Case Law Details

Case Name : In re Flint Group India Private Limited (GST AAR Gujarat)
Appeal Number : Advance Ruling No. GUJ/GAAR/R/2019/22
Date of Judgement/Order : 20/09/2019
Related Assessment Year :
Courts : AAR Gujarat (99) Advance Rulings (1533)

In re Flint Group India Private Limited (GST AAR Gujarat)

The applicant has submitted that their product, ‘Technical varnish’, “Medium’ or ‘tinting ink’ should not be treated anything other than printing ink. The ‘Printing ink’ manufactured and supplied by them fall under Chapter Heading 3215 of GST Tariff. The Tariff Heading 3215 reads as follows:-

“All Goods, including printing ink, writing or drawing ink and other inks, whether or not concentrated or solid, fountain pen ink, ball pen ink”

We find that the Tariff Heading 3215 covers all Goods, including printing ink, writing or drawing ink and other inks, whether or not concentrated or solid, fountain pen ink, ball pen ink. As the ‘Varnishes’ are different than “Printing ink” and are specifically covered under Tariff Heading 3208, the same do not fall under Tariff Heading 3215.

We also find that during the erstwhile Central Excise regime, in excise returns, they had classified their manufacturing items, “Printing ink (both black & others)” under Chapter sub-heading no. 3215 11 90; “Medium” under Chapter sub-heading no. 3208 90 11; and “Varnish” under Chapter subheading no. 3209 10 10.

In view of the foregoing, we rule that HSN code for the product “Technical Varnish”/ “Medium” is 3208.

FULL TEXT OF ORDER OF BEFORE THE AUTHORITY OF ADVANCE RULING,GUJARAT

2. The applicant, vide Form GST ARA-01 dated 06.04.2018, mentioned their queries as under:

QUERRIES

They want to know the correct HSN code for Technical Varnish and Medium being used in printing industry.

3. Statement of relevant facts having a bearing on the question raised above is as follows:

3.1 Technical Varnish and Medium are liquid used in printing of packaging material. It is used in printing job of packaging material as part and parcel of printing ink.

Applicant’s interpretation of law and/or facts in respect of aforesaid question.

3.2 As these two products are used for printing of packaging material, so it should have the same HSN code just like printing ink. We are not selling these products other than to printers and these are exclusively used for printing purpose only.

3.3 The applicant vide letter dated 12.09.2018 submitted that their product, printing ink and medium is used only for printing purpose and they are selling it to printers only.

3.3.1 Varnish on the other hand is defined as a fluid or solution which on application in thin layers by brush or otherwise, dry within a short period by evaporation leaving a film of smooth shiny, elastic oil and resin, resistant to its surrounding atmospheric conditions.

3.3.2 In Akhtar Akbar vs. Assistant Collector, Central Excise, the High Court of Madhya Pradesh noted in paragraph 17 that in taxing statutes, which have to be construed strictly, it is the natural meaning of the word which must be adhered to. In the absence of any indication in the statute itself, it will not be reasonable to restrict or expand that meaning only because a commodity clearly falling within its ambit is, for certain purposes, given another name in commerce. In this decision, it referred to several dictionary meanings of the term ‘varnish’ which was predominantly described as a colorless, viscous liquid coated over surfaces to lend a lustrous effect to the surface on which it is applied. The Hon’ble High Court emphasized how it would appear from the meaning of the word ‘varnish’ that it is a generic name given to a homogeneous solution of gums or resins in alcohol, linseed oil or the like which is coated on various articles for protective or decorative purposes. Particular reference to the definition of ‘varnish’ in Encyclopedia America (Vol. 27) as relied on by the Hon’ble High Court would assist their understanding:-

“A practical varnish will cover the following requirements : It must be a homogeneous fluid or solution; must be fixed or permanent in effect as to tone of colour, transparency (or opaqueness), and must, on application in thin layers by brush or otherwise, dry within a short period by evaporation of its volatile solvents (alcohol, ether, benzine, spirits or turpentine etc.) leaving a film of smooth lustrous (sometimes purposely dull,), elastic oil and resin, impervious to its surrounding atmospheric conditions”

Therefore varnish, as is commonly understood, is a colourless liquid applied over substances to lend it a particular effect (whether glossy or matte) and for protective purposes.

