TMI Blog2020 (4) TMI 694X X X X Extracts X X X X X X X X Extracts X X X X ..... key payload of the communication satellite i.e. the transponder. Therefore the transponder becomes an integral part of the communication satellite, without which the communication satellite becomes defunct. In the instant case the transponder is a key payload of communication satellite and hence cannot form part of ground segment but is essentially a part of space segment and more specifically the main part to the communication satellite without which the communication satellite becomes defunct. Therefore transponders located on the communication satellite are not covered under the Heading 85256092. Communication Satellite Transponders are appropriately classifiable under Tariff Heading 8803, more specifically under 8803 90 00 - Transponders, being parts of communication satellites, are covered under 8803 90 00 and any leasing of such transponders would be covered under the Entry No.17 of Notification No. 11/2017 - Central Tax (Rate) dated 28th June 2017 at the rate applicable as on the supply of like goods involving the transfer of title in goods. Admittedly the transponders are goods and any transfer of right to use any goods for any purpose (whether or not for a specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t production and marketing of space based services. b. The applicant enables satellite communication service providers with necessary transponder capacity on INSAT/GSAT fleet in C, Ext C, Ku and Ka-Ku bands to Indian users for Television Broadcasting (TV), Direct to Home (DTH), Digital Satellite News Gathering (DSNG), Very Small Aperture Terminal (VSAT) and Telephony services. They also acquire the transponders from foreign satellite operators on lease and provide the leasing services of the same to the service providers. c. A communication satellite has the following basis parts : i. Satellite Housing - This is the outside container of the satellite ii. Power System - This consists of Solar Panels as well as Batteries to power the satellite. iii. Antenna System - This is to receive signals to make the satellite s operation in orbit. iv. Command and control system - This monitors the satellite to ensure that all vital operating parameters are working. v. Transponders - Electronic systems that amplify the frequency of an uplink signal for retransmission to earth. d. A communication satellite can not be without any of the aforesaid parts. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ten submissions inter alia stating that: 5.1 The Applicant, New Space India Limited in short NSIL has been incorporated on 05/03/2019 under the provisions of Companies Act 2013 as a wholly owned Government of India undertaking/ Central Public Sector Enterprise(CPSE), under the administrative control of the Department of Space (DOS). 5.2 THE VISION AND MISSION OF NSIL: VISION Excel in providing space related products and services emanating from Indian Space Programme to global customers and to further spur the growth of Indian Industry in undertaking technologically challenging space related activities MISSION Enabling Indian Industries to scale up high-technology manufacturing base for space programme through technology transfer mechanisms, catering to emerging global commercial small satellite launch service market, satellite services for various domestic and international application needs and enabling space technology spin-offs for betterment of mankind through industry interface. 5.3 A) MANDATE OF NSIL NSIL has the primary mandate of commercially exploiting the Research and Development (R D) activity(ies) carried out by ISRO, in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisioning of space segment capacity as leasing of transponder capacity is indicated below for reference (Copy of agreement enclosed as Annexure-2). I. Article 2, Transponder capacity of the Agreement - It states that DOS provides certain bandwidth capacity on a satellite (part of INSAT/ GSAT system) to the user and this space segment capacity is known as transponder capacity. Both the term, space segment capacity and transponder capacity are used interchangeably. II. Article 5, Operational Requirements of the Agreement - It reflects that the ownership of satellite rests with DOS, GOI and only the transponder capacity is made available to the user to meet their requirements. Hence only transponder capacity is leased to the customer. The rights over transponder, satellite and orbital resource rests with DOS/GOI. III. Frequency Allotment Letter - For example, DOS, vide letter no. SATCOM PO/F.631/ 157 dated February 12,2020 allotted 3 MHz C band capacity on Transponder No. C10 of GSAT-10 satellite. (A copy of frequency allotment letter attached as Annexure-3 ). The customer will be entitled to utilize this 3 MHz bandwidth for their up-linking and down linking of car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er a. The Band Pass Filter is a device that passes frequencies within a certain range and rejects (attenuates) frequencies outside that range. b. Low Noise Amplifier: - An electronic amplifier that amplifies a very low power signal without significantly degrading its signal-to-noise ratio. In general, an amplifier increases the power of both the signal and the noise present at its input. LNAs are designed to minimize additional noise. c. Mixer: - An electronic system which converts the input frequencies to output frequencies with the help