2018 (6) TMI 369 – AUTHORITY FOR ADVANCE RULINGS, UTTARAKHAND – 2018 (14) G. S. T. L. 301 (A. A. R. – GST) – Classification of goods – rate of applicable GST – Disc Brake Pads & Brakes Shoes being used in automobiles – Whether the disc brake pads & brake shoes manufactured by the applicant deserve classification under Chapter 6813 (Friction material and articles thereof) or under Chapter 8708 of the GST Tariff (which deals with parts and accessories of the motor vehicle)?
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Held that:- Since mineral substances are not the principal or fundamental substance of Disc Brake Pads^and Shoes and, therefore, do not warrant classification under subheading 6813 – The Disc Brake Pads and Shoes are not excluded by Chapter 87, and are dedicated and used as parts of motor vehicles of headings 8701 to 8705. Moreover, the said items are not more specifically provided for elsewhere in the GST Tariff.
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For the purposes of classification under Chapter Heading 87.08, the test to be applied is: w
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– applicable rate of GST is 28% as on date. – Ruling No. 02/2017-18 In Application No. 03/2017-18 Dated:- 14-3-2018 – MR VIPIN CHANDRA (MEMBER) AND AMIT GUPTA (MEMBER) For The Applicant : Shri Vipil Dawar RULING 1. This is an application under Sub-Section (1) of Section 97 of the CGST/SGST Act, 2017 and the rules made thereunder filed by M/s Indo German Brakes (P) Ltd) Khasra No. 323Mi, Central Hope Town, Selaqui, Dehradun seeking an advance ruling on classification and rate of applicable GST on Disc Brake Pads & Brakes Shoes being used in automobiles. 2. Advance Ruling under GST means a decision provided by the authority or the appellate authority to an applicant on matters or on questions specified in sub section (2) of section 97 or sub section (1) of section 100 in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. 3. As per Section 97(2) (a) & (e) of CGST/SGST Act, 2017 the advance ruling can be given on cla
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mitted that before GST regime, they were classifying the said product under chapter 6813 of the Central Excise Tariff but after GST regime advance ruling is requested to clarify whether the product in question is required to be classified under under chapter 68 or 87. No body appeared from the side of Revenue for the hearing. 6. In the present application, applicant has requested for advance ruling on (I) classification of the product and (II) rate of applicable GST on Disc Brake Pads 85 Brakes Shoes being used in automobiles. Findings of the authority are as under : 7. Classification of Disc Brake Pads & Brakes Shoes being used in automobiles : Applicant in their application dated 5.12.2017 has submitted that in the chapter 6813 there is entry which specify that if friction material is not mounted, in such scenario it falls under 6813 otherwise not. However certain manufacturer, by deeming that this mounting means mounting on the brake system, therefore the disc brake pads 85 brak
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ts and accessories of the motor vehicles of headings 8701 to 8705 7.2 Having gone through the aforesaid chapter heads we now proceed to determine the issue in hand. 7.3 Sub-heading 6813 provides for: Friction material and articles thereof (for example, sheets, rolls, strips, segments, discs, washers, pads), not mounted, for brakes, for clutches or the like, with a basis of asbestos, of other mineral substances or of cellulose, whether or hot combined with textile or other materials… Other…. Word Basis as mentioned above is not defined in the GST Tariff. In the absence of any guidance in the Explanatory Notes, it is proper to use the principal that tariff terms are construed in accordance with their common and commercial meaning. Basis has been defined as follows: (a) The main constituent, fundamental ingredient. The Compact Edition of the Oxford English Dictionary (1987), pg, 173. (b) The principal component parts of a thing. Black s Law Dictionary (1990); pg. 151. (c) The chief co
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puts used for making the aforesaid items. Therefore we observe that since mineral substances are not the principal or fundamental substance of Disc Brake Pads^and Shoes and, therefore, do not warrant classification under subheading 6813. 7.5 Further Chapter Heading 8708 covers parts and accessories of motor vehicles of headings 8701 to 8705, provided the parts and accessories fulfil the following conditions: (i) They must be identifiable as being suitable for use solely or principally with the above-mentioned vehicles; (ii) They must not be excluded by the provisions of Notes to Chapter 87 (iii) They must not be more specifically included elsewhere in the nomenclature… 7.6 The Disc Brake Pads and Shoes are not excluded by aforesaid Chapter Notes, and are dedicated and used as parts of motor vehicles of headings 8701 to 8705. Moreover, the said items are not more specifically provided for elsewhere in the GST Tariff. 7.7 For the purposes of classification under. Chapter Heading 87.08,
