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TMI Blog2022 (12) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... pellate Authority have rejected the interpretation of the Petitioner. They have held that the marine paint supplied by the Petitioner cannot be classified as part of the ship. Hence the Petitioner is before us in this writ petition challenging these orders. 2. The Petitioner is a supplier and manufacturer of paints and powder coatings. One of the major supplies of the Petitioner is marine paints, and the marine paints manufactured by the Petitioner are used on vessels as anti-fouling paints. 3. Notification No.1/2017, dated 28 June 2017, prescribes applicable rates of CGST. The rules of interpretation of the First Schedule to Customs Tariff Act, 1975 are applicable for the classification of the GST regime. Relevant entries for the present petition are as follows: Sr.No. Chapter/ Heading/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 2 nonaqueous medium; Solutions as defined in Note 4 to this Chapter. x x x x Sr.No. Chapter/ Heading/Sub-heading/ Tariff item Description of Goods 252 Any chapter Parts of goods of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he excise regime, the said goods were classified under Chapter 32 and were taxed at the rate of 12%. The marine paints/ anti-fouling paints are part of the ship due to their special functionality to protect marine vessels and other carriers above and below the waterline. The Petitioner stated that anti-fouling paints are statutorily mandated for application on ships to make them sail-worthy under the Merchant Shipping Act, 1958 and that makes it an essential part of the ship. Any product without which the main product is not workable is to be considered as the main product, and, therefore, the marine paints will have to be construed as an essential part of the ship. 5. The Maharashtra Authority of Advance Ruling on Goods and Service Tax- Respondent No.3 (Authority) rejected the contentions of the Petitioner, holding that merely because antifouling paints are mandatory in the Merchant Shipping Act, that does not make it a part of the ship. Accordingly, the Authority disposed of the application dated 19 May 2018. The Petitioner thereafter filed an appeal under section 18 of the CGST and MGST Act to the Maharashtra Appellate Authority for Advance Ruling for Goods and Service Tax- Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at sail in different oceans can carry organisms attached to them to another ocean. The Technical EIA Guidance Manual for Ship Breaking Yards published by the Ministry of Environment and Forests in August 2010 treats the lead-based anti-fouling coatings as part of the ship's structure. Prudent owners will only sail the ship with anti-fouling paint. The anti-fouling paint is essential to make the ship usable apart from its application, making sailing legal; therefore, the anti-fouling paint must be considered part of the ship. Both the Authorities are in complete error in stating that the ship can enter the water without anti-fouling paint, overlooking that it cannot sail as per the governing legal position. If such activity is carried out, then the owner is liable to a fine and confiscation of the ship. Both the Authorities wrongly overlooked these mandatory requirements. Also, the anti-fouling paint enhances the life of the ship, and it is an anti-corrosion measure. The material published by the International Maritime Organization has emphasized the importance of the antifouling system and how it is necessary for the ship's functioning. The learned counsel for the Petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered the material on record and after giving a full opportunity of hearing to the Petitioner, have taken a view which is inter partes binding. There is no need to interfere with the impugned orders on merits, and the Petitioner cannot convert this proceeding to an appellate proceeding. 9. First and vital aspect of the matter is the scope of writ jurisdiction against the order passed by the Authority and Appellate Authority. 10. Chapter XVII of the Central Goods and Services Tax Act, 2017, deals with Advance Ruling. This Chapter is separate from Chapter XVIII which deals with Appeal and Revision. Section 96 provides for the constitution of the Authority for Advance Ruling. Provision for application for advance ruling is specified under section 97 stating that an applicant desirous of obtaining advance ruling may apply in such form and manner as prescribed stating the question on which the advance ruling is sought. The question on which advance ruling can be sought has to be in respect of the classification of goods and services, applicability of Notification, determination of time and value of supply, admissibility of the input tax credit, determination of liability to pay tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pronounced by the Authority or the Appellate Authority by fraud or suppression of material facts and misrepresentation of facts; the Authority may declare such rule to be void ab initio. Therefore, the legislative scheme indicates that the advance ruling is distinct from the appeal and revision. The order is binding only on those specified under section 103 of the Act. This, in short, is the scheme of advance ruling under the Act. 11. Under the above scheme, it is the applicant who seeks an advance ruling on the matter as specified, which is not pending or decided in the applicant's case and the decision so given after hearing the applicant and the concerned officer is binding on the applicant or the concerned jurisdictional officer. Therefore, no further appeal is provided. This legislative scheme has to be kept in mind when the applicant challenges the order passed by the Authorities invoking writ jurisdiction. The Court will have to be mindful of the fact that the advance ruling is binding in a limited sense. Our enquiry is whether the orders passed by both the Advance Ruling Authorities, which have limited application, need any interference in writ jurisdiction in this pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Asahi India agreed to pay back. The Settlement Commission went into the issue and directed Asahi India to pay back the balance amount towards settlement. Asahi India filed a writ petition in the High Court which remanded the proceeding to the Settlement Commission for consideration afresh in the light of the legal principles. This order was challenged by the Department on the ground that the High Court had no jurisdiction to tinker with the order of the Settlement Commission, stating that once such an order was passed, the High Court had no jurisdiction to interfere with the same. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of Union of India v. Swift Laboratories Ltd. 2011 (4) SCC 635: 1011 (265) ELT 3 (SC). The Hon'ble Supreme Court found the High Court had not meddled with the factual aspects and had concluded that the Commission committed an error by applying the wrong principle of law; therefore, the Hon'ble Supreme Court did not interfere with the order passed by the High Court. In the decision in the case of Asahi India, a proposition is not laid down that the scope of writ jurisdiction against the Advance Ruling Authority is akin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions. Thereafter the Authority passed an order on 15 May 2018. The Petitioner filed an appeal wherein the Petitioner submitted the grounds of appeal. A personal hearing was conducted on 16 January 2019 when the advocate appeared for the Petitioner and also submitted written submissions. The representative of the Revenue also made submissions. Thereafter by a detailed order, the Appellate Authority dismissed the appeal. 17. Therefore, the Authority and the Appellate Authority followed the entire procedure, and full opportunity was given to the Petitioner. There is no ground raised of breach of principles of natural justice on account of not giving an opportunity of being heard. All points put forth by the Petitioner as to why anti-fouling paint should be considered as part of the ship were taken into consideration, and the Authority and the Appellate Authority took a particular view of the matter. 18. As stated earlier, we will have to examine whether any interference is permissible in the findings rendered by the Authority and the Appellate Authority and in that context, only we proceed to analyze what was argued before the Authorities and the findings thereof. 19. In Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Authorities proceeded on surmises and referred to phrases such as "common parlance" when there is no evidence and data based on which such position could have been assumed. The Petitioner has also sought to criticize the approach of the Authorities in mentioning the analogy that the units such as walkie-talkies, binoculars, life jackets, and lifeboats on the ground of such safety equipment are generic and not ship-specific. The Petitioner had also contended that the standards prescribed for hull performance under ISO 19030-1:2016 state that an anti-fouling system is necessary for maintaining the hull in proper condition. Even the Merchant Shipping (Control of Anti-Fouling System) Rules, 2016 makes marine paint mandatory. 22. Both the Authority and the Appellate Authority have dealt with the Petitioners' contentions. The Authority has observed that the paint generally means any liquid or composition that, after application to a substrate in a thin layer, converts into a solid film. There are various types of paints; one type is anti-fouling paint, which falls under Item 3208. It was the Petitioner's case that the goods marine paint would be covered under Sr.No.252 bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities have rightly focused only on the first aspect as that was the scope of enquiry before them. Once the Authorities correctly adopted that approach, the issue of whether the ship was permitted in law to sail in view of the statutory provisions was an issue outside the enquiry of the Authorities. There is no error in the principle adopted by the Authorities that a part is one without which the whole cannot function and then applying that to the Petitioner's case. This is the only enquiry that both the Authorities had to undertake and they have rightly undertaken the same. There is no dispute before us that a ship can enter the water and sail without the marine/anti-fouling paint. We find that there is no fundamental legal error in the approach going by the decision of the Supreme Court in the case of Asahi India. Once we reach that conclusion, proceeding further to analyze would amount to exercising appellate jurisdiction. 25. The judicial precedents cited before us by the learned counsel for the Petitioner were cited before both the Authorities and the Authorities have rendered an opinion that the decisions are not applicable. We have examined the findings of the Authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court observed that to obtain proforma credit, fans with nameplates have a certain value that the fans without the nameplates did not have, and the fans did not become marketable products without the nameplates. The Hon'ble Supreme Court observed that the name should be in terms of the relevant Notification. The third decision relied upon by the Petitioner was of the Hon'ble Supreme court in the case of H.M.M. Ltd. In this case, whether the metal screw cap put on the bottled product, Horlicks, was a part of the manufacturing process in question. The Tribunal had held that the metal screw cap put on the bottle was manufacturing process. The Hon'ble Supreme Court again considered the matter in terms of marketability and observed that after the Horlicks bottle is packed in the bottle with a metal screw container only at that stage it becomes a marketable and excisable article. In the case of Star Paper Mills Limited v. Collector of Central Excise, Meerut (1970) 76 STC 312 (SC), the decision relied upon by the Petitioner before the Authorities, the issue arose before the Hon'ble Supreme Court in the appeal under the Central Excise Act against the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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