TMI Blog2019 (6) TMI 1107X X X X Extracts X X X X X X X X Extracts X X X X ..... the main propulsion or turning the propellers of the normal ships are usually slow speed 2-stroke engines while those used for providing auxiliary power are usually 4-stroke high speed diesel engines. The engine itself is made up of several components such as the crankshaft, bedplate , pistons , liner , etc. A very specific description and mention of such engines is made under Heading 8408 of the GST Tariff and in view of the same it is very clear that Marine Engine is classifiable under heading 8408 of the GST Tariff. Under Sr. No. 115 of Schedule IV of Notification No. 1/2017 - Central Tax (Rate) dated 28th June 2017, the tax rate for Marine Engine is 14% each of CGST and SGST. Gear Boxes - HELD THAT:- In view of the fact that a very specific description and mention of such gear boxes is made under Heading 8483 of the GST Tariff, we find that Gear Boxes are classifiable under Heading 8483 of the GST Tariff. These are marine gear boxes which are used in the Marine industry for driving Marine Propulsion engines, driving Electrical propulsion and driving different types of pumps used in the manufacturing of Ships/Boats/Vessels. Under Sr. No. 135 of Schedule IV of Noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TED, seeking an advance ruling in respect of the following questions. 1. Please confirm that Main Propulsion engine for ships falling under HSN code 8408 1093, Marine Gear box falling under heading 8483 and marine generator falling under 8502 1100 and Marine engine for other applications like pumps falling under 8408 10 would be considered as parts of Goods for Chapter 89. 2. Further if the all above used in manufacturing of the boat/ ships under chapter 8901 /8902/8904/8905/8906 / 8907 shall be charged with 5% even if in their respective chapters, the rates of GST are higher. For example, GST for HSN code 8408 10 93 is 28%, but when supplied to shipyards would be 5% and also implied for chapters 8483 and 8502 1100 above. 3. Also the invoice made by the dealer to the shipyard would be made under the respective product chapter, but with only 5%, for example marine main propulsion engines would be made with 5% GST under HSN code 8408 1093 and not 28%. And also implied for chapters 8483 and 8502 1100 above. 4. As a generator manufacturer, when we buy a marine Engine from our principles (Ashok Leyland here) then we could buy under 5% GST with them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... %. 6. Further also all the parts of goods falling under tariff headings 8901, 8902, 8904, 8905 and 8906 would attract a GST rate of 5% as per S. No. 247 of Schedule I of the notification No. 01/2017-Central Tax (rate) dated 28.06.2017. 7. Further as per Circular No. 52/26/2018- GST, FN No 354/225/2018-TRU (Part (2) dated 9 th August 2018, as per the clause number 10.1 and 10.2, marine engines are a parts of good for fishing vessels built under 8902. 8. Confirmation given by the Assistant Commissioner of Mandal 4, Division IV Madgaon Goa to Vijai Marine shipyard regarding parts of goods falling under any chapter and supplied to shipyard who will be manufacturing the boats under headings 8901, 8902, 8904, 8905, 8906 and 8907 should be charged 5%. 9. As per Maharashtra Authority of Advance Ruling order passed on the 15/06/2018, marine propulsion engines and marine gear box (mentioned in point no I and 2) are parts of goods for headings 8901, 8902, 8904, 8905, 8906 and 8907. Additional submissions- We are authorized dealers for Ashok Leyland Marine engines business. We supply Marine Engines, Marine Gearbox and Marine Generat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by a shipyard while manufacturing. We have also enclosed a letter from a shipyard as a proof Of support on the subject. The application of diesel engine are as follows i. Main Propulsion engines for driving the boat/ships ii. Diesel Generator iii. Engine driven Pumps for A. Firefighting in the boat/ships or special boats/ ships meant for fire fighting B. Bilge Pumps C. Bow thruster D. Winch driving for applications like oil spill vessels wheel of pipe, ship anchor etc. E. Hydraulic Pump and Power packs driving for various application including dredgers iv. Directly driven assemblies like a. Winches b. Pipes laying machines c. Cranes. Please do inform if you need any clarifications and we shall be glad to support. This letter received from M/s. A.G. ROY GO. DIAMOND HERITAGE BUILDING , 16 STRAND ROAD ROOM NO 1505. KOLKATA - 700 001, Ref.: ACD/281/V/2018-2019, Date: 28.02.2019 is reproduced as as below. sub: Clarification asked by C.S. Diesel Engg. Pvt. Ltd. about the application usage of Diesel En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 89 which is applicable for shipyards, all the parts of goods supplied to a shipyard and who are building their boats/ships under headings 8901/8902/8904/8905/8906 shall be charged @ 5% (Five Percent). We hope to have provided you the requisite information and clarification, however should you need any other additional information please feel free to contact us . 