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2025 (5) TMI 984 - AAR - GSTClassification of Blades cleared as Spare Parts for being used in Agricultural Machines viz. Chaff Cutters which is meant and used for Cutting Straw for preparing Animal Feed - to be classified under Chapter Heading 8208 40 00 or under Chapter Heading 8436 10 00 / 8436 80 90? - HELD THAT - Ongoing through the description of the goods manufactured by the applicant it is found that the goods manufactured by the applicant is cutting blades made of metal which is normally used in chaff cutter. According to Rule 1 of the Interpretative Rules classification shall be determined according to the terms of the heading and any relative Section or Chapter Notes . Thus by applying Rule 1 the impugned goods merit Classification under Heading 82.08 which covers within its ambit cutting blades for agricultural horticultural or forestry machines instead of Heading 84.36 as note 1(k) of Section XVI specifically excludes articles of Chapter 82 or 83. It is also settled law that a specific heading must be given precedence over the general Heading. Note 2 to Section XVI which govern classification of parts of machines has been applied by the applicant to classify the impugned product under Heading 84.36 is subject to Note 1 to Section XVI. Since note 1(k) to Section XVI clearly stipulates that This section does not cover (k) Articles of Chapter 82 or 83 . Once the Chaff Cutter Blades cleared as Spare Parts are specifically covered by Chapter 82 Note 2 to Section XVI cannot be invoked for classification in terms of Note 1 (k) to Section XVI. The Chaff Cutter Blades cleared as spare parts merit classification under Chapter 82.08 attracting GST at the rate of 18% and not under Chapter heading 84.36 Conclusion - The blades are classifiable under Chapter Heading 8208 4000 and attract GST rate of 18%.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Authority for Advance Ruling (AAR) were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Correct HSN Classification of Blades as Spare Parts for Agricultural Machines Relevant legal framework and precedents: The classification is governed by the GST Tariff Schedule, which adopts the Customs Tariff nomenclature, including HSN headings 8208 and 8436. The General Rules of Interpretation (Rules 1, 2, and 3) of the Customs Tariff apply, along with relevant Chapter and Section Notes, particularly Note 1(k) and Note 2 of Section XVI and Note 1(f) of Section XV. Precedents relied upon include:
Court's interpretation and reasoning: The AAR examined the descriptions under HSN 8208 40 00 and 8436 10 00 / 8436 80 90. Heading 8208 covers knives and cutting blades for machines, including agricultural machines such as chaff cutters, while heading 8436 covers other agricultural machinery, including machinery for preparing animal feeding stuffs. Applying Rule 1 of the Interpretative Rules, classification is primarily determined by the terms of the heading and relevant notes. Note 1(k) of Section XVI excludes articles of Chapter 82 or 83 from Section XVI, which covers Chapter 84. Since blades fall under Chapter 82, Note 2 of Section XVI, which governs parts of machines under Chapter 84, cannot be invoked to classify blades under Chapter 84. The AAR further relied on the Explanatory Notes of HSN, which explicitly mention that blades for agricultural machines such as root cutters and straw cutters fall under heading 8208.40. The blades in question, being unmounted cutting blades used in chaff cutters, fit squarely within this description. Key evidence and findings: The applicant submitted that the blades are metal cutting blades with holes for fitting to chaff cutter machines and are used solely for cutting straw for animal feed. They also highlighted that manufacturers in other states classify identical blades under heading 8436, attracting a lower GST rate of 12%, causing a competitive disadvantage. The jurisdictional officer's comments supported classification under heading 8208 40 00, noting that a blade alone cannot perform the function of the machine and that blades are specifically covered under heading 8208. Application of law to facts: The AAR applied Rule 1 of the General Rules of Interpretation, giving precedence to the specific description under heading 8208.40 over the general machinery description under heading 8436. The exclusion under Note 1(k) of Section XVI was decisive in rejecting classification under Chapter 84. The Explanatory Notes and judicial precedents reinforced this position. Treatment of competing arguments: The applicant argued for classification under heading 8436 based on Note 2 of Section XVI and the "suitability for use" test, contending that blades are parts of the chaff cutter machine and thus should be classified with the machine. They relied on Supreme Court rulings that specific exclusions must be explicit and that parts suitable solely for a machine should be classified with that machine. The AAR rejected this argument by applying Note 1(k) of Section XVI, which excludes articles of Chapter 82 from Section XVI, and by referring to the settled position in Nice Steel Industries and Dunlop India Ltd. that blades for agricultural machines are classifiable under heading 8208.40. Conclusions: The blades are classifiable under heading 8208 40 00 as knives and cutting blades for agricultural machines, attracting GST at 18%. The classification under heading 8436 10 00 or 8436 80 90 is not tenable due to the specific exclusion in Note 1(k) of Section XVI and the established judicial precedents. 3. SIGNIFICANT HOLDINGS The AAR held: "As discussed above, the blades are classifiable under Chapter Heading 8208 4000 and attract GST rate of 18%." Core principles established include:
In summary, the ruling confirms that blades used as spare parts for chaff cutters are knives and cutting blades for agricultural machines under heading 8208 40 00, attracting GST at 18%, and not parts of machinery under heading 8436, which attract 12% GST.
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