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2025 (5) TMI 985 - 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 HSN Heading 8208 40 00 or under HSN 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 inyoked 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 in the ruling are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Correct HSN Classification of Blades used in Chaff Cutters Relevant Legal Framework and Precedents: The classification is governed by the GST Tariff Schedule, which aligns with the Customs Tariff and HSN codes. The relevant headings are:
Interpretative rules under the Customs Tariff Rules 2 and 3 apply, which govern classification when goods may fall under multiple headings. Rule 1 mandates classification according to the terms of the heading and relevant notes. Important precedents include:
Court's Interpretation and Reasoning: The applicant initially classified the blades under 8208 40 00, paying GST at 18%. However, they noted that manufacturers in other states classify identical blades under 8436 10 00 or 8436 80 90, paying GST at 12%, causing a competitive disadvantage. The applicant argued that blades are parts of agricultural machines (Chaff Cutters) and thus should be classified under Chapter 84 per Note 2 of Section XVI, which deals with parts of machines. They relied on the "principle use test" or "suitability of use test" to argue blades are parts of machines and should be classified with the machine. The jurisdictional officer and the ruling authority examined the tariff descriptions and notes. They noted that Note 1(k) of Section XVI excludes articles of Chapter 82 or 83 from Section XVI, meaning parts covered under Chapter 82 cannot be reclassified under Chapter 84. Applying Rule 1, the ruling authority found that blades are covered under Heading 82.08, which specifically includes knives and cutting blades for agricultural machines, including chaff cutters. The Explanatory Notes to HSN Chapter 82 explicitly mention blades for root cutters and straw cutters, confirming this classification. The authority rejected the applicant's reliance on Note 2 of Section XVI to classify blades as parts under Chapter 84, since Note 1(k) excludes Chapter 82 articles from Section XVI. Consequently, blades cannot be classified under Chapter 84 merely because they are parts of a machine. The authority also distinguished the applicant's reliance on cases like Hadrachalam Paper Boards Ltd., which involved tools that were parts of machines but not independent tools, noting that blades here are specifically covered by Chapter 82. Key Evidence and Findings:
Application of Law to Facts: The blades, though parts of chaff cutter machines, fall under the specific description of knives and cutting blades for agricultural machines in Chapter 82. The exclusion in Note 1(k) prevents reclassification under Chapter 84. The "most specific description" rule under Rule 3(a) favors classification under 8208 40 00 over the more general 8436 headings. Treatment of Competing Arguments: The applicant's argument that blades are parts of machines and should be classified under Chapter 84 was considered but rejected based on the exclusionary notes and the specificity of Chapter 82. The authority also rejected the argument that the classification should be based on the "principal use test" in this context, as the tariff notes and headings provide a clear specific classification. Conclusions: The blades are classifiable under HSN Heading 8208 40 00, attracting GST at 18%, not under 8436 10 00 or 8436 80 90. The classification under Chapter 82 is supported by tariff notes, explanatory notes, and judicial precedents. 3. SIGNIFICANT HOLDINGS The ruling authority held:
Core principles established include:
Final determination: The blades used as spare parts in agricultural chaff cutters are classifiable under HSN Heading 8208 40 00, attracting GST at 18%, and not under HSN Heading 8436 10 00 or related headings attracting GST at 12%.
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