TMI Blog2021 (1) TMI 542X X X X Extracts X X X X X X X X Extracts X X X X ..... se. The principal supply in this case is a supply of goods and, therefore, the GST will have to be paid on the goods at the appropriate rate after classification under the appropriate heading. The principal goods in the subject case is a Chilled Water Plant , which are most important for the applicant to render supply as per the Tender/ Purchase Order - the final deliverable is nothing but ready to operate Chilled Water Plant / Chiller , which supply chilled water through flexible insulated hoses to Ships under refit i.e. ships under repair whose main engine, AC plant are non-operational or cannot be used. The chilled water is further circulated on-board ship to provide control temperature for electronics and human comfort. Thus, the said Chilled Water Plant shall be mobile and movable since it will be installed on a Trailer lying at Naval Dockyard to enable movement of same from one ship to another depending on the requirement - the supply involved in present case is a composite supply with principal supply of goods i.e. supply of the Chilled Water Plant (Chiller). The chiller is mainly consisting of compressor (used to increase the pressure temperature of the refrigera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled in the Warships, Vessels and Submarines meant for Indian Navy but same is installed at Naval Dockyard, we hold that the same cannot be categorised as Any Parts of Vessels under HSN 8906 and consequently, same is not subjected to GST @ 5% under HSN 8906 as per Sr. No. 252 (Any Chapter) of the Notification No. 01/2017-IT (Rate), as we already hold that the said supply to Naval Dockyard (Vishakhapatnam), is a composite supply with principal supply of goods i.e. the Chilled Water Plant / Chiller falling under Chapter sub-heading No. 8418 10. Since the supplies effected by the applicant are meant for Indian Navy and Government of India is the end user of the said supplies for smooth operations of the priority sector being National Defence, GST rate applicable for essential sector-5% is in consonance with the intention of law; that the Chilled Water Plant/ Chiller supplied by the applicant for use in the warships, vessel and submarines to be deployed by the Indian Navy, attracts 5% IGST in terms of Sl. No. 252 of Schedule I of Notification No.1/2017-Central Tax (Rate)/ Integrated Tax (Rate)/ SGST. The said plant is, thus, primarily used in the Naval Dockyard meant for rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 ACCEL Make Air Cooling Unit Spares 8419 18% 9 ACCEL Make Air Conditioning System 8415 28% 10 ACCEL Make Air Conditioning System Spares 8415 28% 11 Works Contract of Cold Storage Plant with installation Commissioning 9954 12% 12 Goods supply to Navy (Other Vessels) vide Notification No.01/2017-IT (Rate), S. No. 252 (Any Chapter) Part of Goods of Heading 8906 8906 5% 13 Service of Maintenance Repair of ACCEL Made Items 9987 18% 2. The applicant further submitted that they also provide works contract of Cold Storage Plant with installation Commissioning. Further, the applicant is also engaged in supplying Air Conditioning Plants on board to the Indian Navy (Other Vessels), vide Notification No.01/2017-IT (Rate), S. No. 252 (Any Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he applicant has sought for an advance ruling in respect of the following questions: Question-1: Clarification in details is sought with regard to the GST rate applicable regarding the Supply, Testing and Commissioning of 160 TR Chilled Water Plant to Naval Dockyard (Vishakhapatnam). Question-2: Clarification in details is sought with regard to the HSN/SAC code applicable regarding the Supply, Testing and Commissioning of 160 TR Chilled Water Plant to Naval Dockyard (Vishakhapatnam). Question-3: Clarification is also sought on applicability of the Notification No. 01/2017-IT (Rate), S. No. 252 (Any Chapter) whether Chillar Water Plant may be categorised as Any Parts and subject to GST @ 5% under HSN 8906. 8. Further, the applicant, vide their letter dated 27.07.2020, submitted the additional submission, as below: I. Facts of the Case: (i) The applicant sought Advance Ruling in respect of the following question as below: Whether Water Chiller Plants and other Refrigeration Systems and Air Conditioning Systems supplied by the Applicant intended for use in relation to the Warships, Vessels and Submarines meant for Indian Navy and Shipbuild ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r would show that the supply includes various items such as Compressor, Evaporator, Centrifugal Pump, Hoses, Trolley etc. (ix) Further to submit that apart from the supply of the Water Chillar Plant, the contract also requires the applicant to provide services of Testing Commissioning of the plant at the Dockyard. The plant being installed shall be mobile and movable since it will be installed on a Trailer to enable movement of same from one ship to another. (x) The applicant further submitted that the supply made of the Water Chillar Plant is essential for smooth operations of stationed Naval Ships since the engines and machines installed in the Naval ships need to be maintained under a fixed temperature to provide efficacy in operation and also prevent damage due to overheating. (xi) In the light of facts as given above, supplies made by applicant to Naval Dockyard for use in Warship, Vessels and Submarines being used by the Indian Navy, the applicant is required to determine the classification of the subject supplies and rate of tax applicable for the same. (xii) As per Section 2(30) of the CGST Act, 2017, Composite Supply means a supply made by a taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8907 Other floating structures (for example, rafts, tanks, coffer-dams, landing-stages, buoys and beacons) It can be noticed that Heading 8903 relating to yachts and other vessels for pleasure and sports; rowing boats and canoes are kept out of the above list apparently considering the same as luxury/sin goods. II. APPLICANT S INTERPRETATION OF LAW AND/ OR FACTS: 8.1 The applicant further submitted that the applicant is of understanding that the subject supplies are covered by S. No. 252 of Schedule I of the Notification No. 1/2017-Central Tax (Rate) for the following reasons: (i) Part of ships do not have separate heading in the Tariff: (a) Explanation (iii) to Notification No.1/2017-IGST provides that the 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 Tariff Act, 1975 (51 of 1975). (b) Further, Explanation (iv) provides that 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 Genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant claims that whenever there is reference to parts of ships, recourse has to be had to the General Rules of Interpretation of the Tariff and each individual component of each assembly has to be identified and classified in the appropriate heading in the Tariff and such exercise could lead to classification under Chapter 39 (plastics), Chapter 40 (rubber), Chapter 44(wood), Chapters 50 to 63 (textile articles) or Section XV (Base metals), Section XVI or Chapter 90 etc. (j) The applicant states that the explanatory notes to HSN clarifies the above aspect as under: Contrary to the provisions related to the transport equipment falling in other Chapters of Section XVII, this Chapter excludes all separately presented parts (other than hulls) and accessories of vessels or floating structures, even if they are clearly identifiable as such. Such parts and accessories are classified in the appropriate headings elsewhere in the Nomenclature, for example: (1) The parts and accessories specified in Note 2 to Section XVII; (2) Wooden oars and paddles (heading 44.21); (3) Ropes and Cables of Textile Materials (heading 56.07); (4) Sails (heading 6306); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/2012-CE also exempted raw materials and parts of ships etc. The relevant entry 306C, which was inserted by Notification No. 44/2015-CE dated 24.11.2015 reads as under: 306C Any Chapter Raw materials and parts, for use in the manufacture of goods falling under heading/tariff item 8901, 8902, 8904 00 00, 8905 (except tariff item 8905 20 00) or 8906.. (f) Notification No.64/95-CE included the following exemption: 21 All Goods If,- (a) the said goods are supplied for use in construction of warships of the Indian Navy or Coast Guard; and before clearance of the said goods, a certificate from an officer not below the rank of a Rear Admiral of the Indian Navy or Coast Guard or Director General of Coast Guard or any other officer of the Indian Navy or Coast Guard equivalent to the Joint Secretary to the Government of India, to the effect that the said goods are intended for the said use, is produced to the proper officer. (g) Further, Notification No.12/2012-Cus also had the following entry: 459 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification(s) should be construed to include all such systems/assemblies. To buttress this submission, reliance is placed on the following decisions in the context of Notification/tariff entries under the Customs/ Central Excise Law: (i) Mehra Brothers v. Joint Commercial Officer-[1991(51) ELT 173(SC)]- held that a part or accessory need not necessarily mean an item which is essential for the effective use of a vehicle but also would include any item which adds to the comfort or enjoyment of the vehicle. Having given our anxious consideration, with respect, we are of the considered view that the test laid down by the Karnataka High Court that the accessories as a part must contribute for convenience or effectiveness in the use of the car as a whole is not a correct test. In our view, the correct test would be whether the article or articles in question would be an adjunct or an accompaniment or an addition for the convenient use of another part of the vehicle or a supplementary or secondary to the main or primary importance. Whether an article or part is an accessory cannot be decided with reference to its necessity to its effective use of the vehicle as a whole. Ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and facts submitted as above, GST is a destination based consumption tax. GST rates are determined by the end use of the product by the consumers. The Water Chiller Plant being supplied by the applicant is meant for consumption by the Indian Navy for the Naval Ships stationed at the Dockyard to maintain the temperature and humidity of the Ships for machines and human comfort. Since the supplies effected by the applicant are meant for Indian Navy and Government of India is the end user of the said supplies for smooth operations of the priority sector being National Defence, GST rate applicable for essential sector-5% is in consonance with the intention of law. 8.6 In view of the above, the applicant prayed to pass an order holding that the water chillar plants supplied by the applicant for use in the warships, vessel and submarines to be deployed by the Indian Navy attract 5% IGST [OR 2.5% CGST + 2.5% SGST depending on the Place of Supply] in terms of Sl. No. 252 of Schedule I of Notification No.1/2017-Central Tax (Rate)/ Integrated Tax (Rate)/ SGST. 9. At the time of personal hearing held through Video Conferencing on 17.08.2020, the Authorised Representative of the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant are primarily used in the Naval Dockyard meant to maintain and control the temperature and humidity in the Naval Ships stationed in the Dockyard. (iv) The applicant further submitted that the Trailer Mounted 160TR Chilled Water Plant to be commissioned at the Naval Dockyard is not a separate product but comprises of various parts/assemblies. It shall constitute the equipments as under: (a) Semi Hermetic Sealed Screw Type Compressor; (b) Air Cooled Finned tube with Axial type Fan Condenser; (c) Shell Tube Type Evaporator; (d) Centrifugal Pump with motor for chilled water; (e) Electrical Panel for Starting Controls of AC Plant; (f) Chilled Water piping/Hoses; (g) Flat Bed mobile trolley on which the Chilled water plant is mounted. (v) After supplying said items, they will install the same at Dockyard and conduct the testing to see whether the water cooling work has been done properly and after successful testing, the commissioning would start. (vi) Thus, apart from the supply of the Water Chillar Plant, the contract also requires the applicant to provide services of Testing Commissioning of the plant at the Dockya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade should be conjunctive to each other, that is, should be made together at the same time. Supplies should be naturally bundled. It is possible to bundle two or more supplies in the ordinary course of business. Out of the combination of supplies made, one should be a principal supply. 15. From the discussion made above, we find that in the proposed activity, the major part is supply of goods viz. Compressor, Fan Condenser, Evaporator, Centrifugal Pump with motor, Electrical Panel, Chilled Water piping/Hoses and mobile trolley etc. These goods are to be delivered to the applicant to provide services of installation, testing commissioning of the Trailer Mounted 160TR Chilled Water Plant at the Naval Dockyard (Vishakhapatnam). Without these goods, the services cannot be supplied by the applicant and, therefore, we find that the goods and services are supplied as a combination and in conjunction and in the course of their business where the principal supply is supply of goods. Thus, we find that there is a composite supply with supply of goods being the principal supply i.e. Chilled Water Plant / Chiller in the subject case. 16. We further find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst Schedule shall, so far as may be, apply to the interpretation of this notification. 18.1 Under General Rule of Interpretation (GRI) 1, Customs Tariff Act 1975, goods are to be classified according to the terms of the headings and any relative section or chapter notes, and provided the headings or notes do not require otherwise, according to GRIs 2 to GRIs 6. 18.2 Section XVI, Note-2 governs the classification of goods that are identifiable as parts of machines or apparatus of Chapter 84 or Chapter 85. Parts which are goods included in any of the headings of Chapters 84 and 85 are in all cases to be classified in their respective headings as per Note 2(a). 18.3 Note 4 to Section XVI are for classification of machines based on function which they perform: Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function . 18.4 The chi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 read with HSN Explanatory Note to tariff heading 8415 8418, the Chilled Water Plant ( Chiller ) is correctly classifiable under tariff heading 8418 10 10. 19. The GST rate on Composite Supply will be equal to the GST rate applicable on the principal supply of such goods and services, included in the composite supply. In such cases, the GST rate applicable to the principal supply levies to the complete supply of goods or services. 20. To determine the rate of GST in respect of the principal supply of goods viz. the Chilled Water Plant ( Chiller ), we have gone through the respective entries of the Chapter heading 8418 in the Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 (hereinafter referred to as the said notification) and find that the goods of Chapter heading 8418 are covered in Entry at Sl. No.120 of the Schedule IV of said Notification, which read as under: Schedule IV-14% (CGST) S.No. Chapter/Heading/ Subheading/ Tariff item Description of goods 120. 8418 Refrigerators, freezers and other refrigerating or freezing equipmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illed water is further circulated on-board ship to provide control temperature for electronics and human comfort. The said plant is, thus, primarily used in the Naval Dockyard meant to maintain and control the temperature and humidity in the Naval Ships stationed in the Dockyard. Since, said Chilled Water Plant is not installed in the Warships, Vessels and Submarines meant for Indian Navy but same is installed at Naval Dockyard, we hold that the same cannot be categorised as Any Parts of Vessels under HSN 8906 and consequently, same is not subjected to GST @ 5% under HSN 8906 as per Sr. No. 252 (Any Chapter) of the Notification No. 01/2017-IT (Rate), as we already hold that the said supply to Naval Dockyard (Vishakhapatnam), is a composite supply with principal supply of goods i.e. the Chilled Water Plant / Chiller falling under Chapter sub-heading No. 8418 10. 23. The Contentions of the Applicant are that the GST Notifications do not mention any specific purpose, as has been done in the Customs/ Central Excise Notifications, it is the humble view of the applicants that Sl. No. 252 of Schedule I of the GST Notifications apply to all goods supplied independently or as an ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be categorised as Any Parts of goods of headings 8901, 8902, 8904, 8905, 8906 8907. Consequently, said supply of the Chilled Water Plant will be out of ambit of the Entry at Sl. No. 252 of the Notification No. 01/2017-IT (Rate) dated 28.06.2017. Further, there is no exemption Notification issued under GST, which provides GST exemption in respect of Supply of 160TR Chilled Water Plant in question to the Naval Dockyard, Visakhapatnam, an Indian Naval Ship Repair Organisation of Indian Navy. 24. In the light of the aforesaid circumstances, we rule as under. R U L I N G Question-1: Clarification in details is sought with regard to the GST rate applicable regarding the Supply, Testing and Commissioning of 160 TR Chilled Water Plant to Naval Dockyard (Vishakhapatnam). Answer : The Supply, Testing and Commissioning of 160 TR Chilled Water Plant to Naval Dockyard (Vishakhapatnam), is a composite supply with the principal supply of goods viz. 160 TR Chilled Water Plant / Chiller falling under Chapter sub-heading No. 8418 10 10 and the applicant is liable to pay GST @28% till 26.07.2018 and @18% from 27.07.2018 on said complete supply of goods and services. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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