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TMI Blog2018 (10) TMI 1314X X X X Extracts X X X X X X X X Extracts X X X X ..... ifeboats, etc. Though these are also to be compulsorily made available on a vessel and ship but cannot be taken to be parts of a ship as per general understanding but are rather additional equipments on a ship - Also, there are other essential items like furniture, fans, air-conditioners, television, etc which are very essential for comfort of officers and crew of the ship but do not come under essential parts or equipments of a vessel/ship. These items are essential parts of a ship/vessel are such essential components of a vessel/ship without which the ship would not be complete and would not exist. These are very integral for the functioning of the ship and can also be separated from the ship for repair/replacement. The classification of goods under Sr. No. 252 depends solely on the nature of use to which the goods are put to. The items mentioned at Sr. Nos A, B, C, D, E, G, H, I, J, K, M and S are essential parts of a ship/vessel without which the ship would not be complete and would not exist. These are very integral for the functioning of the ship. Hence out of the 504 goods mentioned in [Annexure I-A of this ARA application and reproduced by them mentioning their use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the GST Act . 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submission (Brief facts of the case), as reproduced verbatim, could be seen thus - STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTION(S) ON WHICH THE ADVANCE RULING IS SOUGHT 1. This Application is being filed by A. S. Moloobhoy Private Limited ('the Applicant'/'the Company'). The Applicant, having Good and Service Tax ('GST') Registration No. 27AAMCA4160E1ZT is inter alia engaged in the business of sale and distribution of Marine Distress Signals, EPIRB and SART, SSAS, Marine Chemicals, Navigation and Communication (NAVCOM) Equipment and also providing Life Saving services: such as Life raft, Lifeboat and Fire-fighting services, including Pyrotechnic Disposal, Electronic Services and Training Services related to the Marine Industry. 2. Applicant imports various goods/spares, which are supplied on ships and these equipment form an essential part of the ship, and makes the ship sea worthy. 3. The above referred goods are importe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such equipment or parts thereof should be classified as Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907 and should be taxed at the rate of 5%, as such individual goods are supplied as a part of the ship or vessel, to ensure that the ship is sea worthy. Such goods cannot be classified as spares separately in their own right. 7. Applicant is becoming non-competitive in the market if it does not classify the spares/equipment/parts under entry no. 252 of Notification No.1/2017 Central Tax which specifically covers Parts of goods of various types of the ships and vessels covered under headings 8901,8902, 8904, 8905, 8906, 8907. 8. In view of the above the issue for determination before the Authority for Advance Ruling ('AAR') is whether supply of such goods (as listed in Annexure III) is classifiable as Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907 under entry 252 of Schedule I of CGST Notification No. 01/2017-Central Tax (Rate) dated 28lh June, 2017 (Amended from time to time) and liable to GST @ 5% (CGST-2.5% and SGST- 2.5%) or IGST-5% as specified in entry 252 of schedule I of Notification No. 01/2017-Integrated Tax (Rate),dated 28-06-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per IMO; to establish the ship as sea worthy, and not spares per se. The meaning of the term spares referred above, incorporates a wide ambit of products and therefore would lesd to a generic classification of goods. 2.6. On the other hand the classification of the same; as parts of the ship, would be more specific and could be attributed as the products relevant to a particular industry; namely the shipping industry and would therefore provide clarity in identifying the same. SUBMISSION 3 2.7. The appellant strongly relies on the decision of the Honorable Supreme Court in its own case i.e. Commissioner of Customs, Mumbai Appellant(s) VERSUS M/s. A.S. Moloobhoy Sons Ors. Respondent(s) WITH CIVIL APPEAL NOS. 3115-3117 OF 2015, where the Honorable Court declined to interfere with the order passed by the Tribunal, wherein it was held that these imports of equipment and spares should be treated as one for the purpose of ship repair. The copy of the relevant Tribunal judgment and Supreme Court judgment are enclosed at Annexure II-A II-B. 2.8. Annexed please find a copy of the SRU (Ship Repair Unit) registration of the Company. This further endorse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s while they are in any port or place in sea. The Rules require all existing ships comply part I of the Rules on or before 1st February, 1995. Various dates on which these Rules will come into force in parts are mentioned, and but compliance is required on or before 1-2-99 in all cases. The said rules requires inter alia that every ship or fishing boat should carry two satellite EPIRB, Navtex receiver radio facility of Maritime safety information by the INMARSAT, enhanced group calling (EGC) system of HF Direct printing telegraphy, etc 3.4 For undertaking the repair of the ship, over and above rendering of repair service, the Applicants also are required to supply various parts of various equipment in ship viz. Navigation equipment and spares, communication equipment and spares, lifesaving/firefighting equipment and spares, etc. which are listed in their application as Annexure 1-A (504 Items). For brevity, the said items under consideration are referred to as ''Navigation/communication/ lifesaving/firefighting equipment and their associates spares . 