2018 (10) TMI 1314 – AUTHORITY FOR ADVANCE RULING – MAHARASHTRA – 2018 (18) G. S. T. L. 683 (A. A. R. – GST) – Classification of Supply – import of goods/spares, which are supplied on ships and these equipment form an essential part of the ship, and makes the ship “sea worthy.” – whether classified under CTH 8479 or otherwise?
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Whether the said parts/spares/equipments which are used on a ship are forming parts of the ship and therefore chargeable to reduced tax @ 5% under Sr.No.252 of Notification No.1/2017 Central Tax (Rate) dated 28.06.2017?
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Held that:- Items like Anchor, Bow, Bowsprit, Fore and Aft, Hull, Keel, Mast, Rigging, Rudder, Sails, Shrouds, Engines, gearbox, Propeller, Bridge, etc. are the very essential parts of a ship or vessel and are quite clearly parts of a vessel/ship and a ship cannot be imagined to be in existence without these parts – in addition to the above there are some additional equipments that are required to be made available on a ship as a meas
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goods are put to.
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The items mentioned at Sr. Nos A, B, C, D, E, G, H, I, J, K, M and S are essential parts of a ship/vessel without which the ship would not be complete and would not exist. These are very integral for the functioning of the ship. Hence out of the 504 goods mentioned in [Annexure I-A of this ARA application and reproduced by them mentioning their uses in page nos 24 to 39 of their compilation A made before this authority as an additional submission] we are of the opinion that out of the 504 items mentioned by them, only goods used in the equipments mentioned at Sr. Nos. A, B, C, D, E, G, H, I, J, K, M and S of the above table can be considered as parts of a ship and therefore would be eligible to concessional rate of GST as contended by the applicant.
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Parts which are used in equipments mentioned in Sr. Nos F, L, N, O, P, Q, R, T, U, V will not be eligible for concessional rate of duty since the said equipments cannot be considered as essential parts of a sh
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on'ble Authority to decide as to whether the supply of goods [as listed in Annexure I-A of this ARA application] is classifiable as "Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 897" under entry 252 of Schedule 1 of GST Notification No. 01/2017-Central tax (rate) dated 28th June, 2017 as amended and liable to GST @ 5% (CGST-2.5% and SGST-2.5%) or IGST @ 5% or not. At the outset, we would like to make it clear that the provisions of both the CGST Act and the GST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the 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 o
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GST. The detailed list of HSN codes of such imported goods along with the applicable tax rates is attached herewith at Annexure I-A. The sample copies of illustrative Bill Of Entry for such imports are enclosed at Annexure I-B, I-C, I-D, I-E, I-F & I-G. 4. Applicant levies GST on parts/equipment supplied by it on the ship by classifying it under the same tariff head under which the goods are imported. The applicant discharges GST liability on supply based on rates applicable to such tariff entry. For instance, a "Standard Solas Model" is classified under tariff head of "8479" captioned as "Ship Spares" and is therefore taxed at the rate of 18%. 5. Applicant has been receiving the purchase orders for such parts/spares/equipment from reputed customers wherein orders are placed on specific terms that applicable GST rate on items ordered is 5% as all such parts and equipment ordered are forming part of ship. The customers strongly contend that the relevant
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g vessels, factory' ships, other vessels, etc. Heading 8904 is for tugs and pusher crafts. Heading 8905 covers Light vessels, fire floats, dredgers and other vessels. Heading 8906 and 8907 is for other vessels and floating structures. Applicant reiterates that goods supplied by it, are of critical nature, without which the ship would not be permitted to sail and therefore such equipment or parts thereof should be classified as "Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907" and should be taxed at the rate of 5%, as such individual goods are supplied as a part of the ship or vessel, to ensure that the ship is sea worthy. Such goods cannot be classified as spares separately in their own right. 7. Applicant is becoming non-competitive in the market if it does not classify the spares/equipment/parts under entry no. 252 of Notification No.1/2017 Central Tax which specifically covers Parts of goods of various types of the ships and vessels covered under headings
