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TMI Blog2021 (12) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Navy, and fall under entry at Sr. No. 252 of Notification No. 1/2017-C.T.(R), dated 28th June, 2017. By mainly and only placing the reliance on these documents, the applicant argued the case during final hearing. Hence, present decision shall apply to the situation or transaction where the said transaction is supported by such documents or similar documents and not to the any other transaction. The present ruling shall not apply to transactions where the documents similar to described above are absent. Parts of goods of headings 8901, 8902, 8904 to 8907 of any chapter are chargeable to CGST/SGST @ of 2.5% each. The Applicant has submitted that they supply parts of marine diesel engines and gensets to the Indian Navy, for application/ use in ships or vessels and the parts supplied by / to be supplied by the Applicant, includes numerous and diverse parts, intended for use in marine engines or gensets, of ships or vessels (of the Indian Navy) failing under Chapter No. 89 of Customs Tariff Act, 1975, typically under tariff heading number 8901,8902,8904,8905, 8906 and 8907 - in the case of IN RE: M/S. MAN ENERGY SOLUTIONS INDIA PRIVATE LIMITED (FORMERLY KNOWN AS MAN DIESEL TURBO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... natural gas engines, power generation systems, etc. The applicant's business, broadly, comprises of these three segments which includes Distribution business, wherein Applicant provides products, packages, services and solutions for ensuring uptime of equipment supplied; provides parts, new and rebuilt engines, batteries, varied services and customer support solutions. 2.2 Applicant supplies parts of marine diesel engines and gensets to customers such as the Indian Navy, and various shipyards and also other customers for application/ use in ships or vessels. The parts supplied by / to be supplied by the Applicant to the Indian Navy, include numerous and diverse parts, intended for use in marine engines or gensets, of ships or vessels (of the Indian Navy). 2.3 The classification of ships or vessels (including those used by the Indian Navy), falls under Chapter No. 89 of Customs Tariff Act, 1975, typically under tariff heading number 8901,8902,8904,8905, 8906 and 8907. 2.4 Subject application is made to seek ruling in respect of all such parts of meant for and supplied for ships and vessels of the Indian Navy, and which are used in ships or vessels of the Indian Navy. 2.5 Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t coupling (including universal joints) 18% 8484 Gaskets and similar joints of metal sheeting combined with other material or of two or more layers of metal; set or assortment of gaskets and similar joints, dissimilar in composition, put up in pouches, envelops or similar packings, mechanical seals 18% 8503 Parts suitable for use solely or principally with the machines of heading 8501 or 8502 18% 2.8 Sr. No. 252 of Schedule 1 of Notification No. 1/2017-C.T. (R), dated 28.06.2017 stipulates that "Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907 are taxable at the rate of 5%". The parts supplied/ to be supplied by the Applicant are covered under different tax rate brackets however, the said parts supplied / to be supplied to the Indian Navy, are intended for and to be used (as parts) in ships or vessels of the Indian Navy, and which ships or vessels are classified under heading 8901 to 8907 thus attracting 5% IGST (2.5% CGST and SGST each). 2.9 Applicant's supply of varied parts to the Indian Navy which qualifies as parts of headings of 8901, 8902, 8904, 8905, 8906, 8907, is covered under Sr. No. 252 mentioned above eligible for the cumulative GST rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icopter. 2.14 Upon application of the ratio of these judgements, parts (goods) when supplied for use/ fit-out in ships or vessels, as in the present case, to the Indian Navy, in terms of Sr. No. 252, these goods qualify for the concessional rate of GST, irrespective of the classification of these goods. The Applicant submits that the said parts supplied / to be supplied by the Applicant are to be considered as parts of goods of heading 8901 to 8907 covered under entry at Sr. No. 252, in terms of the law declared by the Hon'ble Supreme Court in case of M.C.E. Products Sales and Services Ltd. vs. Commissioner of Central Excise [2002 (144) E.L. T. 457 (S.C.)]. 2.15 In the context of the Applicant's business and present factual matrix, in the light of the judgment of the Hon'ble Supreme Court, a "part is an essential component which makes up the whole (equipment, machinery, chattel). In the present case, the impugned parts supplied by the Applicant are incorporated as a part of the Indian Navy's ships or vessels. In support is appended to this application, the chartered engineer's certificate dated 15th January 2020. Even the Declaration-Certificate of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Water Pump of the engine which cools the engine 14 Adapter, pipe Works as a joint to connect two pipes 15 Air cleaner This item cleans Air before entering engine. 2.17 The above list depicts that the parts supplied/ to be supplied by the Applicant are essential components of the marine engines and gensets used in ships or vessels, without which, the marine engines and gensets may well be incapable of the desired outcome / performance. 2.18 The Applicant refers to the judgement in the case of Commissioner of Cus. (Import), Mumbai Vs. Dilip Kumar & Company (2018 (361) E.L.T.577 (S. C.)] wherein the Supreme Court declared the law that taxing statue (imposing tax liability) should be interpreted strictly and burden to prove tax liability would rest on the revenue authorities. 2.19 On perusal of aforesaid judgement, a taxing statute should be interpreted strictly. Accordingly, in the present case, Sr. No. 252 of Notification No. 1/2017-C.T.