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TMI Blog2018 (8) TMI 975X X X X Extracts X X X X X X X X Extracts X X X X ..... ct 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. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus - "STATEMENT OF RELEVANT FACTS HAVING BEARING ON THE QUESTION(S) ON WHICH ADVANCE RULING IS REOUIRED. 1. M/s. A.W. Faber-Castell (India) Pvt. Ltd. (hereinafter referred to as 'Applicant') having its corporate head office at 801, Kamla Executive Park, Near Vazir Glass Works, J. B. Nagar, Andheri (east), Mumbai and having various regional offices located at Bhiwandi (Maharashtra), Chennai, Delhi, Kolkata and Goa, is inter-alia engaged in the manufacture of various products taxable under GST law. 2. The present application is filed in respect of one of its products - "Modelling Dough" which is a specially manufactured semi-solid, clay-like structure to be used as a toy tor kids to make various shapes, things, caricatures of animals etc. It is made up of 'maida' i.e. 'refined wheat flour' or 'white flour', Modell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of the applicant product in relation to Chapter Heading No. 34.07 of the Customs Tariff The applicant's product may fall under Chapter 34.07 which covers 'modelling pastes'. However, the same product is actually used as a 'toy' for kids and maybe more aptly covered under Chapter 95 of the Customs Tariff which covers Toys, games and sports requisites; parts and accessories thereof. 7. The prevailing ambiguity has led to two separate Tariff Item Nos. being used for the product in question with contradictory usages thereby levying two different rates of CGST applicable on them. While some cautious sellers are charging CGST @ 9% on the product in question whereas some registered persons are using the ambiguity to charge CGST 6% only. The above ambiguity results in unfair market practices being adopted by certain registered persons in an attempt to reduce effective price of product and increase their market share and profits. Further, it shall be noted that many unorganized and un-registered players (having meager marker share) are also taking undue advantage of the above and clearing similar products by charging CGST @ 6% only. 8. Under the above circumstance, we are left with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A supplier shall be liable to be registered under CGST Act in the State or Union Territory, from where he makes taxable supply of goods or services or both; b. If the aggregate turnover in the financial year exceeds rupees twenty lakh. A.5 The Applicant submits that as on date, it is registered in Maharashtra and also making taxable supplies of goods from the same to its customers located in State of Maharashtra, Further, the turnover of the Applicant exceeds rupees twenty lakhs in the financial year. Given this, it is submitted that Applicant clearly satisfies to be 'applicant' in terms of sub-section (c) of the Section 95 of the CGST Act. A.6 That sub-section (1) of the Section 95 of the CGST Act defines the term 'advance ruling' as under:- (a) "advance ruling" means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant;" Emphasis Supplied A.7 Perusal of the above clarifies that the advance ruling can only be sought on the issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 2017, reads as under: "96. (1) The Government shall, by notification, constitute an Authority to be known as the Maharashtra Authority for Advance Ruling : Provided that the Government may, on the recommendation of the Council, notify any Authority located in another State to act as the Authority for the State. (2) The Authority shall consist of- (i) one member from amongst the officers of central tax; and (ii) one member from amongst the officers of State tax, to be appointed by the Central Government and the State Government, respectively. (3) The qualifications, the method of appointment of the members and the terms and conditions of their services shall be such as may be prescribed." Emphasis Supplied A.11 The Applicant submits that in terms of the above referred section 96 of the Maharashtra Goods and Service Tax Act, 2017, the Government of Maharashtra has issued a Notification No. MGST-1017/CR 193/Taxation dated 24.10.2017, which constitutes this authority as Maharashtra Authority for Advance Ruling. The Applicant submits that by virtue of Section 96 of the Maharashtra Goods and Service Tax Act, 2017, the questions for determination in advance ruling lie befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HOE SHAPES , STICKS OR SIMILAR FORMS; OTHER PREPARATIONS FOR USE IN DENTISTRY , WITH A BASIS OF PLASTER (OF CALCINED GYPSUM OR CALCIUM SULPHATE ) 3407 00 - Modelling pastes, including those put up for children's amusement; preparations known as "dental wax" or as "dental impression compounds", put up in sets, in packings for retail sale or in plates, horseshoe shapes, sticks or similar forms; other preparations for use in dentistry, with a basis of plaster (of calcined gypsum or calcium sulphate): 3407 00 10 --- Modelling pastes , including those put up for children 's amusement 3407 00 90 --- Other Chapter Heading No. 95.03 Tariff Item Description of goods Unit Rate Standard Preferential Areas 1 2 3 4 5 9503 TRICYCLES, SCOOTERS, PEDAL CARS AND SIMILAR WHEELED TOYS; DOLL'S CARRIAGES; DOLLS; OTHER TOYS; REDUCED-SIZE ("SCALE") MODELS AND SIMILAR RECREATIONAL MODELS, WORKING OR NOT ; PUZZLES OF ALL KINDS 9503 00 - Tricycles, scooters, pedal cars