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e questions/ issues before Your Honor for determination is whether supply of goods (as listed in Annexure I-A) is classifiable as "Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907" under entry 252 of Schedule 1 of CGST Notification No. 01/2017-Central Tax (Rate) dated 28lh June, 2017 (Amended from time to time) and liable to GST @ 5% (CGST-2.5% and SGST- 2.5%) or IGST-5% as specified in entry 252 of schedule 1 of Notification No. 01/2017-Integrated Tax (Rate),dated 28-06-2017. 1.2. The questions / issues placed for determination before Your Honor have to be appreciated in light of the following position of law and its applicability to the proposed activity undertaken by the Applicant, discussed hereunder. 2. SUBMISSIONS OF THE APPLICANT SUBMISSION 1 2.1. Applicant submits that they are selling equipment and parts/spares of critical nature and are mandated by IMO (International Maritime Organization), which are essential to establish the sea worthiness of a ship a
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establish the ship as sea worthy, and not spares per se. The meaning of the term "spares" referred above, incorporates a wide ambit of products and therefore would lesd to a generic classification of goods. 2.6. On the other hand the classification of the same; as parts of the ship, would be more specific and could be attributed as the products relevant to a particular industry; namely the shipping industry and would therefore provide clarity in identifying the same. SUBMISSION 3 2.7. The appellant strongly relies on the decision of the Honorable Supreme Court in its own case i.e. Commissioner of Customs, Mumbai Appellant(s) VERSUS M/s. A.S. Moloobhoy & Sons & Ors. Respondent(s) WITH CIVIL APPEAL NOS. 3115-3117 OF 2015, where the Honorable Court declined to interfere with the order passed by the Tribunal, wherein it was held that these imports of equipment and spares should be treated as one for "the purpose of ship repair." The copy of the relevant Tribuna
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SAS), Navigation and Communication (NAVCOM) Equipment related to the Marine Industry, as detailed in Annexure-1-A, are covered under Sr.No.252 of Schedule 1 of Notn. No. 1/2017-Central Tax (Rate) and Notn.No.1/2017-lntegrated Tax (Rate) both dated 28.06.2017 and chargeable to GST @ 5%. 3.0 The facts, succinctly, stated are as under: 3.1 The Applicants are registered with Directorate General of Shipping (DGS), Govt of India as "Ship Repairing Unit (SRU)" vide Registration No. DGS/ENGG/REG-0000174 dated 25.04.2014. 3.2 The Applicants are engaged in repairs of ships. The goods under consideration consist of components of Global Maritime Distress and Safety Systems (GMDSS) and of emergency position indicating radio beacon (EPIRB). 3.3 Since Govt, of India is a signatory to the International Convention for the Safety of Life at sea, Govt, has framed the Merchant Shipping (Distress and Safety Radio Communication) Rules, 1995, in exercise of its powers under Section 290 of the Merch
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e safety information by the INMARSAT, enhanced group calling (EGC) system of HF Direct printing telegraphy, etc 3.4 For undertaking the repair of the ship, over and above rendering of repair service, the Applicants also are required to supply various parts of various equipment in ship viz. Navigation equipment and spares, communication equipment and spares, lifesaving/firefighting equipment and spares, etc. which are listed in their application as Annexure 1-A (504 Items). For brevity, the said items under consideration are referred to as ''Navigation/communication/ lifesaving/firefighting equipment and their associates spares". 3.5 The Applicants import the said Navigation equipment, communication equipment, lifesaving equipment, firefighting equipment and their associates spares on payment of applicable import duties and the same are supplied on ship. 3.6 The said equipment are integral part of a ship without which ship cannot sail or be considered seaworthy as per the I
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x (Rate). 4.0 Grounds before Appellate Authority: 4.1 Equipment form an essential part of the ship: 4.2 The Applicants imports goods under consideration which are supplied on ships and these equipment form an essential part of the ship and makes the ship "sea worthy". 4.3 The said equipment are integral part of a ship without which ship cannot sail or be considered seaworthy as per the IMO/SOLAS/ guidelines. 4.4 Every ship being built at any shipyard must include the goods under consideration to construct a sea worthy vessel. 4.5 The Applicants submit that they are selling equipment and parts/spares of critical nature and are mandated by International Maritime Organization (IMO), which are essential to establish the sea worthiness of a ship. 4.6 As stated above, the goods being imported are necessarily parts of the ship, in view of their compulsory requirement as per IMO, to establish the ship as sea worthy. 4.7 The Applicants further submit that Ship Repairing Unit (SRU) Reg
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were not used for repair because the ships were fully functional and would not be part of repair. 5.3 By Order-in-Original No. CAO/68/20027CAC/CC/ASS dated 18.02.2002, Ld. Commissioner of Customs, Mumbai denied exemption under Notification 23/98-Cus (Sr. No.227). 5.4 Since aggrieved an appeal was filed before Hon'ble CESTAT. 5.5 Hon'ble Tribunal vide its order dated 1.7.2003 [2003 (162) ELT 196 (T)] held that the said satellite emergency indicating radio beacons and enhance group calling systems of high frequency printing telegraphy fitted to ship to meet requirement of Merchant Shipping (Distress and Safety Radio Communication) Rules, 1995. Fitting of these equipment to ship to make them sea worthy amounted to its repair and were covered under entry 227 of Notn.No.23/98-Cus. 5.6 Dept, appeal against the said Tribunal order has been dismissed by Hon'ble Supreme Court vide its judgment dated 26.3.2015 reported in 2015 (319) ELT 576 (SC). 5.7 The ratio of the said judgment o
