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TMI Blog2019 (9) TMI 930X X X X Extracts X X X X X X X X Extracts X X X X ..... amplification and frequency conversion are done by the key payload of the communication satellite i.e. the transponder. Therefore the transponder becomes an integral part of the communication satellite, without which the communication satellite becomes defunct. The Communication Satellite Transponders are appropriately classifiable under Tariff Heading 8803, more specifically under 8803 90 00. Transponders, being parts of communication satellites, are covered under 8803 90 00 and any leasing of such transponders would be covered under the Entry No. 17 of Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017 at the rate applicable as on the supply of like goods involving the transfer of title in goods - Admittedly the transponders are goods and any transfer of right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration is covered under the clause (viii) of Entry No. 17 of the said Notification. - AAR No. KAR ADRG 19/2019 - - - Dated:- 26-8-2019 - SRI. HARISH DHARNIA, AND DR. RAVI PRASAD M.P. MEMBER Represented by: Sri Ganesh Shankararaman, Advocate ORDER UNDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to the terms and conditions and in line with the policy of the Government of India, in order to effectively implement the commercial aspect of India s space programme and allied services, in consonance with Department of Space and ISRO. d. The applicant stated that the communication satellite has the following basic parts: (i) Satellite housing - This is the outside container of a Satellite; (ii) Power System - This consists of Solar Panels as well as batteries to power the satellite; (iii) Antenna System - This is to receive signals to make the Satellite s operation in Orbit; (iv) Command and Control System - This monitors the satellite to ensure that all vital operating parameters are working (v) Transponders - Electronic Systems that amplify the frequency of an uplink signal for retransmission to earth. A Communication Satellite cannot be without any of the aforesaid parts. There will not be utility for such equipment without transponders. e. The Applicant stated that a transponder is an electronic system of a satellite that receives the frequency of an uplink signal and amplifies it for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nna System - This is to receive / transmit signals between earth stations. d. Command and Control System - This monitors the Satellite to ensure that all vital operating parameters are working. e. Thermal System - This protects the satellite and its systems from external environment f. Propulsion System - This is used for station keeping and orbit correction, to ensure that the satellite stays in its orbit. (ii) Satellite Payload: a. Transponder - Electronic system that receive the signal, amplify it and transmit it back to earth on a different frequency. (b) In a communication satellite, transponders are the only systems through which various services like TV Broadcasting, DSNG, DTH, VSAT, Telephony, etc., are rendered to the users. Rest of the satellite systems, as detailed under Satellite Bus) are the supporting systems for proper functionality of transponders. (c) The Transponder has the following parts (i) Band Pass Filters (ii) Low Noise Amplifier (iii) Mixer (iv) Oscillator (v) High Power Amplifier The Band Pass Filter is a device that pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, Satellite Communication Equipments as such are categorized as HSN 8525 60 92 - Other Satellite Communication Equipment. (a) U I System Design Ltd. V. Commissioner of Customs (Appeals), Bangalore - 2007 (218) ELT 603 (Tri-Bang) = 2007 (8) TMI 139 - CESTAT, BANGALORE (b) Modern Communication Broadcasting Systems P. Ltd v. Chief Commissioner, Kandla - 2009 (245) ELT 199 (Tri- Ahmd) = 2008 (12) TMI 578 - CESTAT, AHMEDABAD (c) Raj Television Network v. Commissioner of Customs, Chennai - 2007 (215) ELT 71 (Tri- Chennai) = 2007 (6) TMI 37 - CESTAT, CHENNAI . 5.4 The applicant has further placed reliance on the Notification No. 153/93 - Customs dated 13.08.1993 which was issued in the context of exemption to telematic infrastructural equipments. The annexure in the notification covers the following Satellite Communication Equipments - II. SATELLITE COMMUNICATION EQUIPMENT 1. High Power Amplifier 2. Solid State Power Amplifier 3. Low Noise Amplifier 4. Ground Communication Equipment 5. Up/ Down Converter 6. Modulator / Demodulator 7. Ant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case) will be classified as part of that machine and not a part of generic use. This is the rule of classification. The applicant has placed reliance on the following pronouncements which explicitly brings out what is a part and also the classification of specific use of the part: (a) Commissioner of Central Excise, Delhi v. Insulation Electrical (P) Ltd. 2008 (224) ELT 512 (SC) = 2008 (3) TMI 22 - SUPREME COURT - where in para 19, it is stated ... Chapter 9401 covers all types of seats and not only the seats of a car and a seat is complete even without the rail assembly from seat, adjuster / assembly slider seat and rear back lock assembly. They are not essential parts of the seat. Chapter heading 9401 covers only the parts of seats and not accessories to the seat. A part is an essential component of the whole without which the whole cannot function. In the aforesaid judgment, the Apex Court has held that a Part is an essential component of the whole without which the whole cannot function and in the applicant s case, the transponder is a part of the Communication Satellite without which the Communication Satellite cannot function. (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) Collector v. MP (I) Ltd - 1997 (95) ELT A142 (SC) = 1995 (4) TMI 312 - SC ORDER (c) Motor Industries Company Ltd. V. Collector of Central Excise, Aurangabad - 1995 (75) ELT 65 (Tri) = 1994 (11) TMI 219 - CEGAT, NEW DELHI (d) Collector of Central Excise, Aurangabad v. Motor Industries Company Ltd. 2003 (152) ELT 36 (SC) = 2003 (1) TMI 299 - SUPREME COURT Considering the above, the applicant states that it is clear that Satellite Transponder, which is designed for specific use in Satellite is to be classified as Part of Satellite and classifiable under HSN 8803. 