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2022 (2) TMI 651 - AAAR - GSTClassification of goods - Submarine Fired Decoy System (SFDS) - classifiable as 'parts of submarine' under Chapter Heading 8906 or not - taxable GST rate of 5% by virtue of entry no. 252 of Schedule I in Notification No. 1/2017-Integrated Tax (Rate) dated 28.07.2017 - HELD THAT:- The submarines under discussion pertain to the Indian Navy and are basically used for warfare. A submarine, when used as a warship, is equipped with a torpedo launching system as well as a decoy system. Therefore, it can rightly be concluded that the said Submarines are 'Warships' which are classifiable under CTH 8906 - the SFDS system in question is tailor made/customized for use in the submarines by the Indian Navy. Apart from their usage in a submarine for countering torpedoes, it does not have any independent use for it to be sold in the market. Thus it deserves to be classifiable as 'part' of a submarine. Even the defence market recognizes the SFDS as a system necessary for anti-torpedo attacks. The market identity of the SFDS as a system connected to a submarine for anti-torpedo measures qualifies the argument that it is 'part of submarine' in commercial parlance too - as per the detailed write up on the usage of SFDS in the Appeal, it appears that, SFDS is a defense Mechanism and without which the very existence of the submarine is at stake. This in itself is an irrevocable proof/evidence that this is an essential part of the said submarine. Similarly, in case of IN RE: M/S. BHARAT ELECTRONICS LIMITED [2019 (9) TMI 823 - AUTHORITY FOR ADVANCE RULING, KARNATAKA], the systems like “color tactical display system, Radar system, Electro Optical fire control system, optical director system”, etc, are ruled as 'parts of submarine'. Now in the present case, SFDS system is a similar system, as is in the case of Bharat Electronics Ltd. Further, following the spirit of the advance rulings pronounced by various Advance Ruling Authorities (on which the appellant placed reliance), we differ with the ruling of the lower Authority that, SFDS is not a part of 'Submarine', but an additional feature that falls under the category of 'arms and ammunition'. The SFDS is classifiable as 'parts of Submarine' falling under Chapter 8906 and consequently attract a GST rate of five (5) percent, by virtue of entry No.252 of Schedule I in Notification No. 28.06.2017.
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