2020 (8) TMI 776 - AAR - GST

Classification of goods - applicable rate of tax - Printing and supply of Security Excise Adhesive Labels - whether classifiable under HSN Code 4821 attracting GST @ 18% or under HSN Code 4911attracting 12%? - HELD THAT - Hon ble Supreme Court in the case of M/S. HOLOSTICK INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NOIDA 2015 (4) TMI 357 - SUPREME COURT dealt with an identical issue. In that case, the question was whether a coated metallised film (classified under Central Excise Tariff 39.20.36) undergoing embossing and applied with an adhesive coating resulting in a hologram would be classified under Heading 4901 or 3919. It was held by Apex Court that the primary use of the product is security and not the quality of being adhesive. The primary use of such tape is by virtue of its adhesiveness to bind and package containers in which goods are to be stored and transported. Obviously, in such an example, the printed monogram of such adhesive tape would be incidental to the primary use of the said goods - the adhesive tape. In the present case also, the primary use of the Security Excise labels is for security. Akin to Note No.2 to entry 49 in Central Excise Tariff, a similar Note No. 12 is existing in Chapter 48 of GST Tariff - Also, the sixth edition of volume III of Explanatory Notes of World Customs Organisation in relation to Chapter Heading 4911 also includes at item No. 10, Self-adhesive printed stickers designed to be used, for example, for publicity, advertising or mere decoration, e.g., comic stickers and window stickers . Thus, the judgment of the Hon ble Supreme Court in the case of M/S. HOLOSTICK INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NOIDA 2015 (4) TMI 357 - SUPREME COURT wholly applies to the instant case and therefore the product in question is classified under the Heading 4911 and rate of tax is 12% as per Sr. No. 132 of schedule Il of Notification No. 01/2017-CT (R) dated 28.06.2017.

Summary

Issues:
1. Correct classification of Security Excise Adhesive Labels (HSN Code)
2. Rate of tax applicable on supply of Security Excise Adhesive Labels

Analysis:
1. The case involved an application for Advance Ruling by a State Public Sector Enterprise regarding the classification and tax rate applicable to Security Excise Labels supplied to distilleries. The applicant entered into an agreement with another company for printing the labels using specific materials and security features. The applicant sought clarification on the correct HSN Code and tax rate for these labels.

2. The Authority considered the submissions and relevant facts. The applicant initially classified the labels under HSN Code 4821, attracting CGST and SGST at 9%. However, they argued that the correct classification should be under HSN Code 4911, with a lower tax rate. They relied on a Supreme Court judgment for support. The Authority analyzed the definitions of both HSN codes and referred to a previous Supreme Court judgment involving a similar issue.

3. The Authority highlighted the importance of determining whether printing on the labels is incidental to their primary use. They referenced relevant case law and international nomenclature to support their decision. The primary use of Security Excise Labels was deemed to be for security purposes, leading to the conclusion that the correct classification is under HSN Code 4911. The tax rate was determined to be 12% based on the applicable notification.

4. Consequently, the ruling provided by the Authority stated that the HSN Code for Security Excise Labels is 4911, and the applicable tax rate is 6% under the CGST Act and KGST Act, and 12% under the IGST Act. The decision was based on the analysis of the primary use of the labels and relevant legal precedents, ensuring clarity on the classification and tax treatment of the supplied labels.