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TMI Blog2018 (10) TMI 1871X X X X Extracts X X X X X X X X Extracts X X X X ..... s per advance ruling application, this is a case of Mild hybrids ,- also called micro hybrids-use a battery and electric motor to help power the vehicle and can allow the engine to shut off when the vehicle stops (such as at traffic lights or in stop-and-go traffic), further improving fuel economy, Mild hybrid systems cannot power the vehicle using electricity alone - Further, the application also says that HEVs manufactured and supplied by the Applicant have a compact electric motor (Ciaz, Ertiga and S-Cross have electric motor of 1.779 kW, 1.779 kW and 1.772 kW capacity, respectively); that this compact motor in such HEVs provides assistance to the IC engine for propelling the vehicle and in other instances such as start-stop etc. These HEVs supplied by the Applicant draws energy from the consumable fuel as well as electrical energy; that in such HEV's the degree of hybridization is to the extent that electric motor provides assistance to the IC engine; that the electric motor assists the IC engine mainly when driver demands acceleration (press accelerator pedal above certain threshold); that therefore, such HEVs are mild hybrid vehicles. We have carefully gone through th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated starter generator (ISG) which supplements the engine's power and enables acceleration. The relevant specifications of the three HEVs are provided in the following table: Technical Specifications Models S-Cross Ertiga Ciaz Overall width (mm) 4300 4296 4505 Overall width (mm) 1785 1695 1730 Overall height(mm) 1595 1685 1485 Engine Capacity(cc) 1248 1248 1248 Fuel Tank Capacity(1) 48 45 43 3. It is pertinent to mention that the aforementioned specifications in regard to HEVs supplied by the Applicant are determined as per Rule 93 and 124 of the Motor Vehicles Rules, 1989, as amended from time to time, which provides the methodology to determine the dimensions, safet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his help the engine in providing optimal acceleration and performance. c. The vehicle has idle start-stop function which helps the vehicle conserve precious fuel in certain idling conditions. STATEMENT CONTAINING APPLICANT'S INTERPRETATION OF LAW AND/OR FACTS. AS THE CASE MAYBE. IN RESPECT OF THE QUESTION(S) ON WHICH ADVANCE RULING IS REQUIRED. APPLICANT'S ELIGIBILITY FOR ADVANCE RULING: 10. Section 11(1) of the GST (Compensation to States) Act, 2017 (hereinafter referred to as the 'Compensation Cess Act') provides that all provisions of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the 'CGST Act') and the rules made thereunder, shall be applicable in relation to the levy and collection of the cess leviable under Section 8 of the Compensation Cess Act. The relevant portion of Section 11(1) of the Compensation Cess Act is reproduced hereunder: (1) The provisions of the Central Goods and Services Tax Act, and the rules made thereunder, including those relating to assessment, input tax credit, non-levy, short-levy, interest, appeals, offences and penalties, shall, mutatis mutandis, apply in relation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Haryana and thus, the present advance ruling application is maintainable before the Hon'ble Authority of Advance Ruling, Haryana. ISSUE REQUIRING ADVANCE RULING: 16. The Applicant submits the following question for Advance Ruling and its interpretation on the question as under: c. Whether HEVs supplied by the Applicant are leviable to Compensation Cess at the rate of 15% as prescribed under Sl. No. 48 of Notification No. 01/2017-Compensation Cess (Rate) dated 28.06.2017 (hereinafter referred to as Notification No. 01/2017-CC} as amended by Notification No. 05/2017-Compensation Cess (Rate) dated 11.09.2017 (hereinafter referred to as Notification No. 05/2017-CC)? Applicant's understanding: 17. In the understanding of the Applicant, HEVs supplied by the Applicant are leviable to concessional rate of Compensation Cess i.e. 15% under SI. No. 48 of Notification No. 01/2017-CC as amended by Notification No. 05/2017-CC. Applicable provisions: GST (Compensation to States) Act, 2017 18. Section 8 of the Compensation Cess Act, is the charging section which provides that a compensation cess shall be leviable on supplies of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be determined as per the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under. NIL 52 8703 All goods other than those mentioned at S. No.s. 43 to 51 above 15% Notification No. 05/2017-CC 21, The above referred Notification No. 01/2017-CC was amended by Notification No.05/2017-CC which substituted SI. No. 48 and 52 of Notification No. 01/2017-CC. The amended SI. No. 48 and 52 are as under: S.No. CHAPTER/HEADING/SUB-HEADING/TARIFF ITEM DESCRIPTION OF GOODS RATES OF GOODS AND SERVICES TAX COMPENSATION CESS 48 8703 60, 8703 70 Following Vehicles, with both compression- ignition internal combustion piston engine (diesel or semi diesel) and electric motor as motors for propulsion; a) Motor vehicles cleared as ambulances duly fitted with all the fitments, furniture and accessories necessary for an ambulance from _ the factory manufacturing such motor vehicles c) Motor vehicles of Nil engine capacity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... request. 