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TMI Blog2019 (7) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... and hence, the product in question i.e. Hydraulic Kit will not be covered under Headings No. 8708, 8714 and 8716. The hydraulic kits are appropriately classifiable under heading 8412 by application of HSN Explanatory Notes to headings 8412, 8708, 8714 and 8716 and Section Note 4 to Section XVI and Exclusion Note 2 to Section XVII. - GST-ARA-96/2018-19/B-20 - - - Dated:- 18-2-2019 - SHRI B. TIMOTHY, AND SHRI B.V. BORHADE, 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 M/s. Hyva India Pvt. Ltd., the applicant, seeking an advance ruling in respect of the following questions :- a. What is the appropriate classification and tax rate applicable on the supply of - Hydraulic Kits supplied to dealers / distributors or body builders as such from the factory of applicant, under Central Goods and Service Tax Act, 2017 (CGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with wet kit. The Hydraulic cylinder and Valve are manufactured by the applicant at its factory/workshop duly registered under GST law. It is submitted that bulk packs of wet kit parts are received from various vendors. The applicant is then undertaking the activity of repacking of wet kit items in sets from the bulk pack to small pack. It means all the parts of Hydraulic kit complete in itself are dispatched in loose sets. Thus, the Hydraulic system in unassembled form are supplied by the applicant from its premises comprising of Hydraulic cylinder, wet kits in loose forms. 4. It is to be noted that Hydraulic Kit (cylinder + wet kit) when fitted on the chassis of motor vehicle delivers higher transport efficiency and safer operating at lower cost in the Construction, Transportation and Mining market segments. 5. It is observed by the applicant that there is an ambiguity prevailing in respect of the classification of Hydraulic Kit under GST laws for the purpose of determination of rate of tax. 6. Hydraulic Kit is supplied in two modes: (i) Supply to dealers / distributors / body builders: (ii) Supply to OEMs (namely Tata Motors, Ei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engines and motors, Pneumatic power engines and motors, Other, arts) (other than wind turbine or engine) 9% Therefore, Hydraulic Power engines and motors of Heading No. 84,12 are covered by Sl. No. 317 of Schedule III and attract CGST @ 9%. 13. The present ambiguity regarding the Hydraulic Kit cleared to dealers / distributors or body builders cleared as such, arises due to absence of such type/category of product in Customs Tariff. The Customs Tariff mentions Hydraulic power engines and motors under Chapter Heading NO. 84.12. However, the applicant s query arises from the fact that whether Hydraulic kits can be held to be synonymous to the term Hydraulic power engines and motors as covered under Heading No.84.12 of the Customs Tariff. STATEMENT CONTAINING APPLICANTS INTERPRETATION OF LAW AND/OR FACTS, AS THE CASE MAY BE, IN RESPECT OF QUESTION(S) ON WHICH ADVANCE RULING IS REOUIRED. APPLICANT S INTERPRETATION HYDRAULIC KITS MANUFACTURED AND SUPPLIED BY THE APPLICANT ARE CLASSIFIABLE UNDER CHAPTER HEADING NO. 84.12 OF THE CUSTOMS TARIFF AND COVERED BY SL NO. 317 OF SCHEDULE-111 TO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -- Other C.4. The relevant entry in Schedule-III of Notification No. 1/2017-CentraI Tax (Rate) dated 28.06.2017, for the purpose of the applicant s product in question, reads as under: Sch. SL.No. Chapter Heading Sub-Heading Description of Goods Rate of Tax (GST) III. 317 8412 Other engines and motors (Reaction engines other than turbo jets, Hydraulic power engines and motors, Pneumatic power engines and motors; other, parts) other than wind turbine or engine] 9% C.5 The aforesaid Notification contains the following explanation: (i) (ii) (iii) Tariff item sub-heading , heading and Chapter shall mean respectively a tariff item, Breading, sub-leading and Chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). (iv) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e meaning of Note 4 to Section XVI (see the General Explanatory Note to that Section). These systems are used, e.g., to operate civil engineering structures. C.10 For sake of reference, Note 4 to Section XVI of HSN reads as under: 4. Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function. C.11 As per the Explanatory Note, Heading No.84.12 of HSN covers hydraulic systems consisting of a hydraulic power unit (comprising essentially a hydraulic pump, an electric motor, control valves and an oil tank), hydraulic cylinders and the pipes or hoses needed to connect the cylinders to the hydraulic power unit. C.12 The lack of mention of the term Hydraulic Kit in the Tariff entries should not be considered against such mechanical kits which work primarily on Hydraulic cylinders as the rest of the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planatory Notes to heading 84.79 state, in pertinent part, that This heading is restricted to machinery having individual functions, which....