ORDER

PROCEEDINGS

(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)

The present application has been filed under section 97 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&I MATERIALS INDIA PRIVATE LIMITED, the applicant, seeking an advance ruling in respect of the applicability of GST on:

What is the correct Harmonized System of Nomenclature (HSN) code and the applicable GST rate for our products MIDEL eN 1204 (rapeseed oil based dielectric transformer fluid) and MIDEL eN 1275 (soya oil based dielectric transformer fluid) in terms of Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017?

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 provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the “GST Act”.

02. FACTS AND CONTENTION – AS PER THE APPLICANT

The submissions, as reproduced verbatim, could be seen thus-

“Statement of relevant facts having a bearing on the question(s) raised

1. M&l Materials India Pvt. Ltd (hereinafter referred to as M&l India’ or the ‘company’ or ‘we’ or ‘us’ ) is a wholly owned subsidiary of M&l Materials Ltd. based in UK (hereinafter referred to as ‘M&I UK’).

2. The company commenced its operations in the month of April 2014 and is, inter alia. engaged in the following activities:

2.1 Import of ‘Midel Dielectric Fluids’ from M&l UK and subsequent sale in India

2.2 Establishing local warehousing and distribution capability.

2.3 Marketing and business development activity with a focus on assisting in the development of the Midel Dielectric Fluids business in India

2.4 Provide local first line support for any technical queries.

3.  The details of the products for which the Advance Ruling is being sought is as follows:

3.1 MIDEL eN 1204

3.1.1 It is a vegetable oil based dielectric transformer fluid It is a chemically modified rapeseed oil based natural ester

3.1.2 It is used as electric insulator in transformers Its function is to provide electrical insulation, suppress corona and arcing, and to serve as a coolant.

3.1.3 We have classified MIDEL eN 1204 as per the Harmonized System of Nomenclature (HSN) code under the First Schedule of the Customs Tariff Act, 1975 (hereinafter referred to as “the Customs Tariff’) under the entry 15180039 The relevant extract of the entry is reproduced hereunder for ease of reference:

“1518.00 animal or vegetable fats and oils and their fractions , boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 1516 ; inedible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this chapter , not elsewhere specified or included:

1518 00.39 – Other

[emphasis supplied]

3.1.4 The applicable Indian Standards (IS) of the Bureau of Indian Standards (BIS) under the Bureau of Indian Standards Act, 1986 is IS 16659:2017.

3.2 MIDEL eN 1215

3.2.1 It is a vegetable oil based dielectric transformer fluid. It is a chemically modified soya based natural ester.

3.2.2 It is used as electric insulator in transformers. Its function is to provide electrical insulation, suppress corona and arcing, and to serve as a coolant.

3.2.3 We have classified MIDEL eN 1215 as per HSN code under the First Schedule of the Customs Tariff Act, 1975 under the entry 15180039.

3.2.4 The applicable Indian Standards (IS) of the Bureau of Indian Standards (BIS) under the Bureau of Indian Standards Act, 1986 is IS 16659:2017.

4. The rate of GST applicable on supply of various goods is notified vide Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017, as amended from time to time (hereinafter referred to as “the Notification”).

4.1 Under the Notification, the HSN code 1518 appears under “Schedule I – 2.5%” as well as “Schedule 2 – 6%”. The relevant extract is reproduced hereunder for ease of reference:

4.2

S. No.	Chapter / Heading / Sub-heading / Tariff item	Description of goods
Schedule I – 2.5%
90.	1518	Vegetable fats and oils and their fractions, boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 1516 [emphasis supplied]
Schedule II – 6%
27.	1518	Animal fats and animal oils and their fractions, boded, oxidised, dehydrated, sulphurised, blown, polymerised by heal in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 1516; inedible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of tins chapter, not elsewhere specified of included [emphasis supplied]

4.3 It can be seen that under GST, items constituting of vegetable fats and oils, which are classifiable under entry 1518 00.39 of the Customs Tariff can be classified under two different entries, which has resulted in an uncertainty in respect of the correct classification applicable to our above mentioned products

5. We humbly request you to give a ruling in respect of the appropriate classification for both of our above mentioned products

Statement containing the applicant’s interpretation of law and/or facts, as the case may be, in respect of the aforesaid question(s) (i.e. applicant’s view point and submissions on issues on which the advance ruling is sought)

We submit that both our products viz. MIDEL eN 1204 and MIDEL eN 1215, are chemically modified vegetable oil based transformer fluids which should be classified under Entry at S. No. 90 of Schedule – 1 [applicable rate of Central Goods and Services Tax (CGST) – 2,5%]. To support our view, we would like to put forth our contentions, without prejudice to each other, as follows:

1. Specific entry should prevail over general entry

1.1 Chemically modified vegetable oils are more specifically covered under Entry at S No 90 of Schedule – I of the Notification. Hence, both our products viz, MIDEL eN 1204 and MIDEL eN 1215 should be classified under the said entry.

