In re Temple Packaging Pvt. Ltd. (GST AAR Daman, Diu & DNH)
Issue- Classification of Printed Leaflet manufactured by them in their factory out of their own raw material-paper/ink and with the contents supplied by the purchaser. Clarification sought as to whether the same is to be considered as supply of goods or supply of services
Held by GST AAR Daman, Diu & DNH
In the present case we, the members of Advance Ruling, have to decide as to whether the goods/service (under question) has to be considered as supply of goods falling under Chapter Sub-heading No.4901 or as a supply of service falling under SAC No.9989.
As per the evidence available before us, the applicant is engaged in the process of printing of the contents, supplied by the recipient of such printed goods (client), on the paper, purchased and owned by the applicant assessee, using the link also purchased and owned by the applicant. In simple language they are engaged in printing works for which the contents of prints are supplied by their client whereas materials needed for their printing are being purchased by the applicant.
The applicant have relied upon circular No.11/11/2017 dtd. 20.10.2017 and has contended that SAC 9989 covers only the publishing matter attended on a fee or a contract basis and did not cover printing matter other than publishing matter.
The applicant relied upon the Circular No. 1052/1/2017-CX, dtd 23.02.2017 to support their claim, However, on going through the contents of the said Circular it is noted that the referred Circular belong to pre GST era, hence, not applicable in the GST cases. Similarly, it is further noted that the applicant in their defence relied upon plethora of judgments while contending that their product is goods. We have gone through all the cases and found no force in any of the judgment applicable in their defence. Further the crux of all judgment referred by the applicant either pertain to Central Excise or Customs cases and the circumstances /issue referred in the cases relied are different from the issue in hand, hence not applicable. Thus we find that the judgments relied upon by the applicant assessee are not applicable in present case and the product Pamphlet/leaflet has the dominance of service and correctly classifiable under SAC 9989 if the contents are supplied by the customer as in the present case.
Advance Ruling is given that printing of Pamphlet/leaflet falls under the category of Supply of Service falling under SAC No.9989. The case is disposed off accordingly.
FULL TEXT OF THE ORDER OF APPELLATE AUTHORITY OF DAMAN, DIU AND DADAR & NAGAR HAVELI
M/s Temple Packaging Pvt Ltd, Survey No 171/3 &7, Behind Olive Healthcare, Hatiyawad, village- Dabhel, Nani Daman – 396210. Having GSTIN Number 251800000005AR4, is engaged in the printing of leaflets (further divided as insert/outsert) .They have made an application on 19.03.2018 under advance Ruling for printed leaflet supplied by the Applicant to ascertain the correct classification asto whether the same falls under the category of supply of goods falling under CHS No. 4901 or supply of service under SAC No.9989 and for that they have paid the required fee amounting to Rs.5,000/- for Central GST and Rs. 5,000/- for UT GST. Vide Challan Identification Number (CIN) -18022500004135 Date -23.02.2018.
2. The application for seeking Advance Ruling was forwarded vide letter dtd 20.03.2018 to the JAC for their report on the classification of the said product considering the prevailing practice by other manufacturer and similar case of the applicant assessee pending before any other appellate forum etc.
2.1 The JAC vide their letter issued from F.No. Div-1/Misc./CGST/1/2018-19/87 dtd 13.04.2018 had concluded their report stating that the case of the applicant falls under the category of supply of services falling under heading 9989 of the scheme of classification of services covered under Sr. No. 27 of Notification No. 11/2017-CT(R).
