In re Isotex Corporation Pvt. Ltd. (GST AAAR Gujarat)
In view of the foregoing, we confirm the Advance Ruling No. GUJ/GAAR/R/74/2020 dated 17.09.2020 of the Gujarat Authority for Advance Ruling to the extent it has been appealed before us, by holding that the products Biomass Fired (Steam) Boilers, Agro Waste Thermic Fluid Heater of M/s. Isotex Corporation Pvt. Ltd. are not covered under Entry at Sl. No. 234 of Schedule I of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 and Notification No. 1/2017-State Tax (Rate) dated 30.06.2017 but are covered under Entry at Sl. No. 310 of Schedule III of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 and Notification No. 1/2017-State Tax (Rate) dated 30.06.2017 attracting Goods and Services Tax @ 18% (CGST 9% + SGST 9%), and reject the appeal.
FULL TEXT OF THE ORDER OF AUTHORITY OF APPELLATE ADVANCE RULING, GUJARAT
M/s. Isotex Corporation Pvt. Ltd. (herein after referred to as the “appellant”) filed an application for advance ruling before the Gujarat Authority for Advance Ruling (herein after referred to as the ‘GAAR’) wherein it has been submitted that their products viz. Agro Waste Thermic Fluid Heater or Biomass Fired Boilers are Waste to Energy Plant / Device and would attract total GST of 5% (CGST 2.5%, SGST 2.5% or IGST 5%) as such goods are covered by Sl. No. 234 of Notification No. 1/2017-Central Tax (Rate) and falls under Chapter 84 of the First Schedule to the Customs Tariff Act, 1975 (herein after referred to as the ‘CTA, 1975’). The appellant cited the case laws of M/s Boldrocchi India Pvt. Ltd. [2019(22) GSTL 135 (A.A.R.-GST)], M/s Triveni Turbine Ltd. [2019(23) GSTL.549 (App. A.A.R.-GST)], M/s Mukund Ltd.[2018(18) GSTL 327 (A.A.R.-GST)] and M/s Enexio Power Cooling Solutions India Pvt. Ltd. [2018(19) GSTL 135 (A.A.R.-GST)].
2. The appellant raised the following question for advance ruling before the GAAR:-
(i) What is the classification and rate of tax payable in respect of Agro Waste Thermic Fluid Heater or Boiler and parts thereof considering the applicability of Sl. No. 234 of Schedule I to Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 and corresponding notifications issued under State GST law and IGST Act?
3. The GAAR has examined the issue and has observed that Schedule I of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 and corresponding Notification No. 1/2017-State Tax (Rate) dated 30.06.2017 (the Central Tax (Rate) Notification referred herein after includes the reference to corresponding State Tax (Rate) Notification also] covers the listed renewable energy devices and parts for their manufacture which attract 2.5% CGST including Waste to energy plants / devices (energy should be created from waste i.e. fuel used should inevitable be ‘waste’). The GAAR has observed that the appellant has presented partial facts and remained silent on the aspect of fuel used in the product hence the GAAR referred to the official website of the appellant and observed that the nearest products that matches the description of products under consideration is ‘Fluidized Bed Combustor Thermic Fluid Heater’ and ‘Biomass Steam Boiler’. The fuel used in above mentioned products has been specified as Imported coal, rice husk, lignite etc. and Coal, wood, briquette etc. respectively. It has been observed that the concessional Notification No. 1/2017-Central Tax (Rate) specifically applies only to the goods falling under chapters 84, 85 and 94 of the Tariff and the products under consideration attracts rate of tax of 9% CGST+ 9% SGST as applicable under Sr. No. 310 under Schedule III of Notification No. 1/2017-Central Tax (Rate)and in case of Intra –State supply, the applicable rate of tax will be 18% IGST under corresponding notification of Integrated Tax. In view of the foregoing, the GAAR passed the following ruling.
(i) The Agro Waste Thermic Fluid Heaters or Boilers are classifiable under heading 8402 19 19 of the First Schedule to the Customs Tariff Act, 1975 and attract 9% CGST + 9% SGST in terms of Sr. No. 310 of Schedule III of Notification No. 01/2017- Central Tax (Rate) & the corresponding Notification issued under GGST Act, 2017 or 18% IGST in terms of Sr. No. 310 of Schedule III of Notification No. 01/2017- Integrated Tax (Rate), as applicable.
