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TMI Blog2018 (9) TMI 1035X X X X Extracts X X X X X X X X Extracts X X X X ..... are used in the marine industry. The engines used for the main propulsion or turning the propellers of the normal ships are usually slow speed 2-stroke engines while those used for providing auxiliary power are usually 4-stroke high speed diesel engines. The engine itself is made up of several components such as the crankshaft, bedplate, pistons, liner, etc. - a very specific description and mention of such engines is made under Heading 8408 of the GST Tariff and in view of the same it is very clear that MDEs are classifiable under CH 8408 of the GST Tariff. Under Sr. No. 115 of Schedule IV of Notification No. 1/2017 - Central Tax (Rate) dated 28th June 2017, the tax rate for MDEs is 14% each of CGST and SGST. Whether the classification of Gear Box falling under TSH 8483 of Customs Tariff Act, 1975 as adopted to GST attracting 28% of IGST (14% CGST + 14% SGST) as per Schedule IV (Sr. No. 135) of Notification No. 01/2017 - Central (GST (Rate) dated 28.06.2017 is correct or not? - Held that:- In view of the fact that a very specific description and mention of such gear boxes is made under Heading 8483 of the GST Tariff, we find that Gear Boxes are classifiable under Heading 8483 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 905, 8906 and 8907 of the GST Tariff Act, 2017. However if the said goods are used for some other purpose, then the tax rate as applicable to the TSH under GST Tariff would apply. - GST-ARA-44/2017-18/B-51 - - - Dated:- 15-6-2018 - SHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, MEMBER PROCEEDINGS (under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act ] by Shandong Heavy Industry India Pvt. Ltd, the applicant, seeking an advance ruling in respect of the following questions. A. Whether the classification of Marine Diesel Engine falling under TSH 8408 of Customs Tariff Act, 1975 as adopted to GST attracting of IGST (14% CGST + 14% SGST) as per Schedule IV (Sr. No. 115) of Notification No. 01/2017 - Central Tax (Rate) dated 28.06.2017 is correct or not? B. Whether the classification of Gear Box falling under TSH 8483 of Customs Tariff Act, 1975 as adopted to GST attracting 28% of IGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exure - A collectively). 2. The Applicant is also engaged in importing and Supply of various models of Gear Boxes including Trans capacity KW FD135, FD120 and FD 300 etc.(The detailed specifications of the said gear boxes are given in the Service Manuals. The relevant copies from the said Service Manuals are enclosed herewith and marked as Annexure - B ). 3. The supply of Diesel Engine made is of two types i.e. assembly of Diesel Engine by using various imported parts and import the diesel engine as such (The copy of process flow diagram of Marine Diesel Engines and the copies Of Commercial Invoice issued by M/s. Shandong Weichai import and Export Corporation, Shandong, China to the applicant along with BOE are enclosed herewith and marked as Annexure - C and Annexure - D respectively). 4. The supply of Gear boxes is made by importing the same and never assembled by the applicant in India (The copies Of Commercial Invoice issued by M/s. Shandong Weichai import and Export Corporation, Shandong, China to the applicant along with BOE are enclosed herewith and marked as Annexure - E ). 5. The applicant made supplies of marine engines and the gear boxes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hafts (Including cam shafts and crank shafts) and cranks; bearing housings and plain shaft bearings; gears and gearing; ball or roller screws; gear boxes and other speed changers, including torque converters; flywheels and pulleys, including pulley blocks; clutches and shaft couplings (including universal joints) 10. Notification No. 1/2017 - Central Tax (Rate) dated 28 th June, 2017, amended from time to time, specifies CGST rate schedules and classification of abovementioned goods under different Schedules. Similarly, Notification No. 1/2017 - Integrated Tax (Rate) dated 28th June, 2017 is also issued to specify IGST rate Schedules. The Schedules applicable to the applicant as per the classification of goods as mentioned in Para 9 (supra) attracting tax rate is as follows: Schedule No. Sr.No. Chapter/Heading/Sub-heading/Tariff item Description of goods CGST/SGST Rate IGST Rate IV 115 8408 Compression-ignition internal combustion piston engines (diesel or semi-diesel engines) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicable to the above-mentioned goods as per the classification of goods as mentioned in Para 11 ( supra ) attracting tax rate is as follows: Schedule Sr.No. Chapter/Heading Sub-heading/Tariff item Description of goods CGST/SGST Rate IGST Rate I 246 8901 Cruise-ships, excursion boats, ferry-boats, cargo-ships, barges and similar vessels for the transport of persons or goods 2.5% 5% I 247 8902 Fishing vessels; factory ships and other vessels for processing or preserving fishery products 2.5% 5% I 248 8904 Tugs and pusher crafts 2.5% 5% I 249 8905 Light-vessels, fire-floats, dredgers, floating cranes and other