2018 (12) TMI 648 - AAR - GST

Classification of an item - Friction Material Based Brake Lining and Pad - whether classified under CTH 6813 @ 18% List and Motor Vehicle Brakes and Parts classified under head 8708 comes under 28% List or otherwise? Held that - From Explanatory Notes, it is evident that only friction material in different shape is classifiable under heading 6813 and that those mounted are specifically excluded from the purview of said heading. Applicant is a manufacturer of Disc Brake Pads which are used in Braking System of Passenger cars. From the manufacturing process flow chart we find that functional part on baking, grinding, machining and powder coating fitted on steel plate. This finished product is ready for being fixed in the brake system of cars - the impugned product is not covered by chapter Heading 6813. The undisputed fact of the present case is that Disc Brake Pads are being used in Braking System of passenger cars and SUV Vehicles - further, DBP is not excluded from the aforesaid chapter Notes and are exclusively used as parts of motor vehicles of heading 8701 to 8707 and as such merit classification chapter heading 8707. Ruling - The Product i.e. Disc Brake Pads falls under chapter heading 8708 and would be liable to tax @28% (14% each under CGST and MGST Act).

Summary

Issues: Classification of product under HSN code - 6813 or 8708 for tax purposes.

Analysis:
1. Facts and Contentions by Applicant:
The applicant, a manufacturer of Disc Brake Pads (DBP), sought clarification on the appropriate HSN code for their product. They argued that the DBP should be classified under 6813 due to the absence of mounting, as per the industry understanding. They detailed their manufacturing process and the materials used in producing DBPs for passenger and commercial vehicles.

2. Contentions by Concerned Officer:
The concerned officer contended that the DBPs should be classified under HSN code 8708, attracting 28% GST, based on the manufacturing activities and the description of products submitted. They emphasized that DBPs are parts and accessories of motor vehicles, falling under chapter heading 8708.

3. Observations and Decision:
The Authority analyzed the relevant tariff headings, specifically 6813 and 8708, along with the Explanatory Notes to the Harmonized System of Nomenclature. They noted that products mounted on brake systems are excluded from 6813, supporting the classification under 8708 for DBPs. The Authority determined that DBPs are identifiable for use in braking systems of vehicles, meeting the conditions of chapter heading 8708.

4. Conclusion:
In the final order, the Authority ruled that the product, Disc Brake Pads, should be classified under chapter heading 8708, subject to 28% tax under CGST and MGST Acts. The decision was based on the analysis of the manufacturing process, product usage, and relevant tariff headings, resolving the classification query raised by the applicant effectively.