TMI Blog2021 (9) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... 8904 to 8907 - the applicant's contention is agreed upon that the batteries supplied by them for exclusive use in goods falling under heading 8901, 8902, 8904 to 8907 will be taxable @ 5% IGST. However it is to reiterate that the benefit of reduced CGST and SGST for such batteries is only available if the said batteries 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 subject batteries supplied for use in goods other than goods of heading 8901, 8902, 8904 to 8907 of the GST Tariff. The batteries are essential requirements in manufacture of submarines and are classified under heading 85 of the GST Tariff and are parts of submarines. Since the subject goods are meant for use in manufacture of submarines and are supplied for purpose of use or application in manufacture of goods that are classifiable under Tariff headings 8901, 8902, 8904, 8905, 8906, 8907, the said goods can be considered as parts of a submarine. Entry at Sr. No. 252 covers goods which merit classification under Any Chapter of the GST Tariff wherein the description in Sr. No. 252, is Parts of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , specifically submarines, to Indian Navy. 2.3 Applicant has been awarded orders by the Ministry of Defense, Government of India, requiring the Applicant to supply specific types of batteries for use in warships, specifically submarines, for instance, Applicant was awarded a purchase order No. HLB/111/ Type II MB/S4/479 dated 02.02.2018 from the Defense Machinery Design Establishment, Department of Defense Research Development to supply submarine batteries, spares, interconnecting links and also provide inspection, testing and acceptance trials. The said Department is under the Ministry of Defense, Government of India. 2.4 Supply of submarine batteries under the Purchase Orders consists of a combination of goods and ancillary services with the supply of goods as the principal supply. Moreover, the supply of spares and services of inspection and testing are naturally bundled with the supply of batteries. Hence, the same is a composite supply, the principal supply being supply of battery. 2.5 Applicant feels that the rate of tax applicable would be 5% in terms of SI.No.252 of Schedule 1 of the Notification No. 1/2017-I.T. (R) which is reproduced as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enumerated hereunder: Grounds to support the contention that the said supply is subject to tax @ 5% under Entry No. 252 of Schedule I to Notification No. 01/2017 Integrated Tax (Rate) dated 28.06.2017 A) THE SAID ENTRY COVERS ANY PRODUCT SUPPLIED WHICH FORMS PART OF GOODS COVERED UNDER TARIFF HEADING 8901, 8902, 8904, 8905, 8906, 8907 A.1. Applicant submits that the Entry 252 of Schedule 1 to Notification No. 01/2017 I.T.(Rate) dated 28.06.2017 (hereinafter referred to as the rate notification ) covers all goods which form a part of goods falling under tariff Heading 8901, 8902, 8904, 8905,8906 and 8907. From a bare reading of the said entry at S. No. 252, it is apparent that any and all goods irrespective of their individual classification would be covered there under, if such goods are used as parts of the goods covered under tariff heading 8902, 8904, 8905, 8906 and 8907. Submarines, being a warship, is covered under the tariff heading 8906. A.2 In the instant case, Applicant is supplying submarine batteries to Ministry of Defense for use in warships. In this regard, the Indian Navy has provided End User Certificate wherein it has been certified that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 962 (52 of 1962) Nil Nil 83 A.8. The above entry was inserted with effect from 24.11.2015. Further, the above Notification has since been superseded by Notification No. 50/2017-CUS dated 30.06.2017; with the exemption being provided under SI.No. 559 in the new Notification. A.9. Similarly, in the context of Central Excise, Notification No. 12/2012-CE dated 17.03.2012 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... A.10 From the above, it can be seen that whenever exemption is provided to goods meant for ships etc. falling under Chapter 89, either for manufacture of ships or for repairs or for specified purposes such as use by Indian Navy, such exemption has been provided to goods falling under any Chapter of the respective Tariff (Customs or Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with another or others makes up a whole B.3. Further, as per Cambridge English Dictionary, part means 'a separate piece of something or a piece that combines with other pieces to form the whole of something. One of the pieces that together form a machine or some type of equipment'. B.4. Relying on the aforesaid definitions, it is submitted that part means an essential and integral piece of a goods without which the goods are incomplete. B.5. It is a well settled law that in a taxing statute, words of everyday use must be construed not in their scientific or technical sense but as understood in its popular sense, meaning that sense with which people conversant with the subject matter of the statute would attribute. In essence, it is to be construed as understood in common parlance or language. The doctrine of common parlance becomes clearly applicable in the instant case to establish that in common parlance, 'parts of goods' would include within its ambit batteries essential for operation of the goods. This principle of common parlance has been enumerated in innumerable decisions of the Hon'ble Supreme Court. B.6. The product in question is known i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al part of the warship / submarine and hence, ore liable to be covered under SI. No. 252 of Schedule 1 of the Rate Notification. C. THE INTENTION OF THE LEGISLATURE IS NOT TO HAVE HIGH GST ON ESSENTIAL SUPPLIES TO MINISTRY OF DEFENCE, GOVERNMENT OF INDIA. C.1. The batteries supplied by Applicant are used by the Ministry of Defense in warships as is evident from the end user certificate, the supply undertaken by the Applicant is chargeable to GST @ 5%. C.2. Applicant has already made detailed submissions above that batteries supplied by it, forms an essential part of the warships as it is specifically designed and manufactured for use in warships and without such batteries, the warships cannot function. C.3. It is submitted that it can never be the intention of the legislature that goods procured by the Armed Services are taxed at the highest rate of taxation. The said goods being procured for use in National Defense cannot be taxed as batteries being supplied for luxury items. C.4. It is humbly submitted for the kind consideration of the Hon'ble Authority that the Supplies of the Applicant to the Ministry of Defense, Government of India, are used only for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. 4.3 Heard the matter. 05. OBSERVATIONS AND FINDINGS: 5.1 We have perused the records on file, facts of the case and the submissions made by the applicant. The matter is related to the rate of GST on the supply of goods by the applicant. The applicant has made both, oral and written submissions. 5.2 Applicant manufactures and supplies of lead acid storage batteries falling under Chapter 85 of the First Schedule to the Customs Tariff Act 1975. The present application has been made by them in respect to supply of batteries for use in warships, specifically submarines, by Indian Navy as per orders received. The issue before this authority is whether Entry No. 252 of Notification No. 01/2017-Integrated Tax (Rate) is applicable to the supply of batteries to the Indian Navy. 5.3 Applicant has made submissions stating that the said supply of batteries to the Indian Navy, for use in submarines are subject to tax @ 5% under Entry No. 252 of Schedule I to Notification No. 01/2017 Integrated Tax (Rate) dated 28.06.2017 because the said batteries are understood to be a part of the submarines in common parlance. 5.4 Applicant has stated that the supply of the subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The only issue that is raised before us by the applicant is whether the said batteries are used in submarines forming parts of the said submarines and therefore chargeable to reduced tax @ 5% under Sr.No.252 of Notification No.1/2017 Central Tax (Rate) dated 28.06.2017. 5.7. To deal with the limited issue before us i.e. to find out whether the batteries supplied by the applicant are parts of a ship first of all we need to examine as to what are Parts . We find that the word, Part/Parts has not been defined under GST Laws. In view of this first we are required to understand the general meaning of the word 'Part/Parts' which is of relevance to us in the present case. ------We find that as per Cambridge English Dictionary: Part as a noun - a separate piece of something or a piece that combines with other pieces to form the whole of something -------One of the pieces that together form a machine or some type of equipment. It has other meanings also in other context which are not of relevance in present context like: ----a single broadcast of a series of television or radio programme or Division of a story. ----one of two or more equal or alm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, final product cannot be conceived of. 13. The meaning of the expression 'component' in common parlance is that 'component part of an article is an integral part necessary to the constitution of the whole article and without it, the article will not be complete'. 5.7.5 In light of the above, we find that batteries will be considered as parts of vessels falling under heading 8901, 8902, 8904 to 8907, only if they are used in manufacturing goods falling under Tariff Headings 8901, 8902, 8904 to 8907. We agree with the applicant's contention that the batteries supplied by them for exclusive use in goods falling under heading 8901, 8902, 8904 to 8907 will be taxable @ 5% IGST (2.5% CGST and SGST each). However it is to reiterate that the benefit of reduced CGST and SGST for such batteries is only available if the said batteries 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 subject batteries supplied for use in goods other than goods of heading 8901, 8902, 8904 to 8907 of the GST Tariff. 5.8 We find that, batteries are essential requirem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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