TMI Blog2019 (6) TMI 1358X X X X Extracts X X X X X X X X Extracts X X X X ..... rted from out of India and which are used by them in the manufacturing process to produce products which are then supplied to the market. We find primarily that, as per provision of section 95 of CGST ACT, this authority can give a ruling to the applicant on matters or questions raised, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. Supply of goods or not - Section 7 of the GST Act - Scope of supply - HELD THAT:- From a reading of the said section it is very apparent that, import of services are alone considered as a supply , not import of goods. Further we find that Section 5 of the IGST Act, the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of Section 3 of the CTA, 1975 on the value as determined under the said act at the point when duties of Customs are levied on the said goods under Section 12 of the Customs Act, 1962 - Since the subject proposed transaction is itself not a supply under the GST Act, in view of the provisions of Section 95 read with Section 97 of the GST Act, the issue is not within the purview of this authority. This aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Spoilers merits classification under Tariff item 8708 29 00 which pertains to parts and accessories of the body of a motor vehicle and thus provides the more specific description of the Fasteners and Spoilers, in comparison to Tariff entry 8708 99 00, which pertains to the residual entry under Heading 8708? A.9 Whether Bracket merits classification under Tariff item 8708 99 00 and not under Tariff item 8708 29 00, which pertains to a part or accessory found on the exterior of a motor vehicle. A.10. Whether the Subject Product merits classification under Tariff item 7220 20 90 despite being capable of being classified under Chapter 87 of the First Schedule, and not under Tariff item 8708 99 00. At the outset, we would like to make it clear that the provisions of both the CGST Act and MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression GST Act would mean CGST Act and MGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of classification 8. Scheme of classification of goods is provided in the Classification Notification which classifies goods into Chapter, Section, Heading and Groups and also provides description of the goods and supports in determining the nature of goods and rate of GST payable qua the goods classified under each head. 9. It is relevant to note that Explanation (iii) and (iv) of the Classification Notification establishes a link between the Classification Notification and CTA. The relevant part of the Classification Notification is extracted below: (iii) Tariff item , sub-heading , heading and Chapter shall mean respectively a tariff item, sub-heading, heading and Chapter as specified in the First Schedule to the Customs Tari Act 1975 (51 of 1975). (iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification. 10. In terms of the Classification Notification, classification of goods in the GST regime ought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, of heading 8306 In Chapters 73 to 76 and 78 to 82 (but not in heading 7315) references to parts of goods do not include references to parts of general use as defined above. Subject to the preceding paragraph and to Note 1 to Chapter 83, the articles of Chapter 82 or 83 are excluded from Chapters 72 to 76 and 78 to 81. General Rules for interpretation of the Harmonized System ( General Rules for Interpretation ) 14. To determine the correct classification of a product, it is also necessary to take into consideration the General Rules for Interpretation in addition to the Section Notes and Chapter Notes of First Schedule. Rule 3(a) of the General Rules for interpretation is relevant for the purpose of this application and is extracted as follows: Rule 3 When by application of Rule 2(b) or for any other reason, goods are prima facie, classifiable under two or more headings, classification shall be effected as follows: a. The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst Schedule: 4. In the pre-GST regime, Threaded Metal Nuts were classified under Chapter 87 of the First Schedule which pertains to Vehicles other than railway or tramway rolling-stock and more specifically, under the Heading 8708 and Tariff item 8708 99 00. 5. On a perusal of the Section Note 2(b) of Chapter XVII of the First Schedule of the CTA, it is understood that the expressions parts and parts and accessories do not apply to parts of general use defined in Section Note 2 of Section XV of the First Schedule. In terms of Section Note 2(a) of Section XV of the CTA, products classifiable under Heading 73 18 tantamount to parts of general use and are therefore disqualified from being classified under Section XVII, which pertains to Chapter 87. This is also corroborated by the Explanatory Note to Heading 7318 of the Harmonised System of Nomenclature ( HSN Explanatory Notes ) which is reproduced below: Bolts and nuts (including bolt ends), screw studs and other screws for metal, whether or not threaded or tapped, screws for wood and coach-screws are threaded (in the finished state) and are used to assemble or fasten goods so that they c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaded Metal Nuts is under Chapter 73 and more specifically under the Tariff item 7318 16 00. 