(c) Cannot be classified in any other particular heading of this Chapter . As the device under consideration is specifically provided for elsewhere in Chapter 84, classification in leading 8479, HTSUS, is precluded. The applicable sub-heading for the HEADIM Hybrid System will be 8412.29.8075, HTSUS, of the United States (HTSUS), which provides for other engines and motors, and parts thereof, hydraulic power engines and motors, other, other, other. The rate of duty will be free.... HYDRAULIC KIT WILL BE EXCLUDED FROM CHAPTER HEADING NO.87.08 D.1 Chapter 87 of the HSN covered vehicles other than railway or tramway rolling stock, and parts and accessories thereof , D.2 Chapter Heading 87. 08 covers Parts and accessories of the motor vehicles of headings 87.01 to 87.05 . To understand the scope of goods covered under heading 8708, it is relevant to refer Explanatory Note to Heading No. 8708 of the HSN which reads as under: This heading covers all the motor vehicles of heading 8701 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8708 are not satisfied in the present case and hence, the product in question i.e. Hydraulic Kit will not be covered under Heading No.8708, COMPLETE HYDRAULIC KIT IS CLEARED FROM THE FACTORY OF THE APPLICANT IN UNASSEMBLED/DISASSEMBLED CONDITION. E.1 Applicants are clearing complete Hydraulic Kit from their factory in unassembled/disassembled condition. The Hydraulic Kit is a combination of various items including Hydraulic front-end cylinder, Gasket, washers, MTG Kit valves, hose, pipes, Oil tanks, cables, etc, E.2 To decide the classification of an item in disassembled form, rule 2(a) of the Interpretative Rules has to be invoked. The applicant submits that in terms of Rule 2(a) of the General Interpretative Rules, the classification of Hydraulic Kit cleared in unassembled condition has to be under Heading No.8412 only. The applicant relies upon Rule 2(a) of the General Interpretative Rules which reads as under: Rule 2(a) of GIR Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D/CKD condition or ready to assemble sets. Accordingly, such imports require a specific import licence. However, in some cases it has been noticed that the various bodies of the Government like the Secretariat of Industrial Approvals, FIPB etc., have approved the projects for the manufacture of such articles, with permission to in port SKD kits in the initial period. Though the import licence is a must in these cases also, still if by mistake the importers have not obtained the licence. prior to the imports, they may be advised to obtain the same and the cases need not be adjudicated without giving this opportunity. In genuine cases, like in the cases of reputed manufacturers with a proper infrastructure for manufacturing activities in respect of the goods being imported and having industrial approvals for SKD imports; clearance of goods under ITC bonds may also be considered pending production of licences. E.4 Thus, when any article such as Hydraulic Kit is cleared in CKD/SKD condition, its classification for purpose of assessment would be done as complete or finished article in terms of the said Rule 2(a). In view of Rule 2(a) read with CBEC Circular dated 30.5.1995, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents, for use in the assembly of cylinder number 1503, i.e., the cylinder, rod assembly, cylinder bottom, gland, piston and pivot tube, will be 8412.90.9005, HTSUS, which provides for parts of linear acting hydraulic power engines and motors. The rate of duty is free. In your request you also inquire about the required country of origin marking for the imported components that are assembled by Swanson in the United States. The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and exceptions of19 USC 1304. Section 134.1 (d), defines the ultimate purchaser as generally the last person in the U.S. who will receive the article in the form in which it was imported 19 CFR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Heading No.84.79 of the Customs Tariff Act. F.1 Chapter Heading No.84.79 of the Customs Tariff Act covers machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter F.2 The relevant entry of Notification No. 1/2017-lntegrated Tax (Rate) dated 28.6.2017, for the purpose of this opinion as in Schedule - III is as under: Sl.No. Chapter/Heading/Sub-Heading/Tariff Item Description of Goods 366 8479 Machines and mechanical appliances having individual functions, not specified or included elsewhere in this Chapter [other than Passenger boarding bridges of a kind used in airports (8479 71 00) and other (8479 79 00)]. F.3 Heading No .84.79 of Chapter 84 is a residuary entry which covers mechanical equipment which have individual purpose and are not covered anywhere in Chapter 84. F.4 It is informed that the Hydraulic Kit is installed in the various places to lift and control the movement of the item to be lifted in ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was submitted in the Advance Ruling Application in paras C.1 to C.12 (Refer Page no. 14-19 of the Advance Ruling Application) that Hydraulic Kit is the same as Hydraulic System and thus classifiable under Chapter Heading 84.12 of the