TMI Blog2019 (4) TMI 455X X X X Extracts X X X X X X X X Extracts X X X X ..... the exclusion Note in heading 8483 referred to above, the geared motors being a combination of machines that is Electric Motors and Gear Box intended to contribute together a cleared defined function to run industrial machineries with speed controlling mechanism, the Geared Motor is appropriately classifiable in the heading 8501. The jurisdictional officer has different view. He submits that Geared Motor is a machine consisting of two individual components interconnected. His view is that electrical motors when attached to Gear Box will no longer remain an electrical motor but a geared motor with altogether a different function that is transmission of mechanical power and speed from one shaft to another. Though the contention of the jurisdictional officer appears convincing, in view of the exclusion note under chapter heading 8483 and inclusive note to 8501, it would be against the scheme of HSN to agree with the jurisdictional officer s view. Thus, the Geared Motors supplied by the applicants fall under Tariff Heading 8501. - GST-ARA-78/2018-19/B-167 - - - Dated:- 24-12-2018 - SHRI B. TIMOTHY, AND SHRI B.V. BORHADE, MEMBER PROCEEDINGS (Under section 98 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regime - Goods and Service Tax (GST) has been introduced in India by way of introduction of following legislation: I. Central Goods and Service Tax Act, 2017 (CGST) II. State wise Goods and Service Tax Legislation (SGST) III. Integrated Goods and Service Tax Act, 2017 (GST) In recent decision of Gujarat Authority of Advance Ruling, in respect of a similar matter, it had been held that the product Geared Motor would be classified under the HSN Code 8501 In light of the same, Applicant has analysed classification and applicability of CGST, SGST and IGST under the new legislation. For classification, it has been clarified in the rate notification of respective legislation that rule for interpretation of the First Schedule to the Customs Tariff Act, 1975 including Section notes and Chapter notes and general explanatory notes of the said First Schedule would be applicable for the purpose of classification under GST. The classification under the Customs Tariff Act, 1975 is based on the harmonized system of nomenclature adopted worldwide. The HSN Codes 8483 and 8501 are taxable at the rate 28% and 18% respectively under the GST legislatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) Geared box is a separate marketable commodity and hence can be sold separately as well. (vi) The geared motors manufactured by the applicant are used in many industrial machineries/conveyers that require speed controlled motors. Hence, when a customer intends to buy a geared motor, the clearly defined function of such product is to have a motor with a controlled speed in order for the machine to operate properly. (vi) The manufacturing process of Geared Motor includes below Activity Description of the Process Material issue from store In this process CNC (Computerised Numerical Control) blank and casting will be issue to machine shop as PPC (Production Planning and Control) PIan. Hobbing It is a gear cutting process on outer diameter of CNC gear blank by using tool called as hob For this operation the applicant is using hobbing machine. Heat-Treatment It is process where material will be heated up to 900 degree and hardness will be created also including pre-heating and tempring. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re out wheel with shaft will be assembled in end cover with the use of bearing and circlip. Final Assembly It is process where the main housing assembly is assembled with adaptor assembly and end cover assembly Testing It is process of confirming noise level ear head ratio as per requirement. Electric Motor Assembly It is process where Gear head will be assembled with electrical motor which is bought out item and new product will be gear motor which is sold in market as a final product. Painting It is process where the geared motor will be cleaned by hand with the help of cleaning agent and washed. Then it is painted using a gun and dried with the help of a dryer. Final Pre-delivery Inspection It is process of confirming the product as per GA (General Arrangement) drawing/Outbound. Packing It is process where geared motor will be packed as per outbound. Invoicing It is process where tax inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ICATION UNDER CUSTOMS TARIFF ACT (a) As regards classification of Geared Motor , it would be pertinent to note that there is no separate tariff entry for this combined product. Hence, it would be important to refer to tariff entries in which Gear Boxes and Electric Motor fall. We would like to draw your attention to the extract of description of goods falling under Customs Heading 8483 and 8501 : 8483 - Transmission shafts (including cam shafts and Crank shafts) and cranks; bearing housings and plain shaft bearings, gears and gearing; ball or roller screws; gear boxes and other speed changers, including torque converters; Flywheels and pulleys, including pulley Blocks; clutches and shaft couplings (including universal joints) 8501 - Electric motors and generators (Excluding generating sets) (b) Further it is also imperative to look at the relevant section and chapter notes to the Customs Tariff Act, 1975 for classification of products. For the tariff entries under discussion there are no relevant chapter notes to the chapter 84 and 85. However, below section note to Section XVI of which the chapters 84 and 85 are a part of is relevant in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted nomenclature was taken into account to reduce disputes on account of tariff classification . Accordingly, for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the HSN . (d) This case has further been referred in various other cases wherein the harmonized system of nomenclature along with its explanatory notes has been relied on as a safe guide for matters of classification. (e) Hence, it would be imperative to refer to the descriptions provided in the Explanatory Notes to the Harmonized System of Nomenclature. (f) We request your kind attention to the relevant extract of explanatory notes for chapter headings 8483 and 8501 reproduced below 8483- (E) Gear Boxes and other speed changers, including torque converters . The heading does not cover gear boxes or other variable speed changers combined with a motor; these are classified in the same heading as the motor. 