2022 (11) TMI 388 - AAAR - GST

Classification of goods - CNG dispenser - classifiable under Chapter Heading 84.13 placed at SI. No. 117, Schedule IV of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 or not - whether the impugned product can be construed as pump as provided under the relevant entry of the Notification No. 01/2017-C.T.(Rate) dated 28.06.2017? - HELD THAT - It is observed that the term pump is neither defined under the GST law including Acts, rules, or notification issued thereunder, nor under the Customs Tariff Act, 1975, which has been referred to in the notification no. 01/2017-C.T. (Rate) dated 28.06.2017, for the purpose of determining HSN of the goods based on the descriptions contained in the Chapters of the first schedule to the Customs Tariff Act, 1975. It is evident that for any device or apparatus to qualify for the pump, it should transfer or deliver liquid or gases by using pressure or suction or both. On perusal of the descriptions of the impugned product, CNG Dispenser, as submitted by the Appellant, it is noticed that the impugned product does not use pressure or suction to transfer the gas from filling station to fuel tank of the vehicle. It is further observed that it is the difference between the pressures of the gas in the filling station and that in the fuel tank of the vehicle that actuate the flow of gas from the filling station to the fuel tank. That is, the pressure in the filling station is higher than that in the fuel tank. Since it is trite that the gas flows from high pressure to low pressure, accordingly, the gas in the filling station starts flowing into the fuel tank of the vehicle. The pump covered under Heading 84.13 is an instrument that is used for raising and/or displacing volumes of liquid from one place to another, using external forces, which may be in the nature of pressure or suction. Since the impugned product, CNG Dispenser, does not use any external force driven by any electrical or mechanical devices, the same cannot be considered as pump in terms of its meaning provided under the explanatory note - Since it has been established now that the impugned product is not a pump, which is the primary clause of the entry of the chapter heading 84.13, the same will not be classified under Chapter Heading 84.13. Since as per the submissions made by the Appellant regarding components of the impugned device which includes the components like pressure sensor, controller unit, which automatically control and regulate the pressure of CNG being dispensed into the fuel tank, it is observed that the impugned device would merit classification under the Chapter Heading 90.32 placed at SI. No. 422 of the Schedule III to the Notification No. 01/2017-C.T.(Rate) dated 28.06.2017.

Summary

Issues Involved:
1. Classification of CNG Dispenser under GST.
2. Applicability of Heading 84.13 for pumps.
3. Applicability of Heading 90.32 for automatic regulating or controlling instruments.
4. Interpretation of relevant GST notifications and tariff headings.
5. Condonation of delay in filing the appeal.

Analysis of Judgment:

1. Classification of CNG Dispenser under GST:
The primary issue is whether the CNG Dispenser should be classified under Heading 84.13 (pumps) or Heading 90.32 (automatic regulating or controlling instruments). The Appellant contends that the CNG Dispenser should be classified under Heading 90.32 as it does not perform any pumping function but rather controls and regulates the flow and pressure of CNG.

2. Applicability of Heading 84.13 for Pumps:
The MAAR initially classified the CNG Dispenser under Heading 84.13, stating that it functions as a pump by causing CNG to flow from the filling station to the vehicle's tank. The Appellant argued that this classification is incorrect as the CNG Dispenser does not use any external force to move the gas; instead, it relies on the pressure differential between the storage tank and the vehicle tank.

The dictionary definitions and explanatory notes to Chapter 84 were examined, which indicate that a pump must use pressure or suction to transfer liquids or gases. Since the CNG Dispenser does not use such mechanisms, it does not qualify as a pump under Heading 84.13.

3. Applicability of Heading 90.32 for Automatic Regulating or Controlling Instruments:
The Appellant argued that the CNG Dispenser should be classified under Heading 90.32 because it automatically controls and regulates the flow and pressure of CNG. The components of the CNG Dispenser, such as the mass flow meter, pressure sensor, and controller unit, meet the criteria for automatic regulating or controlling instruments as outlined in Chapter Note 7 to Chapter 90 and the Explanatory Notes.

The Explanatory Notes to Heading 90.32 specify that such instruments must measure variables (e.g., pressure), compare them to desired values, and actuate control devices to maintain these values. The CNG Dispenser satisfies these requirements, as it measures the mass and pressure of CNG and automatically stops the flow when preset values are reached.

4. Interpretation of Relevant GST Notifications and Tariff Headings:
The relevant parts of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 were reviewed. The notification adopts the principles of the General Rules for Interpretation of the Customs Tariff. For an item to be classified under Heading 84.13, it must be a pump used in filling stations or garages. Since the CNG Dispenser does not meet the definition of a pump, it cannot be classified under this heading.

The Appellant's contention that the CNG Dispenser should be classified under Heading 90.32, as it is an automatic regulating or controlling instrument, was found to be valid based on the detailed analysis of the components and functions of the CNG Dispenser.

5. Condonation of Delay in Filing the Appeal:
The Appellant filed the appeal within the statutory period of limitation, considering the Supreme Court's order extending the limitation period due to COVID-19. Alternatively, the Appellant requested condonation of delay citing the surge in COVID-19 cases and the bona fide belief that the Supreme Court's order applied to their case. The MAAAR accepted the appeal as being filed within the statutory period.

Conclusion:
The MAAAR set aside the impugned Advance Ruling and held that the CNG Dispenser is correctly classifiable under Heading 90.32 and covered by SI. No. 422, Schedule III of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017. The appeal filed by the Appellant was allowed.