2022 (7) TMI 180 - AAR - GST

Classification of goods - three-wheeled electrically operated vehicle, commonly known as e-rickshaw, when sold without battery - classifiable as an electrically operated motor vehicle under HSN 8703 or not - rate of tax - HELD THAT - Chapter 87 of the First Schedule to the Customs Tariff Act,1975 classifies Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof - Furthermore, Other vehicles, with only electric motor for propulsion under Tariff item 8703 80 covers Three-wheeled vehicles having HSN Code 8703 80 40. It appears that e-rickshaw being a three-wheeled electrically operated vehicle would be classifiable under tariff item 8703 80 40. But the issue in hand is not to decide the HSN code of e-rickshaw rather the issue, as it is found, is confined to decide whether fitting of battery is a pre-condition or not so as to qualify an e-rickshaw as an electrically operated vehicle. In the present case, the power of a battery operated vehicle is solely generated from the rechargeable battery since it doesn t have any other source of propulsion. Electrically operated vehicles as it has been explained in serial number 242A of the Notification No. 12/2019-Central Tax (Rate) dated 31.07.2019 requires a single factum that the vehicles will run solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such road vehicles. There is not an iota of doubt that unless the battery is fitted to an e-rickshaw, it will not be capable to run. But the question arises that when an e-rickshaw, having a motor fitted on it, is supplied without battery, does it lose its original character and can be termed as chassis . Thus, when a vehicle which is solely operational on battery power is supplied without battery, the same will qualify as a supply of electrically operated vehicle and therefore shall be classifiable under tariff item 8703.

Issues Involved:
1. Classification of a three-wheeled electrically operated vehicle (e-rickshaw) without battery under HSN 8703.
2. Determination of the applicable tax rate if the classification is negative.

Detailed Analysis:

Issue 1: Classification of a three-wheeled electrically operated vehicle (e-rickshaw) without battery under HSN 8703

Applicant's Submission:

1. Definition of E-Rickshaw and Battery Operated Vehicle:
- As per the Motor Vehicles Act, 1988, an e-rickshaw is a special purpose battery-powered vehicle with three wheels, not exceeding 4000 watts, for carrying goods or passengers.
- As per Rule 2(u) of the Central Motor Vehicles Rules, 1989, a "Battery Operated Vehicle" is powered exclusively by an electric motor whose traction energy is supplied exclusively by traction battery installed in the vehicle.

2. Analysis of Definitions:
- The definitions do not mandate that the battery must be supplied by the manufacturer. The vehicle should be capable of being powered by a battery installed in the vehicle.
- An electric motor converts electrical energy from traction batteries into mechanical energy for vehicle propulsion.

3. Classification Principles under GST Law:
- Chapter 87 of the Customs Tariff Act, 1975, covers vehicles other than railway or tramway rolling-stock.
- Sub-heading 870380 under Chapter 8703 includes "Other vehicles with only electric motor for propulsion," specifically three-wheeled vehicles under tariff item 87038040.
- The rate notification under GST law specifies different tax rates for vehicles under Chapter 87, with electrically operated vehicles, including e-rickshaws, attracting a 5% GST rate from 01.08.2019.

4. Applicant's Argument:
- The e-rickshaw intended for manufacture uses only an electric motor for propulsion.
- The absence of a battery at the time of supply does not alter the vehicle's classification as an electrically operated vehicle.
- Rule 122 of CMVR, 1989, requires the embossment of the motor number, not the engine number, for battery-operated vehicles.
- The specific description of electrically operated vehicles under Entry No. 242A in Schedule-I (5% GST) should be preferred over a general description in Schedule-IV (28% GST).

Revenue's Submission:

1. Battery Installation Requirement:
- As per Rule 2(u) of the Central Motor Vehicles Rules, 1989, a battery-operated vehicle must have a battery installed to operate.
- An e-rickshaw without a battery is considered unfinished goods and should be classified under HSN CODE 87060031, relating to chassis fitted with engines.

Authority's Observations and Findings:

1. Classification under HSN 8703:
- Chapter 87 classifies vehicles other than railway or tramway rolling-stock, with sub-heading 870380 covering vehicles with only electric motor for propulsion, including three-wheeled vehicles under tariff item 87038040.
- The issue is whether the absence of a battery disqualifies the e-rickshaw from being classified as an electrically operated vehicle.

2. Analysis of Electrically Operated Vehicles:
- Electrically operated vehicles run solely on electrical energy derived from external sources or batteries fitted to the vehicle.
- The main components of a battery-operated vehicle include an electric motor, inverter, battery, control module, and drive train.
- The power for a battery-operated vehicle is generated solely from the rechargeable battery.

3. Ruling:
- The fitting of a battery is not a pre-condition for classifying a vehicle as an electrically operated vehicle.
- The Orissa Authority for Advance Ruling's judgment in the case of Anjali Enterprises supports this view, holding that a vehicle supplied without a battery still qualifies as a battery-powered road vehicle.
- The three-wheeled e-rickshaw without a battery is classifiable under tariff item 8703 80 40 as an electrically operated motor vehicle.

Conclusion:
A three-wheeled electrically operated vehicle, commonly known as an e-rickshaw, when supplied without a battery, is classifiable as an "electrically operated motor vehicle" under HSN 8703.

Ruling:
A three-wheeled electrically operated vehicle, commonly known as e-rickshaw, when supplied without battery, is classifiable as an "electrically operated motor vehicle" under HSN 8703.

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