TMI Blog2021 (8) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... her Engines. Whether the said MDEs and parts thereof used on a ship/tugs/fishing vessels, etc are forming parts of the said ship/tugs/fishing vessels, etc and therefore chargeable to reduced tax @ 5% under Sr.No.252 of Notification No.1/2017 Central Tax (Rate) dated 28.06.2017? - HELD THAT:- MDEs are the very essential parts of a ship or vessel and are quite clearly parts of a vessel/ship. A ship or a vessel cannot be imagined to be in existence without MDEs because they are essential for the main propulsion or turning the propellers of the normal ships and also for providing auxiliary power. A ship/vessel, etc. cannot sail without the marine diesel engines. There may be additional equipments required on a ship like Walkie-talkie, Binoculars, Life Jackets, Lifeboats, furniture, fans, air-conditioners, etc. but such goods cannot be taken to be parts of a ship as per general understanding but are rather additional equipment on a ship and a ship can sail without these additions - MDEs are such essential components of a vessel/ship without which the ship would not be complete and would not exist. These are very integral for the functioning of the ship and can also be separated fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant, seeking an advance ruling in respect of the following question. Whether the marine diesel engine, and parts thereof illustrated in Exhibit D, supplied by the Applicant exclusively to ship building companies / shipyards or Indian Navy for use and application in ships, vessels, boats, floating structures etc. are to be classified under Sr. No. 252 of Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017? At the outset, we would like to make it clear that the provisions of both the CGST Act and the 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 Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT 2.1. MAN Energy Solutions India Private Limited, the Applicant, is engaged in design and manufacture of two-stroke and four-stroke engines. Applicant's range of products includes complete marine propulsion systems, turbo machinery u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification No. 1/2017-C.T.-(R), and Notification No. 1/2017-I.T-(R), both dated 28.06.2017, specifies CGST and IGST rates respectively, for classification of subject goods under different Schedules which are as under: Schedule No. Sr.No. Chapter Heading Description of goods CGST/SGST Rate IGST Rate IV 115 8408 Compression-ignition Combustion piston engines (diesel semi-diesel engines) 14% 28% IV 116 8409 Parts suitable for use solely principally with the engines heading 8407 or 8408 14% 28% 2.7 Similarly, the said Notification No. 1/2017-C.T.-(R), and Notification No. 1/2017-I.T. (Rate), specifies CGST IGST rates respectively, for classification of above mentioned goods under different Schedules. Schedule entries applicable to the ships, boats, etc. (goods manufactured by Applicant's customers) are as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, 8907 2.5% 5% 2.10 From the above, it is clear that, Applicant can supply the said goods as Parts of headings of 8901, 8902, 8904, 8905, 8906, 8907 under Sr. No. 252 of Schedule I of Notification No. 1/2017-C.T.-(R), dated 28.06.2017. The said Goods manufactured/supplied by the Applicant are classified under chapter heading 8408/8409. The said classification has been consistently used by the Applicant and also has been accepted by various authorities under excise, Customs and GST Laws. 2.11 Entry at Sr. no. 252 of Notification 1/2017-C.T.-(R) dated 28-6-2017 covers goods classified under any chapter which are parts of goods of heading 8901, 8902, 8904, 8905, 8906, 8907 . The operative provisions of the said Notification specify that the rate applicable, shall be primarily determined on the basis of description which falls under the Chap. Heading Sub-heading Tariff item specified against such description. 2.12 On a plain and literal reading of the entry Sr. No. 252, it can be inferred that where goods are used as parts of goods which fall under tariff headings 8901, 8902, 8904, 8905, 8906, 8907, then said goods, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chattel) and in the present case, applicant supplies subject goods for subsequent use in manufacture of ships, vessels. 2.16. Finally, the Applicant refers to the advance ruling decision in the case of SHANDONG Heavy Industry India Pvt. Ltd. (2018 (17) G.S.T L. 631 (A.A. R. - GST) in support of their contention the subject goods are liable to he charged to 5% of IGST (or 2.5% CGST + 2.5% SGST) as per Schedule 1 Sr. No 252 of Not cation No 01/ 2017.C.T. (Rate). 2.17 In view of the above, subject goods supplied by applicant, are parts of ships, boats and floating structures falling under tariff heading 8901, 8902, 8904, 8905, 8906, 8907. Accordingly, supply of such goods can be effected at the rate of 5% GST in terms of entry 252 of Schedule I of Notification No. 01/2017-Central Tax (Rate). 2.18 Applicant has submitted a of parts/components of marine diesel engines (Exhibit D), which too are supplied exclusively to ship building companies/shipyards to the Indian Navy for application and use in the ships, vessels, boats, floating structures etc. 2.19 In terms of decision of the Hon'ble Supreme Court in Hemraj Gordhandas [1978 (2) ELT. J 350 (S.C.)] and Baris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies/ shipyards such as Garden Reach Shipbuilders Engineers Limited, Mazagaon Dock Limited, Indian Navy (Material Organisation) etc. for application in and use in various ships / vessels. It is clarified that, in view of the query posed by the Hon'ble Authority, the marine engines manufactured and supplied by the Applicant-Company are medium speed heavy duty engines with high power . These types of engines are required for / suitable for propulsion of ocean-going merchant / naval ships and these engines are not suitable for yachts or other vessels for pleasure or sports; rowing- boats and canoes that fall for classification under Chapter Heading 8903 of the Customs tariff (First Schedule) and the GST tariff. It is to be appreciated that some of the watercrafts mentioned in heading 8903 do not have any engine whatsoever (for e.g. canoe). Moreover, the engines supplied by the Applicant are always oversized or misfit for and so incapable of use in yachts or other vessels for pleasure or sports rowing boats and canoes that fall for classification under Chapter Heading 8903. It follows therefore that the marine diesel engines and parts supplied by the Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IV 115 8408 Compression-ignition inter combustion piston engines (diesel semi-diesel engines) 14% 28% IV 116 8409 Parts suitable for use solely principally with the engines heading 8407 or 8408 14% 28% 3.3 As per above, GST applicable to 8408 and 8409 is 14% CGST + 14% SGST or 28% IGST, whereas GST on 8902, 8904, 8905, 8906, 8907 in terms of Sr. No. 252 of Notification No.1/2017- C.T.(Rate), dated 28.06.2017 is 5% IGST or 2.5% CGST+ 2.5% SGST. 3.4 In view of above, applicants request may be rejected since it will lessen the GST revenue. 04. HEARING 4.1 Preliminary hearing in the matter was held on 12.12.2019. Shri. Ranjeet Mahatani, Advocate appeared, and requested for admission of the application. Jurisdictional Officer was absent. 4.2 Final hearing was fixed on 26.11.2020, but applicant took adjournment. Further hearing was fixed and accordingly Final online e-hearing was held on 08.12.2020. Authorized Representatives of applicant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 975. The supply of the subject goods in the subject case are specific to and tailor-made for this sector's usage. Applicant feels that the subject goods, classified under heading 8408/8409 of the GST tariff, are parts of ships, boats, etc., hence, can be supplied in terms of Entry No. 252 of Schedule 1 of Notification No. 01/2017-C.T. (Rate). 5.5 Sr. No. 252 of Notification No. 01/2017 C.T (Rate) dated 28.06.2017 is as under:- Schedule No. Sr. No. Chapter / Heading / Sub-heading/ Tariff item Description of goods CGST/SGST IGST Rate I 252 Any Chapter Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907 2.5% 5% 5.5.1 From the above table it is very clear that parts of goods of headings 8901, 8902, 8904 to 8907 are chargeable to CGST/SGST @ of 2.5% each. We now reproduce the description of headings 8901, 8902, 8904, 8905, 8906 and 8907 as under:- Chapter /Heading / Sub-heading / Tariff item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of a story. ----one of two or more equal or almost equal measures of something etc. 5.7.1 In view of the above meanings/definitions of parts, we are required to examine as to whether the subject goods/spares as mentioned by the applicant can be taken to be covered within the meaning of Parts of Goods of CTH 8901, 8902, 8904, 8905, 8906 and 8907 and for Sr. No. 252 of Notification No. 1/2017 Integrated Tax (Rate) dated 28.06.2017. 5.7.2 We find that MDEs are the very essential parts of a ship or vessel and are quite clearly parts of a vessel/ship. A ship or a vessel cannot be imagined to be in existence without MDEs because they are essential for the main propulsion or turning the propellers of the normal ships and also for providing auxiliary power. A ship/vessel, etc. cannot sail without the marine diesel engines. There may be additional equipments required on a ship like Walkie-talkie, Binoculars, Life Jackets, Lifeboats, furniture, fans, air-conditioners, etc. but such goods cannot be taken to be parts of a ship as per general understanding but are rather additional equipment on a ship and a ship can sail without these additions. 5.7.3 We find that MDEs are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ines are used as parts of goods falling under heading 8901, 8902, 8904 to 8907 of the GST Tariff. The benefit of reduced GST rates would not be available in respect of Engines supplied for use in goods other than goods of heading 8901, 8902, 8904 to 8907 of the GST Tariff: 5.8 In the present case applicant supplies subject goods and has listed many items in the Exhibit D submitted by them, and stated that the same are parts of MDEs supplied by them to the shipyards manufacturing ships and vessels. Applicant has not spelt out in detail as to how each and every item mentioned in Exhibit ₹ 13' are to be considered as parts of Marine Diesel Engines. In absence of such details, we cannot spell out whether every product mentioned in Exhibit `D' will be parts of MDEs. However we are of the opinion that MDEs and parts thereof falling under Chapter 8408/8409 of the GST Tariff would attract concessional rate of 5% GST as per Sr. No. 252 only if the said goods are supplied to/and used by companies manufacturing ships and other vessels falling under Chapter headings 8901, 8902, 8904, 8905, 8906 and 8907. Applicant has submitted relevant purchase orders and invoices on record, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt / naval ships and these engines are not suitable for yachts or other vessels for pleasure or sports; rowing boats and canoes that fall for classification under Chapter Heading 8903 of the Customs tariff (First Schedule) and the GST tariff. 5.12 In view of above, we conclude that, the supply of MDEs and parts thereof supplied by the Applicant exclusively and directly to ship building companies/shipyards or Indian Navy for use in manufacture of ships, vessels, boats, floating structures etc. will be classified under Sr. No. 252 of Notification No. 1/2017- C.T. (Rate), dated 28-6-2017. If the applicant supplies the impugned goods to parties other than ship building companies and for other purposes, it would not be covered in the said entry and is liable to be taxed at respective higher rates as per schedule entry. 06. In View of the above discussions, we pass an order as follows: ORDER (Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) NO. GST-ARA-56/2019-20/B-41 Mumbai, dt. 30.07.2021 For reasons as discussed in the body of the order, the questions are answered thus - Question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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