4.1 Aggrieved by the aforesaid ruling, the appellant has filed the present appeal, along with request for granting personal hearing and with prayer for stay of advance ruling.
4.2 The appellant has inter-alia submitted that it is involved in manufacturing of ‘Biomass Fired (Steam) Boilers’ and ‘Agro Waste Thermic Fluid Heaters’ falling under Tariff Item 8402 19 90 of the CTA, 1975’, which are used for providing renewable energy solutions, specifically by employing Biomass / Agro Waste and energy is generated by fueling waste into the boilers. The appellant has submitted that the ‘Biomass Fired (Steam) Boilers’ stand covered under clause (e) of Entry No. 234 of Schedule I of Notification No. 1/2017-Central Tax (Rate) and has referred to Circular No. 80/54/2018-GST dated 31.12.2018 issued by the Central Board of Indirect Taxes & Customs (CBIC). It is the submission of the appellant that the GAAR has failed to understand the submission of the appellant inasmuch as the GAAR has mentioned in the Advance Ruling that the applicant has sought an advance ruling in the ‘matter of classification and rate of GST applicable on the parts being supplied for setting up Waste to Energy Plant’, which is not the case / matter under the application for advance ruling; that the appellant had approached the GAAR for the product manufactured i.e. Biomass Fired (Steam) Boilers, Agro Waste Thermic Fluid Heater. The appellant has further submitted that there is no dispute in classification of Biomass Fired (Steam) Boilers, Agro Waste Thermic Fluid Heater, which gets classified under Tariff Item 8402 19 90 of the CTA, 1975. It has also been submitted that the GAAR has referred Company’s website and from there, they have taken into consideration variety of product range of boilers and heaters with numerous screenshots mentioning in ruling, except the product Biomass Fired (Steam) Boilers and Agro Waste Thermic Fluid Heater, which are actually the product put before the learned authority for answering.
4.3 The appellant has submitted that the GAAR has erred by stating that fuel used in the boiler are conventional elements like Coal, Lignite etc., however that is not the case in the question raised by the appellant in the application for advance ruling.
4.4 It has been submitted by the appellant that in order to be placed under clause (e) of Entry No. 234 of Schedule I of Notification No. 1/2017-Central Tax (Rate), it is inevitable to fulfill the functionality test of ‘Waste to Energy Plant’. The appellant has further submitted that it manufactures Biomass Fired (Steam) Boilers, Agro Waste Thermic Fluid Heater, run by the use of fuel which are waste (also called as Biomass / Agro Waste) and with the use of such waste, the energy is generated; that Boiler is a closed Vessel and used for producing energy by applying combustion.
4.5 The appellant has also explained what “Waste to Energy Plant” is.
4.5 The appellant has submitted that a steam boiler is a power generation device, used for generating steam by applying the heat energy to water. It has further submitted that a thermal oil / fluid boiler fires through a helical coil and generates energy from the hot products of combustion. This, by heating the coil through radiation and convection. The coil heats the thermal oil or fluid that is pumped through the thermal oil boiler. The thermal oil heats coil in various types of heat users. The appellant has submitted image (3D Model) and technicality of the product Biomass Fired (Steam) Boilers, Agro Waste Thermic Fluid Heater and has submitted that the aforesaid details shall bring a wide clarity to understand the functionality of this product; that the crucial part of the functionality of the product is stage of generation of energy.
4.7 The appellant has submitted that the product under discussion were exempt from levy of Central Excise vide Sl. No. 332 read with List 8 (Sl. No. 16) of Notification No. 12/2012-Central Excise dated 17.03.2012.
4.8 As submitted by the appellant, waste (also known as fuel) used to generate energy in Biomass Fired (Steam) Boilers, Agro Waste Thermic Fluid Heater are illustratively stated Rice Husk, Groundnut Shell, Palm Kernel Shell, Sunflower Husk, Baggasse etc., in other words, these are biomass.
4.9 It has been submitted by the appellant that the inevitable part of clause (e) of aforesaid Entry No. 234 states that ‘Waste’ shall be used as fuel and deposited in Plant / Device (in the current case of Boiler); that the applicant has designed and manufactured the aforesaid boilers wherein the fuel used are in the nature of Agro Waste exclusively and no other types of fuel can be used when it comes to Biomass Fired (Steam) Boilers, Agro Waste Thermic Fluid Heater. The appellant has submitted that the vital part of the Boiler is the stage of energy generation. The biomass / agro waste is stored and is pushed into the furnace for combustion by help of fuel feeder. In the course of burning of waste, the heat is generated and from other part of boiler, water is pumped into, herein the heat evaporates the water which turns into steam and this is the stage where energy is generated in the boiler.
