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TMI Blog2024 (8) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... comfort. The features of the seat cover are distinct and clearly distinguishable from seat - The heading 940120 covers seats for motor vehicles whereas the appellant is not manufacturing seats as such but only a seat cover which is fitted over the seat already factory manufactured. Thus the product manufactured by the appellant is not covered under 940120. In order for motor vehicle parts or accessories to be classifiable under heading 8708, they must satisfy all the three following conditions: They must be identifiable as being suitable for use solely or principally with motor vehicles of headings 8701-8705 - On the test of sole use / principal use also, the seat covers merit classification under-8708 as they are only usable and used for motor vehicles and not of general use. - SRI SANJAY PANT AND SRI M.GIRIJA SHANKAR, MEMBER Authorized Representative : L. Satya Sai, Advocate (Under Section 101 of the Central Goods and Service Tax Act and the Andhra Pradesh Goods and Service Tax Act). At the outset, we would like to make it clear that the provisions of both the CGST Act and the APGST Act are the same except for certain provisions. Therefore, unless a mention is specifically mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ype of fastener). The original seat covers serves as a primary layer of textile fabric of the car seat which is permanently affixed over the raw seat after the foam cushion pad, which is fastened or attached to the frame of seat assembly. Without mounting the original seat cover over the raw foam seat, the seat is incomplete since the raw foam seat in itself does not last long, cannot be fixed as such without any damage etc. and thus, the same cannot be sold to the customers in the same manner. Further, the original seat covers manufactured by Appellant adheres to the safety standards and are designed keeping in mind the airbag compatibility. Therefore, the original seat covers being permanently fitted / installed to the seat in the vehicle at the time of sale, is an essential and integral part of the seat. The Appellant wanted to know whether the original car seat covers which are permanently attached to the raw foam seat of vehicles are classifiable under Chapter Heading 9401 as Seats (other than those of heading 9402), whether or not convertible into beds, and parts thereof and liable to GST at the rate of 18 % vide Sl.No. 435A under Schedule III of Notification No. 1/2017-Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... type of fastener). A.2 It is submitted that without mounting the original seat cover over the raw foam seat, the seat is incomplete since the raw foam seat in itself does not last long, cannot be fixed as such without any damage etc. and thus, the same cannot be sold to the customers in the same manner. Further, the original seat covers also adheres to the safety standards and is designed keeping in mind the airbag compatibility of the car to which the seat is to be installed/ assembles in. A.3 According to the Appellant, the seat covers are classifiable under Chapter Heading 9401 and liable to GST at 18% in terms of Sl. No. 435A of Schedule III of the Rate Notification as amended by Notification No. 41/2017-Central tax (Rate) dated 14.11.2017 (hereinafter referred to as Amendment Notification ) which notifies that Seats (other than those of heading 9402), whether or not convertible into beds, and parts thereof [other than seats of a kind used for aircraft] . However, the Ld. AAR held that the seat covers are classifiable under Chapter Heading 8708 and liable to GST at 28% as per the Rate Notification. The relevant portion of the corresponding entries of the Rate Notification as am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther parts of seats of Chapter Heading 9401. A.9 It is submitted that on perusal of the above entries, it is clear that the seats of a kind used for motor vehicles merit classification under Tarif Item 9401 2000. Further, parts of seats of a kind used for motor vehicles would be covered under Tariff Item 9401 9900. A.10 Therefore, on perusal of the above, the aforementioned tariff entries clearly and specifically cover the seats of motor vehicles and parts of such seats and both are classifiable under Chapter Heading 9401. The Ld. AAR has failed to appreciate the aforementioned submissions made in the Application for Advance Ruling and the personal hearing. A.11 As submitted supra, the original seat covers are parts of the seats used in the motor vehicles since the said seat covers the raw foam seat and which out such coverage, the raw foam seat would be not considered as a complete seat for use in the motor vehicles. A.12 Thus, the Appellant submits that the original seat covers being parts of the seats used for motor vehicles merit classification under Tariff Item 9401 9900. Accordingly, such original seat covers are covered under Sl. No. 435A of Schedule III of the Rate Notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) Any movable articles (not included under other more specific headings of the