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or benefit of Notification No. 21/2002-Cus (Sr. No.351). 6.0 Squarely covered by Sr.No.252 of list 1 of Notn.No. 1/2017-Central Tax (Rate) dated 28.06.2017: 6.1 The Entry No. 252 of list 1 of Notn.No. 1/2017-Central Tax (Rate) dated 28.06.2017 is as reproduced below: "S. No Chapter/Heading/Sub- heading/Tariff ltem Description of Goods (1) (2) (3) XXX XXXX xxxxxx 52. Any chapter Parts of goods of headings 8901, 8902,8904, 8905, 8906, 8907 XXX XXX XXXXXX" 6.2 From the above it is clear that parts of ships, vessels, tugs, floating structure, etc. mentioned in headings of chapter 89, except heading 8903, irrespective of their classification, would be eligible for concessional rate of GST of 5%. The Notification, like statute, has to be interpreted in terms of its language adopted and when language is plain and clear effect thereof has to be given. It is also settled position of law that plain terms of Exemption have to be given effect without calling in aid of any supposed intent
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(b2) -do- Upheld by Supreme Court – 1997 (94) ELT A-52 (SC) (c) Set Telecommunication – 2003 (161) ELT 1105 (T) 8.0 Issue no more res-integra – order of AAR Kerala: 8.1 M/s. Saraswati Metal Industries had approached Authority for Advance Ruling, Kerala praying for ruling for similar goods under the very same notification under consideration in the present case, Hon'ble AAR Kerala, vide its order No. CT/5496/18-C3 dated 29.05.2018 [2018-TIOL-46-AARGST), had held that commodities such as marine propellers, rudder set, stern tube set, propeller shaft and M.S.Shaft for couplings are mainly used as a part of fishing/floating vessels and the same would be covered under Entry 252 of Schedule 1 of Notn.Non. 1/2017-CT(R) and taxable @ 5% [CGST + SGST] 9.0 Goods under consideration are Integral parts of ships – Chartered Engineers Certificate: 9.1 Shri Ravi Krishnamurthy, Chartered Engineer, vide his certificate dated 10.06.2018, has certified that Navigation equipment and their associated s
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humbly prayed for holding that the disputed equipment would be covered under Entry No. 252 of Notn.No.l/2017Central Tax (Rate) and are entitled for concessional rate of tax. 03. CONTENTION – AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- The notice under Advance ruling provision was issued to the this office as the dealer, M/s. A.S. MOLOOBHAY GSIN:- 27AAMCA4160E1ZT, Who is assigned to this office under case allocation, has applied for advance ruling under section 97 of CGST/MGST Act, 2017. The dealer has mentioned its nature of activity as factory/ manufacturing & in brief it says "Sale and distribution of marine Distress Signals, EPIRB and SART, SSAS, Marine Chemicals, Navigation and communication (NAVCOM) equipment and also providing lifesaving services such as life raft, lifeboat and firefighting services, including Pyrotechnic Disposal, Electronic services and training services related to the marine industry. Dealer has requested I
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notification of Central Excise if any availed. 5) (a) Classification of Service/Services as applicable. (b) Rate/Rates of Service/Services as provided. (c) Details of benefits of Notification of Service Tax if any availed 6) Copies of Advance Ruling Applicable /orders if any obtained by applicant under the provision of Central Excise, Service Tax and Sales Tax and their present status in case of your company/related company or sister concern. 7) Copy of Show Cause Notices/ Adjudication orders in respect of Central Excise or Service Tax if any issued during Last Five years, in case of Your Company I Related Company or sister concern. 8) Case of violation of Central Excise/Service Tax if any booked during Last Five years. Whether any proceeding is pending before any authority on said subject matter or otherwise. As asked in notice please find information given below:- 1) Applicant was only registered under service tax No. AAMCA4160E dt. 04/03/2014. 2) Registered address of dealer for se
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excise or service tax. 7) As per applicant there is no any case of violation of central excise or service tax has been booked against the applicant in last five years. Applicant is dealing in import of various goods which are supplied on ships. Goods are imported by applicant on payment of IGST. As per the Bill of Entry submitted by applicant it is observed that wile importing he has paid the IGST @ rate of 18 and 28%. In GST there is separate entry of goods imported an, supplied by registered person but dealer is requesting to classify these goods as part of ship. When there is specific entry for any commodity the said commodity cannot be classified in another way. Therefore the dealers request cannot be accepted. The List of HSN codes of such imported goods is as below. Table-2 Sr. NO. HSN code Description of goods Rate of tax 8529 Parts suitable for use solely or principally with the apparatus of headings 8525 to 8528 48% 9014 Direction finding compasses; other navigational instrume