8. It is also pertinent to note that in terms of Rule 3(a) of General Rules for Interpretation, when a product is classifiable under two or more headings, the heading which provides the most specific description should be preferred over the heading which gives the general description, 9. Reliance in this regard can be placed on the decision of the Hon ble Supreme Court in the case Moorco (India) Ltd. vs Collector of Customs, Madras ( Moorco Case ) = 1994 (9) TMI 68 - SUPREME COURT held that it is a settled principal in law that for classification of goods (or services), it is always the most specific entry which is required to be preferred over an entry which provides a more general description. This ratio has been consistently followed in matters of classification under the Customs and the Central Excise law; the relevant extract from Moorco Case is reproduced here: 4... . The applicability of the rule arises when the goods consisting of more than one material fall in two or more headings. It is further clear that each of the classes are mutually excl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the body of a motor vehicle. The primary function of Plastic Rivets is to join fitments. Rivets can be used in other industries as well. An image of Plastic Rivets is enclosed herein and marked as Exhibit B. Classification of the product Plastic Rivets should be classified under Chapter 39 of the First Schedule: 2. Plastic Rivets merit classification under Chapter 39 of the First Schedule, which pertains to Plastics and articles thereof . Under Chapter 39, the relevant heading for the classification of Plastic Rivets is Heading 3926, and the specific Tariff item is 3926 90 99, which is extracted as follows: Tariff Item Description of goods 3926 Other articles of plastics and articles of other materials of headings 3901 to 3914 - Other: - - Other: 3926 90 99 - ---- Oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries for similar functionality. C. Adaptor for plastic pipe Nature of the product 1. The subject product is a type of Quick Connector made of plastic ( Quick Connector ) and can be used to connect pipes or tubes in the interior of a motor vehicle and for the purpose of internal fluid handling. Quick Connectors can be used in other industries too. An image of Quick Connector is enclosed herein and marked as Exhibit C. Classification of the product Quick Connectors should be classified under Chapter 39 of the First Schedule: 2. Quick Connectors merit classification under Chapter 39 of the First Schedule, which pertains to Plastics and articles thereof . Since Quick Connectors are used to connect pipe or tubes, it comes within the ambit of the Heading 3917 Tubes, pipes and hoses, and fittings thereof (for example, joints, elbows, flanges), of plastics . Therefore, Quick Connectors merit classification under the Heading 3917 and more specifically under Tariff item 3917 40 00. 3. In this context, it is necessary to refer to the Explanatory Notes to Heading 3917 of HSN Explanatory Notes, which is reproduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or cables in the engine area of a motor vehicle. An image of Plastic Pipe Clips is enclosed herein and marked as Exhibit D. Classification of the product Plastic Pipe Clips should be classified under Chapter 39 of the First Schedule: 2. Plastic Pipe Clips by its description merits classification under Chapter 39 of the First Schedule, which pertains to Plastics and articles thereof . Under Chapter 39, the relevant heading for the classification of Plastic Pipe Clips is Heading 3926, and the specific Tariff item is 3926 90 99 considering the nature of the product. Plastic Pipe Clips should not be classified under Chapter 87 of the First Schedule: 3. In the pre-GST regime, the Plastic Pipe Clips were classified under Chapter 87 of the First Schedule of CTA which pertains to Vehicles other than railway or tramway rolling-stock and more specifically, under Heading 8708 and Tariff item 8708 99 00. 4. on a perusal of the Section Note 2(b) of Chapter XVII of the First Schedule of CTA, it is understood that the expressions parts and parts and accessories do not apply to parts of general use defined in Section Note 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapters 86 to 88 do not cover within their ambit parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. It is clear from paragraph I above that Brackets and Channels are designed to be used in the manufacture of motor vehicles. Though Brackets and Channels are capable of being used in other industries with certain modifications, they are currently principally being used in the manufacture of motor vehicles by automobile manufacturers. 4. Therefore, Brackets and Channels satisfy the test of Principal use or Sole use set out in n Note 3 of Section XVII of the CTA and may be classified under Chapter 87. 5. Under Chapter 87, the relevant heading for classification of Subject Products is Heading 8708, since it is clear that Brackets and Channels can be considered as parts and accessories of motor vehicles, under the specific Tariff item 8708 99 00. Brackets and Channels should not be classified under Chapter 39 of the First Schedule: 6. On a perusal of Section Note 2(b) of Chapter XVII of the First Schedule of the CTA, it is understood that the expressions parts and parts and accessori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tionality, Non-Return Valves are specifically used to restrict the flow of fluid to one direction whereas Quick Connectors are used for the purpose of internal fluid handling and do not possess the ability to provide for unidirectional flow of fluids. Thus, Non-Return Valves cannot be classified under the same entry as that of Quick Connectors, which is Tariff item 3917 40 00 and should be classified under the Tariff item 8481 30 00. 4. The classification of Non-Return Valves under the Tariff item 8481 30 00 is further supported by the Explanatory Notes to heading 84.81 of HSN Explanatory Notes, which is reproduced below: The heading includes inter alia: (1) (2)... (3) Non-return Valves (E.g. swing check vales and ball valves) 6. Therefore, by virtue of the description of the product and the HSN Explanatory Notes extracted at paragraph 5 above, it can be concluded that Non-Return Valves should be classified under Tariff item 8481 30 00. Non-Return Valve should not be classified under Chapter 87 of the First Schedule: 5. In the pre-GST regime, the Non-Return Valves were classified under Chapter 87 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the pre-GST regime, the Metal U Clips were classified under Chapter 87 of the First Schedule which pertains to Vehicles other than railway or tramway rolling-stock and more specifically, under the Heading 8708 and the Tariff item 8708 99 00. 