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2018 (10) TMI 1314 - AAR - GSTClassification of Supply - import of goods/spares, which are supplied on ships and these equipment form an essential part of the ship, and makes the ship sea worthy. - whether classified under CTH 8479 or otherwise? Whether the said parts/spares/equipments which are used on a ship are forming parts of the ship 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 - Items like Anchor, Bow, Bowsprit, Fore and Aft, Hull, Keel, Mast, Rigging, Rudder, Sails, Shrouds, Engines, gearbox, Propeller, Bridge, etc. are the very essential parts of a ship or vessel and are quite clearly parts of a vessel/ship and a ship cannot be imagined to be in existence without these parts - in addition to the above there are some additional equipments that are required to be made available on a ship as a measure of statutory compliances under various marine acts such as Merchant Shipping Act or Additional Safety measures such as Walkie-talkie, Binoculars, Life Jackets, Lifeboats, etc. Though these are also to be compulsorily made available on a vessel and ship but cannot be taken to be parts of a ship as per general understanding but are rather additional equipments on a ship - Also, there are other essential items like furniture, fans, air-conditioners, television, etc which are very essential for comfort of officers and crew of the ship but do not come under essential parts or equipments of a vessel/ship. These items are essential parts of a ship/vessel 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 from the ship for repair/replacement. The classification of goods under Sr. No. 252 depends solely on the nature of use to which the goods are put to. The items mentioned at Sr. Nos A, B, C, D, E, G, H, I, J, K, M and S are essential parts of a ship/vessel without which the ship would not be complete and would not exist. These are very integral for the functioning of the ship. Hence out of the 504 goods mentioned in Annexure I-A of this ARA application and reproduced by them mentioning their uses in page nos 24 to 39 of their compilation A made before this authority as an additional submission we are of the opinion that out of the 504 items mentioned by them, only goods used in the equipments mentioned at Sr. Nos. A, B, C, D, E, G, H, I, J, K, M and S of the above table can be considered as parts of a ship and therefore would be eligible to concessional rate of GST as contended by the applicant. Parts which are used in equipments mentioned in Sr. Nos F, L, N, O, P, Q, R, T, U, V will not be eligible for concessional rate of duty since the said equipments cannot be considered as essential parts of a ship. Ruling - Only those goods that are used in equipments mentioned at Sr. Nos A, B, C, D, E, G, H, I, K, M and S of the table will liable to GST @ 5% (CGST-2.5% and SGST-2.5%) or IGST @ 5% under entry 252 of Schedule 1 of GST Notification No. 01/2017-Central tax (rate) dated 28th June, 2017 as amended and schedule 1 of Notification No. 01/2017-Integrated Tax (Rate), dated 28-06-2017 as amended.
Issues Involved:
1. Classification of goods supplied by the applicant as parts of ships under specific GST headings. 2. Applicability of concessional GST rate of 5% on such goods. Issue-wise Detailed Analysis: 1. Classification of Goods Supplied by the Applicant as Parts of Ships: The applicant, engaged in the sale and distribution of marine equipment, sought an advance ruling on whether their supplied goods could be classified as "Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907" under entry 252 of Schedule 1 of GST Notification No. 01/2017-Central tax (rate) dated 28th June, 2017, thus attracting a GST rate of 5%. The applicant argued that the goods supplied, such as Marine Distress Signals, EPIRB, SART, SSAS, Marine Chemicals, Navigation and Communication Equipment, and Life-saving services, are essential for making a ship seaworthy and should be classified under the specified headings. They emphasized that without these goods, a ship would not be allowed to sail, making them integral parts of the ship. The applicant supported their claim by referencing various legal precedents, including a Supreme Court judgment in their favor, which classified similar goods as essential for ship repair. They also presented a Chartered Engineer's certificate stating that the goods in question are integral parts of a ship. 2. Applicability of Concessional GST Rate of 5% on Such Goods: The Authority for Advance Ruling (AAR) analyzed the applicant's submissions and the relevant legal provisions. They noted that the term "part" was not defined in GST or Central Excise laws, necessitating a general understanding of the term. The AAR referred to dictionary definitions and legal precedents to determine that "parts" are essential components without which the ship would not be complete or functional. The AAR examined each item listed by the applicant to determine if they could be classified as parts of a ship. They concluded that items such as GPS, Echo Sounder, Radar, ECDIS, Gyroscope, Doppler Speed Log, Medium/High Frequency Communication, Very High Frequency, Satellite Communication, Ship Security Alert System, Emergency Positioning Indicating Radio Beacon, and Bridge Navigation Watch Alarm System are essential parts of a ship. These items, being integral to the ship's functionality, qualify for the concessional GST rate of 5%. However, items such as Automatic Identification System, Navigational Telex, Voyage Data Recorder, Non-Directional Beacon, Fish Finder, Sound Navigation and Ranging, Life-saving/Fire Fighting Appliances, Search and Rescue Transponder, Anemometer, and Walkie Talkie were considered additional equipment. These items, while important, were not deemed essential parts of a ship and thus do not qualify for the concessional GST rate. Conclusion: The AAR ruled that out of the goods listed by the applicant, only those used in the essential equipment mentioned (GPS, Echo Sounder, Radar, ECDIS, Gyroscope, Doppler Speed Log, Medium/High Frequency Communication, Very High Frequency, Satellite Communication, Ship Security Alert System, Emergency Positioning Indicating Radio Beacon, and Bridge Navigation Watch Alarm System) are eligible for the concessional GST rate of 5%. Other items, considered additional equipment, do not qualify for this rate.
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