1.2 Further, explanations (iii) and (iv) to Notification No 1/2017-Central Tax (Rate) dated 28 June 2017, as amended from time to time, state as under

“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. “

1.3 At this stage, we would also like to reproduce the relevant extract of the Rules for the interpretation of the First Schedule’ for ease of reference:

“…

3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:

(a) the heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even If one of them gives a more complete or precise description of the goods

(emphasis supplied)

1.4 The entry at S. No 27 of Schedule II – 6% is a general entry mainly referring to animal fats and oils while vegetable fats and oils are mentioned only cursorily. Further, it should be noted under the said entry only those vegetable fats or oils can be covered which are not specified elsewhere.

1.5 It is a well established principle of taxation jurisprudence for resolving classification disputes that a specific entry shall prevail over a general entry. In this regard, we would like to bring to your attention the judgement of the Hon’ble Supreme Court of India in the case of Western India Plywoods Ltd. versus Collector of Customs, Cochin [2005 (188) E.L.T 365 (S.C.)] (attached as Annexure I), wherein the question pertained to classification of “motor vibrator with actuator” under the Customs Tariff. In this case, the Hon’ble Supreme Court held that,

” … it is well settled that the application of the residuary tariff entry must always be made with a good deal of caution as it is attracted only when no other provision expressly or by necessary implication applies to the goods in question. “

1.6 Further, the Hon’ble Supreme Court of India in the case of Superintendent of Central Excise and Others versus Vac Met Corpn. Ltd. [1985 (22) E.L.T 330 (S.C.)] (attached as Annexure 2) held that,

“…. Where an article falls within a specific entry like Entry 15A(2) which covers plastic articles of all sorts, in different shapes or even of strips, whether laminated or not, they must necessarily be excluded from the general Entry 18 which relates to rayon and synthetic fibres and yarn i.e. manmade fibres.”

1.7 Given the above, we submit that a combined reading of relevant entries along with the general rules of interpretation [supra] and the decisions of the Apex Court on the matter, it is evidently clear that both our products should fall under Schedule I – 2.5% as it provides a more specific description applicable to both our products

2. Intention of the legislature

2 .1 It is pertinent to note that whereas under the Customs law, animal or vegetable fats and oils are part of the same entry i.e. 1518.00 (supra), under the GST regime a conscious decision has been made by the GST Council to split the said entry between vegetable fats and oils and animal fats and oil by including vegetable fats and oil under Schedule I of the Notification which provides for lower GST rate of 2.5%.

2.2 The Constitution Bench of the Hon’ble Supreme Court of India in Dattatraya Govind Mahajan versus State of Maharashtra [1977 AIR 915] (attached as Annexure 3) has held that,

“…. ultimately it is the intention of the legislature which is paramount and mere use of a label cannot control or deflect such intention. It must be remembered that the legislature has different ways of expressing itself and in the last analysis the words used by the legislature alone are the true repository of the intent of the legislature and they must be construed having regard to the context and setting in which they occur….”

2.3 Insertion of a specific and separate entry in the GST rate schedule in respect of vegetable fats and oils clearly brings out the intention of the legislature and the GST Council to tax it at a lower rate of 2.5%.

2.4 Given the above, we humbly submit that in view of the specific entry under the GST provisions, both our products should fall under Schedule I – 2.5%.

3. Classification under Heading 1516

3.1          Without prejudice to the above, if it is assumed that either or both of our products cannot be classified under entry at S. No. 90 of Schedule I – 2.5%, we would like to submit that, entry at S. No. 88 of Schedule I – 2.5% also provides an appropriate description of our products, and that in no case the said products can be classified under the general entry at S. No. 27 of Schedule II – 6%.

3.2 In this regard, we would like to reproduce the entry at S. No 88 of Schedule 1 – 2 5% for ease of reference:

S. No.	Chapter / Heading / Subheading / Tariff item	Description of goods
Schedule I – 2.5%
88.	1516	Vegetable fats and oils and their fractions, partly or wholly hydrogenated, inter-esterified, re-esterified or elaidnised, whether or not refined, but not further prepared. “

3.3 Both our products being vegetable oil based esterified transformer fluids, we submit that they should fall within the ambit of the said entry and classified accordingly.

4. Beneficial rate under the Maharashtra Value Added Tax (MVAT) Act, 2002

4.1 Most of the customers of the Company to whom these products are supplied include government and non-government entities operating in the essential sector of electricity generation, transmission and distribution.