03. CONTENTIONS- AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- 1. This office does not have any records relating to the Central Excise registration and Service Tax registration with this office Mumbai (West) Commissionerate. Further this office has written a letter dated 6.02.2019 seeking information from the applicant regarding their earlier registrations in Central Excise and Service Tax and details of the earlier SCN. However till date i.e. 18/02/2019 this office has not received any reply from them. Therefore information sought under annexure annexed to the preliminary hearing notice could not be furnished from department side. 2. At the outset after going through the ARA application it appears that assesse has not came fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 8903. 2.11 Further in the First question at Sr .No 14 assesse has implied that Marine Engine can be used for other application like pumps falling under 840810. In such cases the exemption under 1/2017 Sr No 252 is not available to the assesse. Further from this submission of the assesse that Marine Engines were having multiple use besides being merely a part of 8901,8902,8904,8905,8906 8907. Therefore presuming the marine engine will be used as a part of goods falling under chapter 89 will be absurd. 2.12. AIso supplying to shipyard also does not establish the usage in 8901,8902,8904,895,8906 and 8907 as shipyard owner can use it in goods falling under chapter 8903 / sell it to other person /use it for other purpose. Therefore assesse statement in question No. 2 (or statement 2at sr. No 14 of application) that supply of these goods to shipyard owner will make them eligible for availment of exemption No. 1/2017 Central Tax dated 28.06.2017 is not proper, far-fetched. 2.13 Further at Question No 3 also assesse is seeking the how the invoice is to be made. As a dealer applicant is merely selling the goods without actually effecting the change in goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars that assesse is engaged in trading of marine engines from Ashok Leyland and also engaged in the manufacture of generators of 85021100. As stated in Question No 4 (at Sr No 14 of application), Marine Engine is used for manufacturing the generators by the applicant, Therefore there is every possibility that marine engine meant for shipyard owner can be diverted to manufacturing generator and this possibility cannot be ignored while scrutinizing the application. 4. The main propulsion engine for ships 84081093, marine gear box under 8483 and marine engine for other application under 840810 was already categorized and classified by the HSN in these respective chapters. In the chapter 89 of HSN there is no specific category in the HSN for the parts of chapter 89 The classification of the goods referred above cannot be changed and Stays the same unless and until there is manufacturing process undertaken on these goods. In case of assessee, they are traders of Ashok Leyland marine engines and imported marine gear boxes. Since they are not carrying out any independent process on these goods, classification of the goods remain same as that of 84081093 and 8483 respectively. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be read in isolation and entire fact of the case should be taken into consideration. Ashok Leyland is clearing to dealer and paying full rate of duty applicable to the chapter. In the case also there is no reason to change this rate of duty applicable to Ashok Leyland. This exemption referred in the circular is strictly be available to MARIINE ENGINE FOR FISHING VESSELS ONLY , If marine engine is used for any other purpose presuming if it is used for Yatch 8903 or any other purpose this benefit its not available. For the purpose of availing this exemption usage of the marine engine in fishing boat has to be proven beyond doubt by the person who is claiming benefit. In view of foregoing, it appears that applicant has not provided entire factual realities of their case stating clearly their receipts, supplies, class of supplier, and class of purchaser s etc. i.e. entire documentary process which will allow the department to make a proper submission. Further if all the condition mentioned in the notification No 1/2017 Central Tax (Sr No 252) dated 28/06/2017 is satisfied, there is no reason for the department to raise any objection in this regards. 8. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in this application is the applicability of entry no. 252 as aforesaid which reads as below: Rate of 2.5% in respect of goods specified in Schedule I Sr. No. Chapter heading/Sub-heading/Tariff Item Description of goods 252 Any Chapter Parts of goods of heading No 8901, 8902, 8904, 8905, 8906 and 8907, 8908 2. During the course of hearing, product details were called from the applicant such as supply, usage and certificate and invoices from the actual user of these products. Accordingly applicant has submitted; he details regarding usage of products and also a certificate from the recipient of this product company i.e. M/s. A.C. Roy and Company, Kolkata dt. 01.3.2019 and invoices corresponding to supply. We find that the applicant has asked the classification and rate of tax on mainly 3 products Marine Engines, Marine Gearbox and Marine Generators which are fitted on boats/ ships /vessels, manufactured by the manufacturing companies of marine boat/ships/ vessels and whether these products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 373 8502 Electric generating sets and rotary convertors 9% 18% The applicant supplies goods such as Marine engines, Marine gear boxes, and Marine generators to the end user and which are used in building of Boats/Ships/vessels etc. The classifications of these ships/vessels etc. are falling under following headings of Customs Tariff Act, 1975 as adopted by GST Notification No. 1/2017 - Central Tax (Rate) dated 28dt June, 2017, amended from time to time, and which specifies CGST rate schedules and classification of above mentioned goods under different Schedule. The Schedules applicable to the above mentioned goods as per the classification of goods as mentioned above attracting tax rate is as follows: Sr.No. Chapter / Heading / Sub-heading / Tariff item Description of goods CGST/SGST Rate 246 8901 Cruise-ships, excursion boats, ferry-boats, cargo-ships, barges and similar vessels ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idge English Dictionary: a separate piece of something or a piece that combines with other pieces to form the whole of something One of the pieces that together form a machine or some type of equipment As per Import-Export Policy Part means an element of a sub-assembly or assembly not normally useful by itself, and not amenable to further disassembly for maintenance purposes. A part may be a component, spare or an accessory. From the above it could be understood that anything which is an integral element and is also essential to an object, could be considered as part of the article. Thus in view of the above meanings/definitions of part/parts/Spare Part, we will be required to examine as to what are the parts of Goods of CTH 8901, 8902, 8904, 8905, 8906 and 8907 and whether the subject goods/spares as mentioned by the applicant listed in questions of this ARA application can be taken to be covered within the meaning of Parts for Sr. No. 252 of Notification no. 1/2017 Integrated Tax (Rate) dated 28.06.2017. We shall now deal with each supply separately. Applicant has submitted that they are engaged in supply of Marine Engines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods like Marine Engine. We find that that a very specific description and mention of such engines is made under Heading 8408 of the GST Tariff and in view of the same it is very clear that Marine Engine is classifiable under heading 8408 of the GST Tariff. Under Sr. No. 1 15 of Schedule IV of Notification No. 1/2017 - Central Tax (Rate) dated 28th June 2017, the tax rate for Marine Engine is 14% each of CGST and SGST. Now we shall move to the second product raised in question by the applicant which is Marine Gear Box , as follows:- The applicant has submitted that they are also engaged in supply of Marine Gear Box falling under heading 8483 and making supply of the same as such to various dealers of shipyard manufacturers. We find that Tariff Heading 8483 covers goods as under:- Chapter / Heading / Sub-heading/ Tariff item Description of goods 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they are presented together (even if packed separately for convenience of transport). Electric generating sets for welding equipment are classified in this heading when presented