2020 (8) TMI 246 - AAR - GST

Classification of goods - rate of GST - certain parts such as Couplers, Knuckle, Locks, Toggle, Yoke etc. - parts of railway or tramway locomotives or rolling-stock - whether the impugned goods are liable to be classified under HSN 7325 and the applicable rate of GST is 18% or not? - HELD THAT - Chapter heading 86 07 covers parts of railway or tramway locomotives or rolling- stock and heading 8607.30 covers hooks and other coupling devices, buffers, and parts thereof. Further the heading 8607 covers parts of railway, tramway locomotives or rolling-stock subject to fulfillment of both the following conditions. i. They must be identifiable as being suitable for use solely or principally with the above mentioned vehicles, and, ii. They must not be excluded by the provisions of the Notes to Section XVII. The applicant, in support of fulfillment of the first condition, submitted that the impugned goods are manufactured as per the pre-determined drawings of Indian Railways, on placement of order by M/s. Sanrok Enterprices (buyer), Faridabad, who are the main contractors for supply of the impugned goods. Further they also submitted that the buyer of the impugned goods have given an affidavit that the said goods supplied by the applicant are in turn supplied only to Indian Railways the said goods are not useful for anyone other than the Indian Railways and thus the impugned goods are suitable for use solely with the Railway Locomotives. It is observed from the photographs submitted by the applicant that the goods are suitable only for coupling the railway bogies/wagons and hence the first conditions is fulfilled - It is observed that in the instant case the impugned goods (parts of coupling device) are suitable for use solely with the Railway Locomotives and also classified specifically under heading 8607.30. Thus the second condition also is fulfilled. Thus, the impugned goods (parts of coupling device) are classifiable under heading 8607.30. Rate of GST - HELD THAT - The impugned goods are not covered under any other Schedules of the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017. Further No refund of unutilized input tax credit shall be allowed, where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on the output supply of the impugned goods, in terms of Sl.No.14 of Notification No.5/2017-Central Tax (Rate) dated 28.06.2017.

Summary

Issues Involved:
1. Classification of goods (Couplers, Knuckle, Locks, Toggle, Yoke, etc.)
2. Applicable GST rate on the classified goods.

Issue-wise Detailed Analysis:

1. Classification of Goods:
The applicant, involved in the manufacture and supply of various steel castings, sought an advance ruling on whether certain railway parts (Couplers, Knuckle, Locks, Toggle, Yoke, etc.) should be classified under HSN 8607 (attracting 5% GST) or HSN 7325 (attracting 18% GST). The goods are supplied to M/s. Sanrok Enterprises, which then supplies them to Indian Railways. The applicant argued that these goods should be classified under HSN 8607 because:
- The final consumer is Indian Railways, and the goods cannot be used by anyone else.
- The classification should remain consistent throughout the supply chain, from manufacturer to final consumer.
- Specific entries for railway parts should override the general entry for iron castings (HSN 7325).

2. Applicant’s Interpretation of Law:
The applicant contended that:
- The goods are manufactured as per Indian Railways' specifications and are supplied exclusively for their use.
- The classification should not change at different stages of the supply chain.
- Specific entries based on usage should override general entries, citing Rule 3(a) & 2(a) of the General Rules of Interpretation of Import Tariff.
- The goods retain their physical and chemical properties even after machining, thus should not be classified under HSN 7325.
- They referenced several judgments and notifications to support their claim that the goods should be classified under HSN 8607.

3. Authority’s Discussion and Findings:
The authority examined the submissions and found that:
- The goods are identifiable as suitable solely for railway use, fulfilling the first condition for classification under HSN 8607.
- The goods are not excluded by the provisions of the Notes to Section XVII, fulfilling the second condition.
- The goods are thus classifiable under heading 8607.30, which covers parts of railway or tramway locomotives or rolling-stock.

4. Applicable GST Rate:
The applicable GST rate for the classified goods was initially 5% under Entry No. 241 of Schedule I to Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017. However, effective from 30.09.2019, the rate was revised to 12% under Entry No. 205 G of Schedule II to the same notification, as amended by Notification No. 14/2019-Central Tax (Rate) dated 30.09.2019. Additionally, no refund of unutilized input tax credit is allowed where the credit has accumulated due to a higher tax rate on inputs compared to the output supply.

Ruling:
Railway parts such as Couplers, Knuckle, Locks, Toggle, Yoke, etc., manufactured and supplied by the applicant to M/s. Sanrok Enterprises (who in turn supply to Indian Railways after assembly) are classifiable under HSN 8607. The applicable GST rate on these goods is 5% until 29.09.2019 and 12% effective from 30.09.2019, with no refund of unutilized input tax credit.