26. As per the Applicant's understanding, all 3 models of HEVs of the Applicant namely Ciaz, Ertiga and S-Cross fall under the sub-heading 8703 50 of the CTA and are consequently covered under clause (d) of SII.No.48 of the Notification No. 01/2017-CC as substituted by Notification No. 05/2017-CC and thus, attracting compensation cess at the rate of 15%. The reasons for the same are explained hereunder;- The HEVs are classifiable under Heading 8703 27. On reading the aforementioned notification, it can be seen SI. No. 48 as substituted is applicable for sub-heading 8703 50,8703 70. The relevant extract of Heading 8703 of the CTA is provided below for quick reference: TARIFF ITEM DESCRIPTION OF GOODS (1) (2) 8703 Motor Cars and other motor vehicles principally designed for the transport of persons (other than those of heading 8702), including station wagons and racing cars. 8703 40 Other vehicles, with both spark-ignition internal combustion reciprocating piston engine and electri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able under sub-heading 8703 50 of the CTA. Discussion in detail in this regard is made in the subsequent paragraphs. 31. Once it is established that HEVs supplied by the Applicant fails under Heading 8703 of the CTA, it is pertinent to determine as to whether or not these HEVs are covered under SI. No. 48 of the Notification No. 01/2017-CC as amended by Notification No. 05/2017-CC, referred above. This is for the reason that in case these HEVs are covered under SI. No. 48, compensation cess at the rate mentioned in column (4) corresponding to Sl. No. 48 i.e. 15% would be leviable. However, in case these HEVs are not covered under SI. No. 48 of the Notification No. 01/2017-CC as amended by Notification No. 05/2017-CC, these HEVs would be covered under SI. No. 52, which is a residual entry for vehicles falling under Heading 8763 of the CTA and thus, would be leviable to the compensation cess at the rate mentioned in column (4) corresponding to SI. No. 52 which is 17%. Analysis of SI. No. 48 of Notification No. 01/2017-CC as amended by Notification No. 05/2017-CC 32. On a careful perusal of amended Sl. No, 48 of Notification No. 01/2017-CC referred above, it is clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. The World Book Encyclopedia, Volume 11: Jet Propulsion is the production of motion in one direction by releasing a high-pressure stream of gas in the opposite direction . vii. The Compact edition of the Oxford English Dictionary. Volume If: propel: to drive before one, push or urge forward propulsion: The action of driving or pushing forward or onward, the condition of being impelled onward; also, propulsive force or effort, viii McGraw-Hill Concise Encyclopedia of Science Technology, 3 rd edition The process of causing a body to move by exerting a force against it 37. On a careful perusal of the above referred meanings of the term 'propel or propulsion' it is dear that any action or activity which causes or urges to cause movement in a body is called propulsion. Thus, the act of pushing or causing a body to move is propulsion. 38. Meaning of the term 'both': i. I Major Law Lexicon (4 Edition, 2010): 'the one and the other; the two without the. exception of the other'. 39. In view of the above referred meaning of the term 'both', it is Clear that the usage of the term 'both' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the coverage of the said amended entries is extended to capture any vehicle with a motor which in any manner is used for driving such vehicle. 45. it has already been detailed in the facts above that HEVs supplied by the Applicant has an IC engine as weft as ISG (motor). In view of the dictionary meaning of the term propulsion, as explained above, any activity which provides forward or onward movement to the vehicle is called propulsion. Moreover, even the tendency or urge to push or accelerate the vehicle is also called propulsion. 46 It has already been defined in the facts above that HEVs manufactured and supplied by the Applicant are driven by the IC engine and thus, the IC engine is acting as a motor for propulsion in as much as it is providing the necessary push to move the vehicle. 47. Further, at certain points viz. at the time of starting the HEVs, the electric motor starts the engine and thereafter, the IC engine takes over for further movement of HEVs. It is pertinent to note that the activity of starting the engine is to put HEVs in moving condition and therefore, the electric motor is acting as motor for propulsion. Also, at certain instances the elect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/2017-CC which provides that Tariff item , sub-heading heading and Chapter shall respectively mean a tariff item, sub-heading, beading and chapter as specified in the First Schedule to the CFA. Further, Explanation (2) to Notification No. 1/2017-CC provides that the rules for the interpretation of the First Schedule to the CTA, 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. 54. Thus, reference is made to sub-heading 8703 50 of the CTA, which Is reproduced hereunder: Tariff Item Description of goods (1) (2) 8703 50 Other vehicles, with both compression-ignition internal combustion piston engine (diesel or semi diesel) and electric motor as motors for propulsion, other than those capable of being charged by plugging to external source of electric power 55. It is pertinent to note that the above referred sub-heading 8703 50 of the CTA is pari materia to SL No. 48 and thus, the interpretation and scope o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be placed on the HSN Explanatory Notes. 