In re SI Air Springs Private Limited (GST AAR Taminadu)
Whether ‘Air Springs’ manufactured and supplied by the applicant will be correctly classifiable under Tariff heading 40169990 as opposed to Tariff heading 8708 9900 and attract GST at the rate of 18%?
In the case at hand, it is true that the products are for use primarily with articles of chapter 8701 to 8705. The product Main Air Spring are fitted in the lift axle and act as suspension for lift axle. The product Lift Air Springs are fitted in the lift axle suspension system and operate to move the lift axle up and down. Thus both these air springs are ‘Suspension systems and part thereof’ and by predominant usage are classifiable under CTH 8708. Following the Apex Court s decision above, the product in hand being suitable for use solely with articles of Chapter Heading No. 8701 to 8705 are classifiable under CTH 8708, more appropriately under ‘CTH 8708 80 00- Suspension Systems and parts thereof. We find that the applicant are classifying their product under the residual entry ‘CTH 8708 9900-Other’ as seen in the Invoice furnished to us. But specific entry is to be preferred as per the General Interpretation Rules to Customs Tariff and therefore considering the functional utility and the entry being specific, CTH 8708 80 00 is the right classification for ‘Air Springs’, the product in hand and we hold so.
Further, we find that the US tariff classification bearing No. N303352 dated 28th March 2019 relied upon by the applicant has classified the rolling lobe air spring under 4016.99.5500, HTSUS, which provides for Other articles of vulcanized rubber other than hard rubber: Other: Other: Other: Vibration control goods of a kind used in vehicles of headings 8701 through 8705. Thus it is seen that the said classification is based on the heading of the HTSUS, i.e., Vibration control goods of a kind used in vehicles of heading 8701 through 8705′, which is specific to cover those goods wherein the functionality is defined by the type of rubber and for use in vehicles of heading 8701 to 8705 for the purposes of vibration control. Whereas the Customs Tariff which is adopted for GST do not have any such entry and therefore the above ruling is differentiable.
To sum up, we find that the product as a whole is not an article of vulcanized rubber other than hard rubber and not classifiable under Customs Tariff entry at 40169990. Customs heading entry at 87088000 specifically covers Suspension systems and parts thereof of Motor Vehicles classifiable under CTH 8701 to 8705 and the functional utility of the ‘Air Springs being extending suspension or acting as shock absorber designed specifically for Motor Vehicles, the said entry is to be preferred to the residual entry of CTH 8708 9900. However, the GST rates for the purposes of Notification No. 01/2017-C.T.(Rate) dated 28.06.2017 are based on the descriptions in the notification with the CTH at the four digit level and therefore we hold that the ‘Air Springs’ manufactured by the applicant are rightly classifiable under CTH 8708 and more specifically under CTH 8708 8000.
AAAR order: Motor Car Air Springs (shock absorber) classifiable under CTH 8708: AAAR
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, TAMILNADU
Note: Any appeal against the Advance Ruling order shall be filed before the Tamil Nadu State Appellate Authority for Advance Ruling, Chennai under Sub-section (1) of Section 100 of CGST ACT/TNGST Act 2017 within 30 days from the date on which the ruling sought to be appealed against is communicated.
At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.
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SI AIR SPRINGS PRIVATE LIMITED, S.Nos 19/3 & 14/2-A, Poosaripatti Post, Kallikulam Village, Melur Taluk, Madurai – 625122 (hereinafter called the ‘Applicant’) is registered under the GST Vide GSTIN 33AABCF1689G1ZQ. They are engaged in the manufacture and sale of “Air Springs” which are used in air suspension system for buses, trucks and trailers. They have sought Advance Ruling on the following question:-
Whether “Air Springs” manufactured and supplied by them will be correctly classifiable under Tariff heading 40169990 as opposed to Tariff heading 8708 9900 and attract GST at the rate of 18%.
The Applicant has submitted the copy of application in Form GST ARA – 01 and also submitted a copy of Challan evidencing payment of application fees of Rs.5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017.
2.1 The Applicant has stated that the composition, function and usage of the ‘Air Springs’ manufactured and sold by them are as below:-
> Composition & Description of ‘Air Springs‘: The ‘Air Springs’ manufactured and sold by the Applicant are composed of a rubber bellow which includes rubber and fabric composite, beadwire, griddle hoop, crimped top plate, piston and a bumper. The material composition of such Air Spring’ is approximately 60% metal and 40% rubber.
> Function of ‘Air Soring’: The product is made up of sealed fabric-reinforced rubber bellows and is sealed with a steel plate. The ‘Air Springs’ work on the pneumatic system principle, whereby a volume of gas confined within a container is compressed, and it produces a reaction force. The reaction force takes the vehicle load, makes the ride smoother and reduces wear and tear in the vehicle. The vulcanised rubber component of the ‘Air Springs’ is the heart of the product and gives the product its key functionality. The steel component provides support for the same.
