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TMI Blog2021 (1) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... definition of the word part , we find that it is a separate piece of something or a piece that combines with other pieces to form the whole of something. Similarly, the second definition of part also defines part as one of the pieces that together forms a machine or some type of equipment. It is required to find out whether the marine pressure tight cables and marine non-pressure tight cables manufactured and supplied by the applicant can be considered as parts of a warship. The classification of these goods under Entry No.252 of Schedule-I of Notification No.01/2017-Integrated Tax(Rate) dated 28.06.2017 is solely dependent on the nature of use to which these goods are put to in order to be able to decide as to whether these goods are integral parts of the ships without which the ship would not be complete or would not exist. In order to avail of the benefit of reduced rate of GST as mentioned hereinabove, the applicant has to prove that the goods manufactured and supplied by them to the Navy are an integral part of the warship and are goods without which the warship would not come into being, or would not be complete or would not come into existence. The applicant has cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various goods such as: (a) Transformer oils, white oil, industrial lubricating oils and specialities oils falling under the Customs/GST Tariff No.2710. (b) Aluminium conductors falling under Chapter Heading No.7614 of the Customs/GST Tariff Act. (c) Various grades of cables, including power/electric cables, house wire cables, marine/pressure tight cables and non-pressure tight cables and other cables, etc. falling under Chapter Heading No.8544 of the Customs Tariff Act. 2. The applicant has stated that they have received orders and are expecting future orders from the Defence Machinery Design Establishment (DMDE), Department of Defence Research and Development under the Ministry of Defence, Government of India for the supply of Marine-pressure tight and Non-Pressure right cables, specially made and designed for use in the warship as parts of warship; that these cables are though universally classified under Tariff Heading No.8544, but made and designed for use in Warship as it s integral parts, without which warship cannot function and cannot be treated as complete in all respects and at the same time the same is capable of being separated from warship for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parts of Warship and that while placing the above orders, the Ministry of Defence have clearly and categorically stated that GST @5% will be applicable on this supply in terms of Sr.No.252 of Schedule-I of the above Notification as these goods (cables) are intended to be used in warship as parts of warship. (i) Purchase Order No.HLC/85/PT-10 ((32 Types)/S4*/225 dated 26.03.2019). (ii) Purchase Order No.PT-45: PO No.HLC/85/PI-45(05 Types)/S4*/228 dated 22.04.2019. (iii) Purchase Order Special Cable HLC/85/SPL-CABLES(09 Types)/S4*/237 dated 17.06.2019. (iv) Tender No.NPT Cable:HLC/85/NPT CABLES/S4* dated 6.5.2019 (Order Expected). However, the applicant has submitted photocopies of Purchase order mentioned at Sr.No.(i) above only as well as End Use Certificate issued by the Real Admiral and Director, DMD Establishment, Post Box No.2043, Secunderabad on 10.06.2019 from File F.No.HLC/85/PT-10 Cables (32 Types) S4* in respect of the said purchase order. 5. The applicant has stated that since the marine/pressure tight cables/non-pressure tight cables, to be supplied by them are very essential and integral part of the warship, without which warship cannot fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of GST @5% is applicable to Marine or Pressure tight cables when supplied for use in warship in terms of Sr.No.252 of Schedule-I of the Notification No.01/2017-Integrated Tax(Rate) dated 28.06.2017 and that as per the said entry Goods supplied can be of any chapter/heading , if known, recognized and used as Parts of goods of heading 8901, 8902, 8904, 8905, 8906 and 8907 , the GST applicable rate will be either 2.5% each of CGST and State/UT GST or 5% IGST. 7. The applicant has submitted some additional documents which was received vide email dated 25.08.2020 which contained photocopies of Purchase Orders mentioned at Sr.No.(ii) and (iii) in para 4 above along with the photocopies of contracts/agreements. The applicant has asked the following question seeking Advance Ruling on the same: Whether the applicability or determination of liability to pay Tax on our said goods at 5% GST rate is legally correct and in order in terms of Schedule-I of Notification No.1/2017-Integrated Tax(Rate) or not? CONTENTION-AS PER THE CONCERNED OFFICER: 8. The contentions of the concerned officer are reproduced hereunder in brief: (1) End user certificate mentioned that the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bles and Non pressure tight cables classified under Tariff Heading 8544 can t be applied under 5% duty structure. (4) Considering the facts and documents like end user certificate, the goods cannot be covered under 5% of GST and it should be cleared under 18% of GST. In this respect, Order No.GST-ARA-28/2017-18/B-64 dated 11.07.2018 issued under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 in the case of Mazagon Dock Shipbuilders limited(GST AAR Maharashtra) may be referred. DISCUSSION FINDINGS: 9. We have considered the submissions made by the applicant in their application for advance ruling as well as the arguments/discussions made by their representative Shri D P Bhave , Advocate of the applicant at the time of personal hearing. We have also considered the issues involved on which Advance Ruling is sought by the applicant. We have also taken into consideration the contention of the concerned officer. 