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2021 (1) TMI 895 - AAAR - GSTClassification of goods - threaded metal nuts which function same as standard nuts - whether merit classification under the Tariff item 7318 16 00 and not under Tariff item 8708 99 00? - Challenge to AAR decision - HELD THAT - The impugned goods can clearly be construed as the parts and accessories of the vehicles falling under the Chapter Headings from 8701 to 8705 and will merit classification under the Chapter Heading 8708, which covers the parts and accessories of the vehicles. Our observation is primarily attributed to the fact that the impugned products are manufactured by the Respondent as per the specifications/requirements approved by the automobile manufacturer, which is illustrated by the descriptions contained in the sample Purchase Order, placed by M/s. Tata Motors Ltd. to the Respondent, which amongst other things, mentions the drawing document number and materials, approved by M/s. Tata Motors Ltd. The said drawing document, designed and made by the Respondent, also contains the part number of the automobile manufacturer, i.e., M/s. Tata Motors Ltd., rendering the said impugned product unique, in terms of its specifications, and materials used in the manufacture of the impugned goods which are identified by the material code of the impugned goods, and thereby lending support to our observation that the impugned goods have been manufactured at the behest of the automobile manufacturer as per the materials and design specifications of the motor vehicles to be manufactured by the automobile manufacturer, and the same is supplied solely or primarily to the said automobile manufacturer, which is also corroborated by the condition laid in the said sample Purchase Order placed by M/s. Tata Motors Ltd., which stipulates that Sale of goods mentioned in the Purchase Order to Spare Market is strictly prohibited. Thus, it has been established beyond doubt that the impugned goods are suitable for use solely or primarily with articles of Chapter Heading Nos. 87.01 to 87.05, and therefore, applying the principle laid down by the Hon ble Supreme Court in the case of G.S. AUTO INTERNATIONAL LTD. VERSUS COLLECTOR OF C. EX., CHANDIGARH 2003 (1) TMI 700 - SUPREME COURT , it is manifest that the impugned products will be construed as parts of motor vehicles falling under Chapter Heading 87.01 to 87.05, and will merit consideration under the Tariff Item 8708 9900. The commercial identity of the impugned goods would he the parts of the motor vehicles as discussed above. Further, though there may be some ambiguities as far as the functions of these impugned goods are concerned, which are in the nature of fastening, thereby fomenting the temptation to classify these goods under Chapter Heading 73.18 by considering them as parts of general use, it is to be stated that doing so would not be legal as per the ratio laid down by Hon ble Supreme Court in M/S CAST METAL INDUSTRIES (P) LTD. VERSUS COMMR. OF CENTRAL EXCISE-IV, KOLKATA 2015 (11) TMI 833 - SUPREME COURT , wherein it has been held by the Hon ble Apex Court that the functional test for the classification of the goods is not the relevant test. Hence, the impugned goods will not be construed as parts of general use , and accordingly will not merit consideration under the Chapter Heading 73.18 - further, the impugned goods are customized and tailor made for the automobile customers as per the specification approved by the automobile customers. Thus, the contention of the Respondent that the impugned goods are supplied to the customers across various sectors, and thereby, the impugned goods are to be construed as parts of general use, and therefore, warranting classification of the impugned goods under the Chapter Heading 73.18, is devoid of any merit, and hence not tenable. The Respondent have heavily relied on the Hon ble Supreme Court Judgement in the case of COMMISSIONER OF CENTRAL EXCISE, DELHI-III VERSUS M/S. UNI PRODUCTS INDIA LTD 2020 (5) TMI 63 - SUPREME COURT . In this regard, it is observed that the issue involved in the above- mentioned case was classification of Car Mats made of textile material , and the said decision in the said case was based on the facts that the Car Mats made of textile material were specifically excluded from Chapter 87. Hence, in this regard, it is opined that the facts and circumstances of the case referred to by the Respondent is entirely different from those of the case at hand, which involves the classification of Metal Nuts and Metal Nuts are not categorically excluded under any HSN explanatory notes, the Section Notes or the Chapter Notes either, and therefore is clearly distinguishable. The impugned goods, i.e., Metal Nuts with metrical threading, Metal Nuts without metrical threading, and Metal Spring Nuts, will be considered as parts of motor vehicles falling under Chapter Heading from 87.01 to 87.05, and accordingly will merit classification under the Tariff Item 8708 99 00, as purported by the Appellant - Advance Ruling decision set aside.
Issues Involved:
1. Classification of threaded metal nuts. 2. Applicability of Section Notes and Chapter Notes for classification. 3. Consideration of end use in classification. 4. Reliance on previous Supreme Court judgments for classification. Issue-wise Detailed Analysis: 1. Classification of Threaded Metal Nuts: The primary issue was whether threaded metal nuts should be classified under Tariff Item 7318 16 00 or 8708 99 00. The Maharashtra Authority for Advance Ruling (MAAR) initially classified the nuts under 7318 16 00, considering them as "parts of general use" per Note 2(a) to Section XV of the Customs Tariff Act, 1975. However, the Appellant argued that these nuts, manufactured as per the specifications of automobile manufacturers, should be classified under 8708 99 00 as parts and accessories of motor vehicles. The Appellate Authority for Advance Ruling (AAAR) concurred with the Appellant, emphasizing that the nuts were primarily used in the automobile industry and thus merited classification under 8708 99 00. 2. Applicability of Section Notes and Chapter Notes for Classification: The MAAR based its ruling on Note 2(b) to Section XVII, which excludes "parts of general use" from being classified as parts and accessories of motor vehicles. The Appellant, however, relied on the Supreme Court judgment in G.S. Auto International Ltd. vs. Collector of Central Excise, which clarified that parts suitable for use solely or primarily with motor vehicles should be classified under Chapter Heading 87.08. The AAAR supported this view, stating that the nuts, being customized for automobile manufacturers, did not qualify as parts of general use and should be classified under 8708 99 00. 3. Consideration of End Use in Classification: The Respondent argued that the classification should not depend on the end use of the product, citing Supreme Court judgments in India Aluminium Cables Ltd. vs. Union of India and Commissioner of Central Excise vs. Carrier Aircon Ltd. However, the AAAR noted that the Supreme Court in G.S. Auto International Ltd. had specifically addressed the classification of fasteners, including metal nuts, for automobiles. The AAAR concluded that the end use was relevant in this case, as the nuts were primarily used in the automobile industry. 4. Reliance on Previous Supreme Court Judgments for Classification: The Appellant heavily relied on the Supreme Court judgment in G.S. Auto International Ltd., which provided a clear test for classifying parts suitable for use with motor vehicles. The AAAR agreed with the Appellant, emphasizing that the nuts, being customized for automobile manufacturers, should be classified under 8708 99 00. The AAAR also referred to the Supreme Court judgment in Cast Metal Industries (P) Ltd. vs. Commissioner of C. Ex.-IV, Kolkata, which stated that the commercial identity of goods should determine their classification. Conclusion: The AAAR set aside the MAAR's ruling, holding that the threaded metal nuts, being customized for use in the automobile industry, should be classified under Tariff Item 8708 99 00. The appeal filed by the Department was allowed, and the classification under 7318 16 00 was rejected.
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