vessels the navigability of which is subsidiary to their main function; floating docks; floating or submersible d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which Advance Ruling is sought. Brief note regarding prior to GST regime a. The applicant is engaged in assembling of Marine Diesel Engine prior to 01.07.2017 also, however, never claimed General Exemptions of Central Excise Tariff Act, 1985 which read as under Sr.No. Chapter or heading Description Rate Condition 305A 89 or any other chapter Capital goods and spares thereof, raw materials, parts, material handling equipment and consumables, for repairs of ocean-going vessels by a ship repair unit. NIL Where such use is elsewhere than in the factory of production, the exemption shall be allowed if the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, is followed. b. Likewise, while importing the Marine Diesel Engines and Gear Boxes prior to 1.7.2017, the applicant never claimed General Exemptions of Customs Tariff Act, 1975 which read as under:- Sr.No Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... General Exemptions for import duty also under General Exemptions issued under Customs Tariff Act, 1975. 2. Applicant s views and submissions (GST Regime) a. In the GST regime, there are two separate Schedules (I and IV) given under Notification No. 1/2017 - C.T. (Rate) dated 28/06/2017. The relevant entries related to the applicant are reproduced below:- Schedule I Sr.No. Chapter/Heading Description of goods Rate of GST (CGST+SGST) 246 8901 Cruise ships, excursion boats, ferry-boats, cargo ships, barges and similar vessels for the transport of persons or goods 5% 247 8902 Fishing vessels; factory ships and other vessels for processing or preserving fishery products 5% 248 8904 Tugs and pusher craft 5% 249 8905 Light-vessels, fire-floats, dredgers, floating cranes and other vessels the navigability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 408, 8409 and 8483 of Central Excise Tariff Act, 1985 as adopted to GST in the goods falling under TSH 8902, 8904, 8905, 8906, and 8907 (Sr. Nos. 246 to 251 of Schedule I). 4. The applicant, till date, has not supplied Marine Diesel Engines, Gear Boxes falling under TSH 8408, 8409 and 8483 under Sr. No. 252 of Schedule I. The applicant, till date, has made all the supplies after 01.07.2017 by charging 28% IGST (14% CGST + 14% SGST) as per Sr. No. 115, 116 and 135 of Schedule IV of Notification No. 01/2017 - C. T. (Rate) dated 28.06.2017. (Refer Para 10 above). 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- 1. M/s. Shandong Heavy Industry India Pvt. Ltd., falls under the Jurisdiction of Range: IV, Division: II (Pimpri), Central GST, Pune-l Commissionerate. In the pre-GST regime, the taxpayer had obtained registration under Central Excise, Service Tax as well as Importer Trader/Dealer. Their registration Nos. being AAPCS5350REM001, AAPCS5350RSD001, AAPCS5350RE1004, AAPCS5350RED003 respectively. The taxpayer has migrated in the GST regime with GSTIN 27AAPCS5350R1ZF. The taxpayer is engaged in importing di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erving fishery products 8904 Tugs and pusher crafts 8905 Light-vessels, fire-floats, dredgers, floating cranes and other vessels the navigability of which is subsidiary to their main function; floating docks; floating or submersible drilling or production platforms 8906 Other vessels, including warships and lifeboats other than rowing boats 8907 Other floating structures (for example, rafts, tanks, coffer-dams, landing-stages, buoys and beacons) Further, they stated that the Notification No. 1/2017 - Central GST (Rate), dated 28th June, 2017, amended from time to time, specifies CGST rate schedules and classification of above-mentioned goods under different Schedules. Similarly, Notification No. 1/2017 - Integrated Tax (Rate) dated 28th June, 2017 is also issued to specify IGST rate Schedules. The Schedules applicable to the above-mentioned goods and attracting tax rate is as follows: Schedule No. Sr. No. Chapter/Heading/Sub-heading/Tariff item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s requested for the Advance Ruling to know the correct interpretation and applicability of Sr. No. 252 as mentioned above. However, the taxpayer as on date have never supplied the goods under Sr. No. 252 by charging of 5% IGST or 2.5% CGSI and SGST each and also did not take any benefit of exemption before GST, 7. The taxpayer has raised questions on the following points: D. Whether the classification of Marine Diesel Engine falling under TSH 8408 of Customs Tariff Act, 1975 as adopted to GST attracting 28% of IGST (14% CGST + 14% SGST) as per Schedule IV (Sr. No. 115) of Notification No. 01/2017 - Central GST (Rate) dated is correct or not? E. Whether the classification of Gear Box falling under TSH 8483 of Customs Tariff Act, 1975 as adopted to GST attracting 28% of IGST (14% CGST + 14% SGST) as per Schedule IV (Sr. No. 135) of Notification No. 01/2017 - Central (GST (Rate) dated 28.06.2017 is correct or not? F. Whether the goods falling under TSH 8408, 8409 and 8483 of Customs Tariff Act, 1975 as adopted to GST can be treated as parts of heading of 8902, 8904, 