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TMI Blog2021 (3) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... , they have classified their product under CTH 8708. It is seen that all articles of vulcanized rubber(other than hard rubber) not covered by the preceding headings are included in this heading. Thus the entry 4016 is a residual entry which covers Other articles of Vulcanised Rubber other than hard rubber in which CTH 4016 99 is a further residual entry Other and CTH 4016 99 90 is a residual- residual-residual entry and therefore not a specific entry . To be classified under this heading, the product should be an article of vulcanised rubber other than hard rubber and should not be covered under any specific preceeding entries - it is seen that CTH 8708 covers Parts and accessories of vehicles falling under CTH 8701 to 8705. Section Note 2(a) of Section XVII, states that the expression Parts of this Section do not apply to articles covered under CTH 4016-other articles of vulcanised rubber other than hard rubber . The functional unit of the air spring, the container which holds the air i.e, bellows made of fabric-reinforced vulcanised soft rubber and therefore should merit classification under CTH 40169990, the suspension, i.e., the functional utility, is not provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt are rightly classifiable under CTH 8708 and more specifically under CTH 8708 8000. - TN/01/ARA/2021 - - - Dated:- 24-2-2021 - THIRU SENTHILVELAVAN B., I.R.S., AND THIRU KURINJISELVAAN V.S., M.SC., (AGRI.), M.B.A., MEMBER Note: Any appeal against the Advance Ruling order shall be filed before the Tamil Nadu State Appellate Authority for Advance Ruling, Chennai under Sub-section (1) of Section 100 of CGST ACT/TNGST Act 2017 within 30 days from the date on which the ruling sought to be appealed against is communicated. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act. ------------------------- SI AIR SPRINGS PRIVATE LIMITED, S.Nos 19/3 86 14/2-A, Poosaripatti Post, Kallikulam Village, Melur Taluk, Madurai -625122 (hereinafter called the Applicant ) is registered under the GST Vide GST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir pressure developed by the air flowing into the air spring causes it to extend axially. 2.2 The applicant has stated that the products manufactured and sold by them which are in the nature of Main Air Springs and Lift Air Springs are critical components of the air suspension and lift axle systems in trucks, trailers and buses. They have also stated that under the erstwhile Central Excise regime, they were classifying and clearing the Air Springs under Central Excise Tariff Heading 4016 on payment of appropriate excise duty and have submitted documents evidencing the same. The Applicant has for the purposes of GST been classifying such Air Springs under tariff heading 8708 9900 w.e.f. 01.07.2017, which attracts GST at the rate of 28%. They have stated that certain other manufacturers in the industry are classifying similar products - Air Springs manufactured and supplied by them, under the heading 4016 9990 18% GST). They have subsequently obtained a legal opinion on issue and has been advised that the appropriate classification of Air Springs is under tariff heading 4016 9990 as Other Articles of Vulcanised Rubber other than Hard Rubber of the Customs Tariff and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based principles and not on bending principles. 5. The rubber used in Air Springs is not in the nature of hard rubber . They have stated that they have been classifying Air Springs under Chapter 87 (albeit erroneously) because it was of the erroneous opinion that Air Springs would form parts and accessories of motor vehicles of headings 8701 to 8705. However, now they are of the view that HSN Explanatory notes to Section XVII specifically excludes springs from the scope of Chapter 87. Further Section note 2 to Section XVII, specifically excludes articles of vulcanized rubber from the scope of Chapter 87. They have placed reliance on the following case laws/instructions/tariff classifications to validate their interpretation of law. Instruction dated 21.05.2019 issued by the Office of the Commissioner of Customs (Import), Mumbai The Tribunal in Prag Industries v. CCE, 1998 (103) ELT 62 (T) = 1998 (6) TMI 159 - CEGAT, NEW DELHI US tariff classification bearing no. N303352 and dated March 28, 2019 2.5 In view of the above facts, the applicant has sought the authority to seek clarification on the correct classification of Air Springs man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When the vehicle is loaded to its full capacity, the driver moves down the lift axle on the road. When the vehicle is empty or lesser load, the driver moves up the lift axle from the road. 3.3 In furtherance to the hearing, the applicant was asked to furnish a report on components, specifically the type of rubber and its constituent certified by an authorized Chemical Examiner. The applicant vide their letter dated 30.11.2020 furnished a test report issued by Kamaraj College of Engineering and Technology. The following is the report issued by the Head of Polymer Technology, Kamaraj College of Engineering and Technology. It is inevitably concluded based on the observations and results that the nature of rubber used in SI Air Springs manufactured by M/s SI AIR SPRINGS PVT LTD, Madurai is soft rubber which is flexible and high elastic in nature. 3.4 The applicant was given another opportunity to be heard and the virtual hearing was held on 16.12.2020. The authorized representative appeared for the hearing. He reiterated their earlier submissions made along with the application and that furnished on 26.08.2020. He drew the attention to the Chartered Engi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Commissionerate submitted the test report received from Custom House Laboratory Chennai vide letter Lab No.01/ Madurai/08.01.2021 dated 15.01.2021. The details of report is given below verbatim; The Sample is an article. It is mainly composed of compounded rubber. It answers test for Sulphur, an ingredient of Vulcanised rubber. However, mechanical tests could not be carried out for want of facilities. Sealed remnant returned. 