TMI Blog2019 (10) TMI 669X X X X Extracts X X X X X X X X Extracts X X X X ..... tems supplied by the applicant to Railways are Air filters for Electric locomotives, Air filters for Diesel locomotives, Car body filter and Lube oil and Fuel filter. The Air filters for internal combustion engines are specifically classified under heading 84213100, Oil filters under 84212300 and Air filters for electric locomotives under 84213990. Applying the rules of interpretation under Note 2 all these items, because they find specific heading under which they are placed by name, will continue to be classified under the same heading even if they are designed for specific or sole use in some machine. They would not liable to be classified under the heading of the machine. The goods made specifically for railways were covered under Headings 8312, 7308, 7613, 7611, 8409 and 3926. All these headings are not hit by the provisions of Note 2. Note 2 applies the restrictions in respect of items covered by Headings 84.01 to 84.79 only. Further the three conditions, as enumerated in Para 9.11, show that any parts made specifically for railways and not covered under headings 84.01 to 84.79 would invariably be covered by heading 8607. The exclusion is specifically for items under headi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Service Tax Act, 2017 ( KGST Act ) bearing GSTIN 29AAACP6820G1ZF. b. The range of products manufactured and supplied by the applicant includes Filters, which are custom manufactured for Indian Railways as per the design specifications provided by Indian Railways itself. The product so supplied is not a catalogue product of the applicant and is customized to the last mile for Indian Railways on the parameters of Form, Fitment and Function, which thus makes the product s use exclusively by the Railways. c. It becomes pertinent to submit that these filters find its application only in the Indian Railways and, as such, cannot be used elsewhere due to limitation of its Form, Fitment and Function as discussed above. In other words, these filters are manufactured solely and principally for its application in the railway engines for Indian railways and have no alternate usage possible not even hypothetically. d. Oil and/ or fuel filters or other filters could be, generically, classified under the (HSN Based) Tariff Heading 8421; however owing to the fact that these filters are used solely and principally in railway/ tramway/ locomotives, classification under (HSN Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c). . . (d). . . (e) Machines and apparatus of heading 8401 to 8479, or parts thereof, other than the radiators for the articles of this Section, articles of heading 8481 or 8482 or, provided they constitute integral parts of engines and motors, articles of heading 8483; 3. References in Chapters 86 to 88 to parts or accessories do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. A part or accessory which answers to a description in two or more of the headings of those Chapters is to be classified under that heading which corresponds to the principal use of that part or accessory. 5. The applicant has also provided that the two relevant Customs Tariff Entries applicable to the product under question are as under Section Chapter Heading Description XVI 84 8421 Centrifuges, including Centrifugal dryers; Filtering or purifying machinery and apparatus for liquids or gases XVII 86 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chittaranjan Locomotive works (CLW), Electric loco sheds (Founder Indian Railways) Air filters for Diesel locomotives Providing clean air to Diesel IC engine for combustion purpose Diesel locomotive works (DLW), Diesel loco sheds (Founder Indian Railways) Car body filter Providing clean air to the electrical equipment and compressor compartment Lube oil and Fuel filter Removes particulate matter from the fuel oil and engine lube oil 6.1.3 Basis the foregone submission, the applicant reiterates that, the subject filters ipso facto are not capable of generic use (for any other OEMs or in any other Industry apart from railway or locomotives) since the same have been manufactured to cater a specific design and configuration. As a matter of fact these filters (made to specification of Indian Railways) do not have any other buyer and hence, cannot be supplied otherwise than to Indian Railways by applicant. 6.1.4 In view of customized design/ specification, lack of usage other than in railway engines of Indian Railwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also clearly indicates that all those items which come along with the computer are to be treated as spares and accessories. Thus, in view of the submissions made by the appellants and in view of the case law referred to by the applicants at the time of personal hearing, it is observed that the proper classification of the product under classification would be under chapter 8473.30 or 84.71 and not under chapter 90 as held by the lower authority. I set aside the order passed by the lower authority and allow the appeal filed by the appellants. 6.2.2 The above decision of the Hon ble Tribunal has further been affirmed by the Hon ble Supreme Court in Commissioner vs. Hi-Tech Computers 2015 (321) E.L.T. A274 (S.C.)] = 2015 (4) TMI 1260 - SC ORDER . 6.2.3 Reliance is further placed by the applicant on the judgement of the Tribunal in the case of Rail Tech vs. Commissioner of Central Excise Chandigarh [2000 (120) E.L.T. 393 (Tribunal)] = 2000 (6) TMI 232 - CEGAT, NEW DELHI where in the following was held: 9. The bare perusal of Tariff heading 76.10 shows that it covers aluminium structures and parts thereof. The entry windows and their frames in the bracketed wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -CX.4, dated 9-7-1990 Clarification : Gear, gear boxes per se classified under 8483 would attract classification under heading 8607 /8608/8614 when specifically designed for use with vehicles of Section XVII. Rationale : Transmission elements even though covered under a specific heading would be covered under heading 8607 when they have been specifically designed for use with the vehicles of Section XVII. A copy of the said clarification is enclosed as Annexure - III(C). Though a clarification under the erstwhile excise regime, but since the excise also followed the common code of classification i.e. HS, an interpretation of the Tariff thereunder would squarely apply to resent matter also. Hindustan Welding Engineers vs. CCE, Calcutta [2001 (133) ELT 770 (Tri.