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TMI Blog2019 (6) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... ea the bags need to be dipped in hot only. Tea bags offer a quick and user friendly way of making the beverage. First member opinion - Packing of tea bags in cartons is an ancillary service to the main service of making tea bags. Tea and tea bags are distinct and separate commercial products. Manufacturing of tea leaves and manufacturing of tea bags are completely separate processes. Processes like plucking, withering, wilting, disruption, oxidation, fixation, kill-green, rolling, shaping, drying, aging, curing or tea sorting are processes associated with manufacturing of tea and not tea bags. Tea bags have distinct character and use and rightly classified under Tariff item 0902 40 40. In view of above discussion it is held that the service offered by the Respondent to M/s. Hindusthan Unilever Ltd. is classifiable under Sl. No. 26 (i) (f) of the Notification No. 11/2017-CT(Rate) dated 28.06.2017, as amended vide Notification No. 31/2017-CT (Rate) dated 13.10.2017. and taxable @5% Second member opinion - Para 3 of Schedule II (Section 7) of CGST Act, 2017 sated that Any treatment or process which is applied to another person's goods is a supply of services and SAC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication of the services provided in packing of tea bags; (ii) Rate of GST on the said service 3. The West Bengal Authority for Advance Ruling (hereinafter referred to as the WBAAR) pronounced its advance ruling by an order dated 28.01.2019 as under: (i) The Respondent makes a composite supply to M/s. Hindusthan Unilever Ltd. (hereinafter referred to as HUL) where the service of manufacturing tea bags from the physical inputs owned by the latter is the principal supply; (ii) The Respondent's service is classifiable under SAC 9988 and taxable at 5% rate under Sl. No. 26 (f) of the Notification No. 11/2017-CT (Rate) dated 28.06.2017, as amended from time to time; (iii) Applicability of this ruling with respect to other recipients is subject to the specific nature of the contracts with them. 4. The Appellant has filed the instant Appeal against the above Advance Ruling with the prayer to set aside/modify the impugned Advance Ruling passed by the WBAAR or pass any such further or other orders as may be deemed fit and proper in the facts and circumstances of the case on the following grounds: (a) The WBAAR err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that being supply of packing services. Further no new product emerges from the process. 6. The Respondent submitted that the process of service undertaken by him involves assembly of materials on machine including blended tea leaves and other inputs received from HUL. The Respondent used to classify it as packaging service under SAC 998540 and charge GST under Sl. No. 23(iii) of Notification No. 11/2017-CT (Rate) dated 28.06.2017 (hereinafter referred to as the Rate Notification ) amended vide Notification No. 1/2018-CT (Rate) dated 25.01.2018. On 01.11.2018 the Respondent received communication from HUL informing that the services should be taxed under Sl. No.26(f) of the Rate Notification amended vide Notification No. 31/2017-CT (Rate) dated 13.10.2017. Sl. No.26(f) of the Rate Notification applies to manufacturing service under SAC 9988 on physical inputs owned by others for food and food products falling under chapters 1 to 22 in the First Schedule to the Customs Tariff Act, 1975. The WBAAR in its ruling dated 28.01.2019 pronounced the supply classifiable under SAC 9988 and taxable at 5% rate under. Sl. No. 26(f) of the Rate Notification, as amended from time to tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice ought to be classified under SAC 9985. 12. If we look at entry at sl. no. 26(i)(f), tea falls under chapter 9 of the Tariff Act. Again the physical inputs (goods) provided to the Respondent are owned by others, in this case HUL. It needs to be examined whether the service provided by the Respondent qualifies to be a manufacturing service. 13. As per Ms. Smaraki Mahapatra, Member : Section 2(72) of the GST Act defines manufacture as the processing of raw materials or inputs in any manner that results in the emergence of a new product having a distinct name, character and use. In tea bags blended tea leaves are put into special porous pouches and then stitched so that for making tea the bag needs to be dipped in hot water only. Tea bags offer a quick and user friendly way of making the beverage. The tea bag pouch are made of specialized material so that it acts as a strainer for the leaves inside while allowing the beverage extract to blend in the water. The tea bag pouch is an essential input of making tea bags and not a mere packaging material. Packaging activity makes the same product more suitable for handling, delivery, preservation, retaili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owned by units other than the units providing the service. As such, they are characterized as outsourced portions of a manufacturing process or a complete outsourced manufacturing process. Since this Heading covers manufacturing services, the output is not owned by the unit providing this service. Therefore, the value of the services in this Heading is based on the service fee paid and not the value of the goods manufactured. 998816: Other food product manufacturing services This service code includes grain mill product manufacturing services, starch and starch product manufacturing services, bakery product manufacturing services, sugar manufacturing services, cocoa, chocolate and sugar confectionery manufacturing services, macaroni, noodles, couscous and similar farinaceous products manufacturing services, prepared meals and dishes manufacturing services and other food product manufacturing services n.e.c. However, the activity of M/s. Vedica Exports Tea Pvt Ltd that is stuffing tea in pouches and supplying the said tea bags cannot be said to be an act of manufacturing as it has not changed the nature and character of tea. Manufacturing involves change ..... X X X X Extracts X X X X X X X X Extracts X X X X
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