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on material and articles thereof and are known as parts of motor vehicle. Further, Disc Brake Pads and shoes also qualify the test to the effect that they are suitable for use solely or primarily with articles of Chapter Heading Nos. 8701 to 8705; accordingly they are classifiable under chapter heading 8708. 7.9 Irrespective of aforesaid we also find that products being manufactured by the applicant are meant to be used in the braking system of vehicles of heading 8701 to 8705 of the Tariff. The parts and accessories of such vehicles are covered in heading 8708 of the Tariff; (a) The said Chapter 87 falls under Section XVII of the Tariff Section Note 2 to Section XVII (covering Chapter 86 to 89) specifically excludes certain articles from the purview of the expression parts and parts and accessories . I find that goods of Chapter 68 do not find mention in the listed articles in the said Note 2; (b) Section Note 3 of Section XVII further excludes articles which, though may be usable as
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les, it is observed that there seems no dispute as regards to the fact that they are not excluded vide said Section Note 2 of Section XVII and that they are meant solely or principally for use in the braking system of automobiles. The only point of discussion, then, remains as to whether they could be taken out from the purview of Section XVII for the reason that they are more specifically classified elsewhere in the Tariff; (f) The contesting heading, as stated by the applicant, is 6813 of the Tariff. Chapter 68 falls within Section XIII of the Tariff and this Section does not have any Section Notes. Heading 6813 reads Friction material and articles thereof (For example, sheets, rolls, strips, segments, discs, washers, pads), not mounted, for brakes, for clutches, or the like, with the basis of asbestos, of other mineral substances or of cellulose, whether or not combined with textile or other materials ; (g) It has been stated by the applicant that the Disk Brake Pads and Brake Shoes
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l already mounted on metal plate is not be covered under heading 6813 of the Tariff; (h) Explanatory Notes to the Harmonized System of Nomenclature, pertaining to heading 6813 of the Tariff too have been perused and give a similar interpretation. The relevant portion reads as follows:- … Owing to its high friction coefficient and its resistance to heat and wear, this material is used for lining brake shoes, clutch disc, etc., for vehicles of all kinds, cranes, dredges or other machinery… According to the particular use for which it is intended, friction material of this heading may be in the form of sheets, rolls, strips, segments, discs, rings, washers, pads or cut to any other shape… ….. The heading excludes: (a)… (b) Mounted brake lining (including friction material fixed to a metal plate provided with circular cavities^ perforated tongues or similar fittings, for disc brakes); these are classified as parts of the machines or vehicles for which they are designed
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The friction material in powder form is poured into a mould/die and along with the metal sheet it is fed into the moulding machine where the powder takes shape of a mould and gets fixed upon the metal plate. This product there after undergoes certain curing and finishing process to attain the desired marketable condition. The product [ disk brakes pads and brake shoes for two/four wheelers] is then packed in retail packs and in secondary packing in which it is cleared from the factory; (j) In view of the foregoing report, authority observes that the disk brakes pads and brake shoes are meant for sale in the secondary market i.e. replacement market of various models of vehicles. The products so manufactured are supplied to renowned brands for example Bosch India Ltd. etc. who subsequently sell it in the secondary market through their supply chain. Further from the samples (retail packs) drawn by the Assistant Commissioner, CGST, Division Dehradun it is observed that From perusal of thes
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