-Kolkata)] = 2000 (7) TMI 557 - CEGAT, KOLKATA Ratio: Various parts such as aluminium doors, windows, frames although generally covered elsewhere under the Excise Tariff were held to be classifiable under heading 8607 inasmuch as such parts were used solely and exclusively for the railways. Decision of Tribunal in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve is apt and unambiguous. PERSONAL HEARING 7. Personal hearing in the matter was held on 28.06.2018 and Shri Gopal Mundhra, Advocate, represented the applicant. The Advocate submitted a compilation of their arguments and also undertook to submit additional documents. 7.1 During the personal hearing, when it was pointed out as to whether the application for advance ruling was maintainable for the reason that the question raised in the application was a subject matter of SCN No. 107/HEB/JC/B1/2016 dated 23.03.2017 issued under the Central Excise Act, 1944 (in the pre-GST regime) by the Office of the Principal Commissioner of Central Excise, Bangalore-I Commissionerate, the applicant submitted that (a) the proviso to Section 98(2) of the CGST Act, 2017 embodies the expression proceeding in the case of an applicant under any of the provisions of this Act and evidently, the words this Act shall mean the CGST Act and not the Central Excise Act and section 1 of the CGST Act states (1) This Act may be called the Central Goods and Services Tax Act, 2017. (b) The applicant has also submitted that in the flyer issued by CBIC on Advance Ruling Mechanism it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by its principal use. Thus, the steering gear, braking systems, road wheels, mudguards, etc., used on many of the mobile machines falling under Chapter 84, are virtually identical with those used on lorries of Chapter 87, and since their principal use is with lorries, such parts and accessories are classified in this Section. (2) Parts and accessories classifiable in two or more headings of the Section. Certain parts and accessories are suitable for use on more than one type of vehicle (motor cars, aircraft, motorcycles, etc.); examples of such goods brakes, steering systems, wheels, axles, etc. Such parts and accessories are to be classified in the heading relating to the parts and accessories of the vehicles with which they are principally used. The applicant stated that in view of the above explanatory notes, it was established that the effect of Note 3 was therefore that when a part or accessory can fall in one or more other sections as well as in Section XVII, its final classification is determined by its sole or principal use as clarified in the explanatory notes to the HSN. 7.2.3 In this connection, the applicant submits that the Hon ble Supreme Court, tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding classification under Tariff heading 86.07, the applicant states that this is supported by a plethora of judicial precedents: 7.3.1 The classification of goods on the basis of sole and principal usage for Indian Railways have been determined under the specific tariff heading under 86.07 in number of cases. The said cases have been summarized as under: Case law Goods in question Competing classification entry Classification under 8607 based on sole and principal use Commissioner of Central Excise, Bangalore v. Sri Ram Metal Works [1998 (99) ELT 616 (Tri)] = 1997 (11) TMI 265 - CEGAT, MADRAS Water Tank Sanitary Ware 8312.90 Container fabricated to specific design and drawings of railways for fitment into coach and becomes art of coach Sanitary ware 7308.80/ 7613.30 Sanitary ware designed for fitment into coach and considered as part of coach work Commissioner of Central Excise, Chennai v. Parikh Metal Chemical Industries [2001 (130) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Section Note 3 for classifying the articles under heading 8607, the departmental authorities sought to invoke provisions of Section Note 2(e) to disallow the classification under heading 8607. In the said case, while laying down its ratio, the Hon ble Tribunal took cognizance of the provisions of Section Note 2(e) as well as Section Note 3 and held that articles in question attract classification under heading 8607 in view of the collective reading of Section Notes. The applicant has extracted the relevant portion of the said decision, which reads as under: The Excise Department took the stand that the goods manufactured by the appellant company are not parts of locomotives, but they are parts of machines and apparatuses falling under Chapter Heading 84 or 85. This approach was made on the basis of Note 2(e). For a proper understanding of that Note, we read the same: 2. The expressions parts and parts and accessories do not apply to the following articles, whether or not they are identifiable as for the goods of this Section:- (e) Machines and apparatus of heading No.s 84.01 to 84.79, and parts thereof; articles of heading No. 84.81 or 84.82 and provided they co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me up for consideration. The Tribunal gave the answer in the affirmative. parts of IC engines which were the main parts in the locomotive should also be termed as part of the locomotive and not as IC engines coming under the general category. Central Board of Excise and Customs had to consider the issue as to whether a radiator assembly supplied to Indian Railways is to be classified under sub-heading 8607.00 or otherwise. The Board observed that product radiator assembly is designed according to the specifications of the Indian Railways and is for use solely and principally with locomotives of Heading 8601 and 8602. It is clarified that the radiator assembly is not to be classified as parts of IC engines under Heading 8409. This understanding of the Central Board of Excise and Customs is discemible from circular No. 16/90 dated 11-06-1990, which still holds good. If radiator assembly manufactured for Railways for being fitted in locomotives is to be classified under Heading 8607, we do not find any justification in the department taking a view that integral parts of IC engines which form locomotive are outside Chapter Heading 86. In light of the above discussion, we come to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts. The vendor directory specifically states/ mentioned the name of the applicant corresponding to the product for which the applicant is an authorised manufacturer. Purchase order is issued by the Indian Railways to the applicant. Thus, the applicant states that the manufacturing process for the subject goods is based upon the design and specification received from the Indian Railways. 