Defense Reply:-
3. The representative of the Applicant vide their letter dtd 15.05.2018 submitted that they had filed the captioned Advance Ruling application for decision on classification of printed leaflet manufactured by them at their Daman factory out of their own raw materials namely paper/ink with the contents supplied by the purchaser of leaflet to whom leaflets were sold by the Applicant on principal to principal basis. The issue to be decided as to whether same had to be considered as supply of goods falling under Chapter Sub-heading No.4901 attracting GST @5% as per Sr.No.201 of Schedule-1 of Noti.No.1/2017-CT (Rate) 28.6.2017 or as a supply of service falling under SAC No.9989 attracting GST @12% as per Sr.No.27 (1) of Noti.No.11/2017-CT (Rate) dated 28.6.2017, as amended (GST rate 18% up to 12.10.2017 and thereafter 12%)
3.1 They submitted that since 2005 they were clearing printed leaflets on outright sale basis and clearing the same under CSH No.4901 as exempted being not chargeable to duty. Accordingly w.e.f. 1.7.2017, the Applicant continued supplying the same under the category of goods falling under Chapter sub-heading No. 4901. However, w.e.f. 29.8.2017 the Applicant after intimating the Assistant Commissioner of CGST & CE vide their letter dated 29.8.2018 started supplying the same under the category of service falling under SAC No.9989. This was done on account of clarification issued by All India Federation of Master Printer through their letter dated 8.8.2017 circulated to the members whereby it was clarified that as per the understanding given during the course of meeting of A.I.F.P delegation with the Officers of the Ministry of Finance the printed matter manufactured by printer with own physical inputs and contents are supplied by the customer, will fall under the category of supply of service, SAC No.9989.
3.2 They further submitted that subsequently, CBEC issued Circular No.11/11/2017-GST dated 20.10.2017 to provide clarification on taxability of printing contracts. However, the clarification provided by CBEC does not directly deal and does not conclusively provide clarification for leaflet when cleared on sale account.
3. 3 They submitted that according to them the printed leaflet supplied by them Merits Classification under the category of supply of goods falling under CSH No. 4901 only on following grounds.
3.3.1 They submitted that Goods is defined under Section 2(52) of the CGST Act, 2017 as per which goods means every kind of moveable property other than money and security. Service was defined as per Section 2(102) of the CGST Act, 2017 as per which service means anything other than goods. The leaflet sold is nothing but one kind of moveable property and falls under the category of goods only.
3.3.2 They submitted that as per Para No.2 and 3 of CBEC Circular 11/11/2017-GST dated 20.10.2017 the printing contracts falls under the category of composite supply and the classification had to be decided on the basis of supply which constitutes the principal supply. Principal supply was defined at Section 2(90) as per which supply of goods or services which constitutes the pre-dominant element of composite supply and to which any other supply forming part of that composite supply was ancillary. In the given case mere supply of content by the customer was ancillary and the entire manufacturing cost of the products was comprising of own inputs used. Therefore, the principal supply was supply of goods on sale to customer on principal to principal basis.
3.3.3 They submitted that SAC 9989 covers only publishing matter attended on a fee or a contract basis and did not cover printing matter other than publishing matter. This was also clear from Para no.4 of CBEC Circular No. 11/11/2017-GST dated 20.10.2017 which reads as follows.
In the case of printing of books, pamphlets, brochures, annual reports, and the like, where only content is supplied by the publisher or the person who owns the usage rights to the intangible inputs while the physical inputs including paper used for printing belong to the printer, supply of printing [of the content supplied by the recipient of supply] is the principal supply and therefore such supplies would constitute supply of service falling under heading 9989 of the scheme of classification of services.
3.4 They submitted that as per the above clarification the printed matter will fall under SAC No.9989 when the content was supplied by the publisher or a person who owns users right to the intangible inputs. The SAC No.998911 covers publishing on a fee or a contract basis and SAC No. 998912 covers printing and reproduction service of recorded media on a fee or a contract basis. There was no coverage of printed leaflet in SAC No.9989. Accordingly Sr.No.27 (1) of Noti.No. 11/2017-CT (Rate) only covers publishing matter like news paper/books/generals/periodicals made on the basis of content supplied by publisher and Sr.No.27(2) inter-alia covers printing and re-production services of recorded media.
3.5 They submitted that accordingly printed leaflet manufactured with their own raw materials and as per content supplied by customer (other than publisher or person who owns the users right to the intangible input) does not fall under SAC No.9989 and merits classification under the category of goods only falling under CSH 4901. In other words, the above circular of CBEC supports applicant’s case for classification under the category of goods.
3.6 They submitted that undisputedly the product was classifiable as excisable goods prior to introduction of GST from 01.07.2017. The CBEC under their Cir.No.1052/1/2017-CX dated 23.2.2017 provided clarifications for various printed matters falling under 48 or 49 depending upon the applicability of Chapter Notes. Further they referred follows case laws/Circulars in their defence.
