In Re: M/s. Mazagon Dock Shipbuilders Limited
GST
2018 (12) TMI 1153 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2019 (20) G. S. T. L. 475 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – AAR
Dated:- 11-7-2018
GST-ARA-28/2017-18/B-64
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.
1. Whether the expression “Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907” in entry number 252 of the schedule 1 of the Notification No 01/2017-lntegrated Tax (Rate) covers specific list of
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ar 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 –
Statement A Statement of relevant facts having a bearing on the question(s) raised
1. Mazagon Dock Shipbuilders Limited (MDL), is the India's leading Defence public sector undertaking shipyard under the Ministry of Defence, Main activities are construction of state-of-the-art warships and submarines with facilities situated at Mumbai. MDL has earned a reputation for quality work and established a tradition of skilled and resourceful service to the shipping world in general and the Indian Navy, Coast Guard & ONGC in particular. MDL had also delivered cargo ships, passenger ships, supply vessels, multipurpose support vessel, water tankers, tugs, dredgers, fishing trawlers, barges & border out posts for various customers in India as well as abroad. MDL have al
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Other vessels, including warships and lifeboats other than rowing boats”.
4. Entry no. 252 of Schedule 1 in rate notification is “Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907”. In view of the same, rate of GST for parts of goods of heading 8906 is 5%.
5. In the Earlier Law i.e. under Excise Law, goods supplied for use in construction of warship of Indian Navy or Coast Guard were exempt as per sr. no. 21 (given below) of the Notification No. 64/95 dated 16th March 1995, subject to certain conditions and procedures.
S.No.
Description of goods
Conditions
1
2
3
21.
All goods
If-
(a) the said goods are supplied for use in construction of warships of the Indian Navy or Coast Guard; and
(b) before clearance of the said goods, a certificate from an officer not below the rank of a Rear Admiral of the Indian Navy or Coast Guard or Director General of Coast Guard or any other officer of the Indian Navy or Coast Guard; equivalent to the Joint Secretary to the Gover
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fication No. 1/2017-Integrated (Rate) dated 28th June, 2017 covers all inputs (falling under any chapter) for warships falling under HSN 89061000.
8. Attention is also invited various citation in relation to classification of parts of goods & whether parts of part is part of whole is provided below:
a. In CC v. Rajasthan Industrial & Scientific Corporation 1997 (96) ELT 104 (CEGAT) = 1997 (7) TMI 353 – CEGAT, NEW DELHI, it was held that in absence of any exception, the basic criteria of the parts being classifiable under the parent machine would hold good.
b. In Eureka Forbes v. CCE 2001 (130) ELT 146 (CEGAT) = 2000 (8) TMI 567 – CEGAT, NEW DELHI, it was held that a hose specifically designed for a particular product and not capable of general use will be classified as part of that machine and not as a 'hose'.
c. In G S Auto International v. CCE 2003 (152) ELT 3 (SC) = 2003 (1) TMI 700 – SUPREME COURT, it was held that If a part solely or primarily suitable for automobiles will b
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2002 (7) TMI 311 – CEGAT, NEW DELHI * CCE v. Rungta Irrigation 2004 (165) ELT 574 (CESTAT) = 2004 (1) TMI 411 – CESTAT, NEW DELHI Premier Irrigation Equipment v. CCE 2005 (184) ELT 150 (CESTAT) = 2005 (3) TMI 185 – CESTAT, NEW DELHI.
e. It is settled law that a part of part is also a part of the main product – Lakhanpal National Ltd. v. CCE – 1996 (88) ELT 87 (CEGAT SMB) = 1996 (4) TMI 302 – CEGAT, MUMBAI.
f. A component of component of a machine is a component of machine. – Audio Vision Electronics v, CC – 1987 (31) ELT 796 (CEGAT) = 1987 (7) TMI 254 – CEGAT, NEW DELHI.
g. Part of refill is also a part of ball point pen (as refill is part of ball point pen) – Naianda Manufacturing co. v. CCE 1998 (102) ELT 289 27 RLT 150 (CEGAT) = 1997 (12) TMI 381 – CEGAT, NEW DELHI – quoted and followed in B D Sanghvi v. CCE 1999(113) ELT 571 (CEGAT) = 1998 (8) TMI 363 – CEGAT, NEW DELHI, where it was held that brass tip used in refill is part of ball point pen, as refill is essential part of
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ence of Rule 3(a) of custom tariff Act 1975, wherein we believe that, all goods specifically (Specific entry) falls under entry 252 i.e Parts of goods which was not provided in erstwhile excise & custom schedules given in chapter 89. Also HSN 8906 occurs last in numerical order to classify this parts under 8906 (Rule 3(c) of Custom Tariff Act).
12. From the above submission, we are of the view that all the goods will fall under entry no 252 & GST @ 5% will be applicable. However, since there are no conditions or procedures prescribed for entry no. 252 of Schedule I which was provided in the erstwhile law & to avoid litigation & to clear our ambiguity, advance ruling is sought in relation to question raised under Sr-14 of the application.