and similar wheeled toys; dolls' carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e corresponding Chapter of HSN, then the HSN explanatory notes explaining the scope of headings of that Chapter would have persuasive value in the determination of scope of headings of correspondence Chapter of Central Excise Tariff. The aforesaid position has been laid down by the Hon'ble Supreme Court in the following decisions: (a) Camlin Limited vs. CCE -2008 (230) ELT 193 (SC) (b) Coen Bharat Limited vs. CCE--2007 (217) ELT 165 (SC) (c) CCE vs. Bakelite limited - 1997 (91) ELT 13 (SC) C.8 Explanatory Notes for Chapter Heading No. 34.07 of the HSN read as follows: "(A) Modelling pastes These ore plastics preparations generally used by artists or goldsmiths far making models and also by children for amusement purposes. The most common are Those a basis of zinc oleate. These also contain waxes. while oil and kaolin and are slightly greasy to the touch. Other are mixtures of cellulose pulp and kaolin with binders. These pastes are usually coloured and are presented in bulk or in cakes, sticks, plates. etc, Assorted modelling pastes, including those put up in sets for the amusement of children, are also covered by this heading." .............emphasis supplied C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owth stimulating, creativity toy and may be termed to be for the amusement of children; it is specifically made from edible substances including maida so as to make it safe for children and not have any harmful effects even if accidently consumed by the children. The ingredients of the product are specifically selected and no plastics are added to the product. Therefore, the product cannot be said to be classifiable under Chapter Heading No. 34.07 which specifically includes goods made of plastics only. C. 13 Further, Chapter 34 of the Customs Tariff includes "Shop; organic surface-active, washing preparations, lubricating preparations, artificial waxes, prepared waxes, polishing or scouring preparations, candles and similar articles, modelling pastes, "dental waxes" and dental preparations with a basis of plaster". Chapter Heading No. 34 07 is a sub-heading of Chapter No.-34 itself. The broad spectrum of goods covered under Chapter 34 are all chemicals and similar preparations. It shall be unfair to state that goods made of edible stuff like maida are classifiable under the same Chapter as that of the chemicals like soap and surfactants. C.14 Furthermore, Chapter 34 palls within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission, as reproduced verbatim, could be seen thus- "2. It is submitted at the outset that the applicant ought to have furnished all the relevant information and details in his application necessary to decide the classification issue. For determination of classification number of factors are required to be examined like raw materials/inputs used and their proportion; desired characteristics of the final product and in turn function, essential characteristics of different raw materials used /the purpose of using each input, manufacturing process, intended as well as alternate use of the product, manufacturing process, machinery and equipments used etc. However scrutiny of the application and Annexure to it has revealed that the applicant has not provided following information/details which are crucial for taking decision in the matter. i) samples, photographs, types, range of the product, catalogue about the product or whatever material available on the same to understand the product ii) function and the purpose of using each such raw material/input. iii) essential characteristics of the product 'modeling,/moulding dough' and the raw material/process which provide such char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch as potassium or ammonium. By itself, "alum" often refers to potassium alum, with the formula KAl(SO4) 2*12H 2O. Other alums are named after the monovalent ion, such as sodium alum and ammonium alum. The name "alum" is also used, more generally, for salts with the same formula and structure, except that aluminium is replaced by another trivalent metal ion like chromium(III), and/or sulfur is replaced by other chalcogen like selenium. The most common of these analogs is chrome alum KCr(SO 4) 2*12H 2O. In some industries, the name "alum" (or "papermaker's alum") is used to refer to aluminium sulfate Al 2(SO 4) 3*nH 2O. Most industrial flocculation done with "alum" actually uses aluminium sulfate. In medicine, "alum" may also refer to aluminium hydroxide gel used as a vaccine adjuvant **** c) From above it appears that while manufacturing 'moulding /modelling dough' on commercial basis, certain chemical must be being used to give essential characteristics like elasticity, pliability and non perishable nature to the emerging product. It further appears that such chemical used providing essential characteristics to the product is a principal raw material and crucial in decidin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant seems to convey that there are two Custom Tariff Headings under which the impugned product could be said to fall. We have been informed that the impugned product is- * Is made up of 'maida' i.e. 