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2021 (8) TMI 190 - AAAR - GSTClassification of goods - rate of GST - Air Springs manufactured and supplied by the appellant - classifiable under Tariff heading 40169990 as opposed to Tariff heading 8708 9900 and attract GST at the rate of 18%? - HELD THAT - The product is composed of a rubber bellow which includes rubber and fabric composite, beadwire, griddle hoop, crimped top plate, piston and a bumper. The material composition is approximately 60% metal and 40% rubber. It is stated that the product works on the pneumatic system principle and the vulcanized rubber component gives the key functionality of the product, a critical component of the air suspension and lift axle systems in trucks, trailers and buses. Pre-GST, the appellant had classified this product under CETH 4016 and after the introduction of GST from 1st July 2017, they have started classifying under CTH 8708 for the purposes of GST. In the case at hand, it is stated that the Air Springs functions on the Pneumatic principles, i.e., the fluid used to balance is air . Air when pumped in and out of the bellow when connected in the system acts as a shock absorber and provides the suspension by its reaction force. The product, Air Spring assembly manufactured by the appellant consists of a bellow made of vulcanised soft rubber coated with fabric sheet sealed with bottom Bead Plate Top Bead Plate and also has Bead Wire, Girdle hoop, Piston and a Rubber Bumper. The fabric in the bellow wall restricts radial expansion so that the air pressure developed by the air flowing into the air spring causes it to expand axially and the rubber essentially provides the enclosure for the fluid, i.e., air. It has been opined by the Certified Chartered Engineer that the essential characteristics is derived from the vulcanised rubber. The commercial identity of the product is that the product is a critical component of the air suspension and lift axle system in trucks, trailers and buses as has been stated by the appellant. It is also pertinent to note that the product is suitable for use solely or primarily with the articles of Chapter 8701 to 8705. The appellant has also claimed that the HSN Explanatory Notes to Section XVII specifically excludes Springs from the scope of Parts and Accessories under CTH 8708. The relevant note seeks to exclude Parts of General use- springs (including leaf springs for vehicles) such goods of base metal fall in Chapter 73 to 76 and 78 to 81, and similar goods of Plastics fall in Chapter 39 . The product in hand is an air below the utility of which is to act as a Shock absorbent . It is not a spring classifiable under any of the Chapters mentioned, for the reason that the product is not an article of base metal or alloy of base metal - The product is made of fabric coated soft vulcanized rubber trimmed with the base plate and designed to give its full utility when used in axles of the Motor Vehicles to absorb shock and provide the required suspension and this claim is not valid. Thus, Air Springs manufactured by the appellant is classifiable under CTH 8708 as rightly held by the Lower Authority - appeal disposed off.
Issues Involved:
1. Classification of "Air Springs" under GST. 2. Applicability of Section Note 2(a) to Section XVII. 3. Consideration of HSN Explanatory Notes. 4. Consistency in classification among competing manufacturers. Detailed Analysis: Issue 1: Classification of "Air Springs" under GST The primary issue was whether "Air Springs" manufactured by the appellant should be classified under Tariff Heading 40169990 (articles of vulcanized rubber) or 8708 8000 (parts and accessories of motor vehicles). The appellant argued that the product, composed of approximately 60% metal and 40% rubber, derives its essential character from vulcanized rubber. The lower authority had classified the product under CTH 8708 8000. Issue 2: Applicability of Section Note 2(a) to Section XVII The appellant contended that as per Section Note 2(a) to Section XVII, articles of vulcanized rubber other than hard rubber are excluded from the scope of Chapter 87. The lower authority, however, did not accept this argument, stating that the product is not wholly made of vulcanized rubber and serves as a critical component of the air suspension system in motor vehicles, thus fitting under CTH 8708. Issue 3: Consideration of HSN Explanatory Notes The appellant argued that the HSN Explanatory Notes to Chapter 40 state that articles whose essential character derives from rubber should be classified under Chapter 40. The lower authority had not contradicted the Chartered Engineer's report which stated that the key functionality of the product is derived from vulcanized rubber. The appellant also cited Rule 3(b) of the General Rules for the Interpretation of Import Tariff, which supports classification based on the material that gives the essential character to composite goods. Issue 4: Consistency in classification among competing manufacturers The appellant highlighted that other manufacturers classify similar products under Tariff Heading 40169990, which attracts a GST rate of 18%. The appellant argued that there should not be different classifications for the same product among different manufacturers, as it leads to discrimination. Judgment Analysis: The appellate authority considered the submissions, the impugned order, and statutory provisions. It noted that the product is a critical component of the air suspension system for motor vehicles, composed of various materials including vulcanized rubber. The authority found that the product functions on pneumatic principles and the essential character is derived from vulcanized rubber, as per the Chartered Engineer's report. However, the authority emphasized that the functional utility, design, shape, and predominant usage of the product should be considered. It concluded that the product's primary use as a part of the suspension system in motor vehicles justifies its classification under CTH 8708. The authority also addressed the appellant's reliance on HSN Explanatory Notes and Rule 3(b), stating that while the product may derive its essential character from rubber, its specific design and use in motor vehicles necessitate classification under CTH 8708. Regarding Section Note 2(a) to Section XVII, the authority referred to the Supreme Court's interpretation, which clarified that only joints, washers, or the like made of any material or other articles of vulcanized rubber are excluded from being considered as parts. The product in question, being a specifically designed part for motor vehicles, does not fall under this exclusion. The authority also dismissed the appellant's argument about competing manufacturers, stating that the ruling applies only to the appellant and that no substantial evidence was provided to support the claim of different classifications for similar products. Ruling: The appellate authority upheld the lower authority's decision, classifying "Air Springs" under CTH 8708. The appeal was disposed of accordingly.
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