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TMI Blog2018 (9) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... o such dissimilar provisions, a reference to the CGST Act 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. FATC AND CONTENTION - AS PER THE APPLICANT The submission (Brief facts of the case), as reproduced verbatim, could be seen thus - * "Jotun Group is a leading supplier of paints and powder coatings. The Applicant, Jotun India Private Limited is a supplier, exporter and manufacturer of paints and powder coatings, The Applicant supplies paints and coatings that are specially designed for unique conditions. * Broadly, the paints supplied by the applicant can be categorized in Solvent based paints and Water based paints. One of the major supplies by Applicant are marine paints, Composition of such marine paint being manufactured by Applicant makes it suitable for ships during building stage and even during maintenance. Details of such products along with its description are enclosed as Annexure 4 * In the erstwhile Indirect Tax regime, Applicant has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paint is a specific type of paints suitable for use principally for ships during building stage and even during maintenance. The sailing ship needs protection from corrosive environment in which they operate. Such marine corrosion has a significant impact on sea carriers and their longevity. Therefore, effective corrosion control strategies are chosen considering appropriate selection of coating for a marine environment. Marine coatings have special functionality to protect marine vessels and other carriers above and below the waterline. Accordingly, marine paints supplied by Applicant 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 * Vide notification no 1/2017 of Integrated Tax (Rate) dated June 28, 2017, the Government of India has notified IGST rates for goods. The said notification has classified goods into 4 digit HSN Codes. Further under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / Sub-heading/ Tariff item Description of Goods 20. 3208 Paints and varnishes (including enamels and lacquers) based on synthetic polymers or chemically modified natural polymers, dispersed or dissolved in a non-aqueous medium; solutions as defined in Note 4 to this Chapter However, marine paints are suitable for principally use of ships and hence, it is also pertinent to analyse Entry 252 to Schedule I of Notification No 1/2017 Integrated Tax (Rates) dated June 28, 2017 liable to 5% IGST: Sr.No. Chapter/Heading/ Sub-heading/ Tariff item Description of Goods 252. Any Chapter Parts of goods of heading 8901, 8902, 8904, 8905, 8906 and 8907' Description of goods falling under above referred heading, are mentioned below: Sr.No. Chapter/Heading/ Sub-heading/ Tariff item Description of Goods 246 8901 Cruise ships, excursion boats, ferry-boats, cargo ships, barges and similar vessels for the transport of persons or goods 247 8902 Fishing vessels; factory ships and other vessels for processing or preserving fishery products 248 8904 Tugs and pusher craft 249 8905 Light-vessels, fire-floats, dredgers, floating cranes and other vessels the navigability of wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the term 'parts of goods', could then be adopted from its meaning in common parlance. Consequently, we have referred to the definition of the term 'Part', legal jurisprudence on the term 'Parts / Components' under erstwhile Indirect Tax regime, the Merchant Shipping Act, 1958 and UK VAT Guidelines. B.2 Meaning of 'PART' * The term 'Part' as defined under The Black's Law Dictionary 'an integral portion, something essentially belonging to a larger whole, that which together with another or others makes up a whole.' * Definition of 'Part' from Thesaurus 'an essential or integral attribute or quality' * The meaning of the term 'part' in common parlance is that component part of an article is an integral part necessary to the constitution of the whole article and without it, the article will not be complete'. B3. From the above, it could be understood that anything which is an integral element and is also essential to an object, could be considered as part of that article. Anything required to make the goods a finished item can be described as component parts. Applicant hereby submits relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is evident that every ship has to adhere to the anti-fouling provisions as prescribed under MS Act. Basis the Same, a layer of coating or paint, has to be applied on the hull of the ship to control or prevent attachment of unwanted organisms. Further in the Concise Oxford English Dictionary, the term 'hull' is defined as follows- The main body of a ship or other vessel, including the bottom, sides, and deck but not the masts, superstructure, rigging, engines, and other fittings B5. Furthermore, if any Indian ship fails to comply with the provisions of this chapter, the Director - General or any officer authorised by him in his behalf can detain the ship until the causes of such contravention are removed or levy a penalty on such ship. Consequently, it could be construed that ships must have a layer of coating or paint on its hull, thereby making it very essential for a ship to operate and thus be marketable. B6. Considering the fact that all ships are