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2021 (12) TMI 573 - AAR - GSTClassification of goods - Pure supply of goods or not - rate of tax on supply of goods - parts of diesel marine engine or genset supplied or to be supplied by the Applicant to the Indian Navy - chargeable to 5% IGST or 2.5% CGST 2.5% SGST as 'parts of heading of 8902, 8904, 8905, 8906 and 8907'? - applicability of Sr. No. 252 of Notification No. 11/2017-Central Tax (Rate), dated 28 6-2017 - HELD THAT - The applicant referred to documents produced at Annexure B to Annexure F of the application, and referred to goods as mentioned therein. The applicant has produced the tender documents; Standard sourcing process; Purchase order raised by the customer i.e. Indian Navy; Chartered Engineer's certificate which specifies that the parts supplied by the Applicant to the Indian Navy are capable of being used as part of the ships or vessels and Declaration-Certificate from the Indian Navy certifying that goods supplied by the Applicant are for the exclusive use of the Indian Navy, and fall under entry at Sr. No. 252 of Notification No. 1/2017-C.T.(R), dated 28th June, 2017. By mainly and only placing the reliance on these documents, the applicant argued the case during final hearing. Hence, present decision shall apply to the situation or transaction where the said transaction is supported by such documents or similar documents and not to the any other transaction. The present ruling shall not apply to transactions where the documents similar to described above are absent. Parts of goods of headings 8901, 8902, 8904 to 8907 of any chapter are chargeable to CGST/SGST @ of 2.5% each. The Applicant has submitted that they supply parts of marine diesel engines and gensets to the Indian Navy, for application/ use in ships or vessels and the parts supplied by / to be supplied by the Applicant, includes numerous and diverse parts, intended for use in marine engines or gensets, of ships or vessels (of the Indian Navy) failing under Chapter No. 89 of Customs Tariff Act, 1975, typically under tariff heading number 8901,8902,8904,8905, 8906 and 8907 - in the case of IN RE M/S. MAN ENERGY SOLUTIONS INDIA PRIVATE LIMITED (FORMERLY KNOWN AS MAN DIESEL TURBO INDIA PRIVATE LIMITED) 2021 (8) TMI 49 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA , it was held that Marine Engines and parts thereof are essential requirements in manufacture of ship, vessels, boats, floating structures etc., falling under Tariff headings 8901, 8902, 8904, 8905, 8906, 8907, and therefore the said goods can be considered as parts of ship, boat, vessels etc. and accordingly, the said goods would be covered under Sr. No.252 of the above mentioned Notification. Thus, parts of diesel marine engine or genset supplied or to be supplied by the Applicant to the Indian Navy are chargeable to 5% IGST or 2.5% CGST 2.5% SGST as 'parts of heading of 8902, 8904,8905, 8906 and 8907' in terms of Sr. No. 252 of Notification No. 1/2017-Central Tax (Rate), dated 28 6-2017, only if they are used in diesel marine engine or genset which are further used in ships and vessels falling under chapter headings 8902, 8904, 8905, 8906 and 8907 of the GST Tariff.
Issues Involved:
1. Classification and applicable GST rate for parts of diesel marine engines or gensets supplied to the Indian Navy. 2. Determination of whether the supply of parts and repair services constitutes a "composite supply." Issue-wise Detailed Analysis: 1. Classification and Applicable GST Rate: Facts and Contentions by Applicant: - The applicant, M/s. Cummins India Limited, manufactures and supplies parts of marine diesel engines and gensets to the Indian Navy. - The parts supplied include items such as sea water pumps, gaskets, seals, thermostats, etc., intended for use in marine engines or gensets of ships or vessels classified under Chapter 89 of the Customs Tariff Act, 1975. - The applicant contends that these parts should be taxed at a concessional rate of 5% IGST or 2.5% CGST + 2.5% SGST as per Sr. No. 252 of Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017, which applies to "parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907." Applicant's Interpretation of Law: - The applicant argues that parts used in ships or vessels falling under headings 8901 to 8907 should be taxed at the concessional rate, regardless of their classification under other chapters of the GST Tariff. - The applicant supports this with various legal precedents, including judgments from the Hon’ble Supreme Court and Tribunals, which emphasize that parts used in specific machinery should be taxed based on the machinery's classification. Contentions by Jurisdictional Officer: - The officer argues that parts should be classified based on their specific description under the Harmonized System, not by their end use. - The officer contends that parts like fuel shutoff valves, thermostats, and gaskets are not exclusive to ships or vessels and can be used in other machinery, thus should be classified under their respective headings (e.g., Chapter 84 for machinery parts) and taxed at higher rates (e.g., 18% IGST). Observations and Findings: - The Authority examined the documents provided by the applicant, including tender documents, purchase orders, and certificates from the Indian Navy, which confirm that the parts are for exclusive use in ships or vessels of the Indian Navy. - The Authority referred to a previous ruling in the case of M/s MAN Energy Solutions India Private Limited, where it was held that marine engines and their parts used in manufacturing ships or vessels falling under Chapter 89 are eligible for the concessional rate of 5% GST. - The Authority concluded that the parts supplied by the applicant to the Indian Navy, supported by the relevant documents, qualify for the concessional rate of 5% GST under Sr. No. 252 of Notification No. 1/2017-C.T. (Rate). Order: - The parts of diesel marine engines or gensets supplied by the applicant to the Indian Navy are chargeable to 5% IGST or 2.5% CGST + 2.5% SGST, provided they are used in ships and vessels falling under chapter headings 8902, 8904, 8905, 8906, and 8907 of the GST Tariff. 2. Determination of Composite Supply: Contentions by Jurisdictional Officer: - The officer contends that the supply of parts and repair services by the applicant to ONGC does not constitute a "composite supply" as defined under Section 2(30) of the CGST Act, 2017. - The officer argues that the supply of parts and services can be provided independently, and thus, should be classified as "mixed supply" under Section 2(74) of the CGST Act, 2017. Observations and Findings: - The Authority did not address this issue in detail as the applicant only sought a ruling on the GST rate applicable to parts supplied to the Indian Navy. Conclusion: - The ruling primarily focused on the classification and applicable GST rate for parts supplied to the Indian Navy, affirming the concessional rate of 5% GST, provided the parts are used in ships or vessels classified under specified headings of Chapter 89. The issue of composite supply was not conclusively addressed in this ruling.
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