Nomenclature), which have the essential characteristic that they are construed for placing on the floor or ground, and which are used, mainly with a utilitarian purpose, to equip private dwellings, hotels, theatres, cinemas, offices, churches, schools, cafes, restaurants, laboratories, hospitals, dentists surgeries, etc., or ships, aircrafts, railway coaches, motor vehicles , caravan-trailers or similar means of transport. (It should be noted that, for the purposes of this Chapter, articles are considered to be movable furniture even if they are designed for bolting, etc., to the floor, e.g., chairs for use on ships). Similar articles (seats, chairs, etc.) for use in gardens, squares, promenades, etc. are also included in this category. (Emphasis supplied) A.17 Further, Chapter Note 1 of Chapter 94 of the First Schedule of the CT Act and also under the HSN Explanatory Notes provides the list of goods not covered under said Chapter such as articles of Chapter Heading 8714, Dentists chairs incorporating dental appliances of Chapter Heading 9018 or dentists spittoons of Chapter Heading 9018, etc. It is pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed as parts of upholstered seats (e.g., settees, couches, sofas). When these articles are combined with other parts of seats, however, they remain classified in this heading. They also remain in this heading when press with the seats of which they form part. (Emphasis Supplied) A.22 It is pertinent to note from the above explanatory notes that the Chapter Heading 9401 specifically covers identifiable parts of seats such as seat covers for permanent attachment to a seat. Thus, it clearly flows from the above that the seat covers of seats of a kind used for motor vehicles are covered under parts of such seats. A.23 Here, reliance is placed on the decision of the Hon ble Supreme Court in L.M.L, Limited vs. Commissioner of Customs reported at 2010 (258) ELT 321 (SC), wherein it was held that in order to resolve a dispute on tariff classification, internationally accepted nomenclature emerging from HSN explanatory notes, is a safe guide for classification. A.24 The above principle was also recognized in the following rulings of the Hon ble Supreme Court in: a. CCE v. Wood Craft Products Ltd. reported at 1995 (75) ELT 23 (SC). b. Collector of Central Excise v. Bakelite Hylam reported at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term part(s) would refer to a thing or item which essentially belongs to a distinct larger whole, which is necessary for the constitution of the whole and without which the whole cannot be constituted. A.33 In this regard, reference is made to the decision of the Hon ble Supreme Court, in the case of Pragati Silicon Pvt. Ltd. vs. CCE, Delhi (2007 (211) ELT 534 (SC)), wherein it was held that for an item to qualify as a part , it must be an essential component of a machine or a larger assembly without which the intended use of the finished product cannot be achieved. Such a part is not normally used independently and is not easily disassembled for maintenance purposes. A.34 Further, the Hon ble Supreme Court in CCE v. Insulation Electrical (P) Ltd., 2009 (224) ELT 512 (SC) analyzed the term part and held that it is an essential component of the whole without which the whole cannot function. A.35 The Hon ble Tribunal in CC v. Hydranautics Membrane India Ltd., 1994 (71) ELT 711 (Tri. -Del) construed the meaning of part as something essentially belonging to a larger whole, an integral portion. A.36 It is submitted that on a cumulative analysis of the above judicial precedents, the poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... floor of the car or vehicle. Therefore, Chapter Note 2 would not exclude seats of vehicles from Chapter 94. Significantly, it was also held by the Hon ble Supreme Court in Matador Foam case held that foam used as cushion which is affixed to frame of the automobile seat during manufacture of seat assembly would fall under Chapter Heading 9401 as a part of the automobile seat. Therefore, in the present case, the original seat cover is the primary layer of fabric or PU attached to the raw foam before the car seat is mounted to the car floor. A.41 Further, reliance is placed on the case of Shiroki Auto Components India Pvt. Ltd. reported at 2020 (374) E.L.T. 433 (Tri. Ahmd.), wherein the Hon ble Tribunal held that the imported child parts were used by the assessee in the manufacture of another part i.e. Round Recliner which is an integral part of motor vehicle seat and thus would fall under Tariff Item 9401 90 00 of Customs Tariff Act, as part of seat of a motor vehicle, and not as parts of motor vehicle under Chapter Heading 8708 as the goods imported were not directly used in manufacture of motor vehicle parts. The relevant portion of the decision is extracted hereunder: 5 The limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Revenue, we find that in the said judgment motor vehicle parts and accessories involved was rail assembly front seat adjuster/assembly slider seat and rear back seal lock assembly, all these items are not part of seat but accessories which is fitted in the motor vehicle. Whereas, as per