2021 (1) TMI 369 - AAR - GST

Classification of goods - applicable rate of tax - Hybrid Hydraulic Servo System which is prepared by assembling various parts and is used as part in different type of machines - whether the said product falls under Chapter Heading 8479 or any other suitable Chapter Heading of the Customs Tariff Act, 1975? - HELD THAT - On the basis of the classification of the said product, it will be leviable to appropriate rate of Goods and Services Tax prescribed under Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017 issued under the Central Goods and Services Tax Act, 2017 (herein after referred to as the CGST Act, 2017 ) and corresponding Notification issued under the Gujarat Goods and Services Tax Act, 2017 (hereinafter referred to as the GGST Act, 2017 ) or the Integrated Goods and Services Tax Act, 2017 - From Note 2 of Section XVI of the Customs Tariff Act, 1975 and General Note of Parts of Section XVI of Harmonised System of Nomenclature, it can be seen that parts suitable for use of any particular machine or class of machine would be classified in the same heading of the particular machine or class of machine. Further, parts which can be used as such and are not suitable for any particular machine or class of machine and may be common to a number of machine falling in different headings are to be classified in heading 84.87 (if not electrical) or in heading 85.48 (if electrical). The applicant has contended that the product viz. Hybrid Hydraulic Servo System may merit classification under 8479 with description Machines and mechanical appliances having individual functions, not specified or included elsewhere in this Chapter other than Composting Machines - It is found that Tariff Heading 8479 of custom Tariff Act, 1975 covers the Machine and Mechanical appliances having individual functions, not specified or included elsewhere in this chapter. Tariff Heading 8479 as per Harmonised System of Nomenclature. The applicant has submitted the catalogue of the product, wherein design and scientific parameter of manufacture of the product is given. However, they did not mention the usage of the said product in the different type of machines or class of machines. Further, it is seen that applicant in the application has submitted that, Hybrid Hydraulic Servo System as such Servo System or Drive give right solution for Servo pump control, providing precise pressure and flow control and avoiding the energy waste thus creating added value for customers in terms of energy efficiency and higher mould quality . Hence, it appears that the product does not have any individual functions or it can be stated that the said product cannot perform itself which is the prime condition for classification under Heading 8479 of Custom Tariff Act, 1965. Therefore, the said product cannot be classified in the Chapter heading of 8479 of Customs Tariff Act, 1975. Thus, the product viz. Hybrid Hydraulic Servo System merits classification in terms of Note 2 of Section XVI of the Customs Tariff Act, 1975 and General Note of Parts of Section XVI of Harmonised System of Nomenclature. Accordingly, the rate of GST of the said product would be determined according to the classification of the product.

Summary

Issues Involved:
1. Classification of the Hybrid Hydraulic Servo System.
2. Applicable tax rate on the Hybrid Hydraulic Servo System.

Detailed Analysis:

Classification of the Hybrid Hydraulic Servo System:
The applicant, M/s. Dyna Automation Private Limited, sought an advance ruling on the classification of their product, the Hybrid Hydraulic Servo System, which is used as part of various machines like Plastic Injection Moulding Machines, Rubber Injection Moulding Machines, and machine tools in hydraulic presses, among others. The applicant contended that the Hybrid Hydraulic Servo System should be classified under Tariff Item 84799090 of the First Schedule to the Customs Tariff Act, 1975, as it is used as a part of machines or machinery.

The Authority for Advance Ruling (AAR) examined the provisions of both the CGST Act and the GGST Act, noting that the provisions are the same except for certain specific provisions. The AAR considered the relevant facts and the applicant's interpretation of the law. They referred to Note 2 of Section XVI of the Customs Tariff Act, 1975, which provides rules for classifying parts of machines. According to these rules, parts suitable for use solely or principally with a particular kind of machine are to be classified with the machines of that kind.

The AAR also referred to the General Note of Parts of Section XVI of the Harmonised System of Nomenclature (HSN), which states that parts suitable for use solely or principally with particular machines are classified in the same heading as those machines. The applicant's product, Hybrid Hydraulic Servo System, is used in various machines to provide precise pressure and flow control, thus avoiding energy waste. However, the AAR noted that the product does not have individual functions and cannot perform its function independently, which is a prime condition for classification under Heading 8479 of the Customs Tariff Act, 1975.

Applicable Tax Rate on the Hybrid Hydraulic Servo System:
The applicant also sought an advance ruling on the applicable tax rate for the Hybrid Hydraulic Servo System. The AAR referred to Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017, which prescribes the GST rates based on the classification of the product. The AAR concluded that the GST rate would be determined according to the classification of the Hybrid Hydraulic Servo System under the Customs Tariff Act, 1975.

Ruling:
1. Classification: The Hybrid Hydraulic Servo System merits classification in terms of Note 2 of Section XVI of the Customs Tariff Act, 1975, and the General Note of Parts of Section XVI of the Harmonised System of Nomenclature.
2. Applicable Tax Rate: The GST rate would be leviable on the basis of the classification of the product, as specified under Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017.