03. CONTENTION – AS PER THE CONCERNED OFFICER
The submission, as reproduced verbatim, could be seen thus-
In this connection, the point wise comments on para 14 of the application are as under:
1) The meaning of expression “Parts of goods of head
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t to them that the questions that they have raised in application are too general in respect of 'Parts' and are not very specific and therefore the application needs to be reframed and they need to give details of claimed 'Parts' alongwith their essentiality and use in warship and then only application can be considered. They requested that they be given one month to reframe their application and their application be considered filed from that date. The request was granted. The jurisdictional officer, Sh. K.W. Thaware, Supdt., appeared and stated that they have made a written submissions on which be taken on record and be considered.
The applicant has filed reframed application on 14.05.2018 and admitted. The final hearing in the matter is held on 27.06.2018, Sh. Viren Thakkar, C.A. along with Sh. A. B. Shetty, Manager Taxation, Sh. S. P. Shenoy, GM., Sh. Rajiv Rathare, DG, Design, Sh. Punam Chand, ET Finance, appeared and made written and oral contentions as per details in their ARA.
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of the Inputs are mentioned at Annexure B of their application). In addition, some of the blocks of ships required for the manufacture of Ships are outsourced to Vendors.
First and foremost it is seen that Entry no. 250 represents “Other vessels, including warship and lifeboats other than rowing boats”. Against this entry of the Schedule 1 in rate notification under the heading 8906 the rate of GST prescribed is 5%.
Entry no. 252 of Schedule 1 in rate notification represents “Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907”. Against this entry of the Schedule I in rate notification under the heading 8906 the rate of GST prescribed is 5%.
We find that the issue that is raised before us by the applicant is whether the inputs mentioned in Annexure B of the application, which are used for constructing the warships and submarines are forming parts of such warships/ submarines and therefore chargeable to reduced tax @ 5% under Sr.No.252 Of Notification No-I/ 2017 Central Ta
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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 Of 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. Spare parts are an important feature of Logistics Engineering and Supply Chain Management.
Thus in view of the above meanings/definitions of part/ parts/ Spare Part, we will be required to examine as to what are the parts of Goods of CTH 8901, 8902, 8904, 8905, 8906 and 8907 and whether the subject goods/ spares as mentioned by the applicant listed in Annexure B of this ARA application can be taken to be covered within the meaning of Parts for Sr. No. 252 of Notifica
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e 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, we find that 'part' is a separate piece of something or a piece that combines with other pieces to form the whole of something.
Similarly the second definition of part also defines 'part' as one of the pieces that together form a machine or some type of equipment.
While interpreting the issues like the one at hand, we may refer to certain judgments which throw light on the disputed issue.
In case of Saraswati Sugar Mills Vs Commissioner of Central Excise Civil Appe
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and without it, the article will not be complete'.
14. This Court, in Star Paper Mills (1989 (8) TMI 78 – SUPREME COURT OF INDIA) 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 thus fall within the term “component parts” used in the Notification in so far as manufacture of paper in rolls is concerned. Paper core, however, cannot be said to be used in the manufacture of paper in sheets as component part. We are conscious that the relevant tariff item uses the word “paper” but since paper in rolls and paper in sheets are nothing but different forms of paper, both of them would be excisable g
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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 = 1976 (10) TMI 131 – SUPREME COURT OF INDIA.
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, and that ribbon is not an accessory but an essential part of the typewriter. While dismissing
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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 (India) Ltd (26 STC 87) = 1970 (3) TMI 126 – MYSORE HIGH COURT. (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 Second Schedule to the Mysore Sales Tax Act, 1957.”
In light of the above discussi
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ms like steel plates/ profiles/ sections, M/S. Angles, flat bars, channels, etc. We find that these are metals used for constructing a warship/ submarine and are consumed in the process of construction. The said metals cannot be removed as such for repairs etc., and will therefore be considered as consumables and therefore cannot be considered as parts of a warship/ submarine.
We further take up the 35 items mentioned in Annexure B, P-15B Consumables List. We find that all the 35 items mentioned, (like welding electrodes, adhesives, compressed air, industrial cutting gases, etc.), therein cannot be considered as parts of a warship/ submarine. They are essentially in the form of consumables and for reasons mentioned above cannot be considered as parts of a ship.
We also find that the applicant has filed four addendums to Annexure B submitted by them.
The first addendum to Annexure B is a P-75 Equipment List consisting of 153 items. We find that except the equipments mentioned in Sr.
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in Sr. Nos. 69 and 70, all other equipments can be considered to be parts of a warship/ submarine., for reasons mentioned above.
In the above discussions we have listed a list of items which cannot be considered as a part of a warship/ submarine. Other than that all the equipments/ tools, etc can be considered as parts of a submarine/warship, without which the same would not be complete and would not exist. These are very integral for the functioning of the submarine/ warship. Hence for reasons mentioned above we find that except for the items listed by us above from the Annexure B and Addendums to Annexure B, all other items can be considered as parts of a ship and therefore would be eligible to concessional rate of GST as contended by the applicant.
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-28
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