3.3.3 Their product, (they mentioned in invoice as technical varnish, medium or tinting ink) on the other hand is not used for protecting any article of substance, rather it is used for printing of substance by applying a process which is called printing. As it is used for printing of substance by applying a process which can be called printing, so it should not be treated anything other than printing ink.

4. The Central Goods & Services Tax and Customs Commissionerate, Vadodara-II, has submitted the point wise compliance report/comments, as under:-

(i) The activity is manufacturing of “varnish”, “Medium” and “Printing ink” are “ongoing activity” and not a proposed one; (these details are on the basis of manufacturing product shown in their Excise Returns).

(ii) This is a fresh application in GST and with reference to Central Excise, M/s. Flint Group is already quoting Chapter Heading against “Varnishes and Medium”.

(iii) From the Excise returns filed by M/s. Flint group, it is observed that during the Central Excise regime, “Medium” a manufacturing item classified under Chapter S/Heading 32089011 attracts duty @ 12.5%, “Printing ink” which is classified under Chapter S/Heading 32151190 attracts duty @12.5%, “varnish” is classified under 32091010 and attracts duty @12.5%; Thus, though all the three items are classified under different Chapter Heading, they attract uniform rate of duty;

(iv) In GST Regime, M/s. Flint Group, in GSTR-3B, as per GST REG26 -“details of goods supplied by the business”, the following are available under Description of goods Column:

Sr. No Description of goods HSN Code
1. Printing ink, writing ink or drawing ink and other inks, whether or not concentrated or solid -printing ink – black , other 32151190
2. Printing ink, writing ink or drawing ink and other inks, whether or not concentrated or solid -printing ink – Other, other 32151190
3. Paints and varnishes (including enamels and lacquers) based on synthetic polymers or chemically modified natural polymers, dispersed or dissolved in a non-aqueous medium; solutions as defined in Note 4 to this Chapter – based on Acrylic or Vinyl polymers – other 32082090
4. Paints and varnishes (including enamels and lacquers) based on synthetic polymers or chemically modified natural polymers, dispersed or dissolved in a non-aqueous medium; solutions as defined in Note 4 to this Chapter – based on Cellulose nitrate or other Cellulose derivatives, nitrocellulose lacquers 32089011

(v) Accordingly, in GST Regime, Printing ink (both black & others), whose HSN Code is 32151190, the GST rate is CGST 6%; SGST 6% & Interstate IGST 12%, whereas Varnish whose HSN Code is 32089011, the GST rate is CGST 14%; SGST 14% & Interstate IGST 28%. M/s. Flint group stated that Varnish and Medium are liquid used in printing ink of packaging material. When the uniform rate of duty of Excise for Varnishes, Medium and Printing ink, which was in existence, is increased by GST council and different rates are fixed for Paints and Varnishes, it will have effect on the manufacturers who are taking ITC. In view of this, Varnish and Medium are liquid used in printing ink, they need not have the same HSN code just like printing ink.

(vi) Manufacturing process of Printing ink, the final product of M/s. Flint Group India Pvt. Ltd.:

Ingredients of Printing ink is Solvent, Resin and various colours. The solvent, i.e. liquid organic compound (Tolune, Methyl Ethyl Ketone etc.,) is a clear, colourless liquid; this is transferred through pipes and at a certain temperature resin is added to this solvent; resin is a binding material which is also a polymer product; this mixture after undergoing heating and cooling processes, is called as Technical Varnish; Colouring material, is added to this mixture, and after undergoing certain processes, the final product i.e. Printing ink / Packaging ink emerges.

(vii) Technical varnish is intermediatery product and is the base material of Printing ink. M/s. Flint group, clears printing ink and sometimes, depending upon the need, also supplies “technical varnish” to their customers.

When M/s. Flint Group India P. Ltd. is supplying “technical varnish” alone, then they use the term “Medium”. The term “technical varnish” is used by M/s. Flint group, when it is used as intermediatory product i.e. in their further process. Thus, “Medium”/ “Technical varnish” is independent product and is being sold to “printing industries”. As such, “medium” and “printing ink” are having separate identity.