separately, without their welding heads or welding appliances. However, they are excluded (heading 8515) when presented together with their welding heads or welding appliances. In the present case applicant has submitted that the all Marine Generators are an assembly of Marine Diesel Engine, Marine Alternator and Marine Panel on a base rail. These Engines/ alternator/ panel are specially made for Marine adaptability, are specially manufactured and have a third party certifying (International Maritime approved body) which ensures the adherence to marine specifications. Therefore considering the above provisions under GST Act and submissions of the applicant, we find that marine generator are generating sets with compression-ignition internal combustion piston engines. They are a combination of an electric generator and any prime mover other than an electric motor and working with the engine. Therefore, Marine Generator is used as part of the marine engine which is further used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove discussions 3 Marine Generator Used to build the ships/ Boats Marine Vessels Is an essential part of ship and without it the ship would not be performing its essential function and therefore would be parts of a ships boat/vessel as per above discussions We have found that above said goods are falling under Headings 8408, 8483 and 8502 and as per the GST Notification no. 1/2017 CT (Rate) dated .28.6.2017, are taxable at rates of 28 % , 28% and 18% respectively. But in view of the above discussion and as submitted by the applicant we find that the marine engine, the gear boxes and marine Generator supplied by them as parts for end-use in the ships/boats/vessels, merit classification as parts of goods under headings 8901, 8902, 8904, 8905, 8906 and 8907 of the GST Tariff and therefore would attract 5% (2.5% CGST and SGST each). We find that Marine Engines, Marine Gear Boxes and Generators which are claimed to be supplied by the applicant to dealers and shipyard manufacturers for use in goods falling under headings 8901, 8902, 8904, 8905, 8906 and 8907 will b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive chapters, the rates of GST are higher: For example, GST for HSN code 8408 10 93 is 28%, but when supplied to shipyards would be 5% and also implied for chapters 8483 and 8502 1100 above. 3) The invoice made by the dealer to the shipyard would be made under the respective headings, but with 5% GST. For example marine main propulsion engine would be made with 5% GST under HSN code 8408 1093 and not 28%. And also implied for chapters 8483 and 8502 1100 above with 5% GST. From the forgoing discussion it is clear that the applicant can supply the Marine Engine, Marine Gear Boxes and Marine Generators as Parts of headings of 8901, 8902, 8904, 8905, 8906, 8907 as per Sr. No. 252 of Schedule I of Notification No. 1/2017 Central Tax (Rate) dated 28th June, 2017. However, the applicant s impugned products are covered under different Headings 8408, 8483 and 8502 attracting higher rate of GST. We have considered the opinion and appreciated the written contention of the jurisdictional officer but have not found the same to be convincing. Applicant has submitted sufficient information including the usage information and certificate of the manufacturing shipya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would be made with 5% GST under HSN code 8408 1093 and not 28%. And also implied for chapters 8483 and 8502 1100 above with 5% GST. Answer : - Answered in the affirmative Question:- 4) As a generator manufacturer, we buy a marine Engine from our principles (Ashok Leyland), Please conform if we could buy under 5% GST from Ashok Leyland with our letter of undertaking stating that we shall be supplying these Generators to Marine Shipyard also stating in the letter, the with Hull number (which is always unique )for a project and shipyard order copy. We would also submit a covering letter from the shipyard to Ashok Leyland for the same subject matter and yard number (which is always unique). With all this above procedure can Ashok Leyland supply us Marine Generator Diesel Engines with 5% GST under HSN code 8408 1093? Answer : - Not answered in view of above discussions. Question :- 5) When we have to sell an engine to shipyard for main Propulsion, we buy it from Ashok Leyland. under that context could we buy the engines with our letter of undertaking stating that we shall be supplying these engines to marine Shipyard name a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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