2019 (11) TMI 158 - AAR - GST

Rate of tax - supply of Kapton Polyimide Film Adhesive Tape to Indian Railways for use in its railway locomotives - HELD THAT - The goods under Chapter 85 are not covered under Chapter 86. Even by the admission of the applicant in their catalogue, the pressure sensitive polymide film adhesive insulation tape find use in a wide range of industries and are not solely for use by Railways in their locomotives. Therefore by virtue of Note 3 alone the product is not liable to be classified under Heading 8607. Further, the pressure sensitive polymide film adhesive insulation tape is used in the locomotive for insulation and it can also be used in other industries for insulation. Hence their primary function is as insulators and hence they are not parts of the locomotives. Thus, rate of tax on supply of Kapton Polyimide Film Adhesive Tape to Indian Railways for use in its railway locomotives shall be the rate of tax as applicable to goods covered under the heading 8546-Electrical Insulators of any material and therefore the rate is 18%.

Summary

Issues:
- Classification of Kapton Polyimide Adhesive Tape for tax rate determination.

Analysis:
1. Application for Advance Ruling: M/s. Intek Tapes Private Limited sought clarification on the applicable tax rate for supplying Kapton Polyimide Adhesive Tape to Indian Railways. The applicant classified the product under electrical insulators attracting 18% GST but argued it should be considered under parts of railway locomotives attracting 5% GST.

2. Arguments Presented: The applicant contended that the adhesive tape, used as an insulator in railway locomotives, should be classified under the specific heading 8607 for parts of railway locomotives instead of the general heading 8546 for electrical insulators. They relied on the rule of interpretation favoring specific descriptions over general categories.

3. Product Utility: The Kapton Polyimide Adhesive Tape imported by the applicant is used in various industries, including railways, for insulation purposes due to its high-temperature tolerance and dielectric strength. The tape serves as an insulator in armature coil winding for traction motors used in electric vehicles and other electrical systems.

4. Legal Precedents: The applicant referenced legal cases where similar products were classified under heading 8546 for electrical insulators, emphasizing the specificity and appropriateness of this classification. However, the tribunal and court decisions highlighted the classification under heading 8546 as more suitable for such goods.

5. Authority's Decision: After considering all submissions and relevant provisions, the Authority ruled that the Kapton Polyimide Adhesive Tape supplied to Indian Railways should be taxed at 18% under the heading 8546 for electrical insulators. The decision was based on the primary function of the tape as an insulator used in various industries, not solely in railway locomotives.

6. Interpretation of Tariff Headings: The Authority analyzed the relevant section notes and rules of interpretation under the Customs Tariff Act to determine the appropriate classification. It was concluded that the tape's use in multiple industries and its primary function as an insulator did not warrant classification as parts of railway locomotives under heading 8607.

This detailed analysis of the judgment provides insights into the classification of the Kapton Polyimide Adhesive Tape for tax rate determination, highlighting the legal arguments, product utility, precedents, and the Authority's decision based on tariff headings interpretation.