In Re: Shandong Heavy Industry India Pvt. Ltd.
GST
2018 (9) TMI 1035 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2018 (17) G. S. T. L. 631 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – AAR
Dated:- 15-6-2018
GST-ARA-44/2017-18/B-51
GST
SHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, MEMBER
PROCEEDINGS
(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by Shandong Heavy Industry India Pvt. Ltd, the applicant, seeking an advance ruling in respect of the following questions.
A. Whether the classification of Marine Diesel Engine falling under TSH 8408 of Customs Tariff Act, 1975 as adopted to GST attracting of IGST (14% CGST + 14% SGST) as per Schedule IV (Sr. No. 115) of Noti
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MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the “GST Act”.
02. FACTS AND CONTENTION – AS PER THE APPLICANT
The submission (Brief facts of the case), as reproduced verbatim, could be seen thus –
Description of Activity in which the Advance Ruling is sought
a. The applicant is engaged in assembly and testing of Marine Diesel Engines and making supply to various dealers and shipyard manufacturers falling under TSH 8408.
b. The applicant is also engaged in Importing Marine Diesel Engines (TSH 8408) for making supply as such to various dealers and shipyard manufacturers and engaged in importing parts required for assembly and testing of Marine Diesel Engine (TSH 8409) for making further supplies as well as for consumption assembly of Marine Diesel Engine as mentioned in (a) (supra).
c. The applicant is also engaged in Import of Gear Box
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ngine by using various imported parts and import the diesel engine as such (The copy of process flow diagram of Marine Diesel Engines and the copies Of Commercial Invoice issued by M/s. Shandong Weichai import and Export Corporation, Shandong, China to the applicant along with BOE are enclosed herewith and marked as Annexure – C and Annexure – D respectively).
4. The supply of Gear boxes is made by importing the same and never assembled by the applicant in India (The copies Of Commercial Invoice issued by M/s. Shandong Weichai import and Export Corporation, Shandong, China to the applicant along with BOE are enclosed herewith and marked as Annexure – E).
5. The applicant made supplies of marine engines and the gear boxes (Hereinafter referred as 'said goods') to two types of customers i.e. dealers who supply the said goods to the sailors who further use the said goods in fishing vessels, ships, boat or trawlers and the shipyard manufacturers engaged in manufacturing of various vessel
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the marine engine to describe the engine number, net weight, rated speed max power and the date of manufacture of the said engine etc. likewise, the exporter while exporting the 'gear box' to India, is supposed to affix the name/ number plate of gear box with its specifications (The photographs of the said name/number plates of marine engine assembled by the applicant and gear box imported by them are enclosed and marked as Annexure – U)
9. The marine engines as described in Annexure – A and the marine gear box as described in Annexure – B are falling under following 4 digits of Customs Tariff Act, 1975 as adopted by GST.
Chapter/Heading/Sub-heading Tariff item
Description of goods
8408 (Annexure – A)
Compression-ignition internal combustion piston engines (diesel or semi-diesel engines)
8409
Parts suitable for use soleley or principally all with the engines of heading 8407 or 8408
8483 (Annexure – B)
Transmission Shafts (Including cam shafts and crank shafts) and cranks; bea
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r principally with the engines of heading 8407 or 8408
14%
28%
IV
135
8483
Transmission Shafts (Including cam shafts and crank shafts) and cranks; bearing housings and plain shaft bearings; gears and gearing; ball or roller screws; gear boxes and other speed changers, including torque converters; flywheels and pulleys, including pulley blocks; clutches and shaft couplings (including universal joints)
14%
28%
11. As per the Annexures F to H enclosed with this application and as narrated in Para Nos. 5 to 8 (Supra), the applicant supply the marine engines and gear boxes, the end – use of which is in fishing vessels, boats, trawlers etc, The classifications of these vessels etc. are falling under following 4 digits of Customs Tariff Act, 1975 as adopted by GST.
Chapter/Heading/Sub-heading Tariff item
Description of goods
8901
Cruise-ships, excursion boats, ferry-boats, cargo-ships, barges and similar vessels for the transport of persons or goods
8902
Fishing vessels; factor
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le
Sr.No.