mandatorily required to apply paint makes it evident that paint is essential element for any ship to operate. Accordingly, such marine paint has to be considered as part of ship and should get covered under 5% IGST Rate sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly since without the former goods, the later goods couldn't be marketed or are commercially inexpedient. Thus an analogy could be drawn that anything which is required for making goods marketed or to be marketable, would be form component part of that end products. C6. Basis the provisions of The Merchant Shipping Act, ships are bound to adhere to the 'anti-fouling system' norms. Accordingly, ship would not be marketable unless the same has complied with anti-fouling system i.e. application of paints/coating to avoid growth of unwanted organisms. C7. Thus applying the ratio derived from aforementioned legal jurisprudence in the current situation, a view can be taken that since the ship is not commercially expedient without following anti-fouling system, paints would have to be considered as 'part of that ship' C8. Thus, it could be contended that marine paints so supplied for vessels, would be considered as 'Parts of vessel' and thus would fall under the ambit of entry 252 of Schedule I of the classification wherein tax would be levied at the rate of 5%. D. If paint is considered as part of aeroplane helicopter then the same should be considered a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng effective rate of excise for goods mentioned therein. Sr. No. Chapter or heading or sub-heading tariff item or of the First Schedule Description of excisable goods Rate Condition No. 306C Any Chapter Raw materials and parts NIL 2 and 3* *Condition 2 - Where such use is elsewhere than in the factory of production, the exemption shall be allowed if the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, is followed. Condition 3- The exemption shall be allowed if it has been proved to the satisfaction of an officer not below the rank of the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction that such goods are cleared for the intended use. E3. Vide above mentioned entry, rate of excise duty for raw material and parts, for use in the manufacture of different types of vessels has been prescribed as nil. Accordingly, goods falling under any chapter meant for use in the manufacture of vessel was made liable to nil rate of duty. E4. Thus, it can be inferred that intention of the legislators is to grant benefits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raft and associated services published on July 20, 2011 7.5. Which parts and equipment are excluded from zero rating? Any raw or bulk materials. partly processed parts or equipment and also non-specialist goods or appliances are excluded from zero rating. The list below gives examples of other parts and equipment which are not zero-rated. It is not exhaustive. * Binoculars * catering equipment (domestic) * crockery * cutlery * diving equipment * furniture (unfixed) * laundering equipment (domestic) * missiles, shells etc * ship's stores * soft furnishings * phones * televisions * tools * underwater cameras * videotapes/disks, electronic games and Similar entertainment equipment * crockery and cutlery * raw materials such as: fibre board, plastics, and specialist metals * bulk materials such as: adhesives, chemicals, fabrics, inhibitors, metals, oils, paints, solvents and thinners etc * aircraft ground equipment * flight simulators or their parts, and * tooling and equipment used for manufacturing parts or equipment F3. Now as per section 30(2) of VATA, any supply of goods or services would be zero-rated if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isprudence it is said that anything which is required for making goods marketed or to be marketable, would be form component part of that end products and hence paints would form part of the ship. 6. In addition to the above, we have also scrutinized the concerned issue under UK VAT, wherein paints is mentioned under the list of 'Parts and equipments of ship' which are excluded from zero rated goods. However in absence of any such specific provisions in India, it could be said that paints are 'parts of the ship' and therefore would fall under Sr No 252 of Schedule I of IGST Act 2017 and hence be taxed at 5%" On the basis of the above, the questions as reproduced above have been raised. 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- "M/S. Jotun India Pvt. Ltd., GSTIN:- 27AABCj6665jZ6, who is assigned to this office under case allocation, has applied for advance ruling under section 97 of CGST/MGST Act, 2017. The dealer has mentioned its nature of activity as factory/manufacturing & in brief it says "We supply paints and coatings that are specially designed for unique conditions" The dealer has requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to 28% IGST. However further to their claim that their goods 'Marine paints' are classifiable under CTH 3208 and 3209 and individually as per tariff are liable to IGST @ 28%, but the applicant is claiming that in the present facts of the case wherein they are supplying their goods "marine paints" for use on ships and therefore their goods would get covered under Sr. No.252 of Schedule -I of Notification 1/2017 of Integrated Tax (Rates) dated 28.06.2017 and would be