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TMI Blog2019 (7) TMI 1159X X X X Extracts X X X X X X X X Extracts X X X X ..... sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable. The subject Steel Mugs with plastic body are advertised and sold as steel mugs. It is the steel that gives the essential characteristic to the subject product. Liquids specially, is they are boiling are not preferred to be poured in plastic containers. Hence in such a case it would be appropriate to consider the element of steel as the major element which are used in such conditions. Further, the plastic with its varied colours would seem to be lending to only visual attraction of the steel mugs and the essential characteristic remains to be steel. The subject goods fall under Chapter Heading 7323, since according to us, the material which is giving the essential character to the steel cups with plastic body is the presence of steel, which is 75% of the total value and composition of the subject goods - the said product is therefore covered under Sr. No. 184 of Schedule II of Notification 1/2017 Central Tax (Rate) dated 28th June, 2017. - GST-ARA-140/2018-19/B-54 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . With the introduction of GST, the applicant analyzed the notifications issued by the Central Board of Indirect Taxes and Customs (CBIC). Notification 01/2017-Central Tax (Rate) dated 28.06.2017 as amended from time to time along with the Rules of interpretation of First Schedule to the Customs Tariff Act, 1975 (CTA), including Section Notes and Chapter Notes were used for the purpose of classification under GST. 1.4. As an abundant precaution as well as conservatism, the mugs mentioned hereinabove were classified under Tariff heading 3924 Tableware, kitchenware, other household articles hygienic or toilet articles, of plastics accordingly were offered for tax @ 9% (IGST 18%). 1.5. However, on further research as well as on observing the competitors, it is noticed that the same steel mugs with an outer plastic body are being classified under Tariff heading 7323 - Table, kitchen or other household articles of iron steel; Utensils whose applicable rate of tax is 6% (IGST 12%). Since, the aforementioned mugs being supplied by the applicant are same as supplied by its competitors being covered under Sch. II of the said Rate Notification, your applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rability 2.2.2. Steel is a malleable material, extremely strong and, unlike plastic, has low thermal expansion. This all mean it is not vulnerable to the varying temperatures of the beverages placed in the mug. 2.2.3. The heart of the mug is the steel. Plastic outer body adds utility and aesthetics to the product. The customer buys it because of the versatility in use of the steel mug. 2.2.4. The Customer/User buys the mug for its versatility a stainless-steel mug and perceives it as a stainless steel mug only. 2.2.5. The Applicant would like to submit that the plastic outer body is just an aesthetic and helps mainly in preventing the user from getting his hand burnt from a hot beverage kept in the steel mug. The plastic outer body is also used for displaying characters/cartoons i.e. just an aesthetic benefit. Plastic has a low temperature point then temperature point of steel and thus only acts as an insulation so that the person coming in contact with the mug doesn't get burnt. 2.3 Classification under GST 2.3.1 Relevant Schedule Entries under Central Tax Rate notification 1/2017 dt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are required to be understood in the manner defined therein in absence of any such definition, they should be understood in their popular meaning as understood as per common parlance. In M/s Annapurna Biscuit Manufacturing Co., Kanpur Vs Commissioner of Sales Tax, U.P., Lucknow (1981 AIR 1656, 1982 SCR (1) 149) on 28 July, 1981 = 1961 (7) TMI 55 - SUPREME COURT it was held by the Supreme Court It is a well settled rule of construction that the words used in a law imposing a tax should be construed in the same way in which they are understood in ordinary parlance in the area in which the law is in force. If an expression is capable of a wider meaning as well as narrower meaning the question whether the wider or the narrower meaning should be given depends on the context and the background of the case. 2.4.3 The Supreme Court in the matter of Mukesh Kumar Aggarwal Co. v. State of Madhya Pradesh reported in [1988] 68 STC 324 (SC) = 1987 (12) TMI 55 - SUPREME COURT has held that (pages 326 and 327 in 68 STC) 4. In a taxing statute words which are not technical expressions or words of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o put a restrictive meaning to the word 'utensil' as understood in common parlance. The word 'utensil' is a term of wider denotation. 2.4.5 Similar entry came up for consideration before the Chhattisgarh High Court in the matter of Kamesh Traders v. State of Chhattisgarh (2012) 52 VST 120 (Chhattisgarh) passed in W.P. No. 6975 of 2008 decided on December 2, 2010 = 2010 (12) TMI 1107 - CHHATTISGARH HIGH COURT wherein the Chhattisgarh High Court has taken the view that entry makes no distinction between the utensils on the basis of the material for making the utensils except precious metals and that the articles used as articles of kitchen and for domestic purpose are covered in it. The Chhattisgarh High Court in the said judgment has taken the view that serving tray, flask, stainless steel tiffin with plastic body, water jug and hot pot (casserole) are covered within the common parlance meaning of utensils. In M/s P.K. Plastics V. Commissioner of Commercial Tax, Madhya Pradesh and Others [2012] 55 VST 278 (MP), = 2012 (1) TMI 147 - MADHYA PRADESH HIGH COURT The MP High Court took into con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alls under the head of utensils 2.4.9 On analysis of the chapter heading 73, the utensil must be manufactured from iron or steel to fall under the HSN code - 7323 (refer Annexure B of Customs Tariff Headings) 2.4.10 However in the above case, the product is primarily made of steel, but it has plastic outer body, for it to fall under the aforementioned head, the product should be made of iron and steel. 