2022 (9) TMI 205 - AAAR - GST

Classification of goods - applicable rate of tax - Agricultural manually hand operated Seed dressing, Coating and Treating drum - to be classified under HSN 8201 or under HSN 8437? - HELD THAT - The classification of goods under GST regime has to be done in accordance with the Customs Tariff Act, 1975, which in turn is based on Harmonized System of Nomenclature, popularly known as HSN . The General Rules of Interpretation, Section notes and Chapter notes as specified under the Customs Tariff Act, 1975 are also applicable for deciding classification of goods under the GST regime. However, once an item is classified in accordance with the Customs Tariff Act, 1975, the rate of tax applicable would be arrived at on the basis of notifications issued under GST by the respective Governments. On perusal of Chapter Heading 8201 and Note 1 to Chapter 82, it is clear that this heading includes tools which are used in hand like shovels, forks, pruners etc having blade, working edge and working surface and in view of above, appellant products viz. manually operated seed dressing drum, therefore by no stretch of imagination, can be said to be classified under Heading 8201. From the explanatory notes to HSN 8436, which explains the scope of the entry, it is found that, other agricultural machinery includes Seed dusting machines consisting of a revolving drum in which the seeds are coated with insecticidal or fungicidal powders - there is thus no doubt that the product in question is covered under heading 8436. Moreover heading 8437 specifically excludes farm-type machinery , further strengthening the classification of subject goods under heading 8436. The appellant s product viz. manually hand operated seed dressing, coating and treating drum is covered within the description provided under the HSN Code 8436. The appellant s product in its use as well as its function is as described under the said HSN code - The appellant s product viz. manually hand operated seed dressing, coating and treating drum is covered within the description provided under the HSN Code 8436. The appellant s product in its use as well as its function is as described under the said HSN code - the GAAR has correctly classified the product in question under Chapter Heading 8436 and tariff item 8436 80 90. Appeal dismissed.

Summary

Issues:
Classification of manually operated seed dressing drum under HSN code, Applicable tax rate under GST.

Analysis:
1. Classification of Product: The appellant contended that their manually operated seed dressing drum should be classified under HSN 8201 or 8437. However, the GAAR ruled that the product falls under HSN 8436 tariff item 84368090, attracting 12% GST. The appellant argued that their product does not fit under HSN 8436 as it lacks mechanical or thermal equipment, unlike other machinery in the same category. They also highlighted the manual operation of their product, emphasizing its use in agriculture for seed treatment.

2. Customs Tariff Act and HSN: The judgment emphasized that goods' classification under GST follows the Customs Tariff Act, 1975, based on the Harmonized System of Nomenclature (HSN). Chapter 82 includes hand tools like shovels and pruners, while Chapter 84 covers machinery used in specific industries. The appellant's product, a manually operated seed dressing drum, was found unsuitable for classification under Chapter 82 or 8437 due to its nature and operation, leading to its classification under Chapter 84, specifically 8436.

3. Explanatory Notes and Ruling Justification: The judgment detailed the explanatory notes of HSN 8436, highlighting the inclusion of agricultural machinery like seed dusting machines. The appellant's product, serving the purpose of seed treatment in agriculture, aligns with the description under HSN 8436. The ruling justified the classification under Chapter Heading 8436 and tariff item 84368090, emphasizing the product's function, use, and alignment with the specified HSN code.

4. Decision and Conclusion: After thorough consideration of submissions, the judgment upheld the GAAR's ruling, rejecting the appellant's appeal. It affirmed the classification of the manually operated seed dressing drum under HSN 8436 and tariff item 84368090, subject to 12% GST. The decision was based on the product's characteristics, operational nature, and its alignment with the specified HSN code criteria.

By providing a detailed analysis of the issues involved, the judgment clarified the classification and tax implications of the appellant's product, ensuring adherence to the Customs Tariff Act and HSN for accurate categorization under the GST regime.