8501- (0) Electric Motors Motors remain classified here even when they are equipped with pulleys, with gears or gear boxes , or with a flexible shaft for operating hand tools, ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 515 - AUTHORITY FOR ADVANCE RULINGS, GUJARAT (attached as Annexure 7), wherein it was held that the product Geared Motor shall be classified under the same heading as that of Electric Motor . Hence, the same be classified under the heading 8501. (b) Thus bearing in mind, entry 372 of Schedule III of GST classification notification (1/2017 - Integrated Tax dated June 28, 2017) and aforesaid case law, it can be concluded that Geared Motor shall fall under the HSN classification 8501 shall be chargeable to tax at the rate 18% under the above mentioned schedule entry. (vi) CONCLUSIONS : (a) In our view, Geared Motors so supplied by applicant, would be classified under Sr. No 372 of Schedule III of IGST Act, 2017 - Electric motors and generators (excluding generating sets) as the product Geared Motors manufactured by the applicant is a combination of two products and that schedule entry specific to this product is not present in the Harmonized System of Nomenclature, the classification has to be done on the basis of chapter and section notes to the Customs Tariff Act, 1975 and explanatory notes to the Harmonized System of Nomenclature, (b) Under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iversal joints) -------------------------------------------------------------------------------------------------------------------------------------- On going through the following relevant chapter notes, section notes of the Customs Tariff Act, 1975 for chapter 84, 2. Subject to Note 1 to this section, Note 1 to Chapter 84 and to Note 1 to Chapter 85, parts of machines (not being parts of the articles of heading 8484, 8544, 8545, 8546 or 8547) are to be classified according to the following rules : (a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings; (b) other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. However, parts which are equally suitable for use principally with the goods of headings 851 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 8501 which is ELECTRIC MOTORS AND GENERATORS (EXCLUDING GENERATING SETS) since it will no longer remain an Electric Motor but a Geared Motor which can be called a mechanical device all the mechanical transmission devices are to be classified under Chapter 84 MACHINERY AND MECHANICAL APPLIANCES; ELECTRICAL EQUIPMENT; PARTS THEREOF; SOUND RECORDERS AND REPRODUCERS, TELEVISION IMAGE AND SOUND RECORDERS AND REPRODUCERS, AND PARTS AND ACCESSORIES OF SUCH ARTICLES Also nowhere it has been mentioned in Chapter 8501 about Electric Motors equipped with gears or gear box. As claimed by the applicant, although earlier the duty rate was same for 8483 8501, the department never questioned the classification as it was correct. The applicant has mentioned that in Collector of Central Excise Shillong V. Wood Crafts Pvt. Ltd. (1995) 3 SCC 454 = 1995 (3) TMI 93 - SUPREME COURT OF INDIA (Attached as Annexure 5), it was held by the Apex Court that 12. It is significant, as expressly stated, in the Statement of Objects and Reasons, that the Central Excise Tariffs are based on the HSN and the internationally accepted nomenclature was taken into account to reduce disputes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y since there is specific mention of the products under the said system. However, with respect to Geared Motor , a combination product manufactured, the applicant has requested that a ruling be pronounced on the correct classification as there is no specific heading under the HSN. The product Geared Motors is a combination of gear box and electric motors. Vide Notification No. 1/2017 C.T. (Rate) dated June, 28, 2017, tariff rates have been notified for the purpose of levy and collection of GST which has classified goods into 4 digit codes as per HSN. In the said Notification it has been specified that for the purpose of classification of goods, the section notes, chapter notes and the General Explanatory notes mentioned under Customs Tariff Act, 1975 would apply to classification of goods under the GST Act. Therefore the classification of the product is to be decided in terms of HSN. On perusal of the same, we find that the following two headings compete for the classification of Geared Motor:- (i) 8483: Gear Boxes and other speed changers, including torque converters . and (ii) 8501 - Electric motors and generators (excluding generating sets). I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (E) GEAR BOXES AND OTHER SPEED CHANGERS, INCLUDING TORQUE CONVERTERS The heading does not cover gear boxes or other variable speed changers combined with a motor; these are classified in the same heading as the motor. From the harmonious reading of Section notes 4 and 5 to Section XVI and the inclusion Note in 8501 and the exclusion Note in heading 8483 referred to above, the geared motors being a combination of machines that is Electric Motors and Gear Box intended to contribute together a cleared defined function to run industrial machineries with speed controlling mechanism, the Geared Motor is appropriately classifiable in the heading 8501. However, the jurisdictional officer has different view. He submits that Geared Motor is a machine consisting of two individual components interconnected. His view is that electrical motors when attached to Gear Box will no longer remain an electrical motor but a geared motor with altogether a different function that is transmission of mechanical power and speed from one shaft to another. Though the contention of the jurisdictional officer appears convincing, in view of the exclusion note under chapter heading 8483 and ..... 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