Chapter/Heading Sub-heading/Tariff item
Description of goods
CGST/SGST Rate
IGST Rate
I
246
8901
Cruise-ships, excursion boats, ferry-boats, cargo-ships, barges and similar vessels for the transport of persons or goods
2.5%
5%
I
247
8902
Fishing vessels; factory ships and other vessels for processing or preserving fishery products
2.5%
5%
I
248
8904
Tugs and pusher crafts
2.5%
5%
I
249
8905
Light-vessels, fire-floats, dredgers, floating cranes and other vessels the navigability of which is subsidiary to their main function; floating docks; floating or submersible drilling or production platforms
2.5%
5%
I
250
8906
Other vessels, including warships and lifeboats Other than rowing boats
2.5%
5%
I
251
8907
Other floating structures (for example, rafts, tanks, coffer-dams, landing-stages, buoys and beacons)
2.5%
5%
13. The applicant rightly stated in Para No. 11 (Supra) that the marine engine and the gear boxes supplied by them end – use
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has never supplied the goods under Sr. No. 252 by charging 5% IGST or 2.5% CGST and SGST each.
16. The applicant by this application of advance ruling would like to know the correct interpretation and applicability of Sr. No. 252 (Schedule I) vis-a-vis Sr. Nos. 115, 116 and 135 (Schedule IV), reference Para 10 above in the light of different rates of CGST+SGS applicable to TSH 8408, 8409 and 8483 of Customs Tariff Act, 1975 as adopted for GST.
Statement of applicants interpretation of law in respect of question raised in Sr. No. 14 i.e. questions on which Advance Ruling is sought.
Brief note regarding prior to GST regime
a. The applicant is engaged in assembling of Marine Diesel Engine prior to 01.07.2017 also, however, never claimed General Exemptions of Central Excise Tariff Act, 1985 which read as under
Sr.No.
Chapter or heading
Description
Rate
Condition
305A
89 or any other chapter
Capital goods and spares thereof, raw materials, parts, material handling equipment an
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ner.
Explanation. – “Ocean going vessels” includes-
(a) liners; cargo-vessel of various kinds including refrigerator vessels for the transport of meat, fruit or the like, vessels specified for the transport of particular goods (grain, coal, ores or the like); tankers (petrol, wine or the like); yachts and other sailing vessels; cable ships; ice-breakers; floating factories of all kinds (for processing whales, preserving fish or the like) whale catchers; trawlers and other fishing vessels; life boats, scientific research vessels; weather ships; vessels for the transportation or mooring of buoys; pilot-boats; hopper barges for the disposal of dredged material or the like;
(b) war Ships of all kinds including submarines;
(c) tugs, dredgers, fire- floats and salvage ships; and
(d) oil rigs, drilling ships and jack-up rigs
553
8902,890400 00 or 890590
All goods (Excluding vessels and other floating structures as imported for breaking up for)
NIL
Same as above
C.. The applicant wa
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related to the applicant are reproduced below:-
Schedule I
Sr.No.
Chapter/Heading
Description of goods
Rate of GST (CGST+SGST)
246
8901
Cruise ships, excursion boats, ferry-boats, cargo ships, barges and similar vessels for the transport of persons or goods
5%
247
8902
Fishing vessels; factory ships and other vessels for processing or preserving fishery products
5%
248
8904
Tugs and pusher craft
5%
249
8905
Light-vessels, fire-floats, dredgers, floating cranes and other vessels the navigability of which is subsidiary to their main function; floating docks; floating or submersible drilling or production platforms
5%
250
8906
Other vessels, including warships and lifeboats other than rowing boats
5%
251
8907
Other floating structures (for example, rafts, tanks, coffer-dams, landing-stages, buoys and beacons)
5%
252
Any Chapter
Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907
5%
Schedule IV
Sr.No.
Chapter/Heading
Description of goo
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dated 28.06.2017.
