TMI Blog2021 (8) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... ir when pumped in and out of the bellow when connected in the system acts as a shock absorber and provides the suspension by its reaction force. The product, Air Spring assembly manufactured by the appellant consists of a bellow made of vulcanised soft rubber coated with fabric sheet sealed with bottom Bead Plate Top Bead Plate and also has Bead Wire, Girdle hoop, Piston and a Rubber Bumper. The fabric in the bellow wall restricts radial expansion so that the air pressure developed by the air flowing into the air spring causes it to expand axially and the rubber essentially provides the enclosure for the fluid, i.e., air. It has been opined by the Certified Chartered Engineer that the essential characteristics is derived from the vulcanised rubber. The commercial identity of the product is that the product is a critical component of the air suspension and lift axle system in trucks, trailers and buses as has been stated by the appellant. It is also pertinent to note that the product is suitable for use solely or primarily with the articles of Chapter 8701 to 8705. The appellant has also claimed that the HSN Explanatory Notes to Section XVII specifically excludes Spring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruling have changed. 4. Under Section 104(1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void sb-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act. The subject appeal is filed under Section 100(1) of the Tamilnadu Goods Services Tax Act 2017/Central Goods Services Tax Act 2017 (hereinafter referred to the Act ) by M/s SI Air Springs Private Limited (hereinafter referred to as Appellant ). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference is made to the report of the Chartered Engineer. Further, though it is stated that functional utility is not provided solely by the soft rubber, the impugned order does not contradict the independent Chartered Engineer report dated 29.02.2020 relied upon by the Applicant/Appellant that the functional utility is primarily provided by the vulcanized soft rubber. Furthermore, no independent technical report or evidence has been relied upon by the authority in the impugned order to contradict the expert opinion of the Chartered Engineer dated 29.02.2020. The impugned order proceeds on the erroneous basis that despite the product comprising of vulcanized rubber and its functionality being primarily attributable to vulcanized rubber, it cannot be classified under CTH 4016 9990. Therefore, the primary basis on which the impugned order holds that the Air Springs are not classifiable as products of vulcanized rubber is that the whole of product is not an article of vulcanized rubber. Further, the order also holds /does not deny that while the functionality of the Air Spring is primarily from vulcanized rubber, it is not only from the vulcanized rubber, but from the formation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ariff. This Rule has also not been considered in the Impugned Order and the Impugned Order has been passed without even referring to the relevant HSN Explanatory notes to Chapter 40 or the General Rules for the Interpretation of the Import Tariff. The Appellant had placed reliance on the US tariff classification bearing no. N303352 and dated March 28, 2019 to shows that the essential character of the air spring is imparted from the rubber component (vulcanized rubber ). The US authority in such classification opinion on the issue of tariff classification of convoluted/bellows air spring from Mexico , has opined that it is the rubber portion of the spring that allows the spring to act as designed. Therefore, the essential character of the spring is imparted by the rubber component, making it an article of rubber. As a result, classification of the spring in Section XVII is precluded. While the crux of the ruling is that the essential character of the air springs is imparted from the rubber component ( vulcanized rubber ), the Authority has failed to examine this important aspect but instead proceeded on a tangential basis while arriving at erroneous findings at para 9 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l under Chapter Heading 4016 (which findings are incorrect for the reasons highlighted hereinabove), and hence the product will fall for classification under Chapter 8708. The General Rules of Interpretation of Import Tariff lays down as follows - Classification of goods in this Schedule shall be governed by the following principles: I. The titles of Sections, Chapters and Sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions: The Section notes and chapter notes provided under the Customs tariff facilitate in arriving at the proper classification and contain valuable guides to classification. Therefore, it is imperative that in order to arrive at the correct tariff classification, the headings along with relevant Section and Chapter note be taken into consideration. Reliance in this regard is also placed on the Instruction dated 21.05.2019 issued by the Office of Commissioner of Customs (Import), Mumbai, which clarifies that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e metal, even in such a case the classification cannot be under Chapter 87 but will only be under Chapter 7320, the GST rate for which is 18%. Therefore, without prejudice to the submission set out hereinabove, it is submitted that the springs per se cannot be classified under Chapter 87 as has been done vide the Impugned Order. GROUND 4 - WITHOUT PREJUDICE. THE IMPUGNED ORDER FAILED TO APPRECIATE THAT COMPETING MANUFACTURERS WHO MANUFACTURE AIR SPRINGS HAVE CLASSIFIED THE SAME UNDER TARIFF HEADING 4016 9990. HERE CANNOT BE TWO COMPETING CLASSIFICATIONS AS REGARDS THE SAME PRODUCT The Appellant submits that other competing manufacturers in the industry who manufacture the similar product in question - namely Air Springs , have classified the same under Tariff heading 40169990 that attracts GST at the rate of 18%. This submission was also made before the Hon ble Authority for Advance Ruling in the Additional Submissions dated 26.08.2020 along with sample invoice. However, without considering the same, the Impugned Order has ordered that the Air Springs manufactured by the Appellant are classifiable under 8708 8000. There cannot be competing classifications as reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... griddle hoop, crimped top plate, piston and a bumper. The material composition is approximately 60% metal and 40% rubber. It is stated that the product works on the pneumatic system principle and the vulcanized rubber component gives the key functionality of the product, a critical component of the air suspension and lift axle systems in trucks, trailers and buses. Pre-GST, the appellant had classified this product under CETH 4016 and after the introduction of GST from 1st July 2017, they have started classifying under CTH 8708 for the purposes of GST. Since their competitor manufacturers are classifying the said goods under CTH 4016, they have sought Advance Ruling and they continue to classify their product under CTH 8708. 