(viii) HSN Code of Printing ink (both black & others) is 32151190 and their GST rate is CGST 6%, SGST 6% & Interstate IGST 12%, whereas HSN Code of “Technical Varnish” is 32089011 and their GST rate is CGST 14%, SGST 14% & Interstate IGST 28%. The GST rate of “Technical Varnish” is higher than “Printing ink”. Classifying “Technical varnish” / “medium” and “printing ink” in the same HSN is not correct.

Discussion & findings:

5. We have considered the submissions made by the applicant in their application for advance ruling and additional submissions made vide letter dated 12.09.2018 as well as submissions made at the time of personal hearing held on 14.06.2018. We have also considered the information and views submitted by the Central Goods and Service Tax Commissionerate, Vadodara-II.

6. The issue involved in this case is regarding classification of “Technical Varnish” and “Medium” being used in printing industry.

As submitted by the applicant Ingredients of Printing ink is Solvent, Resin and various colours. The solvent, i.e. liquid organic compound (Tolune, Methyl Ethyl Ketone etc.,) is a clear, colourless liquid; this is transferred through pipes and at a certain temperature resin is added to this solvent; resin is a binding material which is also a polymer product; this mixture after undergoing heating and cooling processes, is called as Technical Varnish; Colouring material, is added to this mixture, and after undergoing certain processes, the final product i.e. Printing ink / Packaging ink emerges.

8. The applicant has submitted that they clear ‘Printing ink’ and sometimes, depending upon the need, also supplies “technical varnish” to their customers. When the applicant is supplying “Technical varnish” alone, then they use the term “Medium”. The term “technical varnish” is used by M/s. Flint group, when it is used captively as an intermediatory product for manufacture of ‘Printing ink’.

8.1 From the above it reveals that the “Medium”/ “Technical varnish” is independent product and is being sold to the printing industries. In the production of printing ink, varnish can refer to either a combination of oils, resins, waxes, solvents and other materials used as an ink vehicle. The use of varnish tends to increase the gloss of a printed ink. ‘Technical Varnish’/ ‘Medium’ are liquid used in printing ink. As such, ‘Technical Varnish’/ ‘Medium’ and ‘Printing ink’ are having separate identity and, hence, both are distinct products.

9.1 It is observed that the Explanation (iii) and (iv) of the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 provides as follows:-

“Explanation. – For the purposes of this notification, –

(i) …………………………

(ii) …………………………

(iii) “Tariff item”, “sub-heading” “heading” and “Chapter” shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975).

(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.”

9.2 Further, Hon’ble Supreme Court in the case of L.M.L. Ltd. Vs. Commissioner of Customs [Civil Appeal No. 3764 of 2003, decided on 21.09.2010 reported at 2010 (258) ELT 321 (S.C.)] has held as follows :-

“12. In Collector of Central Excise, Shillong v. Wood Crafts Products Ltd. reported in (1995) 3 SCC 454, it was held by this Court that as expressly stated in the statements of objects and reasons of the Central Excise Tariff Act, 1985, the Central Excise Tariffs are based on the Harmonious System of Nomenclature (HSN) and the internationally accepted nomenclature was taken into account to reduce disputes on account of tariff classification. Accordingly, for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the Harmonious System of Nomenclature (HSN). Although, the decision in the case of Woodcraft Products (supra) dealt with the interpretation of the provisions of the Central Excise Tariff there can be no doubt that the HSN Explanatory Notes are a dependable guide even while interpreting the Customs Tariff.”

10.1 The Tariff Heading No. 3208 reads as follows:-

“Paints and varnishes (including enamels and lacquers) based on synthetic polymers or chemically modified natural polymers, dispersed or dissolved in a non-aqueous medium; solutions as defined in note 4 to this chapter”

10.2 The Explanatory Notes for ‘Paints and varnishes (including enamels and lacquers) based on synthetic polymers or chemically modified natural polymers, dispersed or dissolved in a non-aqueous medium; solutions as defined in note 4 to this chapter”‘ under Tariff Heading 3208 of the Harmonised System of Nomenclature, inter-alia, provides as follows:-

“(A) PAINTS (INCLUDING ENAMELS)

…………………………..

(B) VARNISHES (INCLUDING LACQUERS)

Varnishes and lacquers of this heading are liquid preparations for protecting or decorating surfaces. They are based on synthetic polymers (including synthetic rubber) or chemically modified natural polymers (such as cellulose nitrate or other cellulose derivatives, novolacs or other phenolic resins, ammo-resins, silicones, etc.) with added solvents and thinners. They Form a dry, water-insoluble, relatively hard, more or less transparent or translucent, smooth, continuous film which may be glossy, matt or satiny.