CTA. 1.4 To further substantiate the said position, reference is made to case laws which lay down the Common Parlance test . COMMON PARLANCE TEST FOR THE PURPOSE OF IDENTIFYING THE APPROPRIATE CLASSIFICATION 1.8.1 The Supreme Court in the case of Commissioner of Central Excise, New Delhi vs. Connaught Plaza Restaurant (P) Ltd., New Delhi (286) E.L.T. 321 (S.C.) = 2012 (12) TMI 149 - SUPREME COURT (Refer Page no.113 of Index - 1 submitted during the admission PH) upheld the Test of Common Parlance laid out in the case of Commissioner of Trade Tax, U.P. vs. Kartos International 2011 (268) EL.T. 289 (S.C) (Refer Page no. 129-13 7 of Index - 1 submitted during the admission PH). The court held as under: 31. Therefore, what flows from a reading of the aforementioned decisions is that in the absence of a statutory definition in precise terms; words, entries and items in taxing st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion. 1.6 Ruling No. No. 53556 (Refer Page no. 138 of Index submitted during the admission PH) dated April, 1, 2009, the product in question was a spoiler drive mechanism used to raise and lower the rear spoiler on a motor vehicle. The product comprised of two hydraulic telescoping linear cylinders, a hydraulic fluid power pump, hydraulic hose line and mounting parts, are imported together as a set. The Authority held that the same shall be classifiable as a Hydraulic System under Tariff Item no. 84.12.21.0045. The relevant portion from the ruling is extracted below for your reference: N053556 ; April 1, 2009 CLA-2-84: OT:RR:E:NC:1:102, CATEGORY: Classification; TARIFF NO.: 8412.21,0045 Mr. Robert Resetar Porsche Cars North America, Inc. 980 Hammond Drive (Suite 1000) Atlanta, GA 30328 RE: The tariff classification of a spoiler drive mechanism from Germany Dear Mr. Resetar: In your letter dated March 3, 2009 you requested a tariff classification ruling. A photograph and technical drawing were submitted. The article in question is described as a spoiler drive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs 8425 to 8430. However, United States International Trade Commission held that the applicable subheading for the wheel loader pipes will be 8412.90.9015 as subject parts are more specifically provided for as parts of the hydraulic systems in which they are used. The relevant extract has been reproduced below for your kind perusal: NYL81368; December 21, 2004 CLA-2-84:RR:NC:1:102 L81368; CATEGORY: Classification ; TARIFF NO.: 8412.90.9015 Ms. Shannon E. Fura Sandler, Travis Rosenberg, P.A. Attorneys at Law 225 W. Washington Street (Suite 1550), Chicago, IL 60606 RE: The tariff classification of parts for wheel loader hydraulic systems of unspecified origin Dear Ms. Fura: In your letter dated November 30, 2004 you requested a tariff classification ruling on behalf of your client Volvo Construction Equipment North America ( VCENA ). The articles in question are described as parts of wheel loaders. These parts consist of various pipes designed for use in specific applications on VCENA wheel loaders. You indicate that these parts are identified internally by VCENA as part numbers VOE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncipally with the machinery of headings 8425 to 8430. However. we find that the subject parts are more specifically provided for as parts of the hydraulic systems in which they are used. The applicable subheading for the wheel loader pipes, part numbers VOE11172221, VOE11173847 VOE11015677 VOE11172470 and VOE11023340 will be 8412.90.9015 HTSUS which provides for other parts of hydraulic power engines and motors. The rate of duty will be free. 1.8 The United States International Trade Commission in Ruling No. NY 188204 (Refer Page no. 149 - 150 of Index-II submitted during the final PH) while ruling on the appropriate classification of a Hydraulic ESD held that since the said item consisted of a hydraulic pump, a pressure pilot , a fluid reservoir, and other system controls, it is classifiable under 84.12.90.9080 of the HTSUS which provides for Hydraulic Transmission Systems. 1.9 It is further submitted that Para 10, 11 and 12 of the Department s submission also state that the said Hydraulic Kit is appropriately classifiable under Chapter Heading 84.12 of the CTA. 1.10 In light of the above stated submissions, it is hum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the Hydraulic Kit is not exclusively used on motor vehicles covered under Chapter Heading no. 8701 to 8705 of the CTA and stands excluded from classification under Chapter Heading 87.06 of the CTA. C. WITHOUT PREJUDICE TO THE ABOVE SUBMISSION IF THE PRODUCT IS NOT CLASSIFIABLE UNDER CHAPTER HEADING 84.12 OF THE CUSTOMS TARIFF ACT 1975 THEN IT SHALL BE CLASSIFIABLE UNDER CHAPTER HEADING No.84.79 OF THE CUSTOMS TARIFF ACT 1975 3.1 In the alternative and without prejudice to the submissions made above, it is humbly submitted that even if the authority is of the view that Hydraulic Kit is not classifiable under Chapter Heading 84.12 of the CTA, then the only other heading that it shall be classifiable under shall be Chapter Heading 84.79 of CTA which covers machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter attracting GST at the rate of 18%. 