4.1 The Central Tax jurisdictional authority was addressed to report if there are any pending proceedings in the applicant s case on the issues raised by them in the ARA application and for comments on the issues raised. The authority furnished the following comments : It is admitted by the applicant, that the product in question Air Springs are specifically manufactured for Motor vehicles viz., Heavy Duty Trucks with Lift Axle suspension and Buses with Air suspension system and do not have any other use. The case law LML LTD., Vs Commissioner of Customs 2010 (SC) SCC 503 = 2010 (258) ELT 321 (SC) = 2010 (9) TMI 12 - SUPREME COURT advocates that HSN Explanatory notes are dependable guide for interpretation of Customs Tariff. Thus, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he pictures, and as seen from the chartered engineer s certificate, Air springs are made up of rubber bellow and sealed with steel plates in which Emergency bumpers are placed inside. As such, the product could not be termed as other articles of vulcanised rubber of heading 4016 . Thus, on all counts, the product merits classification under 8708 only. The case law O.K. Play (India) Ltd. V. Commissioner of Central Excise, 2005 (180) E.L.T. 300 (S.C.) = 2005 (2) TMI 114 - SUPREME COURT , throws light on the importance of the Rules of Interpretation esp., rule 3 (a), The heading which provides a specific description shall be preferred to a heading having a more general description . In the present case, 8708 80 00 is more specific than the 4016 99 90. [Others] and also 8708 99 00[others]. 40169990 is a residuary entry and not a specific one. Moreover, as pointed out in the case law, when considering utility, predominant usage of the product, [applicant admitted that the said products are specifically manufactured for use in motor vehicles], it is rightly classifiable under 8708 8000 only. The applicant admits that the subject product is a part and accessories of motor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8708 only. The said case law has been followed in 2015 (325) ELT 471 (SC) Cast Metal Industries P Ltd., VS CCE., Kolkatta = 2015 (11) TMI 833 - SUPREME COURT , wherein it was held that door handles and hinges being specifically meant for and use in motor vehicles as its parts and accessories classifiable under heading 8708. The US TARIFF advise is an unauthorized external aid which cannot be admitted for interpretation. It is admitted by applicant that the product was manufactured with 60% metal and 40% rubber. The reaction force mentioned by applicant is nothing but shock absorbent or shock suspension system. They have also admitted that the products manufactured and sold by the applicant are critical components of the air suspension system. Explanation (iv) to Notification 01/2017-CT(Rate) provides that 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. The crux of the General Rules for the Interpretation of Import Tariff is that classification to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdictional authority and heard the arguments made by the Applicant at the time of Virtual hearings. They have sought ruling on the following question: Whether Air Springs manufactured and supplied by the applicant will be correctly classifiable under Tariff heading 40169990 as opposed to Tariff heading 8708 9900 and attract GST at the rate of 18%. 7.1 The facts of the case as available before us are that the applicant is engaged in the manufacture and sale of Air Springs which are used in Air suspension systems for Buses, Trucks and Trailers. The product is composed of a rubber bellow which includes rubber and fabric composite, beadwire, griddle hoop, crimped top plate, piston and a bumper. The material composition of such Air Spring is approximately 60% metal and 40% rubber. The Air Springs work on the pneumatic system principle, whereby a volume of gas confined within a container is compressed, and, it produces a reaction force. The reaction force takes the vehicle load, makes the ride smoother and reduces wear and tear in the vehicle. Hence, the sole purpose of Air Spring is to provide a smooth, constant ride quality. In the erstwhile Central Excise regime they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No one single universal test can be applied for correct classification HSN along with the explanatory notes provides a safe guide for interpretation of an entry Equal importance is required to be given to the Rules of Interpretation Lastly, it is important to bear in mind that functional utility, design, shape and predominant usage have also got to be taken into account while determining the classification of an item Thus, the above decision hands out that the classification primarily is to be attempted using the chapter headings, HSN Explanatory Notes are safe guides for interpretation and equal importance is to be given to the Rules of Interpretation and lastly, the functional utility, design, shape and predominant usage should also be taken into account while determining the classification of an item. The competing heads for classification of the product in hand are 40169990 and 87089900. 8.2 In terms of explanation (iii) and (iv) to Notification No. 1/2017 - Central Tax (Rate) dt. 28-06-2017, tariff heading, sub-heading, heading and chapter shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40169980 --- Stoppers 40169990 --- Others From the above, it is clear that the entry at 40169990 of CTH made applicable to GST is residual of the residual entry of CTH 4016 99. The Explanatory Notes as per HSN is as below: 40.16 - Other articles of vulcanised rubber other than hard rubber. 