61. At this juncture, attention is invited to the 44 Session of the Harmonised System Review Sub-Committee, wherein, it was proposed to amend the nomenclature of Chapter 87, specifically headings 87.02, 87.03, 87.04 and 87.11 in order to up-to-date the HSN in the light of recent technical innovations in the field of automobile technology. 62. it was pointed out at the meeting that the motor vehicles manufactured with the advanced technology are equipped with a hybrid power system that use two or more power sources to move. This technological advancement improves fuel economy, increase power or provide additional auxiliary power to the vehicles. Besides this, such vehicles are environment friendly with regard to emission of tailpipe pollutants. 63. It was also pointed out in the meeting that the current nomenclature in the HSN is stipulated on the basis of types of internal combustion piston engines and such a simple nomenclature is not enough to reflect the world trade of motor vehicles, taking into account the remarkable changes in technology. 64. In accordance with the proposals, the committee amended the HSN Explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law that in the absence of any statutory definition, the words used in a taxing statute have to be understood in the common parlance or commercial parlance. Reliance in this regard can be placed on the decision of Hon'ble Apex Court in the case of Porritts and Spenser (Asia) ltd. vs. State of Haryana, reported at, [1983 ELT 1607 (SC)] = 1978 (9) TMI 72 - SUPREME COURT , The relevant portion, of the said decision is as under: 4. Now, the word textiles is not defined in the Act, but it is well settled as a result of several decisions of this Court, of which we may mention only a few, namely, Ramavatar Budhaiprasad v. Assistant Sales Tax Officer, Akola AIR 1961 S.C 1325 = 1961 (3) TMI 55 - SUPREME COURT and M/s Motipur Jamindary Co. Ltd. v. State of Bihar, AIR 1962 S.C. 660 = 1961 (11) TMI 58 - SUPREME COURT and the State of West Bengal v. Washi Ahmed, (1977) 3 SCR 199 = 1977 (3) TMI 127 - SUPREME COURT that in a taxing statute words of everyday use must be construed not in their scientific or technical sense but as understood in COMMON PATIANCE . ...............Emphasis Supplied 70. In view of the above referred decision, it becomes clear that in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehicle. 75. As explained in the facts above, HEVs manufactured and supplied by the Applicant consist of an IC engine along with an electric motor. Further, for the purpose of mechanical propulsion, these HEVs draw energy from the conventional IC engine as well as the electric motor. Therefore, in view of the above referred definitions/meanings of Hybrid Electric Vehicles, it can be safely concluded that HEVs manufactured and supplied by the Applicant are Hybrid Electric Vehicles. 76. ft is to be noted that Hybrid Electric Vehicles are of different types and can be classified in the following categories: a. On the basis of power train configuration: Parallel Hybrids, Series Hybrids, Power Split or Series-Parallel Hybrids. b. On the basis of degree of hybridisation: Full Hybrids, Mild Hybrids or Plug-in Hybrids. 77. For the purpose of instant application, the Applicant is only considering the different types of hybrid electric vehicles on the basis of degree of hybridisation. 78. It is to be noted that the term Mild Hybrid Electric Vehicle has not been defined in the HSN Notes or the CTA. However, the said 44 ' Session describes mild parallel hybr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the electric motor, are Full Hybrid Vehicles, whereas, the Hybrid Vehicles, wherein, the electric motor of the certain specification (usually 20 kW) is merely assistive i.e. works together with the IC engine, are Mild Hybrid Vehicles. Thus, the correct nature of the Hybrid Vehicles i.e. mild or full is determined by the functions performed by the electric motor. 82. in the instant case, HEVs manufactured and supplied by the Applicant have a compact electric motor (Ciaz, Ertiga and S-Cross have electric motor of 1.779 kW, 1.779 kW and 1.772 kW capacity, respectively). Further, this compact motor in such HEVs provides assistance to the IC engine for propelling the vehicle and in other instances such as start-stop etc. These HEVs supplied by the Applicant draws energy from the consumable fuel as well as electrical energy. Further, in such HEV's the degree of hybridization is to the extent that electric motor provides assistance to the IC engine. The electric motor assists the IC engine mainly when driver demands acceleration (press accelerator pedal above certain threshold). This function is enabled subject to battery charging condition up to a certain level Therefore, such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - SUPREME COURT . in this case, while deciding the classification of the disputed product, the Hon'ble Apex relied upon a number of cases wherein, the classification has been determined in accordance with the trade parlance. The relevant portion of this decision is reproduced hereunder: 30. There is no fixed test for classification of a taxable commodity. This is probably the reason why the 'common parlance test' or the commercial usage test, are the most common [see A. Nagaraju Bors. v. State of A. P., 1994 Supp (3) SCC 122 = 1994 ...