4.10 The appellant has further submitted that the different dimension of clause (e) of aforesaid Entry No. 234 is self-explanatory that “Waste to Energy Plant / Devices” formally means a waste (also known as fuel) used / deposited in Plant or device that results into generation of energy. The appellant has submitted that the first dimension to the clause (e) of aforesaid Entry No. 234 is the word “Waste” i.e. Agro Waste which is not defined under GST Law, therefore meaning of the same as per trade parlance and other references may be referred. The appellant has referred to the meanings of the terms Waste (or wastes), Rice Husk, Groundnut Shells (Peanut Shells), Palm Kernel Shells (PKS), Sunflower Husk, Baggasse etc. The appellant has submitted that its product Biomass Fired (Steam) Boilers, Agro Waste Thermic Fluid Heater is functioned by the use of aforesaid waste / fuel.
4.11 The appellant has submitted that the second dimension to the clause (e) of aforesaid Entry No. 234 is the word “Energy”, which is not defined under law, hence dictionary meaning may be referred i.e. the capacity for vigorous activity; available power. In physics, energy is the quantitative property that must be transferred to an object in order to perform work on, or to heat, the object. In the instant case, during the process of combustion in the boiler chamber i.e. burning of biomass fuel / agro waste, both heat and steam are generated which are the form of “energy”. Therefore, it has been submitted by the appellant that Agro Waste used as fuel in the combustion generates energy in the Biomass boiler.
4.12 Thereafter, the appellant has submitted that the last dimension to the clause (e) of aforesaid Entry No. 234 is the word “plant”, which is defined under Explanation to Section 17 of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017 (herein after referred to as the ‘CGST Act, 2017 and the GGST Act, 2017 respectively and as the ‘GST Acts’ collectively). The appellant has further submitted that as per dictionary meaning, “device” means a tool or piece of equipment made for a particular purpose. It has been submitted that the product manufactured, which is Biomass Fired (Steam) Boilers, Agro Waste Thermic Fluid Heater can be termed as “Plant” or machinery or “Device”.
4.13 Further, the appellant has submitted that this particular product is classified under Chapter 84 and is also known as renewable energy plant / device. The appellant has referred to CBIC Circular No. 80/54/2018-GST wherein it is inter-alia mentioned that the concession of GST Rate at 5% (CGST 2.5% + SGST 2.5%) would be available only to such machinery, equipment, etc. which falls under Chapters 84, 85 and 94 and used in the initial setting up of renewable energy plants and devices including WTEP (Waste to Energy Plant).
4.14 The appellant has submitted that procurement of Biomass Fired (Steam) Boilers, Agro Waste Thermic Fluid Heater under discussion is usually done by the Food processing unit.
4.15 The appellant has contended that in terms of aforesaid explanation, the product Biomass Fired (Steam) Boilers, Agro Waste Thermic Fluid Heater squarely fall in clause (e) to Entry 234 of Notification No. 1/2017-Central Tax (Rate) as it fulfills the requirements of using waste (also known as fuel) which leads to generation of energy in a Plant (Boiler) and is eligible for concession rate of GST at 5%.
5. The appellant, vide letter dated 18.01.2021, has submitted Inspection Report, Performance Certificate and Product Catalogues, certified by the Chartered Engineer in respect of Agro Waste Fired Thermic Fluid Heaters and Agro Waste Fired Steam Boilers.
FINDINGS :-
6. We have considered the submissions made by the appellant in the appeal filed by them and in additional written submission as well as submissions at the time of personal hearing, Ruling given by the GAAR and other evidences available on record.
7. The issue involved in the present case is whether the products Biomass Fired (Steam) Boilers, Agro Waste Thermic Fluid Heater are covered under Entry at Sl. No. 234(e) of Schedule I of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended and thereby eligible to Goods and Services Tax rate of 5% (CGST 2.5% + SGST 2.5%), or otherwise.
8.1 As the main issue involved in this case is regarding admissibility or otherwise of benefit of Entry at Sl. No. 234 of Schedule I of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended, to the products of the appellant, it would be useful to refer to that entry, which reads as follows :-