of oscillator frequency so as to avoid interference between uplink and downlink signals. d. High Power Amplifier: - An electronic amplifier that increases the power of a downlink signal to compensate the transmission losses so that user terminal receives sufficient signal strength to function adequately. A Communication Satellite cannot be without any of the aforesaid parts and there will not be any utility for satellite without transponders. In a Communication satellite, transponder is the satellite part through which various application services like TV Broadcasting services, Digital Signal Network Gath ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in space with transponder for catering various application/ user needs. The Applicant further submits that, the tariff heading 8525 60 92 of the Customs Tariff Act - Other Satellite Communication Equipment covers those equipment s which are in the Uplink Station and Downlink Station on earth which are not part of Space Segment. Some of such equipment are as follows: a) Amplifiers are used to regenerate and amplify signals. b) Antennas (receiving antennas or transmitting antennas) are Structures used to radiate electromagnetic waves. c) Modulators: Digital data is sent to the modulator which takes the data and converts it into a modulated signal in the Intermediate Frequency Range. d) Block up converters (BUC) are used to convert a band or a block of frequencies from lower to higher frequencies. e) Low-noise block converters (LNB) are down-converters that are used to receive (downlink) satellite signals. f) Equalizers: are communications equipment used to alter or adjust the frequency response of a device. g) Considering the above, the Applicant submits that it is clear that Transponders cannot be categorized in the Tariff heading Other Satel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, uplink their data directly to satellite and it can be down linked in the area covered by satellite by using appropriate ground equipment such as antenna, down converters de-modulators, set top boxes, etc., when a customer intends to start any communication service like, Television, Broadcasting, Digital Satellite news gathering, outdoor Broadcasting, Direct to Home, VSAT (Very Small Aperture Terminal - ATM, Retail, Banking etc.,). Department of space (DOS) identifies and allots Satellite Bandwidth Capacity (in MHz) to customer to enable such services. A Transponder lease agreement/ MOU between DOS and the Customer with NSIL as Contract Manager is entered towards this. The Customer starts using the allotted Satellite Bandwidth Capacity after obtaining other regulatory approvals/ clearance. No intervention of NSIL / DOS is involved in either up linking or down linking. One such lease agreement entered on February 12th, 2020 with M/S. Odisha Television Limited is enclosed for your perusal. As per the agreement entered into between DOS with Odisha Television Limited vide Agreement No. DOS/ OT/ NSIL-GSAT10-DSNG-C-03-2020 dated February 12, 2020 for the provision of 3 MHz C band capac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uitable for use solely or principally with particular machines or apparatus are classified in the same heading as those machines or apparatus. This has been confirmed by the Appellant Tribunal and Courts in many cases, including the decision in Sealol industan Ltd., = 1988 (3) TMI 74 - HIGH COURT OF JUDICATURE AT BOMBAY , and Plastic Craft Industries, = 1990 (10) TMI 181 - CEGAT, NEW DELHI , relied upon by the Ld. Advocate for the Appellants. The Board also clarified vide letter F. No. 145/ 12/ 87-CX4, dated 18-03-88 that Ice Trays, freezer doors, etc. would be classified under Heading 84.18 as parts of refrigerator. The Board, however, classified butter box under Chapter 39 as it was not solely designed for use with refrigerator. Accordingly, we hold that applying Rule 2(b) to section XVI, hoses in question are appropriately classifiable along with vacuum cleaner under Heading No. 85. 09 of the Tariff . In the Applicant s case, the transponder is used solely and principally with the Communication Satellite and hence is a part of the Satellite. With regard to the issue as to why a Transponder cannot be categorized as an equipment as it is also made of few more parts, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 At the outset, we would like to state that the provisions of both the CGST Act and the KGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the KGST Act. 6.3 The Applicant seeks advance ruling in respect of the following question: 1. Whether Leasing of Satellite Transponder which is covered under SAC Code 997319 be charged at 5% GST as per HSN Code 8803 - Parts Goods of Heading 8802 (Satellites)? 2. Whether the applicant can levy GST @ 5% for Leasing of Satellite Transponder Services which is covered under SAC 997319 as per HSN Code 8803-parts goods of Heading 8802 (Satellites) from the date of commencement of the service-Leasing of Satellite Transponder? The applicant contends that leasing of satellite transponder is covered under SAC 997319 and the said transponder is classifiable under Tariff heading 8803 as part of satellite, which is classified under Tariff heading 8802, and hence is taxable at 5% GST. 6.4 A copy of the Memorandum of Understanding between the Department of Space and the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsponders had been leased out. Therefore the rate of tax applicable on the service of leasing of the satellite transponders shall be the same as the rate of tax as applicable on the supply of the satellite transponders. This brings us to the question of determination of the rate of tax on supply of service of leasing of satellite transponders which in turn requires us to determine the classification of the said goods. 6.7 Before proceeding to examine the entries in the Tariff, we shall examine the nature and characteristics of a satellite transponder to understand its features, characteristics etc to correctly determine its classification. 6.8 A Transponder is an automatic electronic monitoring or control device that receives, cross examines, amplifies and retransmits the arriving signal and is primarily implemented in wireless communication (as ascertained from independent sources). The word Transponder itself is a combination of two words i.e. transmitter and responder. A transponder works by receiving a definite signal from a specific source (up link) on a component called interrogator , then it amplifies the signal, converts the signal to a dissimilar frequency, throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the Tariff is 85256092- Other Satellite Communication Equipment . The Tariff entry 8525 reads as under: Tariff Item Description 8525 Transmission apparatus for radio broadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus; television cameras, digital cameras and video camera recorders 852550 - Transmission apparatus 85255010 --- Radio broad cast transmitter 85255020 --- TV broad cast transmitter 85255030 --- Broadcast equipment sub-system 85255040 --- Communication jamming equipment 85255050 --- Wireless microphone 85255090 --- Other 852560 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. The ground segment comprises the transmitting and the receiving Earth stations together with their associated instruments, antennae, electronic circuits etc.,. These earth stations provide access to the space segment by transmitting/receiving information to/from the satellite. The space segment comprises one or more satellites, which act as repeater stations. 6.14 The tone and tenor of the goods covered under Heading 8525 shows that the transmission apparatus (i.e. Radio broadcast transmitter, TV broadcast transmitter, wireless microphone etc under Heading 852550), transmission apparatus incorporating reception apparatus (i.e. two way radio communication equipments etc.) are apparatus and equipments based on the land. Further the entry VSAT Terminals under the category of Others also relates to an earth station. VSATs are Very Small Aperture Terminal ( VSAT ) and are two-way ground stations that transmit and receive data from satellites. The competing entry Other Satellite Communication Equipment immediately follows the VSAT entry. This throws light on the nature of the equipments covered under Other Satellite Communication Equipment . Such equipments ought to be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanatory Notes to Section XVII at General (III) Parts Accessories stipulate that all the following three conditions should be satisfied, for a product to be classified as a Part under the said Section. (a) They must not be excluded by the terms of Note 2 to Section XVII (see paragraph (A) below) (b) They must be suitable for use solely or principally with the articles of Chapters 86 to 88 (see paragraph (B) below) (c) They must not be more specifically included elsewhere in the Nomenclature (see paragraph (C) below) 6.19 The communication satellite transponders are not covered in the list of parts/parts and accessories appearing under Note 2. Therefore the transponders are not excluded by the terms of Note 2 to Section XVII. Therefore the first condition stands complied with. 6.20 The second condition prescribes criterion of sole or principle use (paragraph (B)) inter alia stating that under Section Note 3, parts and accessories which are not suitable for use solely or principally with articles of Chapters 86 to 88 are excluded from those chapters. The effect of Note 3 is therefore that when a part or accessory can fall in one or more other sections as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e will not be applicable. In such cases, the supply need to be examined whether it amounts to composite supply or mixed supply and accordingly the rate of tax need to be determined. 7. In view of the foregoing, we pass the following RULING 1. The service of Leasing of Satellite Transponders, covered under SAC 9973 19, falls under the Entry No.17 (viii) of Notification No. 8 / 2017 -Integrated Tax (Rate) dated 28th June 2017, as amended, and is taxable to GST at the rate of 5% IGST (i.e. 2.5% of CGST and 2.5% of KGST), as applicable on the supply of like goods (transponder - part of communication satellite) involving the transfer of title in goods, covered under 8803 90 00, in terms of Entry no. 245 of the Schedule I of the Notification No. 1/2017 - Integrated Tax (Rate) dated 28th June, 2017, as amended. 2. The applicant cannot levy GST @ 5% for Leasing of Satellite Transponder Services covered under SAC 997319, as per HSN Code 8803-parts goods of Heading 8802 (Satellites), from the date of commencement of the said service that has already been provided, if tax (GST) is already charged collected under any invoice. Any excess collection of tax needs to be paid to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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