3.5 The Applicants import the said Navigation equipment, communication equipment, lifesaving equipment, firefighting eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of repair/replacement of goods on board a vessel, so as to ensure that the ship as a whole is sea worthy as per IMO Regulation. 5.0 Support of judgments in Applicants own case/other's case under Customs: 5.1 Notn.No.23/98-Cus dated 2.6.1998 and succeeding Notifications including 21/2002-Cus dated 1.3.2002 (Sr. No. 251) was prescribing Nil rate of duty (both standard rate and additional duty rate) to capital goods and spares thereof, raw-materials, parts, material handling equipment and consumable used for repair of ocean-going vessel by Ship Repair Unit registered with DGS. 5.2 The notice was issued to the importer-Applicants proposing to deny the exemption under the said Notification on the basis that the goods were not covered by any of the category of item specified in the entry to the exemption. It further alleged that the goods were not used for repair because the ships were fully functional and would not be part of repair. 5.3 By Order-in-Original No. CAO/68/20027CAC/CC/ASS dated 18.02.2002, Ld. Commissioner of Customs, Mumbai denied exemption under Notification 23/98-Cus (Sr. No.227). 5.4 Since aggrieved an appeal was filed before Hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XXX XXX XXXXXX 6.2 From the above it is clear that parts of ships, vessels, tugs, floating structure, etc. mentioned in headings of chapter 89, except heading 8903, irrespective of their classification, would be eligible for concessional rate of GST of 5%. The Notification, like statute, has to be interpreted in terms of its language adopted and when language is plain and clear effect thereof has to be given. It is also settled position of law that plain terms of Exemption have to be given effect without calling in aid of any supposed intention, and a casus omissus cannot be provided by interpretation. 6.3 In support of the above contention that plain interpretation has to be adopted while interpreting an exemption Notification, reliance is placed on the ratio of following judgments:- (a) Malwa Industries - 2009 (235) ELT 214 (SC) (b) Mewar Bartan Nirman Udyog - 2008 (231) ELT 27 (SC) (c) Parle Biscuits - 2005 (192) ELT 23 (SC) (d) Bombay Oil Industries - 1997 (91) ELT 538 (SC) 7.0 Section/Chapter Notes and/or Explanatory Notes to HSN are for classification and not for interpretin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rate) 11. With the above submissions and those made in their application and additional submissions, it is humbly prayed for holding that the disputed equipment would be covered under Entry No. 252 of Notn.No.l/2017Central Tax (Rate) and are entitled for concessional rate of tax. 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- The notice under Advance ruling provision was issued to the this office as the dealer, M/s. A.S. MOLOOBHAY GSIN:- 27AAMCA4160E1ZT, Who is assigned to this office under case allocation, has applied for advance ruling under section 97 of CGST/MGST Act, 2017. The dealer has mentioned its nature of activity as factory/ manufacturing in brief it says Sale and distribution of marine Distress Signals, EPIRB and SART, SSAS, Marine Chemicals, Navigation and communication (NAVCOM) equipment and also providing lifesaving services such as life raft, lifeboat and firefighting services, including Pyrotechnic Disposal, Electronic services and training services related to the marine industry. Dealer has requested In Annexure I that a ruling be pronounced under section 97(2) a of the CGST Act 2017 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r: Table-1 Sr. NO. Services provided by Applicant Accounting Code Service Tax Rate (Basic+SBC+KKC) Benefit of any notification claimed 1 Technical Inspection and certification Agency Services 00440249 15% N. A. 2 Maintenance Repairs Services 00440245 15% Exemption was claimed under clause 25 (b) of Notification 25/2012 ST dated 20/06/2012 for services provided to Govt., a Local authority or a Govt. authority by way of repair or maintenance of vessel. 5) Assesse have not applied for any advance ruling under the provision of central excise, service tax or sales tax. 6) As per applicant there is no any case of violation of central excise or service tax. 7) As per applicant there is no any case of violation of central excise or service tax has been booked against the applicant in last five years. Applicant is dealing in import of various goods which are supplied on ships. Goods are imported by app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and requested for admission of application as per their submissions with ARA. The Jurisdictional officer Deepak Gadhave, Dy. Commissioner of S.T.(MUM-VAT-F,-827), Nodal - 4, Mumbai appeared and stated that he does not have any objection to admission of application and would making submissions in due course. The application was admitted and final hearing was held on 17.07.2018 , Ms. Nafeesa Maloobhoy, M.D., along with Sh. Rajkumar Sarawagi, C.A,, G.M. appeared and made oral and written submissions in addition to the details as per their application. The Jurisdictional officer Deepak Gadhave, Dy. Commissioner of S.T.(MUM-VAT-E-827), Nodal - 4, Mumbai appeared and made written submissions. 05. OBSERVATIONS We have perused the records on file and gone through the facts of the case and the submissions made by the applicant and the department. 