4.2 Under the erstwhile MVAT regime, Sec 8 (5) of the MVAT Act empowered the State Government for partial or full exemption from Value Added Tax (VAT) on sales made by a registered dealer, inter cilia, to entities involved in generation, transmission and distribution of electricity.

4.3 In view of the above, the State government vide Notification No VAT-1507/CR/-93/Taxation – I dated 21 January 2008, had provided for a beneficial VAT rate of 5% on sale of goods by the Company to the said suppliers.

4.4 Given the above, it can be seen that the intention of the law makers has always been to provide for a lower rate of tax on the goods supplied to entities involved in the essential sector of electricity generation, transmission and distribution.

4.5 Accordingly, we submit that, both our products should fall within the ambit of entry at S. No 90 of Schedule I – 2.5%.

Prayer

1. In light of the above, we pray that both our products viz. MIDEL eN 1204 and MIDEL eN 1215 be classified under Entry at S. No. 90 of Schedule – I i.e. at the applicable rate of CGST of 2.5%.

2. We crave leave to add, to alter, amend and/or modify all or any of the foregoing submissions

3. We pray that a hearing be granted to us before any decision is taken in this matter and also crave leave to produce documents / records / case law at the hearing granted to us.”

Additional submission dt.16.03.2018

We, M/s. SKP Business Consulting LLP, in our capacity as authorised representatives of M/s. M&I Materials India Private Limited (hereinafter referred to as “the Company” or “us” or “we”)refer to the preliminary hearing held for admission / rejection of our advance ruling application on 7 March 2018 We thank you for admitting our application and granting us another opportunity to present our case During the course of the hearing, we were requested to submit certain additional information and documents in connection with our advance ruling application. Accordingly, without prejudice to the contentions raised by us in our previous submissions we would like to submit as under:

1. Principle of equivalence under GST

1.1 Under the erstwhile excise law, the tariff rate of excise duty applicable to items covered under entry 15180039 of the Central Excise Tariff was 6%. However, the Government vide Notification No. 12/2012-Central Excise dated 17 March 2012, as amended from time to time, had fully exempted the items falling under chapter heading 1518 of the First Schedule of the Customs Tariff Act, 1975.

1.2 Further, as submitted earlier, vide Notification No. VAT-1507/CR/-93/Taxation – I dated 21 January 2008 under the Maharashtra Value Added Tax Act, 2002 our products were subjected to beneficial VAT rate of 5%. This was in view of the fact that most of the customers of our products include government and non-government entities operating in the essential sector of electricity generation, transmission and distribution.

1.3 Similarly, the Tamil Nadu government vide Notification-III. G O Ms. No. 77, No II(1)/CTR/12(R-I7)/2011 dated 11 July 2011 had reduced the tax payable by any dealer to 5% on the sale of any goods except petrol, diesel and cement to certain entities engaged in generation, transmission and distribution of electrical energy.

1.4 Given the above, it is evident that our products being supplied to an essential sector, the incidence of tax was kept at a minimum i.e. 5%, to avoid any undue tax burden on the ultimate customers of essential sector of electricity.

1.5 At this juncture we would like to reproduce the relevant extract from the minutes of the 3rd and the 4th GST Council meetings held on 18-19 October 2016 and 3-4 November 2016 respectively, wherein the principles for fixation of GST rates were debated upon:

– 3rd GST Council meeting

“37. The principles on the basis of which the proposed GST rate structure was worked out was elucidated and these included: (i) proposed rate slabs should be closest to the present combined tax incidence of ‘Excise and VAT (including cascading): (ii) protecting existing revenues of Centre and States: (iii) impact on inflation i.e.. on items in the Consumer price Index (CPI) basket is minimal, (iv) proposed GST rate structure should not be regressive in nature: (v) items of mass consumption should not be taxed at higher rate; (vi) revenue for compensation should be raised through cess. On this basis, the following four slabs of GST rates were proposed-

i. 6% (to cover those goods presently attracting combined tax rate of Central Excise and VAT between 3% and less than 9%):

ii. 12% (to cover those goods presently attracting combined tax rate of Central Excise and VAT between 9% and less than 15%)’.

iii. 18% (to cover those goods presently attracting combined tax rate of Central Excise and VAT between 15% and less than 21 %):

iv. 26 % (to cover those goods presently attracting combined tax rates of Central Excise and VAT equal to or more than 21 %)”

[emphasis supplied]

– 4th GST Council meeting

“10. Initiating the discussion, the Secretary to the Council briefly recapitulated the discussion on this issue in the 3rd GST Council Meeting on 18-19 October, 2016. He recapitulated the proposal to have a four rate GST structure and the rates could be 6%, 12%, 18% and 26%. He explained that a slab of 6% was needed for such goods where VA T was being charged at 5% and Central Excise duty on the same goods was Nil. He stated that if such goods put in the 12% rate band, it would adversely affect the poorer sections of the society.”

[emphasis supplied]

1.6 Applying the principles emanating from the discussions and observations made by the GST Council it is incontrovertible that our products should be classified under the GST rate bracket which is closest to the combined rate of tax applicable under Central Excise and VAT – i.e. 5%

1.7 Therefore, we submit that the intention of the GST Council provides a compelling view that our products should be classifiable under Entry at S No. 90 of Schedule – I – 2.5% of the Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017, as amended from time to time.

1.8 Further, the Hon’ble Finance Minister Arun Jaitley in his speech to the Joint Session of the Parliament on the midnight of 30 June 2017 reiterated that GST has been framed with the objective of maintaining principle of equivalence, revenue neutrality and ensuring that no unnecessary burden is imposed on the weaker sections of the society.

1.9 It is evident that in the course of fixing GST rates of various commodities under GST, the GST Council in its wisdom was of the view that introduction of GST should not exert any additional burden on the people by increasing the rate of tax on goods which were subjected to beneficial rates of tax under the erstwhile law.

1.10 We submit that the above discussion supplies further credence to our earlier submissions that our products viz. MIDEL eN 1204 and MIDEL eN 1215 being products consumed by entities operating in the essential sector of electricity generation, transmission and distribution, and being subjected to beneficial rate of tax under the erstwhile indirect tax regime, should be classified under Entry at S. No. 90 of Schedule -I of the Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017, as amended from time to time, i.e chargeable to GST at the rate of 5%.

2. Non-classification as ‘mixtures’

2.1 The quantity of additives in our products viz. MIDEL eN 1204 and MIDEL eN 1215 is minimal i.e. 0.3% of the total weight of the product. Therefore, the said products cannot be considered as ‘mixtures’ covered under Entry at S. No. 27 of Schedule II – 6%.

2.2 In order to corroborate our explanation, a copy of test report by ‘Electrical Research and Development Association’ of our product MIDEL eN 1215 is attached herewith as “Annexure 6”.

3. Further, as required, a flow chart exhibiting the transaction flow of the products has been attached herewith as “Annexure 7“

We request your good self to take the above on record and oblige.”

03. CONTENTION – AS PER THE CONCERNED OFFICER

The submissions, as reproduced verbatim, could be seen thus –

1) “The dealer is importing products “MIDEL eN 1204 & Ml DEL eN 1215” from M/s. M & I Material Ltd.. UK. which is manufacturer of these products. The safety data sheet on website of Manufacturer M/s. M & I Material Ltd. is available and downloaded. In this safety data sheet, the details description of product is mentioned which is as under –

(i) MIDEL eN 1215- In this sheet product use is mentioned as dielectric fluid. It is blend of natural triglyceride esters (vegetable oil). It clearly shows that the product is intended to be used as only dielectric fluid. The dealer is in his application admit that use of the product is transformer fluid, which means it is inedible and hence covered by Schedule II. Chapter heading 1518 and rate of tax applicable is 6%.

(ii) MIDEL eN 1204- In this sheet product use is mentioned as dielectric fluid. It is blend of natural triglyceride esters (vegetable oil). It clearly shows that the product is intended to be used as only dielectric fluid. The dealer is in his application admit that use of the product is transformer fluid, which means it is inedible and hence covered by Schedule II. Chapter heading 1518 and rate of tax applicable is 6%.

2) The above submission is made in the light of Notification No. 1/2017-State Tax(Rate) No. MGST-1017/C.R. 104/Taxation 1 dated 29/06/2017.

Hon. Forum is humbly requested to admit the application for Advance Ruling and decide the issue as per above mentioned notification. “

04. HEARING

The case was taken up for hearing on dt.07.03.2018 when Sh. Jigar Doshi, Sh. Shivendra Dwivedi, Sh. Harshal Fifadra, Sh. Prathamesh Shende along with Sh. Nitin Satija, Director and Country head attended and made oral submissions for admission of their application as per submission made in the Advance Ruling application. They were requested to provide copies of Bill of Entries of import of their products for last one year and it was also requested to provide exact contents of their product, duly authenticated and certified, so that its exact nature could be known. The final hearing was held on dt.20.03.2018 when Sh. Shivendra Dwivedi, Sh. Harshal Fifadra and Sh. Prathamesh Shende appeared on behalf of the applicant and reiterated the contention as made in the written submission and further submission were made in the case.

The jurisdictional officer, Sh. Subhodh Lavate, State Tax Officer (RAI-SGST-C-018) Raigad division, CBD Belapur was present on all the hearings. He has tendered a written submission in the matter and stated that the product merits tax @ 12% under Schedule II and not under Schedule I as claimed by the applicant.

05. OBSERVATIONS

We have gone through the facts of the case. We have been called upon to decide the classification of the products MIDEL eN 1204 (rapeseed oil based dielectric transformer fluid) and MIDEL eN 1215 (soya oil based dielectric transformer fluid). Before we ascertain the applicability of the schedule entries, at the cost of repetition, let us have a look at the information about the products as provided by the applicant-

MIDL eN1204

It is a vegetable oil based dielectric transformer fluid. it is chemically modified rapeseed oil based natural ester.

It is used as electric insulator in transformers. Its function is to provide electrical insulation, suppress corona and arcing, and to serve as a coolant.

The applicable Indian Standards (IS) of the Bureau of Indian Standards (BIS) under the Bureau of Indian Standards Act, 1986 is IS 16659:2017.

MIDEL eN 1215

It is a vegetable oil based dielectric transformer fluid. It is a chemically modified soya based natural ester. It is used as electric insulator in transformers. Its function is to provide electrical insulation, suppress corona and arcing, and to serve as a coolant.

The applicable Indian Standards (IS) of the Bureau of Indian Standards (BIS) under the Bureau of Indian Standards Act, 1986 is IS 16659:2017.

The above information does not throw any light as to the ingredients of the product. It is for this very reason that the applicant was asked to submit a Test Report enlisting the contents of the product with the exact proportions. We find that a Test Report has been submitted but it sheds no light as to the exact ingredients or their composition. There is a mention of “additives” being contained in the product but no more information about what these additives than mentioned below –

Test particulars	Requirement as per specification	Obtained value	Remarks
Total Additives, % by wt.	Max.5	0.3	Conforms

The jurisdictional officer had pointed to a document called ‘Safety Data Sheet’, the relevant parameters from which can be seen below :

Particulars	MIDEL eN 1204 (rapeseed oil based dielectric transformer fluid)	MIDEL eN 1215 (soya based dielectric transformer fluid).
1. Identification of the Substance/Mixture and of the Company/Undertaking	1.1 Product Identifier Material Name: MIDEI. eN 1204. 1.2 Relevant identified uses of the substance or mixture and uses advised against Product Use: Dielectric fluid Uses advised against: None. 1.3 Details of the supplier of the substance or mixture Company: M&I Materials Ltd. Hibernia Way, Trafford Park, Manchester, M32 0ZD, UK.	1.1 Product Identifier Material Name: MIDEL eN 1215. 1.2 Relevant identified uses of the substance or mixture and uses advised againstProduct Use: Dielectric fluid Uses advised against: None 1.3 Details of the supplier of the substance or mixture Company: M&I Materials Ltd., Hibernia Way, Trafford Park, Manchester. M32 0ZD, UK
2. Hazards Identification	This product is not classified as hazardous and this document has been compiled for information purposes, in accordance regulation 1907/EC/2006, Annex II, as amended by Regulation (EU) No. 453/2010 and OSHA hazard communication guidelines. 2.1 Classification of the substance or mixture Regulation (EC) No 1272/2008 (CLP) Not classified. 2.2 Label elements Regulation (EC) No 1272/2008 (CLP): No symbol or signal word 2.3 Other hazards None.	This product is not classified as hazardous and this document has been compiled for information purposes, in accordance regulation 1907/EC/2006, Annex II, as amended by Regulation (EU) No. 453/2010 and OSHA hazard communication guidelines. 2.1 Classification of the substance or mixture Regulation (EC) No 1272/2008 (CLP): Not classified. 2.2 Label elements Regulation (EC) No 1272/2008 (CLP): No symbol or signal word. 2.3 Other hazards None.
3. Composition/Information on Ingredients	3 Substance CAS No.: 68956-68-3 Description: Blend of natural triglyceride esters (vegetable oil) Composition: Constituent CAS Number Contents Blend of natural triglyceride esters 68956-68-3 >98.5% Performance enhancing additives Proprietary<1.5% All constituents are listed on the TSCA inventory. Additives used in this product are a trade secret, but do not lead to classification of the substance as hazardous.	3 Substance CAS No.: 68956-68-3 Description: Blend of natural triglyceride esters (vegetable oil) Composition: Constituent CAS Number Contents Blend of natural triglyceride esters 68956-68-3 >98.5% Performance enhancing additives Proprietary<1.5% All constituents are listed on the TSCA inventory. Additives used in this product are a trade secret, but do not lead to classification of the substance as hazardous.
4. First Aid Measures	4,1 Description of first aid measures Inhalation: None envisaged due to the low vapour pressure of the substance Skin: Wash with soap and water. Obtain medical attention if irritation develops. Eyes: Irrigate with copious amounts of water. Obtain medical attention if irritation develops. Ingestion: Do not induce vomiting, obtain medical attention. 4 2 Most important symptoms and effects, both acute and delayed No adverse effects expected 4.3 Indication of any immediate medical attention and special treatment needed No special treatment required.	4.1 Description of first aid measures Inhalation: None envisaged due to the low vapour pressure of the substance Skin: Wash with soap and water. Obtain medical attention if irritation develops. Eyes: Irrigate with copious amounts of water. Obtain medical attention if irritation develops. Ingestion: Do not induce vomiting, obtain medical attention. 4 2 Most important symptoms and effects, both acute and delayed No adverse effects expected 4.3 Indication of any immediate medical attention and special treatment needed No special treatment required.
7. Handling and Storage	7.1 Precautions for safe handling Avoid eye and prolonged skin contact 7.2 Conditions for safe storage, including any incompatibilities No special precautions required 7.3 Specific end use(s) Exposure to air should be minimised. Opened containers should be properly resealed	7.1 Precautions for safe handling Avoid eye and prolonged skin contact 7.2 Conditions for safe storage, including any incompatibilities No special precautions required 7.3 Specific end use(s) Exposure to air should be minimised. Opened containers should be properly resealed
8. Exposure Controls/ Personal Protection	8 1 Control parameters No relevant control parameters. 8 2 Exposure controls Eye washes should be available for emergency use Respiratory protection: None required. Skin protection: Wear coveralls Hand protection: Wash hands after use. For prolonged or repeated skin contact gloves are recommended Eye protection If splashes are likely to occur wear safety glasses.	8.1 Control parameters No relevant control parameters. 8 2 Exposure controls Eye washes should be available for emergency use. Respiratory protection: None required. Skin protection: Wear coveralls. Hand protection: Wash hands after use. For prolonged or repeated skin contact gloves are recommended. Eye protection: If splashes are likely to occur wear safety glasses.
11. Toxicological Information	11.1 Information on toxicological effects Likely routes of exposure: Skin and eyes are the most likely routes for exposure Accidental ingestion may occur. Inhalation is not expected to be a relevant route of exposure. Product is vegetable oil based and as such non-toxic. Acute oral toxicity: Considered to be low toxicity, vegetable oil. Acute dermal toxicity: Considered to be low toxicity. Acute inhalation toxicity: Low volatility makes inhalation unlikely. Skin corrosion/irritation: Considered to be not irritating Eye corrosion/irritation Considered to be not irritating. Respiratory or skin sensitisation: Considered to be not sensitising Aspiration hazard: Not considered an aspiration hazard Carcinogenicity/mutagenicity: Not considered a mutagenic hazard or carcinogen. This product is not considered to be a carcinogen by IARC, ACGIH, NTP or OSHA.	11.1 Information on toxicological effects Likely routes of exposure: Skin and eyes are the most likely routes for exposure Accidental ingestion may occur. Inhalation is not expected to be a relevant route of exposure. Product is vegetable oil based and as such non-toxic. Acute oral toxicity: Considered to be low toxicity, vegetable oil. Acute dermal toxicity: Considered to be low toxicity. Acute inhalation toxicity: Low volatility makes inhalation unlikely Skin corrosion/irritation: Considered to be not irritating Eye corrosion/irritation Considered to be not irritating. Respiratory or skin sensitisation: Considered to be not sensitising Aspiration hazard: Not considered an aspiration hazard Carcinogenicity/mutagenicity: Not considered a mutagenic hazard or carcinogen. This product is not considered to be a carcinogen by IARC, ACGIH, NTP or OSHA.

What we can gather from the above is thus :

Composition/lnformation on Ingredients	Constituent	CAS Number	Contents
MIDEL eN 1204 (rapeseed oil based dielectric transformer fluid)	Blend of natural triglyceride esters	68956-68-3	>98.5%
Performance enhancing additives	Proprietary	<15%
MIDEL eN 1204 (soya based dielectric transformer fluid)	Blend of natural triglyceride esters	68956-68-3	>98 5%
Performance enhancing additives	Proprietary	<1.5%

 

We are afraid to observe herein that the available information would be insufficient for us to decide the issue at hand. Nevertheless we would have a look at the contention as to the applicable classification. From all above, we have only the following information for deliberation as to the classification of the products –

• The only thing we can clearly see is that the impugned products have a distinct identity as being a “transformer fluid”. They are also given distinct names to establish their identity.
• We only learn that the impugned products are vegetable oil based.
• Neither the exact ingredients nor the exact additives, and the composition of each of these are available before us.
• The information shows that the products are a blend of natural triglyceride esters. They also contain additives.
• The applicant has argued that the quantity of additives in their products is minimal i.e. 0.3% of the total weight of the product. Therefore, the said products cannot be considered as ‘mixtures’.

Having seen thus, we look at the contention with regard to the applicability of the schedule entries thus –

• If it is assumed that either or our products cannot be classified under entry at S. No. 90 of Schedule I – 2.5%, we would like to submit that, entry at S. No. 88 of Schedule I – 2.5% also provides an appropriate description of our products, and that in no case the said products can be classified under the general entry at S. No. 27 of Schedule II – 6%.

We shall look at each of the above entries as found in the Notification No. 1/2017-Central / State Tax (Rate) [as amended from time to time] thus –

S. No.	Chapter / Heading/ Subheading / Tariff item	Description of Goods	Rate [CGST + MGST]
88	1516	Vegetable fats and oils and their fractions, partly or wholly hydrogenated, inter-esterified, re-esterified or elaidinised, whether or not refined, but not further prepared.	5% [2.5 +2.5]
90	1518	Vegetable fats and oils and their fractions, boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 1516	5% [2.5 + 2.5]
27	1518	Animal fats and animal oils and their fractions, boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 1516; inedible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this chapter, not elsewhere specified of included	12% [6 + 6]

A look at the description as found in the entries and the product information, as reproduced above, we are constrained to observe thus –

1. The products are not vegetable fats and vegetable oils per se.

2. The products do not remain mere vegetable fat or mere vegetable oil. The impugned products are a distinct product which is known in the market as a dielectric transformer fluid.

3. The applicant has argued that the products cannot be considered as ‘mixtures’. However, we find a reference to the products being a ‘substance’ or ‘mixture’ in the Safety Data Sheet of these products as can be seen thus –

1.3 Details of the supplier of the substance or mixture

4.  No information about the manufacturing process has been given. Neither any information has been shared as to the ingredients contained in the products. The products also contain additives, the information about which has also not been shared with this Authority. But we see that the manufacturing process of these ingredients and the addition of additives leads to a distinct product being formed. The ingredients or additives are added so as to formulate a certain product which could be used as a transformer fluid. So the processes are intended to manufacture a new commodity in which rapeseed oil or soya would be the prime ingredient. Owing to this, the products are described as “rapeseed oil based” or “soya based” and not being “rapeseed oil” per se or “soya” per se. The end product has a distinct identity in the sense that when one desires to have vegetable oil, the impugned products would not be accepted.

5.  We shall see herein the position as appearing in the Customs Tariff Heading 1518 –

1518		ANIMAL OR VEGETABLE FATS AND OILS AND THEIR FRACTIONS, BOILED, OXIDISED, DEHYDRATED, SULPHURISED, BLOWN, POLYMERISED BY HEAT IN VACUUM OR IN INERT GAS OR OTHERWISE CHEMICALLY MODIFIED, EXCLUDING THOSE OF HEADING 1516 ; INEDIBLE MIXTURES OR PREPARATIONS OF ANIMAI. OR VEGETABLE FATS OR OILS OR OF FRACTIONS OF DIFFERENT FATS OR OILS OF THIS CHAPTER, NOT ELSEWHERE SPECIFIED OR INCLUDED
1518 00	–	Animal or vegetable fats and oils and their fractions, boiled, oxidized, dehydrated, sulphurised, blown, polymerized by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 1516; inedible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this Chapter, not elsewhere specified or included :
	—	Lin seed oil:
1518 00 11	—	Edible grade
151800 19	—	Other
	—	Castor oil, dehydrated:
1518 0021	—	Edible grade
1518 00 29	—	Other
	—	Other Vegetable oil and its fats:
1518 00 31	—	Edible grade
1518 00 39	—	Other
151800 40	—	Other

From the Tariff Heading 1518 as reproduced above, we see that –

a. There are 2 parts to Tariff Heading 1518 thus –

• Part 1 – Animal or vegetable fats and oils and their fractions, boiled, oxidized, dehydrated, sulphurised, blown, polymerized by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 1516;

• Part 2 – Inedible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this Chapter, not elsewhere specified or included:

B. Of the Tariff Heading 1518, schedule entry 90 covers portion relating to vegetable fats and oils and their fractions AND schedule entry 27 covers portion relating to animal fats and oils and their fractions.

C. The schedule entry 27, additionally, covers the portion of the Tariff Heading 1518 pertaining to inedible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of the Chapter 15.

D. The Harmonized Commodity Description and Coding System Explanatory Notes (HSN) in respect of the part 1 (as reproduced above) of Heading 1518 says-

“This part covers animal or vegetable fats and oils and their fractions which have been subjected to processes which modify their chemical structure thereby improving their viscosity, drying power (i.e., the property of absorbing oxygen when exposed to the air and forming elastic films) or modifying their other properties, provided they retain their original fundamental structure and are not more specifically covered elsewhere, e.g.:

Thus, the Notes make it clear that the animal or vegetable fats and oils and their fractions should retain their original fundamental structure.

e. The part 1 (as reproduced above) of Heading 1518 speaks of certain processes which have been subjected to vegetable and animal oils. But the HSN Notes say that despite undergoing these processes, the vegetable or animal oils should retain their original fundamental structure. In the present case, we have a final product which is a transformer fluid. Though the Test Report shows the percentage of the natural triglyceride esters to be at 98.5%, it would not mean that a new commodity has not been produced. There are data and international standards galore for mineral oils, there are as yet no IEC standards addressing the composition or testing of the natural ester oils with their different chemical composition. Each manufacturer has his own set of ingredients to obtain a transformer fluid. That is precisely the reason that the applicant has not preferred to divulge the details. Thus, by addition of the needful additives and the ingredients, we have transformer fluids made from different vegetable oils, each with their distinct chemical composition. The requirement of retaining the original fundamental structure would not be possible by the use of the additives and ingredients. The vegetable oils are used as the base to manufacture the final products which are a distinct product. The applicant is also selling the products as dielectric transformer fluid. The products are described as a “fluid”. Is a fluid same as an oil? A fluid is different from even a liquid, let alone oil. The products are not being sold as a modified vegetable oil but as products which result from the adaptation of the natural triglyceride esters to obtain a dielectric transformer fluid. In view thereof, we are convinced that the impugned products would not be covered by the part 1 (as reproduced above) of Hearting 1518. The same reasoning would apply to non-applicability of entry 88 of Schedule I.

f. We now come to part 2 (as reproduced above) of Heading 1518. This part covers inedible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of the Chapter 15. The present products, as discussed above, are a preparation from natural triglyceride esters. They are based or derived from “rapeseed oil based” or “soya based”. In addition, the products are inedible. And even though the applicant disputes about the products being a ‘mixture’, there being a combination of ingredients and additives, the impugned products could be classified as an ‘inedible preparation’. Therefore, they could very well be covered by the description “inedible preparations of vegetable oils’.

Now the aspect which remains to be seen is “not elsewhere specified or included”. We have not found any specific description which covers a “dielectric transformer fluid”. To that extent, it is prima facie felt that the description “inedible preparations of vegetable oils’ perfectly fits the impugned products and hence, the entry 27 of Schedule II of the Notification No. 1/2017- Central / State Tax (Rate) which covers the aforesaid description would be applicable. In the present case, we are unaware of the exact composition in terms of the additives and the ingredients used in the “rapeseed oil based” or “soya based” preparations. This would, as per our considered opinion, affect our decision. We find that there is Chapter 38 of the Customs Tariff which covers residual products of the chemical or allied industries. However as the exact composition of the product is not revealed to us by the applicant and therefore on the basis of the facts at hand, we find them insufficient to arrive at any decision as to the classification of the product under Chapter 38 and accordingly, taking into consideration only the details revealed to us, we find that the product is classifiable under Chapter 15 of the Customs Tariff Heading/GST Tariff.

6. We are not in doubts that entry 88 and 90 of Schedule I of the Notification No. 1/2017-Central / State Tax (Rate) would not cover the impugned products. We are also convinced that the impugned products are not covered by any entry of the Schedule in the Notification No. 2/2017- Central / State Tax (Rate) for goods exempted from GST. It is only the question of entry 90 or any other entry of the Notification No. 1/2017- Central / State Tax (Rate) which would cover the impugned products.

7. We have gone through the case laws and arguments relied upon by the applicant. However, we find that they do not apply to the facts that we are faced with. Since we have formed an opinion on the facts at hand, we would not enter into any discussing or differentiating the case laws.

06. In view of the deliberations as held hereinabove, we pass an order as follows:

ORDER

(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)

ORDER NO.GST-ARA-23/2017-18/B-31,

Mumbai dated, 9th May, 2018

For reasons as discussed in the body of the order, the question is answered thus –

Q. What is the correct Harmonized System of Nomenclature (HSN) code and the applicable GST rate for our products MIDEL eN 1204 (rapeseed oil based dielectric transformer fluid) and MIDEL eN 1215 (soya oil based dielectric transformer fluid) in terms of Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017?

A. As per the discussions and findings under the heading ‘Observations’, the question is answered thus –

The product would fall in schedule entry 27 of Schedule II of the Notification No. 1/2017-Central /State Tax (Rate) under Tariff Heading 1518 and thereby taxable @ 6% each of Central Goods and Services Tax and Maharashtra Goods and Services Tax.