2019 (4) TMI 1941 - AAR - GST

Classification of goods - rate of IGST - sub-assemblies supplied by the Pathredi unit to the Chennai unit - HELD THAT - From the explanatory note VII, it is clear that complete or finished articles presented unassembled or disassembled are to be classified in the same heading as the assembled article only if there is assembly operation is involved. But in the present case assembly operation as well as addition of components is being done to prepare the parent assembly and thereafter being supplied to Indian Railways. Therefore, the goods supplied from Pathredi Unit to Chennai Unit cannot be classified in the same heading as the assembled article is classified - Further, as per para 4 of the Circular No. 30/4/2018-GST dated 25.01.2018 issued by CBIC, it has been clarified that Only the goods classified under Chapter 86 supplied to the Railways attract 5% GST rate with no refund of unutilized input tax credit and that Other goods ( falling in any other chapter ) would attract the general applicable rates to such goods, even if supplied to railways. Thus, the goods which would be supplied from the unit at Pathredi to the unit situated in Chennai cannot be classified under chapter 86; hence, they would attract the general applicable rate of duties as per the classification of each item in their respective chapters.

Issues Involved:
1. Tariff classification of goods/sub-assemblies supplied by Pathredi unit to Chennai unit.
2. Applicable rate of IGST on the goods/sub-assemblies supplied.

Issue-wise Detailed Analysis:

1. Tariff Classification of Goods/Sub-assemblies:
The applicant, engaged in manufacturing parts and components of railway coaches, sought an advance ruling on the tariff classification of goods supplied from their Pathredi unit to their Chennai unit. The goods, including roof assembly, retention tank, toilets, side wall assembly, end-walls, carlines, partition profiles, and roof-arch, are manufactured as per Indian Railways' specifications and drawings and classified under customs tariff item 8607 99 10.

The Pathredi unit dispatches these goods in an unassembled condition to Chennai, where they are assembled into complete assemblies. The Chennai unit undertakes welding, painting, testing, and final inspection before delivering the assemblies to the Indian Railways. The applicant argued that the goods should be classified under the same heading as the assembled articles.

However, the Authority observed that the Pathredi unit dispatches parts and subparts rather than complete sub-assemblies. The process at the Chennai unit involves significant manufacturing activities, including the addition of components procured from other suppliers, and not merely assembly. Therefore, the goods supplied from Pathredi to Chennai cannot be classified under chapter 86, which pertains to railway or tramway locomotives, rolling-stock, and parts thereof.

2. Applicable Rate of IGST:
The Authority referred to the General Rules for the Interpretation of the Harmonized System and Circular No. 30/4/2018-GST dated 25.01.2018 issued by CBIC. According to these guidelines, only goods classified under Chapter 86 supplied to the Railways attract a 5% GST rate with no refund of unutilized input tax credit. Other goods, falling under different chapters, attract the general applicable rates.

Since the goods supplied from Pathredi to Chennai involve significant manufacturing processes and addition of components, they cannot be classified under Chapter 86. Consequently, they would attract the general applicable rate of duties as per the classification of each item in their respective chapters.

Ruling:
The Authority ruled that the goods supplied from the Pathredi unit to the Chennai unit cannot be classified under Chapter 86. Therefore, they would attract the general applicable rate of duties as per the classification of each item in their respective chapters.

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