TMI Blog2024 (2) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... cterized by an assiduous focus on detail, ensuring seamless integration with the intended motor vehicle. It is paramount to recognize that Permanent Seats transcend mere functional contributions to the overall operation of the motor vehicle; they assume a pivotal role in guaranteeing that each seat is purposefully tailored for the precise vehicle with which it is affiliated. This meticulous alignment serves as a safeguard, preserving the structural Integrity and performance parameters of the motor vehicle In Its entirety. The original car seat covers which are manufactured and designed to permanently fit over the raw foam seat of the vehicles by the OEMs as well as the seat manufacturers who further sell to OEMs and are sold with the vehicle as an essential and integral part of seat is classifiable under HSN 8708 and is liable to pay @ 28%(CGST @ 14%+SGST @ 14%). - SRI. K. RAVI SANKAR, SRI.B. LAKSHMI NARAYANA, MEMBER Represented by : Gaurav Narula, Director ORDER (Under sub-section (4) of Section 98 of Central Goods and Services Tax Act, 2017 and sub- section (4) of Section 98 of Andhra Pradesh Goods and Services Tax Act, 2017) 1. At the outset we would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s permanently affixed over the raw seat after the foam cushion pad that is fastened or attached to the frame of seat assembly. Without mounting such permanent covers over the raw foam seat, the seat is incomplete, and in turn vehicle is incomplete and thus cannot be sold to the customers in the same manner. The price of seat covers forms part of the cost of the car / vehicle sold by the automobile manufacturer as a part of original equipment. 3.5 The above seat covers manufactured by Applicant adheres to the safety standards and are designed keeping in mind the airbag compatibility. Therefore, the original primary seat covers which are permanently fitted / installed to the seat in the vehicle at the time of sale, is an essential and integral part of the seat. 3.6 The applicant wishes to know whether the goods, namely original car seat covers which are permanently attached to the raw foam seat of vehicles are classifiable under HSN 9401 as Seats (other than those of heading 9402) used for aircraft and liable to GST @ 18% vide SI. No. 435A under Schedule III, of notification no. 1/2017-Central tax (rate) dated 28.06.2017 as amended by notification no. 41/2017-Central tax (ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y relied upon the decision of Hon'ble Tribunal in Guru Overseas Private Limited vs Commissioner of Central Excise [2001 (132) E.L.T. 60 (Tri.- Del,)], which had relied on the decision passed in the appellant- assessee's own case reported in Guru Overseas Pvt Ltd. Vs. Collector of Central Excise, New Delhi, [200 (120) E.L.T. 209 (Tribunal)] where it was admittedly claimed by appellant assessee that the leather and textile car seats covers manufactured by them were not integral part of car seats but were sold separately as additional covers for seats of cars which are commonly known and traded in the market as accessories of cars used for comfort, convenience and sleek look of the seats and therefore would not fall under Chapter Heading 94.01. In this matrix, the Hon'ble Court held that such additional covers are not integral part of car seats but are in the nature of accessories and would be classifiable under Chapter sub-heading 87.08 instead of 94.01. 5.3 In view of the above, it transpires that the aforesaid ruling was passed by the Hon'ble Authority of Advance Ruling in the context where seat covers were meant and used as additional / secondary covers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring 9402) whether or not convertible into beds.. and parts thereof father than seats of a kind used for aircraft! and is liable to GST @ 18% vide SI. No. 435A under Schedule K of Notification No. 1/2017 as amended. The submissions in support of the aforesaid interpretation have been enunciated in the ensuing paragraphs: 5.7 The primary original cover which is designed to permanently for over the raw foam seat is an integral and essential part of the car seat, installed in the vehicle. Therefore, the same is classifiable under HSN 9401 and liable to GST @ 18 % under SI.No. 435A of Notification No. 01/2017 as amended. Section 9 of CGST Act, is the charging section for levy of GST and provides that GST shall be levied on all inter-state supply of goods or services, at the rates notified by the Government on the recommendations of the GST Council. 5.8 In terms of the power conferred under the aforesaid provision, the Central Government vide Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, has notified the rate of tax on supply of goods. Similar notifications have been issued under APGST Act and IGST Act, prescribing the applicable rate for APGST and IGST, respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le into beds, and parts thereof (other than seats of a kind used for aircraft) 18% Customs Tariff Heading ( CTFI ) 9401 of the Custom Tariff Act, 1975 ( CTA ) also has same description-Seats (other than those of heading 9402), whether or not convertible into beds, and parts thereof, other than seats of a kind used for aircraft' The said Chapter heading of CTA is extracted below: Tariff Item Description of goods Unit Rate of duty Preferential Area Rate (1) (2) (3) (4) (5) 9401 SEATS (OTHER THAN THOSE OF HEADING 9402), WHETHER OR NOT CONVERTIBLE INTO BEDS, AND PARTS THEREOF 9401 10 00 - Seats of a kind used for aircraft u 25% - 9401 20 00 - Seats of a kind used for motor vehicles u 25% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kg. 25% - 9401 99 00 - - Other kg. 25% - In order to understand the scope of headings 9401 to 9403, it is imperative to refer to Note 2 and 3 to Chapter 94 of CTA, which explains as follows: 2. The articles (other than parts) referred to in headings 9401 to 9403 are to be classified in those headings only if they are designed for placing on the floor or ground. The following are, however, to be classified in the above-mentioned headings even if they are designed to be hung, to be fixed to the wall or to stand one on the other: (a) Cupboards, bookcases, other shelved furniture (including single shelves presented with supports for fixing them to the wall) and unit furniture; (b) seats and beds. 3. (A) In headings 9401 to 9403 references to parts of goods do not include references to sheets or slabs (whether or not cut to shape but not combined with other parts) of glass (including mirrors), marble or other stone or of any other material referred to in Chapter 68 or 69. (B) Goods described in head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , promenades, etc., are also included in this category. The HSN Explanatory Notes under heading 9401, further states: Subject to the exclusions mentioned below, this heading covers all seats (including those for vehicles, provided that they comply with the conditions prescribed in Note 2 to this Chapter), for example: Specifically on the question of classification of parts of the furniture of Chapter 94, the HSN explanatory notes state as under: PARTS This Chapter only covers parts, whether or not in the rough, of the goods of headings 94.01 to 94.03 and 94.05, when identifiable by their shape or other specific features as parts designed solely or principally for an article of those headings. They are classified in this Chapter when not more specifically covered elsewhere. Further, the HSN Explanatory Notes under heading 9401 (as amended in 2022) extended the scope of 'parts' to include seat covers for permanent attachment to a seat. The relevant portion of the excerpt is reproduced below: PARTS The heading also covers identifiable parts of chairs or other seats, such as backs, bottoms and arm-rests (whether or not upholst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Black's Law Dictionary is: 'an integral portion, something essentially belonging to a larger whole, that which together with another or others makes up a whole.' (iii) Merriam Webster dictionary, part' is defined as: A constituent member of a machine or other apparatus; an essential portion or integral element. 1. Thus, perusal of the above definitions, categorically express that the term part would refer to a thing or item which essentially belongs to a distinct larger whole, which is necessary for the constitution of the whole and without which the whole cannot be constituted. 2. The Supreme Court, in the case of Pragati Silicon Pvt. Ltd. vs. CCE, Delhi [2007 (211) ELT 534 (SC)], has held that for an item to qualify as a part, it must be an essential component of a machine or a larger assembly, without which the intended use of the finished product cannot be achieved. Such a part is not normally used independently and is not easily disassembled for maintenance purposes. 3. The Hon'ble Supreme Court in CCE v. Insulation Electrical (P) Ltd., 2009 (224) ELT 512 (SC) analysed the term part and held that part is an esse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eat, thus, such seat covers would be classifiable under CTH 9401, as parts of the seat. Judicial Precedents: In support of the aforesaid submission, reliance is placed on the judgment of Supreme Court in CCE, Kanpur vs. Matador Foam, 2005 (179) E.L.T. 257 (S.C.), wherein while construing Chapter Note 2 of Chapter 94, it was held that the term 'floor or ground' would also include floor of the car or vehicle. Seats made for vehicles are placed on the floor of the car or vehicle. Therefore, Chapter Note 2 would not exclude seats of vehicles from Chapter 94. 5. Significantly, it was also held by the Hon'ble Supreme Court in Matador Foam case(supra) that foam used as cushion which is affixed to frame of the automobile seat during manufacture of seat assembly would fall under CTH 9401 as a part of the automobile seat. Therefore, in the present matter, the original car seat cover that is attached to the car seat assembly as a primary layer of fabric before mounting of the car seat on the car floor, would also qualify as an integral part of such car seat and classifiable under CTH 9401. 6. Further, in the case of Shiroki Auto Components India Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fiable under Chapter 57 and not under Chapter 87. In this case, the assessee was manufacturing car mating which was directly used in the motor vehicle and despite this the Hon'ble Supreme Court held the classification under Chapter 57 whereas in the present case, child parts were not used in the motor vehicle but were used in the manufacture of another parts i.e. Round Recliner which is an integral part of motor vehicle seats. Therefore, Apex Court judgment is applicable in the facts of the present case. 10 As regards the judgment in the case of Insulation Electricals Pvt. Limited (supra) relied upon by the Revenue, we find that in the said judgment motor vehicle parts and accessories involved was rail assembly front seat adjuster/assembly slider seat and rear back seat lock assembly, all those Homs are not part of seal but accessories which is fitted in the motor vehicle. Whereas, as per facts in the present case child parts are used to make Round Recliner which is used for manufacturing of Recliner Assembly and the Recliner Assembly is fitted inside the seat at the time of assembling of complete seat. Therefore, the child parts are integral parts of seat and not lik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill take the shape of a sloth once filled with polyester fill. ................... Further, the ENs to Heading 9401 Parts, state: This heading also covers identifiable parts of chairs or other seats, such as backs, bottoms, and arm-rests (whether or not upholstered with straw or cane, stuffed or sprung), seat or backrest covers for permanent attachment to a seat, and spiral springs assembled for seat upholstery. The unstuffed seat shell is a dedicated part of an incomplete child seat and is not more specifically provided for elsewhere in the tariff schedule. The applicable subheading for the subject merchandise will be 9401.90.5021, HTSUS, which provides for Seats (other than those of heading 9402), whether or not convertible into beds, and parts thereof: Parts: Other: Other: Other of textile material, cut to shape. The rate of duty will be free. 12. Further, the Canada Border Services Agency (CBSA) issued Memorandum D10-15-31 providing guidelines on tariff classification of permanent car seat covers under the Customs Tariff. The same is extracted for ease of reference: DEFINITIONS Permanent car seat covers: These are covers for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ues involved from which advance ruling is sought by the applicant and the relevant facts along with arguments made by the applicant and also their submissions made during the time of the personal hearing. On the basis of foregoing the following discussion ensues: Permanent Seats, herein referred to as such, are explicitly designated for exclusive utilization within a specified motor vehicle, thereby serving a specialized function meticulously aligned with the precise design and manufacturing specifications of said particular vehicle. The nomenclature permanent seat cover is employed to underscore the highly specialized nature of these seating arrangements, exemplifying a bespoke creation characterized by an assiduous focus on detail, ensuring seamless integration with the intended motor vehicle. It is imperative to underscore and reiterate that Permanent Seats are expressly proscribed from being employed or promoted for general purposes beyond the specific application intended for the correlated motor vehicle. The distinctive design and the bespoke manufacturing process undertaken for these seats render them an intrinsic and indispensable component of the comprehensive m ..... 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