4016.10 - Of cellular rubber - Other : 4016.91 - - Floor coverings and mats 4016.92 - - Erasers 4016.93 - - Gaskets, washers and other seals 4016.94 - - Boat or dock fenders, whether or not inflatable 4016.95 - - Other inflatable articles 4016.99 - - Other This heading covers all articles of vulcanised rubber (other than hard rubber) not covered by the preceding headings of this Chapter or by the other Chapters. The heading includes : (1) Articles of cellular rubber. (2) Floor coverings and mats (including bath mats), other than rectangular (including square) mats cut from plates or sheets of rubber and not further worked than surface-worked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 87082100 -- Safety seat belts u 87082900 -- Other kg. 87083000 - Brakes and servo-brakes and parts thereof kg. 87084000 - Gear boxes and parts thereof kg. 87085000 - Drive-axles with differential, whether or not provided with other transmission components Non-driving axles and parts thereof kg. 87087000 - Road wheels and parts and accessories thereof kg. 87088000 - Suspension system and parts thereof (including shock-absorbers) kg. - Other parts and accessories : 87089100 -- Radiators and parts thereof kg. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or principally with the articles of Chapters 86 to 88 (see paragraph (B) below). and (c) They must not be more specifically included elsewhere in the Nomenclature (see paragraph (C) below). (A) Parts and accessories excluded by Note 2 to Section XVII. This Note excludes the following parts and accessories, whether or not they are identifiable as for the articles of this Section : (1) Joints, gaskets, washers and the like, of any material (classified according to their constituent material or in heading 84.84 ) and other articles of vulcanised rubber other than hard rubber (e.g., mudguard-flaps and pedal covers) ( heading 40.16 ). (B) Criterion of sole or principal use. (1) Parts and accessories classifiable both in Section XVII and in another Section. Under Section Note 3, parts and accessories which are not suitable for use solely or principally with the articles of Chapters 86 to 88 are excluded from those Chapters. The effect of Note 3 is therefore that when a part or accessory can fall in one or more other Sections as well as in Section XVII, its final classification is determined by its principal use. Thus the steering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arts and accessories : 8708.91 - - Radiators and parts thereof 8708.92 - - Silencers (mufflers) and exhaust pipes; parts thereof 8708.93 - - Clutches and parts thereof 8708.94 - - Steering wheels, steering columns and steering boxes; parts thereof 8708.95 - Safety airbags with inflater system; parts thereof 8708.99 - - Other This heading covers parts and accessories of the motor vehicles of headings 87.01 to 87.05, provided the parts and accessories fulfil both the following conditions : (i) They must be identifiable as being suitable for use solely or principally with the above-mentioned vehicles; and (ii) They must not be excluded by the provisions of the Notes to Section XVII (see the corresponding General Explanatory Note). Parts and accessories of this heading include : (IJ) Suspension shock-absorbers (friction, hydraulic, etc.) and other suspension parts ( other than springs), torsion bars. From the above, it is seen that CTH 8708 covers Parts and accessories of vehicles falling under CTH 8701 to 8705. Section Note 2(a) of Section XVII, states that the expression Parts of this Section do not apply to articles cove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be termed as an article of vulcanised rubber other than hard rubber and classifiable under CTH 40169990.When it is held that the Air Springs are not products of vulcanised rubber other than hard rubber , then there is no application of Note 2 (a) of Section XVII of the Customs Tariff. 8.6 The Air springs are a part of the Suspension System fitted in the axles of the vehicles falling under CTH 8701 to 8705, designed for use in such vehicles. Now, the possibility of the product being classified as Parts and accessories under CTH 8708 is examined as under: (1) The product is not excluded by the specific exclusions of the relevant Section/Chapter Notes as it is concluded that Just because vulcanised soft rubber makes for 40% of the product, the product cannot be termed as article of vulcanised rubber and therefore not covered under exclusion of Section Note 2(a) of Section XVII; (2) The Air springs are designed for use in the Motor Vehicles and are sold to Auto-Manufacturers; (3) The functional utility of the product is to provide Suspension and maintain levels irrespective of the load or to act as Shock absorber and its predominent usage is in the Motor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred as per the General Interpretation Rules to Customs Tariff and therefore considering the functional utility and the entry being specific, CTH 8708 80 00 is the right classification for Air Springs , the product in hand and we hold so. 9. Further, we find that the US tariff classification bearing No. N303352 dated 28th March 2019 relied upon by the applicant has classified the rolling lobe air spring under 4016.99.5500, HTSUS, which provides for Other articles of vulcanized rubber other than hard rubber:Other:Other:Other: Vibration control goods of a kind used in vehicles of headings 8701 through 8705. Thus it is seen that the said classification is based on the heading of the HTSUS, i.e., Vibration control goods of a kind used in vehicles of heading 8701 through 8705 , which is specific to cover those goods wherein the functionality is defined by the type of rubber and for use in vehicles of heading 8701 to 8705 for the purposes of vibration control. Whereas the Customs Tariff which is adopted for GST do not have any such entry and therefore the above ruling is differentiable. 10. To sum up, we find that the product as a whole is not an article of vulcanized rubber ot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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