In re Jotun India Pvt. Ltd. (AAAR Maharashtra)
The Appellate Authority for Advance Ruling upheld the ruling given by the Advance Ruling Authority by observing that marine paints manufacture by the appellant will not be covered under Sl. No. 252 of Schedule I of the Notification No. 1/2017-C.T.(Rate) dated 28.06.2017 as the same can not be considered as part of the ship as contended by them.
Also Read AAR Ruling- Marine paints cannot be considered a Part of Ship under GST Laws
FULL TEXT OF ORDER OF APPELLATE AUTHORITY OF ADVANCE RULING, MAHARASHTRA
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the MGST Act.
The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by M/s. Jotun India Pvt. Ltd.(herein after referred to as the “Appellant”) against the Advance Ruling No. GST-ARA-29/2017-18/B-35 dated 19.05.2018.
BRIEF FACTS OF THE CASE
A. Jotun Group is a leading supplier of paints and powder coatings. Jotun India Private Limited (herein after referred to as ‘Appellant’) is a supplier, exporter and manufacturer of paints and powder coatings. The Appellant supplies paints and coatings that are specially designed for unique conditions.
B. Broadly, the paints supplied by the Appellant can be categorized in solvent based paints and water based paints. One of the major supplies by Appellant are marine paints. Composition of such marine paint being manufactured by Appellant makes it suitable for ship during building stages and even during maintenance.
C. In the erstwhile indirect tax regime, Appellant has been discharging applicable indirect taxes on supply of such paints and availing exemptions when granted under respective
D. With the introduction of GST, Appellant has analyzed classification and applicability of CGST, SGST and IGST in light of new legislation. For classification, it has been clarified in the rate notification of respective legislation that rule of interpretation of the First Schedule to the Customs Tariff Act, 1975 including Section Notes and Chapter Notes and general explanatory notes of the said first schedule would be applicable for the purpose of the classification under GST.
E. Accordingly, Appellant has sought to classify paints being supplied under HSN 3208 and 3209 basis the nature of the product and after considering relevant chapter notes and Section notes. Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 prescribe applicable rate of CGST. Paint supplied by the Appellant classifiable under chapter heading 3208 and 3209 are covered under Schedule VI of the said Notification and accordingly were liable to 14% CGST and subsequently at 9% CGST.
F. However, under same CGST Rate Notification, Schedule I liable to 2.5 % CGST covers parts (classifiable under any chapter) of goods, falling under heading 8907 i.e. part of Since, marine paints supplied by the Appellant are suitable for use by ships, Appellant seeks the clarification whether the said marine paints could get classified under Schedule Ito the Notification No. 1/2017 –C.T. (Rate) dated 28.06.2017.
G. Accordingly, the Appellant had made application before the Advance Ruling Authority seeking a ruling on the following question:
Whether marine paints, supplied by the Appellant, would be considered to be part of ship and accordingly, be then classified under SI. No. 252 of the Schedule I of the Notification No. 1/2017 of Central Tax (Rates) dated 28.06.2017.
H. The Authority for Advance Ruling, Maharashtra passed the advance ruling wherein the Appellant’s contentions of classifying marine paints under SI. No. 252 of Schedule I has been rejected. Hence, the Appellant has preferred an appeal before this Appellate Authority against the impugned Advance Ruling.
GROUNDS OF APPEAL
1. The Appellant submitted that marine paint is a specific type of paints suitable for use principally for ships during building stage and even during maintenance. The sailing ship needs protection from corrosive environment in which they operate. Such marine corrosion has a significant impact on sea carriers and their longevity. Therefore, effective corrosion control strategies are chosen considering appropriate selection of coating for a marine environment. Marine coatings have special functionality to protect marine vessels and other carriers above and below the waterline. Accordingly, marine paints supplied by them has following technical features:
– Protects the body of ship from highly corrosive environment
– Blocks barnacles and other marine organisms from adhering to the hulls of ships
– Lessens fuel consumption as it controls damage to the ship.
– Prevents impact on water eco-systems by reducing emission of Green House Gases.
– Transportation of marine organisms to other areas
2. it is submitted that vide notification no 1/2017 of Central Tax (Rate) dated June 28, 2017, the Government of India has notified CGST rates for goods. The said notification has classified goods into 4 digit HSN Codes. Further under the said notification, it has been specified that section notes, chapter notes and General explanatory notes mentioned under Customs Tariff Act, 1975 shall apply to the goods classified therein under GST.
3. It is submitted that the notification refers to the classification of goods under the Customs Tariff Act, 1975.
4. As regards, classification of the marine paints under Customs Tariff Act, it would be pertinent to refer to extract of description of goods falling under Customs Heading 3208:
“Paints and varnishes (including enamels and lacquers) based on synthetic polymers or chemically modified natural polymers or chemically modified natural polymers dispersed or dissolved in a non-aqueous medium; solutions as defined in Note 4 to this Chapter”
5. It is submitted that based on the technical specification of the product, marine paints appear to be classifiable under heading 3208. Since, marine paint is suitable for use for ships, it could also get classified as part of ship. For the purpose of this analysis, Appellant referred to chapter 89 for ‘Ships, boats and floating structure’. They further submitted that there is no specific entry in Chapter 89 for ‘parts’ of ships covered In the absence of any entry for part of ship, Appellant had adopted classification of marine paint under chapter heading 3208.
6. The Appellant has also been adopting similar classification under Central Excise Law. The excise duty liability has accordingly been discharged by Appellant under erstwhile Indirect Tax regime.
7. It is submitted that marine paints are suitable principally for use in ships and hence, it is also pertinent to analyze Entry 252 to Schedule I of Notification No 1/2017 of Central Tax (Rates) dated June 28, 2017 liable to 2.5% CGST:
