Case BriefsTribunals/Commissions/Regulatory Bodies

West Bengal Authority for Advance Ruling (AAR): The Bench of Sydney D’Silva and Parthasarathi Dey (Members) addressed an application sought on the classification of the services provided in a way of packing of tea bags and rate of GST thereon.

In the present application, it has been submitted that the process of service undertaken by the applicant (Contract Packer of Tea) involves assembly of materials on machine, including blended tea leaves and other inputs received from the recipient of service. Applicant used to classify it as “packaging service”.

Applicant received a communication from Hindustan Unilever Ltd., one of its recipients of services informing that the service should be taxed under Sl No. 26 (f) of the Rate Notification, which applies to “manufacturing service”.

The issue to be addressed in this application was “Whether the applicant’s services to HUL are classifiable as packaging service or manufacturing service or both?”

The Applicant used to classify it as packaging service under SAC 998540 and charged 18% GST.

“The flow chart as mentioned in the “Agreement” between the applicant and HUL, has the processes undertaken at applicants manufacturing unit and shows that the blended tea received from HUL, after quality control procedure, is passed through hoppers, magnetic grill and mesh, and ends with filling tea leaves into the tea bag pouches and stitching. The tea bags are then subjected to quality control before being packed in cartons, wrapped and put into boxes, stored and delivered to HUL after sample testing.”

In accordance to Section 2(72) of CGST Act, 

“Manufacture” is the processing of raw materials or inputs in any manner that results in the emergence of a new product having a distinct name, character and use.

Consuming tea contained in a tea bag does not require the tea leaves to be taken out of the bag. The tea bags are porous and filled with tea leaves, therefore, are distinct from tea leaves which excludes them from the category of “packaging material”.

Thus, it is evident that the applicant’s service to HUL for manufacturing of tea bags is service for manufacturing a product classified under Tariff item 0902 40 40, where physical inputs are owned by the recipient.

Ruling of the Authority:

Applicant makes a composite supply to Hindustan Unilever Ltd. where the service of manufacturing tea bags from the physical inputs owned by the latter is the principal supply. It is classifiable under SAC 9988 and taxable at 5% rate under Sl No. 26(f) of Notification No. 11/2017-CT (Rate) dated 28/06/2017, as amended from time to time. [Application of Vedika Exports Tea (P) Ltd., In Re,  Case No. 41 of 2018, dated 10-12-2018]

Case BriefsHigh Courts

Uttaranchal High Court: A Single Judge Bench comprising of Alok Singh, J. dismissed a writ petition wherein the petitioner could not satisfy the Court as to how he was being deprived of his fundamental right.

The Petitioner, a member of Scheduled Tribes community namely Buxa, has sought to quash the provisions of Section 157-B of the U.P. Zamindari Abolition & Land Reforms Act, 1950 of being ultra-vires and unconstitutional.

The petitioner was a Bhumidhar with transferable rights of 1.3040 hectares of land in his village. He took a loan from two banks by mortgaging the aforesaid land. Subsequently, he wanted to sell his land in order to pay his loans but due to the restriction on the transfer of land, as per Section 157-B. He further submits that land mortgaged could be sold by the bank but he was restricted for the same, which he pleads amounts to discrimination under Article 14 of the Constitution of India along with Article 300-A, wherein no person shall be deprived of his property, save by authority of law.

It was submitted by the respondent that this Court could declare “any provision” of the Act as ultra-vires or unconstitutional, if petitioner was able to prove that it is violative of any fundamental right; but will not work upon an apprehension that had the land been sold by the petitioner, he would get a better price for it.

The Court explained the object of inserting Section 157-B in the Act and said that welfare was the intention behind creating the same. It sought to protect the land of members of Scheduled Tribes from muscleman, influential persons or land mafias, etc. It was held in Ram Krishna Dalmia v. S.R. Tendolkar, AIR 1958 SC 538, ‘that a single individual may be treated as a class by himself.’ But in this case, the petitioner had not been deprived of any of his constitutional right, hence does not create a class in himself. Also, Section 157-B does not create an absolute bar on the transfer of land as it could be transferred to a person belonging to Scheduled Tribes.

Accordingly, as the Bank and petitioner are two different entities having different status, thus there was no discrimination with the petitioner being a member of Scheduled Tribes. [Diwan Singh v. State of Uttarakhand,2018 SCC OnLine Utt 814, dated 06-09-2018]