They may be coloured by the addition of colouring matter of a kind soluble in the composition. (In paints and enamels the colouring matter is called the “pigment” and insoluble in the media – see Part (A) above.)

The more common methods of applying paints, varnishes and lacquers are by use of a brush or roller. The main industrial methods used include spraying, dipping and machine-coating.

This heading also includes:

(1) Varnishes intended to be diluted at the time of their application. They consist of resin dissolved in a small quantity of solvent and of ingredients such as anti skinning agents and certain third thixotropic or drying agents which make them suitable for use solely as varnishes. Varnishes of this description, in which the secondary ingredients are also in solution, can be distinguished from the solutions defined in Note 4 to the Chapter on the basis of the difference in the chemical nature of their respective secondary ingredients and the consequent differences in the functions performed by those ingredients in the two types of solutions.

(2) Radiation-curable varnishes, which consist of oligomers (i.e., polymers comprising 2, 3 or 4 monomer units) and cross-linking monomers, in volatile solvents, with or without photo-initiators. These varnishes are cured by the action of ultra-violet light, infra.-red light, X-rays, electron beams or other radiation to form cross-linked, solvent-insoluble network structures (a hard, dry film). Products of this type do not fall in this heading unless they are clearly identifiable as being intended for use solely as varnishes. Similar products of a kind used as photographic emulsions fall in heading 37.07.

(3) Varnishes being solutions of the polymers described in (C) below, i.e., those of headings 39.01 to 39.13, whatever the weight of the solvent, containing added substances other than those necessary for the manufacture of products specified in heading 39.01 to 39.13, such as anti-skinning agents and certain thixotropic or drying agents, which make them suitable for use solely as varnishes.

The heading also excludes:-

(a) ……………………etc. (heading 32.14).

(b) Printing inks which though having a similar qualitative composition to paint:, are not suitable for painting applications (heading 32.15).

(c) …………. described in Explanatory Note to heading 33.04.

(d) ……………… (heading 38.24).

(e) ………………(heading 39.12).”

10.3 Thus, it is evident that the Explanatory Notes for Tariff Heading 3208 includes “Varnishes” but excludes ‘Printing inks’ which though having a similar qualitative composition to paint, are not suitable for painting applications (heading 32.15).

10.4 It is also observed that in the First Schedule to the Customs Tariff Act, 1975, “Varnishes”: based on polyesters are mentioned against Tariff Item 3208 10 30. “Varnishes”: based on acrylic or vinyl polymers are mentioned against Tariff Item 3208 20 30 and Varnishes: others are mentioned against Tariff Items 3208 90 41/ 3208 90 49, all under Tariff Heading no. 3208. Therefore, ‘Technical Varnishes”/ “Medium” manufactured as an intermediate product and supplied by the applicant merit classification under Tariff Heading 3208.

11. The applicant has submitted that their product, ‘Technical varnish’, “Medium’ or ‘tinting ink’ should not be treated anything other than printing ink. The ‘Printing ink’ manufactured and supplied by them fall under Chapter Heading 3215 of GST Tariff. The Tariff Heading 3215 reads as follows:-

“All Goods, including printing ink, writing or drawing ink and other inks, whether or not concentrated or solid, fountain pen ink, ball pen ink”

11.1 We find that the Tariff Heading 3215 covers all Goods, including printing ink, writing or drawing ink and other inks, whether or not concentrated or solid, fountain pen ink, ball pen ink. As the ‘Varnishes’ are different than “Printing ink” and are specifically covered under Tariff Heading 3208, the same do not fall under Tariff Heading 3215.

12. We also find that during the erstwhile Central Excise regime, in excise returns, they had classified their manufacturing items, “Printing ink (both black & others)” under Chapter sub-heading no. 3215 11 90; “Medium” under Chapter sub-heading no. 3208 90 11; and “Varnish” under Chapter subheading no. 3209 10 10.

13. In view of the foregoing, we rule as under –

RULING

Question 1: We want to know the correct HSN code for Technical Varnish and Medium being used in printing industry.

Answer: HSN code of the product “Technical Varnish”/ “Medium” is 3208.

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