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2020 (6) TMI 706 - AAAR - GSTRectification of mistake - error in the impugned AAAR order - supply of the Electrolnk along with the other consumables comprising of blanket, photo imaging plate, binary ink developer, HP imaging oil, blanket web and other machinery products by the Appellant to its customers - mixed supply or composite supply - HELD THAT - The Appellant themselves have admitted that there is not any specific element under this bundle of supplies, which is more significant than others, ruling out the possibility of presence of any principal supply. The above submissions and the evidence produced by the Appellant themselves in the form of the Chartered Engineer s certificate also lead us to conclude further that there are no components in this bundle of supplies, which are ancillary in nature, as all the components are indispensable in nature, and not additional or subordinate in nature. None of the components are subordinate to any one element of the supplies. That is, none are providing additional support to any specific consumable items. All these consumables are being consumed together to achieve the desired output. In absence of any one of these consumables, the entire printing function will be stalled, which clearly shows the importance of each of the components of the bundled supplies. At the same time, it also shows that none of supplies are ancillary in nature. It is established beyond doubt that the bundled supplies by the Appellant to its customers has no principal supply, which is one of the primary conditions for any supply to be treated as the composite supply as envisaged under section 2(30) of the CGST Act, 2017. Circular No. 32/06/2018-GST, March 1, 2018 states that value is only the guiding factor, and not the sole factor for determining the principal supply in the bundle of supply. Therefore, the Appellant s contention based on the consumption pattern of the printing consumables, wherein consumption of Electrolnk is 41% in terms of the volume, thereby asserting the Electrolnk as the Principal supply only on the basis of its highest consumption among all the printing consumables, without establishing the fact that the same (Electrolnk) is imparting the essential nature of the supply is feeble and slight, and clearly not tenable. We reach the same conclusion as reached earlier in the appellate order, that the supply of the Electrolnk along with other consumables by the Appellant is not a composite supply. Instead the said supply can be construed as mixed supply, as it satisfies all the conditions stipulated for the mixed supply under the provision of section 2 (74) of the CGST Act - As is evident from the facts of the case, the supplies, made by the Appellant, squarely satisfy all the conditions prescribed for the mixed supply. Accordingly, it was rightly held by the AAR that the supply of the Electrolnk along with the other consumables comprising of blanket, photo imaging plate, binary ink developer, HP imaging oil, blanket web and other machinery products is mixed supply and not the composite supply as being made out by the Appellant. There are no reason to amend our original order dated 17.02.2019, wherein it was held that the supply of the Electrolnk along with the other consumables comprising of blanket, photo imaging plate, binary ink developer, HP imaging oil, blanket web and other machinery products by the Appellant to its customers is mixed supply and not the composite supply , as being claimed by the Appellant.
Issues Involved:
1. Non-consideration of additional submissions by the Appellate Authority. 2. Determination of whether the supply of Electro Ink and other consumables constitutes a "composite supply" or "mixed supply" under the CGST Act, 2017. 3. Identification of the principal supply in the bundle of supplies. Detailed Analysis: 1. Non-consideration of Additional Submissions by the Appellate Authority: The Appellant contended that the AAAR order dated 17.02.2019 did not consider their additional submissions dated 11.02.2019, which were crucial for their case. This non-consideration was argued to be an "error apparent on the face of the record," warranting rectification under Section 102 of the CGST Act, 2017. The Appellant cited various judicial pronouncements to support their claim that ignoring or not recording submissions amounts to an error that needs rectification. 2. Determination of Composite Supply vs. Mixed Supply: The Appellant is engaged in supplying HP Indigo printers and consumables to resellers, who then supply them to end customers. The transactions under scrutiny include: - Sale of Indigo press machines. - Supply of Electro Ink and other consumables. - Sale of spare parts for maintenance services. The primary contention was whether the supply of Electro Ink and consumables is a composite supply, which requires the supplies to be "naturally bundled" and to have a "principal supply." The Appellant argued that the supplies are naturally bundled and integral to each other, necessary for the printing process. They cited various business models (Tier "Click" Model and A la carte model) to illustrate how these supplies are consumed together. 3. Identification of Principal Supply: The Appellant argued that Electro Ink is the principal supply among the bundled items, supported by a Chartered Engineer's certificate and consumption patterns showing that Electro Ink constitutes 41% of the total consumption. However, the AAAR found that all components of the bundle (Electro Ink, blanket, photo imaging plate, etc.) are equally important and indispensable for the printing function, ruling out the possibility of any principal supply. The AAAR emphasized that none of the components are ancillary; all are necessary for the printing process. Discussion and Findings: The AAAR reviewed the additional submissions and found that the earlier decision was correct. The AAAR reiterated that the supply of Electro Ink and other consumables does not constitute a composite supply due to the absence of a principal supply. Instead, the supply was classified as a mixed supply under Section 2(74) of the CGST Act, 2017, as the items can be supplied separately and are not dependent on each other. Conclusion: The AAAR concluded that the additional submissions did not significantly alter the outcome of the case. The supply of Electro Ink along with other consumables remains classified as a mixed supply. The original order dated 17.02.2019 was upheld, confirming that the supply of these items by the Appellant is a mixed supply and not a composite supply.
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