(R), dated 28.06.2017 needs to be interpreted strictly. Hence, parts supplied by the applicant, even when classified under "any Chapter" would be covered under Sr. No. 252 above; since the same are used a parts of ships or vessels (i,e. good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be classified under the Harmonized System. Accordingly, it is the GRIs that are the single set of legal principles that always govern the classification of merchandise under the Harmonized System. Rule 3 of General Rules for interpretation of Customs Tariff made applicable to GST in its first sentence to GRI3 (a) provides that goods should be classified in the heading that provides the most specific description. In general, under this criterion, (1) A description by name is more specific than a description by class and (2) A description that more clearly identifies a product is more specific than one which is less complete. Rule 3(a): Prefer the Specific entry over the general entry Rule 3(a) states: 3. when by application of rule 2(b) or for any other reason, goods are, prima fade, classifiable under two or more headings, classification shall be effected as follows: (a)The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more heading search refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds" will be classifiable as "screws" even if these are used on motor vehicles as held in Kwality Sales Corporation v. CCE. 3.5 In Indian Aluminium Cables Ltd. vs. UOI (21) ELT 3 (SC) it was held that process of manufacture and end use to which it is put, cannot necessarily be determinative of classification of that product under fiscal statute like CETA. What is more important is that whether the broad description of the article fits in the expression used in the tariff. Therefore, predominantly, the end user test would not be used as a first principle and would come in last if there is no other test or the tariff entry itself is based on end use. Specific entries will have to be adopted in place of a general description. 3.6 Hence, from the above rulings it is imperative that the principle that specific heading overrides a general heading is well established in tax statutes. 3.7 The Parts supplied/ to be supplied by the Applicant are as mentioned in Annexure II and are therefore not reproduced. 3.8 It may be noted that the parts/components mentioned in Annexure II are basically not the integral parts of the Ships/vessels, but mostly the parts of engines which would do the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of the supply are bundled in the ordinary course of business would depend upon the normal or frequent practice followed in the area of business. It also says that in order to quay for a composite supply one of the characteristic would be that 'none of the individual constituents of the supply are able to provide the essential character of the service.' 3.13 Applicant's contention that in the impugned situation the service is classifiable under Composite Service, is not tenable. A reading the entire contract between the applicant & ONGC Ltd. as well the definition of composite supply reveals that, the proposed supply is not a composite supply as the applicant had, before this agreement, used to only provide Engines of different specifications to ONGC without any other specific contract for repair and overhaul of their engines. Hence, the two elements of supply in the agreement i, e the supply of the parts while undertaking the repair or overhaul & supply of service of repair and overhaul of the engine both can have an independent characteristic of their own in the supply i.e there can be an agreement for only supply of parts as and when needed by ONGC for repair o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to admission of their application. 4.2 The application was admitted and called for final e-hearing on 17.11.2021. The Authorized Representatives of the applicant, Shri. Ranjeet Mahtani, learned advocate, Shri. Ruturaj Bhide, learned advocate and Shri Deepak Bahirwani, learned Tax Director were present. The Jurisdictional officer was absent. Case was heard. 05. OBSERVATIONS AND FINDINGS: 5.1 We have perused the records on file, gone through the facts of the case, submissions made by the applicant as well as the department and have examined the matter in detail. During the course of final hearing, the applicant stated that, they want answer to only one question viz. Whether parts of diesel marine engine or genset supplied or to be supplied by the Applicant to the Indian Navy are chargeable to 5 % IGST or 2.5 % CGST + 2.5 % SGST as 'parts of heading of 8902, 8904, 8905, 8906 and 8907' in terms of Sr. No. 252 of Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017? In other words, the applicant wants answer to the question regarding rate of tax on supply of goods ie when the goods are supplied as pure supply of goods and not coupled with service. The applicant referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended for use in marine engines or gensets, of ships or vessels (of the Indian Navy) failing under Chapter No. 89 of Customs Tariff Act, 1975, typically under tariff heading number 8901,8902,8904,8905, 8906 and 8907. 5.5 In a recent ruling given by this very authority in the case of M/s MAN Energy Solutions India Private Limited (Order No. GST-ARA- 56/2019-20), it has been held that Marine Engines will be considered as parts of vessels falling under heading 8901, 8902, 8904 to 8907, only if they are used in manufacturing goods falling under Tariff Headings 8901, 8902, 8904 to 8907. Further in the same case it has also been held that parts of Marine Engines, falling under Chapter 8408/8409 of the GST Tariff would attract concessional rate of 5% GST as per Sr. No. 252 only if the said goods are supplied to/and used by companies manufacturing ships and other vessels falling under Chapter headings 8901, 8902, 8904, 8905, 8906 and 8907. Thus, in the case of M/s Man Energy Solutions India Pvt. Ltd., we have held that Marine Engines and parts thereof are essential requirements in manufacture of ship, vessels, boats, floating structures etc., falling under Tariff headings 8901, 8902, 8904 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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