7.6 The products manufactured by the applicant are customized for Indian Railways. The product so manufactured and supplied by the applicant, he claims that is unique by its functions, which is compatible only with Railways or locomotives and useless for any other purpose. 8. Hence, in view of the above, the applicant requests the authority to issue a ruling that the filters manufactured by the applicant must be classified under Heading 8607 as parts of goods falling under Chapter 86 (railway / tramway and locomotive) and not elsewhere. FINDINGS DISCUSSION: 9. We have considered the submissions made by the Applicant in their application for advance ruling as well as the submissions made by Sri Gopal Mundhra, Advocate and authorized representatives, during personal hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itute integral parts of engines and motors. Since filters are covered under Heading 8421 and these are not covered under the above exceptions, the same are not liable to be covered under Parts of Railway or Tramway locomotives or rolling stock. 9.6 Further, Section Note 3 of Section XVII reads as under: 3. References in Chapters 86 to 88 to pans or accessories do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. The first sentence clearly states that the parts which are not suitable for use solely or principally with the articles of those Chapters cannot be considered as parts under Chapter 86 to 88. To be considered as parts of an article of Chapter 86, the goods in question must be suitable for use solely or principally with the articles of Chapter 86 . That means, for a goods to be considered as a part of Railway locomotive, it must be suitable for use solely or principally with Railway locomotive 9.7 The seemingly conflicting stipulations of Section Notes 2 and 3 to Section XVII are central to the instant issue. We delve into the details of the aforesaid Notes to reach to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied as a part of the machine under the heading of the machine. This is rightly so as the item appears as an individual entry under a particular heading, which provides the item an identity of its own even if it is a part of some specific machinery. This finds resonance in the next rule at 2(b). It provides that 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 84.79 or 85.43) are to be classified with the machines of that kind. The words Other Parts here means those parts which are not specifically classified as goods. A conjoint reading thus shows that if there are parts which are not specifically named and listed under a heading but are suitable for use solely or principally with a particular kind of machine, then such parts would find classification with the machines of that kind. In summation these Rules in Note 2 provide that if there is a part which is suitable for use solely or principally with a particular kind of machine but is specifically classified under a heading by its name then that part would continue to hold its classification under the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (heading 84.13 and 84.14). (2) Filtering machinery and apparatus of heading 84.21. (3) (4) This shows that in general, parts which are suitable for use solely or principally with particular machines or apparatus are classified in the same heading as those machines or apparatus. However the rule very specifically further states that the above rule does not apply to parts which in themselves constitute an article covered by a heading of this Section and it says This applies in particular to (1) Pumps and compressors (heading 84.13 and 84.14), (2) Filtering machinery and apparatus of heading 84.21 .. . These stipulations and provisions clearly lead one to conclude that the air and oil filters are specifically classified as goods under Heading 8421 and by virtue of the Section Notes and the Explanatory Notes, as enumerated above, these items would continue to be classified under Heading 8421 even if they are solely and specifically for use in railway locomotives. 9.10 We now examine the Explanatory Notes and Section Notes concerning Heading 8607. The applicant contends that their goods find classification as parts of locomotives under heading 8607. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraph (A) below) and (b) They must be suitable for use solely or principally with the articles of Chapters 86 to 88 (see paragraph (B)below) and (c) They must not be specifically included elsewhere in the Nomenclature (see paragraph (C)). The above provisions show that for any item to be classified as a part in Chapter 86 all the three conditions as at (a), (b) and (c) above have to be fulfilled. We now examine whether all these conditions are fulfilled in respect of the items supplied by the applicant. 9.12 The first condition to be fulfilled is that the items must not be excluded by the terms of Note 2 to Section XVII. Note 2 is already reproduced in para 9.10. The Air filters for internal combustion engines are specifically classified under heading 84213100, Oil filters under 84212300 and other Air (for electric locomotives) under 84213990. Therefore by virtue of Note 2(e) to Section XVII, these items are excluded from this Section. Therefore the very first condition is not satisfied. It is seen that the other two conditions are met. However since all the three conditions are required to be met, since the items supplied by the applicant have failed to meet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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