4. On a perusal of the Section Note 3 of Chapter XVII of the First Schedule, it is understood that references to the expressions parts or accessories in Chapters 86 to 88 do not cover within their ambit parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. Metal U Clips, being generic in nature, are capable of being used in other industries. Its use is not limited to the automobile sector. 5. Therefore, Metal U Clips do not satisfy the test of Principal use or Sole use set out in Section Note 3 of Section XVII and is disqualified from being classified under Chapter 87. 6. It is pertinent to note that in terms of Rule 3(a) of General Rules for Interpretation of CTA, when a product is classifiable under two or more headings, the heading which provides the most specific description should be preferred over the heading which gives the general descripti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used in the manufacture of motor vehicles by automobile manufacturers. 4. Therefore, the Fasteners and Spoilers satisfy the test of Principal use or Sole use set out in Section Note 3 of Section XVII and may be classified under Chapter 87. 5. Under Chapter 87, the relevant heading for classification of the Fasteners and Spoilers is Heading 8708, since it is clear that the Fasteners and Spoilers can be considered as parts and accessories of motor vehicles, and the specific Tariff item 8708 29 00. Fasteners and Spoilers should not be classified under the Tariff item 8708 99 00: 6. In the pre-GST regime, the Subject Products were classified under Chapter 87 of the First Schedule and more specifically, under the Tariff item 8708 99 00. 7. But, it is pertinent to note that in terms of Rule 3(a) of General Rules for Interpretation of the CTA, when a product is classifiable under two or more headings, the heading which provides the most specific description should be preferred over the heading which gives the general description. 8. Reliance in this regard can also be placed on the decision of the Hon ble Supreme Court in the Moorco Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Hon ble Supreme Court in the Moorco Case as mentioned above . 9. Since it is clearly ascertainable from the nature of the Bracket that it is a part or accessory of a motor vehicle which is present in the interior of a motor vehicle, it can be concluded that the Bracket merit classification under Tariff item 8708 99 00. J. Stainless Steel Washer Nature of the product 1. The subject product is essentially an anti-creeping ring which is mounted on plastic parts to prevent damage to the part when a screw is affixed to it ( Steel Washer ), While, Steel Washer finds use in the automobile industry in parts like bumpers, front panel and dashboards, its usage is also extended to various other industries. An image of Steel Washer is enclosed herein and marked as Exhibit J. Classification of the product Steel Washer should be classified under Chapter 73 of the First Schedule: 1. The subject product is essentially an anti-creeping ring which is mounted on plastic parts to prevent damage to the part when a screw is affixed to it ( Steel Washer ). While, Steel Washer use in the automobile industry, its usa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing which gives the general description. Reliance in this regard can also be placed on the decision of the Hon ble Supreme Court in the Moorco case , mentioned above. 7. In view of all the foregoing, it can be concluded that Steel Washer attracts classification under the Tariff item 7318 21 00 as it finds use in multiple industries. Prayer i. In view of the factual matrix in the Applicant s case and the extant legal provisions, the Applicant seeks an Advance Ruling from this Hon ble Authority in respect of the classification of the Products for the purpose discharging applicable IGST at the time of import of the Products mentioned above. ii. The Applicant humbly prays that it be granted an opportunity of a hearing to present and explain its submissions and case. Amendment in application Due to change in our understanding based on further information available regarding the nature of two Imported Products, namely Metal U Clips (specified at Sl. No. A.7 of Form GST ARA-01 submitted along with the Application) and Stainless Steel (specified at Sl. No. A.10 of Form GST ARA-01 along with the Application), we wish to amend ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of description provided in the Form. In this regard, the Applicant wishes to submit that this contention of the Department is premised on an isolated reading of the summary of description provided in the Form, without taking into account a) the detailed submissions made in this respect by the Applicant in Annexure I and Il to the Form, i.e., in the ARA, which provide a detailed description of the activities undertaken by the Applicant; and b) the submission made by the Applicant at the time of admission hearing on 15th January, 2019 in presence of the Department s representative, 1.3 With an intent to apprise this Hon ble Authority with the complete set of facts relevant to the issue at hand, and to provide complete disclosure in respect to the transaction involved, the Applicant had Annexed Annexure I and Il to the Application. However, the Department has placed reliance on the brief description provided in the Form. This evidences that the Department has without appreciating the true nature of the transaction involved, on the basis of a cursory perusal of the Form, raised this contention, which practice is bad in law?. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Authority for Advance Rulings, Gujarat in the case Dyna Automation (P.) Ltd., in re [2018/ 94 taxmann.com 143 (AAR-GUJARAT) = 2018 (6) TMI 426 - AUTHORITY FOR ADVANCE RULINGS, GUJARAT wherein the Customs Department was of the view that the imported Steering Unit merited classification under the CTH 8708 whereas the applicant therein believed that the product merited classification under CTH. 8481. The authority in the aforementioned case was pleased to rule in favour of the applicant after perusal of the relevant legal provisions. 2.4 Therefore, this Hon ble Authority is competent to provide a conclusive ruling on the ARA, for the purpose of determination of classification of imported goods. 3. The rules of interpretation for the purpose of classification under GST law are identical to those under Customs Law. 3.1 The classification of the products is to be in done in accordance with the rules for interpretation of the First Schedule of the CTA in terms of Explanation (iv) of the Classification Notification, which are a definitive set of rules prescribed for the classification of goods under the Customs law, erstwhile Central Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the fact that in case of imported goods, which are post importation traded in India, the classification decided by the Customs AAR would be binding on this Hon ble Authority. 5. Conclusion: 5.1 in light of the above and the ARA filed by the Applicant on 19 November 2018, the wishes to deny all the contentions raised by the Department vide the Letter, and prays that: i. an opportunity of being heard be provided by this Hon ble Authority, followed by passing of and order setting out the appropriate classification of the products that form a part of the ARA; or ii. alternately, an order be issued by this Hon ble Authority confirming that any order passed by the Customs AAR in this regard, would be binding on this. Hon ble Authority for the purpose of GST. iii. alternately, if no order is passed setting out classification of the products, it would be deemed as tacit concurrence to the classification determined by Customs AAR for the purpose of GST We request you to provide an opportunity of personal hearing before a ruling is passed under this ARA. 03. CONTENTION - AS PER THE CONCERNED OFF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... office. 05. OBSERVATIONS 5.1 We have gone through the facts of the case, written submissions of both the parties and documentary evidences submitted on record. The issue put before us is in respect of a classification of imported products which would be on the lines thus - 5.2 We find that applicant is registered person under GST Act and involved in the developing and manufacturing of various types of fasteners and other accessories for a variety of industries. Applicant is engaged in the manufacture of, amongst others, industrial clip fasteners and prototyping assembly systems, which are primarily used in automobiles. Products manufactured by the Applicant are supplied locally, typically to businesses which are registered under GST Act all over India. 5.3 We find that, to manufacture the products, the Applicant procures various inputs from outside India i.e. imported products from various sources/ nations, which are then used in the manufacture and subsequent sale of final products viz. industrial clip fasteners, prototyping assembly systems etc. The procurement of products for manufacturing of goods, comes under the term interstate supply u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application, it is essential that it be first determined whether or not the activities undertaken by the applicant pertains to matters or questions specified in Section 97(2) mentioned above. The applicant has raised questions for classification of their inputs imported from out of India and which are used by them in the manufacturing process to produce products which are then supplied to the market. We find primarily that, as per provision of section 95 of CGST ACT, this authority can give a ruling to the applicant on matters or questions raised, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. 5.9 In the subject case we have to first find whether there is a supply of goods as per Section 7 of the GST Act. Section 7 is reproduced herein below:- Section 7. Scope of Supply --(1) For the purposes of this Act, the expression supply includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported goods/product. For queries with respect to classification of imported goods, there are separate Regulations viz. Authority for Advance Ruling (Central Excise, Custom and Service Tax) Procedure Regulations, 2005 and as per the said Regulations, the AAR of Central Excise, Custom and Service Tax, 2005 is the appropriate authority to answer the questions related to classification of imported goods. 5.10 We have considered the arguments made by the jurisdictional officer and written contentions of the applicant in respect to objections raised by the said officer in this matter and also case laws cited on record. We find that this authority is not allowed to answer the question on classification of imported goods since the same is out of the purview of Sec. 95 of CGST Act. 5.11 We find that after the jurisdictional office has raised the issue of classification of imported goods not being covered for the purposes of ruling by this authority, the applicant has further, in their additional submissions contended that that the same products are also supplied locally, out of manufacturing, by them. However they have not supported their new contentions with any materi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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