3. The Applicant in Point No. 15, particularly Para Nos. 1 and 6 to 8, specifically stated that the Diesel Engine and gear Boxes assembled/ imported by the applicant are used exclusively for Marine purposes i.e. for Fishing vessels, Ships, boats, trawlers etc. The applicant also enclosed various Annexures particularly, Annexure A and Annexure F to H to establish the end use of the goods falling under TSH 8408, 8409 and 8483 of Central Excise Tariff Act, 1985 as adopted to GST in the goods falling under TSH 8902, 8904, 8905, 8906, and 8907 (Sr. Nos. 246 to 251 of Schedule I).
4. The applicant, till date, has not supplied Marine Diesel Engines, Gear Boxes falling under TSH 8408, 8409 and 8483 under Sr. No. 252 of Schedule I. The applicant, till date, has made all the supplies after 01.07.2017 by charging 28% IGST (14% CGST + 14% SGST) as per Sr. No. 115, 116 and 135 of Schedule IV of Notification No. 01/2017 – C. T. (Rate) dated 28.06.2017. (Refer Para 10 above).
03
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Tariff Code No.
Rate of duty (Excise)
Customs
Exemption if any
Assembly Marine Diesel Engines
8408
12.5%
10%/7.5%
Nil
Import Marine Diesel Engines/Parts
8408/8409
12.5%
10%
Nil
Import Gear Box
8483
12.5%
10%
Nil
3. The details of the classification and rate of duty under GST on the above mentioned goods are as under:
Name of the goods/ description
Tariff Code No.
Rate of duty (Excise)
Customs
Exemption if any
Assembly Marine Diesel Engines
8408
14% + 14%
28%
Nil
Import Marine Diesel Engines/Parts
8408/8409
14% + 14%
28%
Nil
Import Gear Box
8483
14% + 14%
28%
Nil
4. The taxpayer in his application dated 20-03-2018 to the Advance Ruling Authority stated that, they are supplying the marine Engines and gear boxes, the end use which is in fishing vessels , boats, trawlers, etc. & stated that the classifications of these vessels etc are falling under Customs Tariff Act, 1975 Chapter 89, as adopted by GST.
Chapter/Heading/Sub-heading/Tariff
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is also issued to specify IGST rate Schedules. The Schedules applicable to the above-mentioned goods and attracting tax rate is as follows:
Schedule No.
Sr. No.
Chapter/Heading/Sub-heading/Tariff item
Description of goods
CGST/SGST Rate
IGST Rate
I
246
8901
Cruise-ships, excursion boats, ferry-boats, cargo-ships, barges and similar vessels for the transport of persons or goods
2.5%
5%
I
247
8902
Fishing vessels; factory ships and other vessels for processing or preserving fisher products
2.5%
5%
I
248
8904
Tugs and pusher crafts
2.5%
5%
I
249
8905
Light-vessels, fire-floats, dredgers, floating cranes and other vessels the navigability of which is subsidiary to their main function; floating docks; floating or submersible drilling or production platforms
2.5%
5%
I
250
8906
Other vessels, including warships and lifeboats other than rowing boats
2.5%
5%
I
251
8907
Other floating structures (for example, rafts, tanks, coffer-dams, landing-stages, buo
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harging of 5% IGST or 2.5% CGSI' and SGST each and also did not take any benefit of exemption before GST,
7. The taxpayer has raised questions on the following points:
D. Whether the classification of Marine Diesel Engine falling under TSH 8408 of Customs Tariff Act, 1975 as adopted to GST attracting 28% of IGST (14% CGST + 14% SGST) as per Schedule IV (Sr. No. 115) of Notification No. 01/2017 – Central GST (Rate) dated is correct or not?
E. Whether the classification of Gear Box falling under TSH 8483 of Customs Tariff Act, 1975 as adopted to GST attracting 28% of IGST (14% CGST + 14% SGST) as per Schedule IV (Sr. No. 135) of Notification No. 01/2017 – Central (GST (Rate) dated 28.06.2017 is correct or not?