facts in the present case child parts are used to make Round Recliner which is used for manufacturing Recliner Assembly and the Recliner Assembly is fitted inside the seat at the time of assembling of complete seat. Therefore, the child parts are integral pads of seat and not like accessories which is fitted in the motor vehicle. Hence. The facts of the case in Insulation Electricals Pvt Limited (supra) and in the present case are entirely different. (Emphasis supplied) A.42 The aforesaid decision was affirmed by the Hon ble Supreme Court in Commissioner vs. Shiroki Auto Components India Pvt. Ltd. 2021 (378) E.L.T. A145 (S.C.), wherein the appeal filed by department (Civil Appeal No. 1623 of 2021) was dismissed and classification of child parts used in seat of vehicles under Tariff Item 9401 90 00 instead of Tariff Item 8708 99 00 was upheld. A.43 In view of the above, it is humbly submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndise will be 9401.90.5021, HTSUS. Which provides for Seats (other than those of heading 9402). Whether or not convertible into beds, and parts thereof Pans: Other. Other. Other. Of textile material, cut to shape The rate of duty will be free. (Emphasis supplied) A.47 12 Further, the Canada Border Services Agency (CBSA) issued Memorandum D10-15-31 providing guidelines on tariff classification of permanent car seat covers under the Customs Tariff The same is extracted for ease of reference. DEFINITIONS Permanent car seat covers: These are covers for the permanent attachment to the backs, bottoms and frames of seats of automobiles and other motor vehicles. Permanent car seat covers may be equipped with elements and cutouts for fixing and adapting them to seats and their frames. They can be made of different materials and can consist of more than one piece for assembly to constitute a complete seat cover. After the seats are installed in the vehicle, the covers cannot generally be removed without first removing the seat from the vehicle. For purposes of this administrative policy. It is understood that these covers are presented separately from the seats. And that permanent attachment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral Rules for Interpretation (hereinafter referred to as GRI ) provides as under: 3. When by application of rule 2 (b) or for any other reason, goods are, prima facie, 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 headings each 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 sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. A.55 As per Rule 3(a) of GRI, if a product can be classified under two or more different headings, then the same must be classified under the heading which provides the most specific description as against the heading which provides a general description. A.56 Thus, without prejudice to the other submissions, it is submitted that on this ground also, the original seat covers merits classification under Chapter Heading 9401 which is a specific entry and not und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to. The nomenclature given by the parties to the word or expression is not determinative or conclusive of the nature of the goods. The same will have to be determined by application of the well-settled rules or principles of interpretation which have been referred to as common parlance rule, trade or commercial parlance rule, commonsense rule of interpretation and user test . A.60 It is submitted that the applicability of the common parlance test has been upheld and resorted to in various cases by the Supreme Court like Indo International Industries v. Commissioner of Sales Tax reported at 1981 (8) ELT 325 (SC) and Commissioner of Sales Tax v. Macneill and Barry Ltd. reported at 1986 (23) ELT 5 (SC). A.61 The Appellant sells the original seat covers as covers designed to permanently fit over the raw foam seats installed in the vehicles and are sold as an integral part of the car seats. The customers directly approach the Appellant for the said seat covers for use in making the seats used in the motor vehicles and perceive them as an integral part of the seat. A.62 In view of the above, the Appellant submits that on applying common parlance test to the present factual scenario, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nent seats are explicitly designated for exclusive utilization within a specified motor vehicle, thereby serving a specialized function meticulously aligned with the precise design and manufacturing specifications of said particular vehicle. The nomenclature permanent seat cover is employed to underscore the highly specialized nature of these seating arrangements, exemplifying a bespoke creation characterized by an assiduous focus on detail, ensuring seamless integration with the intended motor vehicle. b. It is imperative to underscore and reiterate that Permanent Seats are expressly proscribed for being employed or promoted for general purposes beyond the specific application intended for the correlated motor vehicle. The distinctive design and the bespoke manufacturing process undertaken for these seats render them an intrinsic and indispensable component of the comprehensive motor