'refined wheat flour' or 'white flour'. * a specially manufactured semi-solid, clay-like structure to be used as a toy for kids to make various shapes, things, caricatures of animals etc. * is usually supplied in packs containing multiple such dough in various colours to attract kids. During hearing, the applicant was asked to submit the ingredients of the product which have been informed as being thus - CONTENTS % CONSUMPTION HYDONTOIN DMDM (PRESERVATIVE) **% POLYSORBATE 80 **% MD-002- POTTASIUM DIHYDROGEN ORTHO PHOSPATE **% MD-003(SODIUM CHLORIDE) **% MD-004- MAIDA 47.57% MD-006-CALCIUM CHLORIDE DIHYDRATE **% MD-008- BUTYL STEARATE **% PETROLIUM JELLY -OP - 304 **% CR-010-LIQUID PARAFFIN OIL **% PC-005-SODWM BENZOATE **% PG-002-ALUMlNIUM SULPHATE **% HEATED DM WATER 34.58% POLYBUTENE-950 **% FLUORO ROYAL BLUE- IXT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts from the modelling pastes. The present product is a dough from which various shapes can be modelled. A prima-facie reading would give but obvious an inference that the impugned product would be covered by the CTH 3407. However, we find that the applicant has pointed to the following, to claim inapplicability of the CTH 3407- * Chapter Heading No, 34.07 falls under Section VI of the Customs Tariff which provides for 'PRODUCTS OF THE CHEMICAL OR ALLIED INDUSTRIES'. The applicant's product is neither a chemical, nor a product of any such allied industry. The applicant's product is made up of 'maida' which is neither a chemical nor any allied industrial product. * Competitors of the applicant (who are branded players in the stationery items and children's goods sector) are clearing identically placed products under the category of 'Toys' by classifying the same under Chapter 95 (Heading No 95.03) of the Customs Tariff (under the GST regime) and charging CGST @6%. * The applicant's product may pall under Chapter 34.07 which covers 'madelling pastes'. However, the same product is actually used as a 'toy' for kids and maybe more aptly covered under Chapter 95 of the Customs Tari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f, the use of chemicals in the modelling dough is significant. And therefore, the product can very well fall in the Section VI for "Products of the Chemical or Allied Industries". Then we come to the Harmonized Commodity Description and Coding System Explanatory Notes (HSN) to heading 34.07 which say thus - "(A) Modelling Pastes These are plastic preparations generally used by artists or goldsmiths for making models and also by children for amusement purposes. The most Common are those with a basis of zinc oleate. These also contain waxes, white oil and kaolin and are slightly easy to the touch. Others are mixtures of cellulose pulp and kaolin with binders. These pastes are usually coloured and are presented in bulk or in cakes, sticks, plates, etc. Assorted modelling pastes, Including those put up in sets for the amusement of children, are also covered by this heading." We find that the applicant is pointing at the words plastic preparations" to place a point that the impugned product is not such a preparation. And hence, a reference is made by the applicant to the meaning assigned to the word "plastics" "Plastics and articles thereof" are covered by Chapter 39. The notes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g "Modelling pastes" it is stated that these are "Plastic Preparations" generally used by Artists or goldsmiths for making models and also by children for amusement purposes. Here in these explanatory notes it is apparent that the word "Plastic" used in phrase "Plastic preparations" is used as an Adjective which denotes the Plastic property of modelling pastes i.e. their malleability, mouIdability, shapability, pliability, flexibility etc as per synonyms of this property mentioned under its meaning above when used as an adjective. From the extracts reproduced and detailed discussions above it is clear that the meaning of 'plastic" is not just restricted to the polymer 'plastic' but rather it refers to various properties with respect to malleability and flexibility. We now refer to Hawley's Condensed Chemical Dictionary which also defines thus - plastic. (1) Capable of being shaped or molded with or without the application of heat. Soft waxes and moist clay are good examples of this property. Thus, we see that the Chemical Dictionary has defined that plastic would mean the capability of being shaped or moulded. We have not an iota of doubt as to the correctness of our view that ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The impugned product being a dough used for amusement of children, the Heading 3407 would be the correct classification. The description against CTH 3407 being applicable to the impugned product, we refrain from engaging ourselves in any exercise of what constitutes a "toy" and whether the impugned product is a toy". We find that the CTH 3407 is covered by the Schedule III of the Notification No. 1/2017-Central/State Tax (Rate) [as amended from time to time] thus - 63 3407 Modelling pastes, including those put up for children's amusement: Preparations known as "dental wax" or as "dental impression compounds", put up in sets, in packings for retail sale or in plates, horseshoe shapes, sticks or similar forms; other preparations for use in dentistry, with a basis of plaster (of calcined gypsum or calcium sulphate) 06. In View of the deliberations as held hereinabove, we pass an order as under : ORDER (under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) No. GST-ARA-31/2017-18-B-39 Mumbai, dt. 23.05.2018 For reasons as discussed in the body of the order, the question is answered thus - Question: Whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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