liable to IGST @ 5% as they are parts of goods of Headings 8901, 8902, 8904, 8905, 8906 and 8907. Further we find that the jurisdictional officer, in his submissions has stated that under CTH-3208 and 3209 of the GST Tariff, there are specific entries for paints and varnishes and therefore the applicant's contention that marine paints be treated as parts of ship cannot be accepted. From the above contentions of the applicant and the department, it is apparent that there is no dispute with regard to classification of the subject goods under CTH 3208 and 3209. The difference of opinion is only with respect to the claim of the applicant that the goods are parts of ship and therefore would be eligible for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vessels for the transport of persons or goods 247 8902 Fishing vessels; factory ships and other vessels for processing or preserving fishery products 248 8904 Tugs and pusher craft 249 8905 Light-vessels, fire-floats, dredgers, floating cranes and other vessels the navigability of which is subsidiary to their main function; floating docks; floating or submersible drilling or production platforms 250 8906 Other vessels, including warships and lifeboats other than rowing boats 251 8907 Other floating structures (for example, rafts, tanks, coffer- dams, landing-stages, buoys and beacons) Now when we know as to what are the goods covered under above CTH, we are required to examine and see if marine paints are parts of goods of the above referred CTHs. First of all we need to examine as to what are "Parts". We find that the word "Part/Parts" has not been defined in GST nor was it defined in Central Excise earlier. In view of this first we are required to understand the general meaning of the word 'Part/ Parts' which is of relevance to us in the present case. ---------We find that as per Cambridge English Dictionary: Part as a noun - a separate piece of somethi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssential components of a vessel/ ship without which the ship would not be complete and would not exist. These are very integral for the functioning of the ship and can be separated from the ship for repair/replacement. There are various consumable items like paints varnish, oils, grease, etc. which are essentially applied and used in or on all or most of these essential ship parts as discussed above to make them tenable, durable and worthy of the ocean. Once applied, these consumable items are consumed and lost and cannot be reused and are also not worth recovery, reuse or recycle for use on ship. The main function of marine paints as per applicant's submissions is ... * Protection the body of ship from highly corrosive environment * Blocking barnacles and other marine organisms from adhering to the hulls of ships * Lessening fuel consumption as it controls damage to the ship. * Preventing impact on water eco-systems by reducing emission of Green House Gases. * Preventing Transportation of marine organisms to other areas. When we refer to the definition of the word 'part' as discussed in detail above, we find that 'part' is a separate piece of so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one at hand, we may refer to certain judgements which throw light on the disputed issue. In case of 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 observed : 12. In order to determine whether a particular article is a component part of another article, the correct test would be to look both at the article which is said to be component part and the completed article and then come to a conclusion whether the first article is a component part of the whole or not. One must first look at the 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. There cannot possibly be any serious dispute that in common parlance, components are items or parts which are used in the manufacture of the final product and without which, final product cannot be conceived of. 13. The meaning of the expression `component' in common parlance is that `component part of an article is an integral part necessary to the constitution of the whole article and without it, the article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmon parlance has to be looked into since the notification itself does not contain any definition of the expression. In the 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 In this case the appellant contended before the Hon SC that carbon paper does not lose its character as paper in spite of being subjected to chemical processes, and that ribbon is not an accessory but an essential part of the typewriter. While dismissing the appeal Court held that "A word which is not defined in an enactment has to be understood in its popular and commercial sense with reference to the context in which it occurs. It has to be understood according to the well-established canon of construction in the sense in which persons dealing in and using the article understand it." The Hon. SC further observed that "Bearing in mind the ratio of the above mentioned decisions, it is quite clear that the mere fact that the word paper' forms part of the denomination of a specialized article is not decisive of the question whether the article is paper as generally understood. 'the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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