vehicle structure. Absent the presence of these highly specialized seating units, the motor vehicle in question would be rendered non-operational and ineligible for lawful sale. c. In summation, it is paramount to recognize that Permanent Seats transcend mere functional contributions to the overall op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for parts (other than hulls) or accessories of ships, boats, or floating structures. Such parts and accessories, even if identifiable as being for ships, etc., are therefore classified in other Chapters in their respective headings. The other Chapters of this Section each provide for the classification of parts and accessories of the vehicles, aircraft or equipment concerned. It should, however, be noted that these heading apply only to those parts or accessories which comply with all three of the following conditions: (a) They must not be excluded by the terms of Note 2 to this Section (see paragraph (A) below) and (b) They must be suitable for use solely 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). (C) Parts and accessories covered more specifically elsewhere in the Nomenclature. Parts and accessories, even if identifiable as for the articles of this Section; are excluded if they are covered more specifically by another heading elsewhere in the Nomenclature, e.g. (12) Vehicle seats of heading 94.01 (Emphasis supplied) B.7 On perusal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R no. 15/AP/GST/2021 dated 21.06.2021 , which is enclosed as Annexure-6. The observations of the Ld. AAR are as follows: a. In the earlier Advance Ruling itself, it has been held that the seat covers shall be treated as falling under Chapter Heading 8708 as parts and accessories of motor vehicles of heading 8701 to 8705 (other than specified parts of tractors), therefore, the seats supplied by the Appellant along with original car itself shall be held as part and accessories of the motor vehicle and shall be classified under the Chapter Heading 8705. b. The original seat cover is an essential and integral part of the seat is classifiable under Chapter Heading 8708 and is liable to pay GST at the rate of 28%. c. As per Section 103(2) of the CGST Act, the advance ruling referred to in sub-section (1) shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed. Thus, unless there is substantial change in the facts or circumstances, it does not warrant a new ruling and it will only result in multiple ruling on the same subject. C.2. At the outset, it is submitted that the Ld. AAR has erred in appreciating the factual and legal position in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u Overseas Pvt. Ltd. vs. Collector of Central Excise, New Delhi, reported at 2000 (120) E.L.T. 209 (Tribunal), wherein it was admittedly claimed by Assessee that the leather and textile car seat covers manufactured by them were not integral part of car seats but were sold separately as additional covers for seats of cars which are commonly known and traded in the market as accessories of cars used for comfort, convenience and sleek look of the seats, and therefore would not fall under Chapter Heading 9401. In this matrix, the Hon'ble Court held that such additional covers are not integral part of car seats but are in the nature of accessories and would be classifiable under Chapter Heading 8708 instead of 9401. C.6. In the present case, as stated supra, the issue on which the Advance Ruling was sought is whether the original seat covers manufactured and supplied by the Appellant to the OEMs designed to permanently fit over the raw foam seat installed in the vehicle falls under Chapter Heading 9401 as Seats (other than those of hearing 9402) whether or not convertible into beds, and parts thereof [other than seats of a kind used for aircraft] and are liable to GST at the rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arts and accessories is very thin proper care should be taken so that parts are not cleared as accessories . 4.6 In continuation of the same into the GST period, the entry under HSN 8708 at Serial No. 170 under Schedule IV of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 continues to be applicable for car seat covers attracting tax at the rate of 28% - IGST, or 14% - CGST plus 14% SGST. In the instant case also, the relevant entries at chapter heading 8711 and 8714, as it existed during the pre-GST regime, continue to remain the same without any changes in the GST period as well. 4.7 Heading 8708, on the other hand, provides for parts and accessories of motor vehicles of headings 8701 to 8705. Accessory is not defined in the HSN. Thus, we employ the common meaning of the term, as the courts did in the past. For example, the Oxford English Dictionary defines accessory as: Of things: Coming as an accession; contributing in an additional and hence subordinate degree; additional, extra, adventitious. The instant seat covers are extras that act directly on seats of motor vehicles, adding to the style of the interior of the motor vehicle, protecting the seats from wear and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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