10. We find that the applicant has submitted that they are engaged in the business of sale and distribution of Marine Distress Signals, EPIRB and SART, SSAS, Marine Chemicals, Navigation and Communication (NAVCOM) Equipment, Life raft, Lifeboat and Fire-fighting services, including pyrotechnic Disposal, Electronic Services and Trai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rigging, Rudder, Sails, Shrouds, Engines, gearbox, Propeller, Bridge, etc. are the very essential parts of a ship or vessel and are quite clearly parts of a vessel/ship and a ship cannot be imagined to be in existence without these parts. However, in addition to the above there are some additional equipments that are required to be made available on a ship as a measure of statutory compliances under various marine acts such as Merchant Shipping Act or Additional Safety measures such as Walkie-talkie, Binoculars, Life Jackets, Lifeboats, etc. Though these are also to be compulsorily made available on a vessel and ship but cannot be taken to be parts of a ship as per general understanding but are rather additional equipments on a ship.. In addition to the above there are other essential items like furniture, fans, air-conditioners, television, etc which are very essential for comfort of officers and crew of the ship but do not come under essential parts or equipments of a vessel/ship. We find that the items that are discussed as essential parts of a ship/vessel are such essential components of a vessel/ship without which the ship would not be complete and would not exist. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be used in the manufacture of paper in sheets as component part. 15. In Modi Rubber Ltd. v. Union of India, (1997) 7 SCC 13, the appellant had set up tyre and tube manufacturing plant and imported various plants and machineries. While using the plants and machineries, PPLF (Polypropylene Liner Fabric) was used as a device in the form of liner components to various machinery units to protect the rubber-coated tyre fabric from atmospheric moisture and dust. This Court held that the PPLF was not a component of the machine itself. It was not a constituent part. It was used as a Liner Fabric not only in tyre production but also in similar other industrial processes. In case of Jindal Strips Vs Collector of Customs, Equivalent citations: 1997 ECR 98 Tri Delhi, 1997 (94) ELT 234 Tri Del. the Two Member Bench of the Tribunal referred the appeal before the larger bench on the following questions: (i) Whether the phrase component parts occurring in Notification 77/90 would cover spare parts for the purpose of granting of benefit thereunder? The larger Bench of the Tribunal having regards to dictionary meaning of part , and Component' observed that in common parlan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commercial sense. Typewriters are being sold in the market without the typewriter ribbons and therefore typewriter ribbon is not an essential part of a typewriter so as to attract tax as per entry 18 of the Second Schedule to the Mysore Sales Tax Act, 1957. In light of the above discussions, considering the meaning of an expression (Part) as given in the dictionary and also the ratio as adopted by the Hon'ble Courts as mentioned above besides common parlance test, we now take up each and every goods/spares, etc claimed by the applicant to be parts of a ship [as listed in Annexure I-A of this ARA application and as reproduced by them mentioning their uses in page no 24 of their compilation A made before this authority as an additional submission] and discuss and find out whether each of the subject goods/spares can be considered as parts of ship. They have broadly listed the equipments/parts of the equipments along with their usage which is as follows:- S. No. EQUIPM ENT FULL FORM DESCRIPTION REMARKS A GPS Global Positioning System ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per above discussions I VHF Very High frequency Used for short range speed communication Is an essential part of ship and without it the ship would not be performing its essential function and therefore would be parts of a ship as per above discussions J SAT-C/FBB Satellite Communication/FIeet Broad band Used for communication between ship and shore Is an essential part of ship and without it the ship would not be performing its essential function and therefore would be parts of a ship as per above discussions K SSAS Ship Security Alert System Used for transmitting distress signal to land station Is an essential part of ship and without it the ship would not Ire performing its essential function and therefore would be parts of a ship as per above discussions L NAVTEX Navigational Telex Used for receiving navigational weather and other warnings Would be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Search and Rescue Transponder Used to assist Coast Guard in search and rescue operations Would be in the nature of an additional equipment and therefore cannot be considered as parts of a ship as per above discussions U ANEMO METER Anemometer Used to calculate speed and direction of wind Would be in the nature of an additional equipment and therefore cannot be considered as parts of a ship as per above discussions V 2 WAY RT Walkie talkie Used for internal communication by the ship's staff Would be in the nature of an additional equipment and therefore cannot be considered as parts of a ship as per above discussions The classification of goods under Sr. No. 252 depends solely on the nature of use to which the goods are put to. We find from the above table that the items mentioned at Sr. Nos A, B, C, D, E, G, H, I, J, K, M and S are essential parts of a ship/vessel without which the ship would not be complete and would not exist. These are very integral for th ..... 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