F. Whether the goods falling under TSH 8408, 8409 and 8483 of Customs Tariff Act, 1975 as adopted to GST can be treated as 'parts of heading of 8902, 8904, 8905, 8906 and 8907' attracting 5% of IGST (2.5% CGST+ 2.5% SGST) as per Schedule I (Sr. No. 252) of Notification No. 0
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sification of the parts/spares of MARINE GEAR BOX is found in CHAPTER HEADING NO. 8483 of the schedule of the tariff which is “gear boxes and other speed changers” Gear boxes of all kinds are classifiable under this heading only. Chapter 89 attracts classification of “SHIPS, BOATS AND FLOATING STRUCTURES which is a specific description and does not attract gear boxes to be classified under this chapter.
Schedule I and Schedule IV of the NOTIFICATION NO. 1/2017-Central GST (Rate), dated 28-06-2017: while schedule I attracts Central GST @ 2.5 per cent and schedule IV attracts Central GST @14 per cent. As a result, rate difference of 11.5 per cent (14% – 2.5%).
10. It is seen that Chapter 89 is about the classification of Ships/Boats/Floating Structures and Chapter 84 is about Machinery & Mechanical Appliances.
The chapter note no. 7 to chapter 84 of GST Tariff Act, 2017 is reproduced below:
7. A machine which is used for more than one purpose is, for the purposes of classification, t
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ods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if consisted of the material or component which gives them their essential character, insofar as this criterion is applicable,
(c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.
Explanation: Rule 3(a) states that where 2 or more Headings seem to apply, the one which provides the most specific description of the product in question should be used. This means that a Heading which names the actual product should be used in preference to one only names a category to which the product could belong. Similarly, a Heading that describes the whole product, should be used in preference to one which describes part of it. However, where two Headings both only describe part of the product, this rule cannot be used to tell which one to use even if on
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acter cannot be determined. In this case, the product should be classified under the Heading which occurs last in numerical order.
Example: A gift set which includes socks (Heading number 6115) and ties (Heading number 6177) cannot be classified by previous rule since neither item gives the gift set its essential character. The gift set must be classified under the Heading number for ties which is the Heading that occurs last in numerical order.
12.1t may be noted that a Gear Box is a device basically designed for changing speed, irrespective of to which device it is coupled/ attached. The gear box will either increase the speed or decrease the speed depending upon desired output needed. Normally gearbox is independent of machine to which it is attached Gear box can be attached to IC engines, machines, etc. That doesn't mean they become parts of vehicles or machines. Therefore, it is wrong to say that gear box falls under chapter 89. This should be rightly classifiable under chapte
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cifically classified under chapter 84834000 of GST Tariff cannot be classified as parts of Goods falling chapter 89. Similarly Diesel Engine bearing General description Marine Diesel Engine is specifically classified under Chapter 840810.
Therefore such Engines cannot be classified as parts of Goods falling under Chapter 89.
04. HEARING
The case was taken up for preliminary hearing on dt. 11.04.2018, with respect to admission or rejection of the application when Sh. Vidhyadhar S. Apte, Advocate along with Sh. Denvendra S. Athawale and Mr. Suresh Kumar , Sr. Manager, Service appeared and requested for admission of application as per their contentions made in ARA. The jurisdictional officer, Sh. Mahesh Hombali Dy. Commissioner CGST Division II, Pimpri, Pune along with Sh. Bhakte, Supdt. appeared and made written submissions.
The application was admitted and during the Final Hearing on Sh. Vidhyadhar S. Apte, Advocate along with Mr. Suresh Kumar, Sr. Manager, Service, appeared and ma
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rs and shipyard manufacturers. MDEs are also imported by them and supplied as such to various dealers and shipyard manufacturers. They are also importing parts (falling under TSH 8409), required for assembly and testing of MDEs, and for further supplies as such.
Diesel engines are known as compression ignition internal combustion piston engines. Diesel Engine are classified under CTH 8408 and are mainly differentiated as Marine Propulsion Engines, Engines of a kind used for the propulsion of vehicles of Chapter 87 and the third as Other Engines. They can further be classified on the basis of operations viz. 2-stroke, 4-stroke, single acting, double acting and finally, on the basis of Cylinder arrangement namely, horizontal, vertical, radial, etc. DMEs are those engines which are used in marine vehicles namely ships, submarines, etc. Both 2-stroke as well as 4-stroke engines are used in the marine industry. The engines used for the main propulsion or turning the propellers of the norma
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f. Under Sr. No. 115 of Schedule IV of Notification No. 1/2017 – Central Tax (Rate) dated 28th June 2017, the tax rate for MDEs is 14% each of CGST and SGST.