8905, 8906 and 8907 attracting 5% of IGST (2.5% CGST+ 2.5% SGST) as per Schedule I (Sr. No. 252 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more heading each refer to part only of the materials or substances contained in mixed or composite goods or to part only the items in set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if consisted of the material or component which gives them their essential character, insofar as this criterion is applicable, (c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. Explanation : Rule 3(a) states that where 2 or more Headings seem to apply, the one which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ines. Therefore, it is wrong to say that gear box falls under chapter 89. This should be rightly classifiable under chapter 8483. The applicant is importing the marine gear boxes and such goods are assessed to chapter 8483 under Customs Act. The applicant himself has admitted this and has given copies of BoEs showing gear boxes assessed under Chapter 8483. 13. As regards to classification of IC engines, the chapter note 7 to chapter 84 of GST Act is referred once again. The IC engine is a multipurpose machine which can be used in motor vehicles, gensets, compressors, etc. That doesn t mean it becomes part of such motor vehicles, genset, or compressor. In applicant s case it is used for vessels under chapter 89, that doesn t take away basic character of IC engine, hence to be classified under Chapter 8408. The applicant in his own admission has submitted copies of B/Es wherein IC engines are classified under 8408 under Customs Tariff. Therefore it is strongly felt that the correct classification of IC engine to be under Chapter 8408. Accordingly the gear box which is bearing general description and specifically classified under chapter 84834000 of GST Tariff cannot be classi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Engines, Engines of a kind used for the propulsion of vehicles of Chapter 87 and the third as Other Engines. They can further be classified on the basis of operations viz. 2-stroke, 4-stroke, single acting, double acting and finally, on the basis of Cylinder arrangement namely, horizontal, vertical, radial, etc. DMEs are those engines which are used in marine vehicles namely ships, submarines, etc. Both 2-stroke as well as 4-stroke engines are used in the marine industry. The engines used for the main propulsion or turning the propellers of the normal ships are usually slow speed 2-stroke engines while those used for providing auxiliary power are usually 4-stroke high speed diesel engines. The engine itself is made up of several components such as the crankshaft, bedplate, pistons, liner, etc. Chapter/Heading/Sub-heading /Tariff item Description of goods 8408 Compression-ignition internal combustion piston engines (diesel or semi-diesel engines 8408 10 Marine propulsion engines Compression-ignition internal combustion piston engines (diesel or sem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3)---Whether the goods falling under TSH 8408, 8409 and 8483 of Customs Tariff Act, 1975 as adopted to GST can be treated as parts of heading of 8902, 8904, 8905, 8906 and 8907 attracting 5% of IGST (2.5% CGST+ 2.5% SGST) as per Schedule I (Sr. No. 252) of Notification No. 01/2017 - Central GST (Rate) dated 28.06.2017 or not? we find that Sr.No. 252 of Notification No. 01/2017 - Central GST (Rate) dated 28.06.2017 which is as follows:- Schedule No. Sr. No. Chapter/Heading/Sub-heading/ Tariff item Description of goods CGST/SGST Rate IGST Rate I 252 Any Chapter Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907 2.5% 5% From a reading of the same it is very clear that parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907 are chargeable to CGST and SGST @ of 2.5% each. We now reproduce the description of headings 8901, 8902, 8904, 8905, 8906 and 8907 as under:- Chapter/Heading/Sub-heading/Tariff item De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill be deemed to be Parts of vessels falling under heading 8901, 8902, 8904, 8905, 8906 and 8907, if they are used in goods covered under Tariff Headings 8901, 8902, 8904, 8905, 8906 and 8907 and are not diverted and used for other purposes somewhere else. We are in agreement with the contention of the applicant that the MDEs and Gear Boxes supplied by them for use in goods falling under heading 8901, 8902, 8904, 8905, 8906 and 8907 will be taxable @ 5% IGST (2.5% CGST and SGST each). However it is to reiterate that the benefit of reduced CGST and SGST for such MDEs and Gear Boxes would only be available and applicable if the engines and gear boxes are used as parts of goods falling under heading 8901, 8902, 8904, 8905, 8906 and 8907 of the GST Tariff. The benefit of reduced GST rates would not be available in respect of the Engines and Gear Boxes supplied by the applicant if the same are for use in goods other than goods of heading 8901, 8902, 8904, 8905, 8906 and 8907 of the GST Tariff. 06. In view of the extensive deliberations as held hereinabove, we pass an order as follows : ORDER (under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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