2.4.11 Relying on the verdict of the application made for the determination of rate of tax filed by M/s. Kraftwares (India) Pvt. Ltd. (DDQ-1187/ADM-5/393/B-5 dt. 6.5.1988) under Section 52(1)(e) of the Bombay Sales Tax Act, 1959. The applicants had stated that they are manufacturers of stainless steel utensils. However, some of these utensils had copper clad to its bottom to improve the heat conductivity of the utensils and make the utensils more fuel efficient. Also the applicants have clarified that the cost of the copper in the finished utensils amounts to 30% of the cost of the utensil. 2.4.12 The Ld. Commissioner of Sales Tax, Shri. Narayan Valluri stated that the transaction of sale of the aforementioned utensil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd steel. Additional submissions on 07.05.2019. The GST Rate Schedule Notification No. 1/2017-Central Tax (Rate) dated 28 th June 2017 contains an explanation at the end of the notification. It states as under: Explanation. - For the purposes of this notification,- (i) . (ii) . (iii) (iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification. The relevant General Rules for The Interpretation of Import Tariff are reproduced hereunder 2. (a) (b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime to make submissions. However to submissions are made till the date of passing of this order. We heard both the sides. 05. OBSERVATIONS AND FINDINGS: 5.1 We have gone through the facts of the case, documents on record and submissions made in the matter. The issue before us is one of classification of goods and its tax rate under GST. 5.2 Applicant is a GST registered person, engaged in the manufacturer export of various products. They also manufacture specially designed Steel mug with plastic outer body which according to their submissions, utilizes the beneficial properties of both, steel and plastic. 5.3 It is their claim that, the product 'steel mug with plastic outer body' answers the description provided in Sch.-II, Chapter Heading 7323, Sr. No. 184 of the Notification 1/2017, dt.28.06.2017. For this, they have strongly argued that the subject products contains around 75% of steel with the balance 25% being plastic other materials and also are considered as 'domestic utensil'. They have submitted the process of manufacture and have urged that the weight of the subject products is predomina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered as a tableware, a kitchenware or household articles but we cannot classify the subject product under Chapter 3924 because it also contains iron/steel. The Chapter Notes to CH.39 also does not throw any light on whether the subject product is covered under Chapter 3924. 5.7 The subject product, even though a household article is not manufactured exclusively with the use of a single material. The materials used are iron/steel and plastics. In the present case, the product is manufactured using more than one substance [mainly steel (close to 75%) and for outer body plastic (with plastic and other components amounting to only 25% of the total cost of the product)]. Clause (iv) of the Explanation in GST Rate Schedule Notification No. 1/2017-Central Tax (Rate) dated 28 th June 2017 mentions that: The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may he, apply to the interpretation of this notification. 5.8 The relevant General Rules for The Interpretation of Import Tariff are repro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tem under CH 9505.10.00.90 i.e. Articles for Christmas festivities. However, when reading the Notes to Chapter 95, it clearly states this Chapter does not cover Candles. Hence they must be classified under CH 3406 i.e Candles, tapers and the like. Rule 2: (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or failing to be classified as complete or finished by virtue of this Rule), presented unassembled or disassembled. (b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. (c) When goods cannot he classified by reference to 3(a) or 3(h), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. Explanation: Rule 3 (a) states that where 2 or more Headings seem to apply, the one which provides the most specific description of the product in question should be used. This means that a Heading which names the actual product should be used in preference to one which only names a category to which the product could belong. Similarly, a Heading that describes the whole product should be used in preference to one which describes part of it. However, where two Headings both only describe part of the product, this rule cannot be used to tell which one to use even if one seems more specific or detailed than the other. Example: Mint tea is not stated specifically, as a product, in the Tariff Although the product descriptions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such a case it would be appropriate to consider the element of steel as the major element which are used in such conditions. Further, the plastic with its varied colours would seem to be lending to only visual attraction of the steel mugs and the essential characteristic remains to be steel. 5.12 Thus in view of the above discussions and also in view of Rule 3 (b) of the Rules of General Interpretation to classify goods, we find that the subject goods fall under Chapter Heading 7323, since according to us, the material which is giving the essential character to the steel cups with plastic body is the presence of steel, which is 75% of the total value and composition of the subject goods. Further we also find that the said product is therefore covered under Sr. No. 184 of Schedule II of Notification 1/2017 Central Tax (Rate) dated 28th June, 2017. 06. In view of the extensive deliberations as held hereinabove, we pass an order as follows : 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-140/2018-19/B-54 ..... 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