Now we take up the second question raised by the applicant which is as follows:-
(2)Whether the classification of Gear Box falling under TSH 8483 of Customs Tariff Act, 1975 as adopted to GST attracting 28% of IGST (14% CGST + 14% SGS as per Schedule IV (Sr. No. 135) of Notification No. 01/2017- Central GST (Rate) dated 28.06.2017 is correct or not?
The applicant has submitted that they are also engaged in Import of Gear Box falling under TSH 8483 and making supply of the same as such to various dealers and shipyard manufacturers. We find that Tariff Heading 8483 covers goods as under:-
Chapter/Heading/Sub- heading Tariff item
Description Of goods
8483
Transmission Shafts (Including cam shafts and crank shafts) and cranks; bearing housings and plain shaft bearings; gears and gearing; ball or roller screws; gear boxes and ot
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(2.5% CGST+ 2.5% SGST) as per Schedule I (Sr. No. 252) of Notification No. 01/2017 – Central GST (Rate) dated 28.06.2017 or not?
we find that Sr.No. 252 of Notification No. 01/2017 – Central GST (Rate) dated 28.06.2017 which is as follows:-
Schedule No.
Sr. No.
Chapter/Heading/Sub-heading/ Tariff item
Description of goods
CGST/SGST Rate
IGST Rate
I
252
Any Chapter
Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907
2.5%
5%
From a reading of the same it is very clear that parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907 are chargeable to CGST and SGST @ of 2.5% each. We now reproduce the description of headings 8901, 8902, 8904, 8905, 8906 and 8907 as under:-
Chapter/Heading/Sub-heading/Tariff item
Description of goods
8901
Cruise-ships, excursion boats, ferry-boats, cargo-ships, barges and similar vessels for the transport of persons or goods
8902
Fishing vessels; factory ships and other vessels for processing or preserving fishery products
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Tariff Act, 1975 as adopted by GST, namely, 8901, 8902, 8904, 8905, 8906 and 8907.
We find, from a general reading of Sr. No. 252 of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017, that goods falling under any chapter of the GST Tariff, if used as parts of goods falling under headings 8901, 8902, 8904, 8905, 8906 and 8907,then such goods would attract CGST and SGST each.
We find that the applicant has stated in their submissions that the marine engine and the gear boxes supplied by them are for end-use in the vessels, trawlers etc, classified under TSH 8901, 8902, 8904, 8905, 8906 and 8907 of the GST Tariff and therefore would attract 5% IGST (2.5% CGST and SGST each).
We find that marine engines and marine gear boxes which are claimed to be supplied by the applicant to dealers and shipyard manufacturers for use in goods falling under heading 8901, 8902, 8904, 8905, 8906 and 8907 will be deemed to be Parts of vessels falling under heading 8901, 8902, 8904, 8905, 8906 a
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follows :
ORDER
(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
NO.GST-ARA-44/2017-18/B-51
Mumbai, dt. 15/06/2018
For reasons as discussed in the body of the order, the questions are answered thus –
QA Whether the classification of Marine Diesel Engine falling under TSH 8408 of Customs Tariff Act, 1975 as adopted to GST attracting of IGST (14% CGST + SGST) as per Schedule IV (Sr. No. 115) of Notification No. 01/2017- Central Tax (Rate) dated 28.06.2017 is correct or not?
Answer:- Answered in the affirmative
Q.B. Whether the classification of Gear Box falling under TSH 8483 of Customs Tariff Act, 1975 as adopted to GST attracting 28% of IGST (14% CGST + 14% SGST) as per Schedule IV (Sr. No. 135) of Notification No. 01/2017 – Central Tax (Rate) dated 28.06.2017 is correct or not?
Answer:- Answered in the affirmative.
Q.C. Whether the goods falling under TSH 8408, 8409 and 8483 of Customs Tariff Act, 1975
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