(72) ELT 801 (S.C.)] = 1994 (7) TMI 88 - SUPREME COURT . Whether a particular article will fall within a particular Tariff heading or not has to be decided on the bases of the tangible material or evidence to determine how such as article in understood in 'common parlance' or in commercial world' or in trade circle or in its popular sense meaning. It Is they who are concerned with It and it Is the sense in which they understand it that constitutes the definitive index of the legislative intension, when the statute was enacted [see D.C.M. vs. State of Rajasthan, 1980 (4) SCC 71 = 1980 (6) E.L.T.383 (S.C.)] = 1980 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs supplied by the Applicant are known as Hybrid Vehicles in the commercial parlance and therefore, these HEVs supplied by the Applicant shall be covered as Hybrid Vehicles' within the scope and ambit of the HSN Explanatory Notes of sub-heading 8703 50 of the CTA and SI. No. 48 of the Notification No. 01/2017-CC as amended by Notification No. 05/2017-CC. It is also submitted that HEVs are supplied by the Applicant as Hybrid Vehicles in India. Sample copies of the invoices are enclosed as Annexure-K. 90. It is also submitted while interpreting a statute, notification, rule, etc. reference can be made to the interpretation or scope of any other statute whose language is pari-materia to the statute under consideration. In this regard, reliance is placed on the decision of Hon'ble Apex Court in the decision of CC, Bangalore vs. Maestro Motors Ltd. reported at, [2004 [174) ELT 289 (SC)] = 2004 (12) TMI 86 - SUPREME COURT . In this case, it was held that when in a notification, exemption is with reference to an item in the schedule to CTA then the interpretative rules applicable to, such tariff is equally applicable to interpret such notification. 91. It is submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Applicant, HEVs supplied by it are leviable to compensation cess at the rate of 15%. RECORDS OF PERSONAL HEARING - 2nd PROVISO TO SECTION 98(2) OF CGST/HGST ACT, 2017 2. Personal hearing in the instant case was conducted on dt.23.10.2018 which was attended by Sh. Laxmi Narsimhan, Advocate, Sh. Amar Pratap Singh, Advocate, Sh. Ankit Ansal, CA. They reiterated the submissions made in their application for advance ruling. DISCUSSIONS AND FINDINGS OF THE AUTHORITY 3. We have carefully gone through the facts and records of the case. The question raised by the applicant seeking advance ruling is regarding applicability of S.No.48 of Notification No.1/2017-Compensatibn Cess (Rate) dt.28.06.17, as amended vide Notification No.05/2017-Compensation (Cess) Rate dt. 11.09.17 to the motor vehicles. being manufactured/supplied by the applicant S.No CHAPTER/HEADING/ SUB-HEADING/ TARIFF ITEM DESCRIPTION OF GOODS RATES OF GOODS AND SERVICES TAX COMPENSATION CESS 48 8703 60, 8703 70 Following Vehicles, with both compression- ignition interna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Motors cars and other motor vehicles principally designed for transport of persons (other than those of heading 8702), including station wagons and racing cars Further, chapter sub-heading 8703 05 provides as under: - Other vehicles, with both compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor as motors for propulsion; other than those capable of being charged by plugging to external source of electric power: Serial number 48(d) of Notification No. 1/2017-Compensation Cess (Rate) dt.28.06-17, as amended, also provides the same wordings, as mentioned in chapter sub-heading 8703 50, and vehicles with both compression-ignition internal combustion Piston engine (diesel or semi-diesel) and electric motor as motors for propulsion, are covered under this serial number . 6. Therefore, the only points which needs to be examined is whether the car models for which advance ruling has been sought by the applicant are with both compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor as motors for propulsion . This phrase also makes clear that there has to be one compression-ignit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t draws energy from the consumable fuel as well as electrical energy; that in such HEV's the degree of hybridization is to the extent that electric motor provides assistance to the IC engine; that the electric motor assists the IC engine mainly when driver demands acceleration (press accelerator pedal above certain threshold); that therefore, such HEVs are mild hybrid vehicles. 9. The applicant has placed reliance on the certificate issued by International Centre for Automotive Technology (A Division of NATRIP Implementation Society (NATiS), Govt, of India), for the cars for which advance ruling has been sought. We have carefully gone through these certificates which certify the vehicles complying with the requirements of the Central Motor Vehicle Rules, 1989. However, from none of the contents of these certificates It is clear that the electric motor present in the vehicle is capable of motor for propulsion . Propulsion means to push forward or drive an object forward. A propulsion system consists of a source of mechanical power, and a propulsar (means of converting this power into propulsive force). The certificates relied upon by the applicant do not make it clear whet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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