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. Nafeesa Moloobhoy, M.D., along with Sh. Rajkumar Sarawagi, C.A, G.M. appeared and requested for admission of application as per their submissions with ARA. The Jurisdictional officer Deepak Gadhave, Dy. Commissioner of S.T.(MUM-VAT-F,-827), Nodal – 4, Mumbai appeared and stated that he does not have any objection to admission of application and would making submissions in due course. The application was admitted and final hearing was held on 17.07.2018 , Ms. Nafeesa Maloobhoy, M.D., along with Sh. Rajkumar Sarawagi, C.A,, G.M. appeared and made oral and written submissions in addition to the details as per their application. The Jurisdictional officer Deepak Gadhave, Dy. Commissioner of S.T.(MUM-VAT-E-827), Nodal – 4, Mumbai appeared and made written submissions. 05. OBSERVATIONS We have perused the records on file and gone through the facts of the case and the submissions made by the applicant and the department. 10. We find that the applicant has submitted that they are engaged in
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arts" has not been defined in GST nor was it defined in Central Excise earlier. In view of this first we are required to understand the general meaning of the word 'Part/Parts' which is of relevance to us in the present case. We find that as per Cambridge English Dictionary: Part as a noun – a separate piece of something or a piece that combines with other pieces to form the whole of something One of the pieces that together form a machine or some type of equipment. It has other meanings also in other context which are not of relevance in present context like: a single broadcast of a series of television or radio programme or Division of a story. one if two or more equal or almost equal measures of something etc. Further, we also find the definition of 'Spare Part' as per Wikipedia A spare part, spare, service part, repair part or replacement part is an interchangeable part that is kept in an inventory and used for the repair or replacement of failed units. Spa
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der various marine acts such as Merchant Shipping Act or Additional Safety measures such as Walkie-talkie, Binoculars, Life Jackets, Lifeboats, etc. Though these are also to be compulsorily made available on a vessel and ship but cannot be taken to be parts of a ship as per general understanding but are rather additional equipments on a ship.. In addition to the above there are other essential items like furniture, fans, air-conditioners, television, etc which are very essential for comfort of officers and crew of the ship but do not come under essential parts or equipments of a vessel/ship. We find that the items that are discussed as essential parts of a ship/vessel are such essential components of a vessel/ship without which the ship would not be complete and would not exist. These are very integral for the functioning of the ship and can also be separated from the ship for repair/replacement. When we refer to the definition of the word 'part' as discussed in detail above, w
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se is as the component part of another article. There cannot possibly be any serious dispute that in common parlance, components are items or parts which are used in the manufacture of the final product and without which, final product cannot be conceived of. 13. The meaning of the expression 'component' in common parlance is that 'component part of an article is an integral part necessary to the constitution of the whole article and without it, the article will not be complete'. 14. This Court, in Star Paper Mills (supra) has made a settled distinction while considering whether paper cores are components' in the manufacture of paper rolls and manufacture of paper sheets. It is stated that 'paper cores' are component parts in so far as manufacture of roll is concerned, but it is not 'component part' in the manufacture of sheets. It is useful to quote the observations made by this Court: Paper core would also be constituent part of paper and would thu
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referred the appeal before the larger bench on the following questions: (i) Whether the phrase "component parts" occurring in Notification 77/90 would cover "spare parts" for the purpose of granting of benefit thereunder? The larger Bench of the Tribunal having regards to dictionary meaning of "part", and "Component' observed that in common parlance meaning of the expression "component" is also the same, that is, one of the parts or elements of which anything is made up or into which it may be resolved or a Constituent. The meaning in common parlance has to be looked into since the notification itself does not contain any definition of the expression. In the State of Uttar Pradesh vs M/S. Kores (India) Ltd on 18 October, 1976, Equivalent citations: 1977 AIR 132,1977 SCR (1) 837. In this case the appellant contended before the Hon SC that carbon paper does not lose its character as paper in spite of being subjected to chemical processes,