5.7 Regarding the Bill of Entry for the transponder assessed under Tariff Heading 88039000, the applicant submitted that for an import of Satellite Transponder earlier by the applicant, the classification under the Customs was under HSN Code 8803 9000. As the assessment has happened under this HSN Code, which is the same as sought in this Advance Ruling Application, the applicant is eligible to classify the transponder as parts of satellite under HSN Code 8803. Hence the applicant has prayed that the classification of Satellite Transponders to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e MOU shows that the agreement is in respect of INSAT and GSAT satellites, which are purely communication satellites. 6.5 In the instant application the applicant is engaged in the service of leasing/ rental of satellite transponders and seeks clarification on the rate of tax applicable in respect of the said service. 6.6 In the subject matter and in relation to the question for Ruling we examine the provisions of Notification No. 08/2017-Integrated Tax (Rate) dated 28.06.2017 and as amended subsequently. Serial Number 17 of the Notification, Heading 9973, pertains to Leasing or rental services, with or without operator. Against the aforementioned Heading the entries in Column (3) of the Notification from (i) to (vii) pertain to issues not related to the application. The entry at serial (viii) is a residual entry and applies to the applicant. Therefore the services provided by the applicant are aptly covered under Serial Number 17, sub-serial (viii) of the said Notification. In so far as the rate of tax applicable to the said service is concerned the Notification provides that the rate shall be as mentioned in Column (4) against the description of the service. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s merit classification under Tariff Heading 8803 as part of Spacecraft (including satellites) falling under Tariff heading 8802. The alternate classification is under Tariff heading 8525 as Other Satellite Communication Equipment . We proceed to examine the two Tariff Headings. 6.10 In respect of Tariff Headings and determination of Classification, Explanations (iii) and (iv) appended to the Notification No. 01/2017-Central Tax (Rate), dated 28.06.2017 are relevant. The said explanations are reproduced below for ease of reference. (iii) Tariff item , sub-heading heading and Chapter shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). (iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification. Accordingly we make a reference to the Section Notes and Chapter Notes of the relevant Chapters of the Customs Tariff and also the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l cameras and video camera recorders: 8525 80 10 ---Television cameras 8525 80 20 --- Digital Cameras 8525 80 30 --- Video Camera recorders 8525 80 90 --- Other It could be seen from above that the heading 8525 primarily deals with transmission apparatus for radio broadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus in addition to television cameras, digital cameras and video camera recorders. The heading is divided into three major sub-headings namely- (a) Transmission apparatus under heading 8525 50, (b) Transmission apparatus incorporating reception apparatus under heading 8525 60 and (c) Television cameras etc., under heading 8525 80. Further 8525 60 1 series covers two way communication equipment and 8525 60 9 series covers others which include VSAT terminals, other satellite communication equipment. 6.13 In this regard our atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation satellite without which the communication satellite becomes defunct. Therefore transponders located on the communication satellite are not covered under the Heading 85256092. 6.16 We now proceed to examine the Tariff Heading 8803. The transponders are stated to be parts of Communication Satellites. In this regard we find that Heading 8802, and more specifically Heading 88026000) covers Spacecraft including Satellites. Therefore Satellites are covered under Tariff Head 8802. The next Heading in the instant Chapter is 8803 and it covers Parts of goods of heading 8801 and 8802 . Therefore it now remains to be determined whether the transponders qualify to be considered as parts of Satellite and whether the same are covered under Heading 8803 or not. 6.17 Chapter 88 falls under Section XVII of the Customs Tariff. Section Note 3 to Section XVII of the said Tariff stipulates that References in Chapters 86 to 88 to parts or accessories do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those chapters. A part or accessory which answers to a description in two or more of the headings of those Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fically by another heading elsewhere in the nomenclature. It is observed from the list that the transponder does not find a place. Moreover the transponders are not more specifically classified elsewhere in the Tariff. Therefore the third condition is also complied with. 6.22 On the basis of the discussions above we find that Communication Satellite Transponders are appropriately classifiable under Tariff Heading 8803, more specifically under 8803 90 00. 6.23 Transponders, being parts of communication satellites, are covered under 8803 90 00 and any leasing of such transponders would be covered under the Entry No. 17 of Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017 at the rate applicable as on the supply of like goods involving the transfer of title in goods. Admittedly the transponders are goods and any transfer of right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration is covered under the clause (viii) of Entry No. 17 of the said Notification. In view of the foregoing, we pass the following RULING The service of Leasing of Satellit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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