3.2 The same has been substantiated under Para F.1 to F .5 of the Advance Ruling Application submitted to the Authority. 04. CONTENTION AND OBJECTIONS TO ADMISSION OF THE APPLICATION- AS PER THE CONCERNED OFFICER 3. As per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heading 84.12, interalia states as under: Para 6 : Hydraulic systems. consisting of a hydraulic power unit (comprising essentially a hydraulic pump, an electric motor, control values and an oil tank). Hydraulic cylinders and the pipes or hoses needed to connect the cylinders to the hydraulic power unit, the whole forming a functional unit within the meaning of Note 4 to Section XVI (see the General Explanatory Note to that Section). These systems are used eg. to operate civil engineering structures. 7. In view of the above, it appears that the Hydraulic Kit is a mechanical appliance and is appropriately classifiable under Tariff Heading 8412, attracting CGST @ 9% as per para 6 of the General Explanatory Note, which is stated above. This mechanical appliance, though fitted on the chassis of the motor vehicle cannot be treated as a parts and accessories of the motor vehicles of Headings 8701 to 8705, so as to classify the same under Heading 8708 which reads as under: Parts and Accessories of the Motor Vehicles of Headings 8701 to 8705 (Other parts and accessories of bodies (including cabs); Other parts and accessories) 8. Chapter Heading 87.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of their ARA application. Jurisdictional Officer Ms. Arpita S., Asstt. Commissioner of CGST CX, Division IV, Belapur appeared and made written submissions. The application was admitted and called for final hearing on 22.01.2019, Sh. Nirav Karia, Advocate, Sh. Astha Singh, Advocate and Sh. Jugal Nanda, AGM-Taxation Casting appeared and argued as per submissions. Jurisdictional Officer Ms. Arpita S., Asstt. Commissioner of CGST CX, Division IV, Belapur appeared. 05. OBSERVATIONS We have gone through the facts of the case, documents on record and written submissions made by both, the applicant and the jurisdictional office. We find that the issue before us is of classification of the product Hydraulic Kits supplied by the applicant to dealers / distributors or body builders. The applicant has submitted that they supply Hydraulic Kits which is a combination of various item including Hydraulic front end cylinder, Gasket, washers, MTG Kit valves, hose, pipes, Oil tanks, cables etc. along with other parts which are used for the fixing / mounting on a motor vehicle chassis. The Hydraulic kit is of a kind fixed on a motor vehicle chassi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission of photographs and write ups. From the submissions made by the applicant we find that, in the case of sale of Hydraulic Kits to OEMs, we agree with their submissions that their product falls under Chapter Heading 8412 of the Customs Tariff under the description Other Engines and Motors in view of the Explanatory Note to heading 8412 and Note 4 to Section XVI which are mentioned below. HYDRAULIC POWER ENGINES AND MOTORS This group includes: (B) HYDRAULIC POWER ENGINES AND MOTOR This group includes: (1) . (2) (3) (4) Hydraulic cylinders..... (5) (6) Hydraulic systems consisting of a hydraulic power unit (comprising essentially a hydraulic pump , an electric motor, control valves and an oil tank), hydraulic cylinders and the pipes or hoses needed to connect the cylinders to the hydraulic power unit, the whole forming a functional unit within the meaning of Note 4 to Section XVI (see the General Explanatory Note to that Section ). These systems are used, e.g., to operate civil engineering structures. For sake of reference, Note 4 to Section XVI of HSN reads as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s do not apply to machines or apparatus of heading 8401 to 8479 or parts thereof, other than radiators or articles of Section 8481 or 8482 or provide constituting integral parts for engines or articles of Heading 8483, whether or not they are identifiable as goods as per the goods of this section. In the present case, the product in question hydraulic cylinders/hydraulic kits is squarely/specifically covered under Heading No.84.12 and hence the condition (a) mentioned above stands not satisfied in the present case. As discussed above, it is clear that Hydraulic Kit is more specifically included in Heading No.84.12 and is more specifically covered under said heading. Thus, the Hydraulic Kit does not satisfy the condition (c) mentioned above. Therefore, we clearly find that all the 3 conditions mentioned in Heading No.8708, 8714 and 8716 are not satisfied in the present case and hence, the product in question i.e. Hydraulic Kit will not be covered under Headings No. 8708, 8714 and 8716. In view of the foregoing the hydraulic kits are appropriately classifiable under heading 8412 by application of HSN Explanatory Notes to headings 8412, 8708, 8714 and 87 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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