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d Notification. Regarding ribbon also to which the above mentioned rule construction equally applies, we have no manner of doubt that it an accessory and not a part of the typewriter (unlike spool) though it may not be possible to use the latter without the former, just as aviation petrol is not a part of the aero- plane nor diesel is a part of a bus in the same way, ribbon is not a part of the typewriter though it may not be possible to type out any matter without it. The very same question with which we are here confronted came up for decision before the High Court of Mysore in [State of Mysore v. Kores (lndia)Ltd(26STC 87). (1) where it was held: "Whether a typewriter ribbon is a part of a typewriter is to be considered in the light of what is meant by a typewriter in the commercial sense. Typewriters are being sold in the market without the typewriter ribbons and therefore typewriter ribbon is not an essential part of a typewriter so as to attract tax as per entry 18 of the Se
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ion and therefore would be parts of a ship as per above discussions B ECHO SOUNDER Echo Sounder Used to find depth under the sea Is an essential part of ship and without it the ship would not be performing its essential function and therefore would be parts of a ship as per above discussions C RADAR Radio Detecting and Ranging Used to detect objects at sea Is an essential part of ship and without it the ship would not be performing its essential function and therefore would be parts of a ship as per above discussions D ECDIS Electronic Charts Display & Information System Used to show locations for navigation Is an essential part of ship and without it the ship would not be performing its essential function and therefore would be parts of a ship as per above discussions E GYRO Gyroscope Used for navigation Is an essential part of ship and without it the ship would not be performing its essential function and therefore would be parts of a ship as per above discussions F AIS Automatic
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essential part of ship and without it the ship would not be performing its essential function and therefore would be parts of a ship as per above discussions K SSAS Ship Security Alert System Used for transmitting distress signal to land station Is an essential part of ship and without it the ship would not Ire performing its essential function and therefore would be parts of a ship as per above discussions L NAVTEX Navigational Telex Used for receiving navigational weather and other warnings Would be in the nature of an additional equipment and therefore cannot be considered as parts of a ship as per above discussions M EPIRB Emergency Positioning Indicating radio Beacon Used to alert search and rescue services in case of distress/ emergencies Is an essential part of ship and without it the ship would not be performing its essential function and therefore would be parts of a ship as per above discussions N VDR Voyage Data Recorder Used for recording and analysing data of the ship Woul
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Watch Alarm System The bridge is manned at sea during voyage, else alarm is issued by the unit for safety of ship Is an essential part of ship and without it the ship would not be performing its essential function and therefore would be parts of a ship as per above discussions T SART Search and Rescue Transponder Used to assist Coast Guard in search and rescue operations Would be in the nature of an additional equipment and therefore cannot be considered as parts of a ship as per above discussions U ANEMO METER Anemometer Used to calculate speed and direction of wind Would be in the nature of an additional equipment and therefore cannot be considered as parts of a ship as per above discussions V 2 WAY RT Walkie talkie Used for internal communication by the ship's staff Would be in the nature of an additional equipment and therefore cannot be considered as parts of a ship as per above discussions The classification of goods under Sr. No. 252 depends solely on the nature of use to wh
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ed as essential parts of a ship in view of our discussions above. 06. In view of the extensive deliberations as held hereinabove, we pass an order as 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-14/2018-19/B-71 Mumbai dt. 18/07/2018 For reasons as discussed in the body of the order, the questions are answered thus Question :-Whether the supply of goods [as listed in Annexure I-A of this ARA application] is classifiable as "Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 897" under entry 252 of Schedule 1 of CST Notification No. 01/2017-Central tax (rate) dated 28th June, 2017 as amended and liable to GST @ 5% (CGST-2.5% and SGST-2.5%) or IGST @ 5% or not. Answer:- In view of the discussions in the 'Observations' section out of the goods listed in Annexure I-A, only those goods that are used in equipments mentioned at Sr. Nos A, B, C, D, E, G, H, I, K, M and
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