If the tips and balls used in the manufacturing of ball point pens are not taxable at the rate of 12% under HSN 9608, then at what rate shall they be taxable and under which HSN?

PJ/Case Law/2018-2019/3530

Case:Shiva Writing Company Pvt. ltd

Citation:44/WBAAR/2018-19 dated 13.03.19

Issue:If the tips and balls used in the manufacturing of ball point pens are not taxable at the rate of 12% under HSN 9608, then at what rate shall they be taxable and under which HSN?
Brief facts: Applicant is in the business of manufacturing and supplying of ball point pens. The applicant requires pen tips and balls for manufacturing of pens. Balls are used inside tips in order to make tips working. Applicant also trades and supplies ball point pen tips and refills to various dealers.

Respondent’s Contention and Reasoning of Judgment:
Since the applicant has referred to the products as ball point pen balls and Nibs, thenit appeared to AAR that applicant was using the words “Tip” and “Nib” interchangeably, and to clear the confusion applicant was asked to submit samples of the products on which the Ruling has been sought for. The applicant only referred in their query about the tax rate on “Tip” and “Balls”.
“Nibs” and “Tips” of pens are completely two different products with distinguishable anatomy catering to different kinds of ink and hence, use. While the split down the centre is the essential and salient feature of a “Nib”, the ball at the end of the refill is the essential and salient feature of a “Tip”. The two terms cannot be used synonymously and/or as substitutes of each other.
Thereafter, after testing the samples, the authority concluded that the product on which Ruling has been sought is pen balls and “tips” and takes up the matter of classification and applicability of the Rate Notification.
Rules of Interpretation of Tariff:Where description of an article or group of articles under a heading is preceded by “-“,such descriptions under “-” (single dash) are first to be considered for sub-classification under a Heading first, before proceeding to further classify under “–” (double dash). Articles whose description are preceded by a “—” (triple dash) or “—-” (quadruple dash) are sub classifications of the immediately preceding single dash or double dash, as the case may be.
Classification as per Customs Tariff Act, 1975:-‘Tips and ball of pens’, essentially are “parts” of refills. Therefore they cannot be classified in either as Ball point pens (960810) or Felt tipped and other porous-tipped pens and markers (960820) or Fountain pens, stylograph pens and other pens (960830) or Propelling or sliding pencils (960840) or Sets of articles from two or more of the foregoing sub-headings (960850) or Refills for ball point pens, comprising the ball point and ink-reservoir (960860). Hence, it has to be classified under “-Other”, which includes:
–960891: Pen nibs and nib points
— 9608 99: Other
Since, nibs and nib points are not similar to tips and the Applicant is in the business of manufacturing “ball-point pens” and not “fountain pens”, the classification of “tips and balls for pen” should fall under –9609 99: Other, which includes
— 9608 99 10: Pen holders, pencil holders and similar holders
— 9608 99 90: Others
Since, “tips and balls of pens” are definitively not considered as part of “Pen holders, pencil holders and similar holders” they are to be classified under 9608 99 90: Others, under HSN 9608 and are to be taxed accordingly.
Classification as Rate Notification No. 01/2017-Central Tax (Rate) dated 28th June 2017 (as amended from time to time)-:In the Rate Notification ball point pens, classified under HSN 9608, are included under Sl No. 232 of Schedule II under the description: “pens other than fountain pens, stylograph pens”. The same Notification also mentions “fountain pens, stylograph pens” under Sl No. 447 of Schedule III. However, parts of pen, including “tips and balls of pens”, classifiable under HSN 9608 as discussed above, are not exempted or specifically included under entries of any other schedules. They are, therefore, to be included under Sl No. 453 of Schedule III and taxable @ 9% CGST and 9% SGST.

Decision: Tips and Balls” of Ball Point Pens are to be classified under GST Tariff Heading 9608 99 90 and included under Sl No. 453 of Schedule III of Notification No. 01/2017–Central Tax (Rate) dated 28.06.2017 (corresponding State Notification No. 1125-FT dated 28/06/2017)
Comment: The gist of the case is that Tips and Balls” of Ball Point Pens are to be classified under GST Tariff Heading 9608 99 90.

Prepared by: Adit Gupta

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PJ/Case Law/2018-2019/3530

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