7.2 The contention of the appellant before us is that The Certified Chartered Engineer has stated that key functionality of the product is extended by the rubber part, which is a vulcanized rubber and it gives the essential characteristics to the product and this opinion is not contradicted by any independent technical report or evidence. As per the HSN Explanatory Note to Chapter 40, the said chapter covers articles wholly of rubber or whose ess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n article of vulcanized rubber and once when an article is an article of vulcanized rubber , the same gets excluded from the purview of section XVII as per Note 2 to Section XVII and cannot be classified under CTH 8708, therefore necessarily to be classified under CTH 4016-other articles of vulcanized rubber other than hard rubber. 7.4 Therefore, we find that the point to be decided is whether the product is an article of vulcanized rubber other than hard rubber and if so, whether as per Note 2 to Section XVII, the same is excluded from chapter 87, though the product are critical components of the air suspension and lift axle system designed for use only in trucks, trailers and buses 8.1 In the case at hand, it is stated that the Air Springs functions on the Pneumatic principles, i.e., the fluid used to balance is air . Air when pumped in and out of the bellow when connected in the system acts as a shock absorber and provides the suspension by its reaction force. The product, Air Spring assembly manufactured by the appellant consists of a bellow made of vulcanised soft rubber coated with fabric sheet sealed with bottom Bead Plate Top Bead Plate and also has Bead Wir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the General notes in the HSN is as follows: Scope of the Chapter This Chapter covers rubber, as defined above, in the raw or semi-manufactured states, whether or not vulcanised or hard, and articles wholly of rubber or whose essential character derives from rubber, other than products excluded by Note 2 to this Chapter. It says articles whose essential character derives from rubber are covered in this chapter. As per the Chartered Engineers certificate, the essential character of the product is derived from rubber which is vulcanized soft rubber and therefore the product may be covered under CTH 4016. Chapter headings of CTH 4016 are examined as under: 4016 OTHER ARTICLES OF VULCANIZED RUBBER OTHER THAN HARD RUBBER 40 16 10 00 - Of cellular rubber kg. - Other 4016 91 00 -- Floor coverings, and mats kg. 4016 92 00 - - Erasers kg. 4016 93 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 87. The relevant Section Note is examined as under: Section XVII Note 2 is as follows: 2. The expressions parts and parts and accessories do not apply to the following articles, whether or not they are identifiable as for the goods of this Section: (a) joints, washers or the like of any material (classified according to their constituent material or in heading 8484) or other articles of vulcanised rubber other than hard rubber (heading 4016); (b) parts of general use, as defined in Note 2 to Section XV, of base metal (Section XV), or similar goods of plastics (Chapter 39); The contention of the appellant is that as per Note 2(a) above, the product which is an article of vulcanized rubber other than hard rubber is excluded from being considered as Parts . Here again, we find that Hon ble Supreme Court in the case of M/s Pragati Silicones PVT Ltd Vs. Commissioner of Central Excise Delhi [2007-TIOL-71-SC-CX], while considering whether Note 2(b) of Section XVII excludes Plastic Name Plates to be excluded from considering as Parts , has stated that: 27. Based on the submissions made by Counsel for the Revenue, the central question before us is: whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other words, without any reference to Chapter 39 in Note 2(b), the only control on the meaning of similar goods of plastics would be the description of goods included within Chapter XV. 30. However, the minute a reference is made to Chapter 39, it is the provisions in Chapter 39 that control the scope of similar goods of plastics . Thus, when Note 2(b) refers to similar goods of plastics as in Chapter 39, it must be interpreted to mean similarly defined goods in Chapter 39. And since no definition or reference exists in Chapter 39 regarding name plates, etc., we cannot find any exclusion with respect to these goods from Chapter 87. For example, when the exclusion regarding base metal name plates is made, it is so because there exist specific and detailed headings in that Chapter. But in the absence of such specific headings in Chapter 39, we are unable to accept the exclusion of the plastic name plates from Chapter 87 and include it within a residuary provision in Chapter 39. 31. Thus, we are of the opinion that the language in Note 2(b) cannot be interpreted to exclude plastic name plates from the scope of Section XVII. 8.4 Applying the above ratio to the case at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l test. It was also held that the expression parts of general use would not apply to parts or accessories which are not suitable for use solely or primarily with articles of Chapter Heading 87.08 which pertains to parts and accessories of motor vehicles of Chapter Headings 87.01 to 87.05. The Court was also categorical that in such a case the test that is to be applied is : whether the goods are suitable for use solely or primarily with articles of Chapter Heading 87.01 to 87.05 . (emphasis supplied) 8.5 In the case at hand, the product is not a joint, washer or the like, it is an Air bellow , a specifically designed part for use in the Motor Vehicle as a Shock absorbent and therefore, even if the part which gives the essential character of the product is made of vulcanized rubber other than hard rubber and the functionality of the product is extended by the said rubber portion as claimed by the appellant, still as per the dictum pronounced by the Apex Court referred above, the test of commercial identity and not the functionality test is relevant. The commercial identity of the product is that the product is a critical component of the air suspension and lift axle sy ..... X X X X Extracts X X X X X X X X Extracts X X X X
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