable person to a recipient. (ii) It should consist of two or more individual supplies of goods or services or any combination thereof. (iii) It should not constitute a composite suppl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f heading-73181500 / 73181600 / 73182200) and the GST leviability on the said supply will be 18%(9% SGST + 9% CGST). 49. Now, we are required to discuss the third question of the applicant seeking Advance Ruling which reads as under: Question-3(Part C) - Whether supply of goods i.e. fender panel system along with services such as assembly, installation & supervision service would qualify as composite supply or not? If the supplies would qualify as composite supply, what would be the classification of this bundle and applicable tax rate thereon in accordance with Notification No.1/2017 dated June 28, 2017 (as amended)? 50. The applicant has submitted his view point for the aforementioned supply being a composite supply as under: (a) The applicant requires to supply fender panel system along with services such as assembly, installation &supervision as per the requirements of the customer for which the price /consideration for fender panel system and services would be separate and individual invoices would be issued for supply of goods and supply of service. (b) The present supply would not qualify as 'works contract' service by referring to the defini....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of work contract under Section 2(119) stating one of the essential conditions to qualify as works contract supply is that the fabrication, erection, fitting out, modification, alteration work is carried out for an immovable property. He has also stated that the resultant structure arising in the present case is not an immoveable property for the reasons that: (i) the fenders panel system can be easily shifted at another location without any complex dismantling process (ii) the fender panel system is dismantled on a periodical basis as these would suffer wear and tear after a certain period and therefore, are not permanently fixed to earth of jetty, hence not immoveable property as per the permanence theory. However, in the event of non-submission of copy of any work order/contract etc. it would not be possible for us to decide whether the present supply is 'Work Contract' or otherwise. We, therefore, have no option but to rely on the submission of the applicant and available records to decide the type of supply. 52. In order to find out whether the aforementioned supply i.e. Fender Panel System (along with services such as assembly, installation & supervision) is a composite su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ant itself consists of supply of three different taxable supply of goods i.e. frontal frames, fascia pads and fixtures and is accompanied by taxable supply of services such as assembly, installation and supervision. It therefore consists of two or more taxable supplies of goods or services or a combination of both. Hence this condition is also satisfied. (iii) The supply of goods i.e. frontal frames, fascia pads and fixtures are not naturally bundled nor supplied in conjunction with each other in the ordinary course of business as discussed in the foregoing paras. Similarly, the supply of the aforementioned goods need not necessarily be supplied alongwith services such as assembly, installation and supervision as these services need not be obtained by the recipient from the applicant but can be obtained from some other supplier also. We, therefore, find that the supply of goods mentioned above and the aforementioned supply of services are not naturally bundled nor supplied in conjunction with each other in the ordinary course of business. Hence this condition is not satisfied. (iv) None of the aforementioned supply of goods, nor the supply of services which the ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lso satisfied. (iii) The said supply does not constitute a 'composite supply'. Hence, this condition is also satisfied. (iv) The supply of goods i.e. frontal frames, fascia pads and fixtures as well as the supply of services are not supplied in conjunction with each other for a single price, as the applicant themselves have stated that the price/consideration for fender panel system and services would be separate, and individual invoices would be issued for supply of goods and supply of service. Hence, this condition is not satisfied. 57. In view of the above, since all the above conditions have not been satisfied, we conclude that the aforementioned supply of goods and services does not constitute a 'mixed supply'. Now, since it has been established that the aforementioned supply is neither a 'composite supply' nor a 'mixed supply', we conclude that the applicant will have to supply the aforementioned goods as well as services separately and not as a combination. In view of the above, we conclude that the supply of goods i.e. fender panel system along with services such as assembly, installation & supervision service would not qualify as a composite supply or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....would constitute supply of service falling under heading 9989 of the scheme of classification of services. (e) The applicant has referred to the case of G.E. Diesel Locomotive (P) Ltd wherein it was held by Uttar Pradesh AAR that since the supply of maintenance service is for a one and fixed price with or without supply of spare parts/goods and supply of service and goods is made in conjunction with each other in the ordinary course as per maintenance contracts, this maintenance service is naturally bundled with the incidental supply of goods and is a case of composite supply of service" (f) The applicant has also referred to the judgement of Gujarat AAR in the case of Khedut Hat [2018-TIOL-173-AAR-GST], wherein it was held that in the said case applicant uses explosives in the blasting activity at their client's site for the client, thus, there is deemed supply of explosives in this case in view of the judgement of Hon'ble Supreme Court in the case of Bharat Pest Control (supra) as well as the supply of service in the form of the blasting work and is therefore a composite supply of goods and services covered by Section 2(30) and Section 8(a) of the CGST A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r Section 2(90) of the CGST Act, 2017 reads as under: "(90) "principal supply" means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary;" 61. From the above, it can be seen that for being a composite supply, all the following conditions are required to be necessarily satisfied: (i) The said supply should be made by a taxable person to a recipient. (ii) It should consist of two or more taxable supplies of goods or services or both or any combination thereof. (iii) They should be naturally bundled and supplied in conjunction with each other in the ordinary course of business. (iv) One of the supplies must be a principal supply. Comparing the above conditions to the issue in hand, we find as under: (i) The said supply is made by a taxable person i.e. the applicant, hence the first condition is satisfied. (ii) The aforementioned supply consists of Installation services along with supply of chemicals which will be used up during the course of supply of service. It therefore consists of two or mo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....017 which reads as under: "8. The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:- (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax." 64. On going through the above provisions and comparing the same to the issue in hand, we find that since the aforementioned supply is a 'Composite supply' in which the 'Installation Service' is the principal supply, the said supply will be treated as a supply of 'Installation Service' in terms of clause(a) of Section 8 above, and therefore, the GST liability will be the tax leviable on 'Installation Service'. In order to find the GST liability on 'Installation Service' we will be required to refer to the Notification No.11/2017-Central Tax(Rate) dated 28.06.2017 (as amended from time to time) which covers the classification of services as well as rate of GST liability on them. On going through the same, we find that 'Installat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 9% CGST). 65. Further, we also observe that the applicant has cited a few judgements of Advance Ruling Authorities to support their contention. In this context, we have to emphasise here that decisions of Advance Ruling Authorities cannot be relied upon by the applicant, since, as per the provisions of Section 103 of the CGST Act, 2017, the Advance Ruling pronounced by the Advance Ruling Authority or the Appellate Authority shall be binding only on the applicant who had sought it in respect of any matter referred to in sub-section(2) of Section 97 for Advance Ruling and the concerned officer or the jurisdictional officer in respect of the applicant. 66. In view of the above circumstances, we rule as under : RULING Question-1(Part-A) -What would be the classification of the following products under GST and applicable tax rate thereon in accordance with Notification No. 01/2017 dated June 28, 2017 (as amended). Sr.No. Products 1 Bollards 2 Bolts, nuts, screw, washer etc. known as fixtures 3 Frontal Frames 4 Fascia Pads - UHMW PE pads 5 Buoys 6 Chains/ Swivel/ D-Shackle/Chain tensioner 7 Rubber Fender (both types) Answer:....