10. At the outset, we would like to state that the provisions of both the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017 are the same except for cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019 (Sr.No.(i) below) only. (i) Purchase Order No.HLC/85/PT-10((32 Types)/S4*/225 dated 26.03.2019) pertains to supply of 32 types of Pressure Tight (PT-10) cables for S4* valued at ₹ 25,61,99,931/-. (ii) Purchase Order No.PT-45: PO No.HLC/85/PI-45(05 Types)/S4*/228 dated 22.04.2019 pertains to supply of 10 types of Pressure tight (PT)-45 cables for S4* valued at ₹ 3,73,39,773/-. (iii) Purchase Order Special Cable HLC/85/SPL-CABLES(09 Types) /S4*/237 dated 17.06.2019 pertains to supply of 09 types of special cables for S4* valued at ₹ 5,09,36,750/-. (iv) Tender No.NPT Cable:HLC/85/NPT CABLES/S4* dated 6.5.2019 (Order Expected). 12. Based on the submission of the applicant as well as the arguments/discussions made by the representative of the applicant during the course of personal hearing, we find that the main issue to be decided is whether the marine-pressure tight and non-pressure tight cables manufactured and designed by the applicant are for use by the Ministry of Defence in their warship as parts of warship as stated by the applicant and whether the concessional rate of GST@5% is available to the applicant as per Entries No.250 and 252 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Bridge, Deck, Deck Crane, Forecastle etc. are 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 i.e. the ship/vessel would not be complete without these parts. However, in addition to the above, there are some additional equipments, which 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. Although, these are equipments to be compulsorily made available on a vessel and ship but cannot be taken to be essential parts of a ship i.e. the ship would still be a ship without these equipments and would rather be considered as additional equipments on a ship. In addition to the above, there are other items such as furniture, fans air-conditioners, television etc. which are required for the comfort of the officers and crew of the ship but do not come under the essential parts or equipments of a vessel/ship. 16. We find that the essential items that are discussed as essential parts of a ship/vessel are suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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. (2) In the case of State of Uttar Pradesh vs. M/s. Kores (India) ltd. on 18.10.1976, Equivalent citations: 1977 AIR 132, 1977 SCR (1) 837 . In this case the appellant contended before the Hon SC that carbon paper does not lose its character as paper in spite of being subjected to chemical processes, and that ribbon is not an accessory but an essential part of the typewriter. While dismissing the appeal, Court held that A word which is not defined in an enactment has to be understood in its popular and commercial sense with reference to the context in which it occurs. The Hon SC further observed that Bearing in mind the ratio of the above me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their submission as well as the additional documents submitted by them (received through email on 25.08.2020). We agree that there is a provision available in Entry No.252 of Schedule-I of Notification No.01/2017-Integrated Tax(Rate) dated 28.06.2017 for reduced rate of GST of 5% for the parts used in ships/vessels of headings 8901, 8902, 8904, 8905, 8906, 8907. We have also gone through Notification No.64/95-CE dated 16.03.1995 of the pre-GST regime (which has been referred to by the applicant) and find that there was a provision therein where full exemption could be availed on all the goods supplied to the Navy or Ministry of Defence based on certificate of use issued by the Rear Admiral of Indian Navy or an officer not in rank below Joint Secretary to the Government of India. The relevant portion of the said notification reads as under: Sr.No. Description of goods Conditions 21. All goods If (a) The said goods are supplied for use in construction of warships of the Indian Navy or Coast Guard; and (b) Before clearance of the said goods, a certif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered to be so essential or so integral a part of a warship, without which the warship would not come into existence or would not be complete. In the absence of these details, it would not be possible for us to decide whether the subject goods are parts of warship or otherwise. In fact, we will be left with no option but to make a decision based on the records available with us as well as on the merits of the case. Further, it is also not forthcoming from the documents i.e. Purchase orders/contracts etc. submitted by the applicant as to how the subject goods are an essential or integral part of the warships without which a warship would not come into existence or be complete. We have also gone through the photocopy of the End Use Certificate issued by the Rear Admiral and Director of DMD Establishment, P.O.Box No.2043, Secunderabad vide File F.No.HLC/85/PT-10 Cables(32 Types/S4* dated 11.06.2019 which reads as under: 1. Refer to DMDE Purchase Order No.HLC/85/PT-10 (32 Types)/S4*/225 dated 26th March, 2019 placed on M/s. Apar Industries (M/s. Apar Industries ltd. (A Unit Uniflex Cables) Survey No.82/2/P1, 88,861/1, 862/1 863/1, Manekpur Road, Khatalwada, Tal:Umbergaon, Walsad( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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