> The detailed description of the product is provided as follows-
i Highly engineered elastometric bellow with metal end closures, which contains a column of fluid with a fabric reinforced rubber envelope called a bellow.
ii. The ends are sealed by bead plates – so called because they are crimped around the beads of the bellow.
iii. Bead plates contain hardware like tapped hole or blind nut for attaching the below to the desired application.
iv. An air fitting is located in one of the bead plates which allows the fluid (usually air) to flow in and out of the bellows.
v. The fabric in the ‘bellow ball’ restricts radial expansion, so that the air pressure developed by the air flowing into the air spring causes it to extend axially.
2.2 The applicant has stated that the products manufactured and sold by them which are in the nature of ‘Main Air Springs’ and ‘Lift Air Springs’ are critical components of the air suspension and lift axle systems in trucks, trailers an buses. They have also stated that under the erstwhile Central Excise regime, they were classifying and clearing the Air Springs under Central Excise Tariff Heading 4016 on payment of appropriate excise duty and have submitted documents evidencing the same. The Applicant has for the purposes of GST been classifying such Air Springs’ under tariff heading 8708 9900 w.e.f. 01.07.2017, which attracts GST at the rate of 28%. They have stated that certain other manufacturers in the industry are classifying similar products – ‘Air Springs’ manufactured and supplied by them, under the heading 4016 9990 (@18% GST). They have subsequently obtained a legal opinion on issue and has been advised that the appropriate classification of ‘Air Springs’ is under tariff heading 4016 9990 as ‘Other Articles of Vulcanised Rubber other than Hard Rubber’ of the Customs Tariff and not under tariff heading 8708 9900.
2.3 They have placed reliance on the decision of Supreme Court in LML limited Vs Commissioner of Customs, 2010 (10) SCC (503). They have stated that the product ‘Air Spring’ is a critical component of the air suspension and lift axle systems in trucks, trailers and buses. They have placed references to the Chapter notes and Section notes of Chapter 40 and 87. They have also submitted that the component which gives the ‘Air Spring’ manufactured and supplied by them its key characteristic and functionality is Vulcanized rubber’. They have referred to the decision of Supreme Court in O.K. Play (India) Ltd. V. Commissioner of Central Excise, 2005 (180) E.L.T. 300 (S.C.), wherein it is held that functionality, utility, design, shape and predominant usage have to be taken into account while determining the classification of an item and is in fact more important than the name used in trade or common parlance. They are of the view that from a reading of the relevant Section Notes, Chapter Notes under the Customs Tariff Act, as well as the Explanatory notes under the HSN, the product of vulcanized rubber, even if it is ‘parts and accessories’ of motor vehicles falling under Chapter 87 will only be classifiable under Chapter 40.
2.4 The applicant has stated that the ‘Air Springs’ unlike conventional springs, function on pneumatic system-based principles and not on bending principles, they are not in the nature of Springs and leaves for springs, of iron and steel, under Chapter 7320 and are not based on the bending principle but based on the pneumatic principle. In order to substantiate the above facts the applicant has submitted a Chartered Engineer Certificate issued by a Registered Valuer for Machinery & Plant. The details of certification are as below:-
“1. The key functionality of the Lift air spring assembly is derived from rubber component
2. Air Springs are made up of fabric-reinforced rubber bellows sealed with steel plate. The same undergoes the process of calendaring and is compressed to produce a reaction force to take the load.
3. The steel component, being the base metal merely provides support. The essential character is derived from ‘vulcanized rubber’.
4. unlike conventional springs, function on pneumatic system-based principles and not on bending principles.
5. The rubber used in ‘Am Springs’ is not in the nature of ‘hard rubber.’
They have stated that they have been classifying ‘Air Springs’ under Chapter 87 (albeit erroneously) because it was of the erroneous opinion that ‘Air Springs’ would form ‘parts and accessories’ of motor vehicles of headings 8701 to 8705. However now they are of the view that HSN Explanatory notes to section XVII specifically excludes springs articles of ‘Vulcanized rubber’ from the scope of Chapter 87. They have placed reliance on the following case laws/instructions/tariff classifications to validate their interpretation of law.-
> instruction dated 21.05.2019 issued by the Office of Commissioner of Customs (Import), Mumbai
> The Tribunal in Prag Industries v. CCE, 1998 (103) ELT 62(T)
> US tariff classification bearing no. N303352 and dated March 28, 2019
2 5 In view of the above facts, the applicant has sough, the authority to seek clarification on the correct classification of Air Springs’ manufactured and supplied by them.
3.1 The applicant was given an opportunity to be virtually heard on 20.08.2020.
The authorized representative appeared for virtual hearing. They furnished the written submissions. They reiterated the submissions made along with the application. The representative emphasised that the functionality of the product is extended by the vulcanized rubber which stands classified under CTH 4016. Though the product is a part of Motor Vehicle classifiable under CTH 8708. The applicant was asked to furnish the Certificate of Name Change from Firestone TVS Private Limited the ER-1 of which is furnished, technical write up on the products. Further, to the query as to whether any change in the manufacture/usage to change the classification in the pre and post GST regime, the representative answered in negative. They stated that they wish to furnish further submissions which was allowed to be furnished.
3.2 Further to the hearing the applicant submitted the following documents vide their letter dated 29.08.2020:
> Write up on difference between main air spring and lift air spring in response to the query raised during PH. They have stated that the essential function and characteristics of ‘Main Air Spring’ and ‘Lift Air Spring’ are the same. The vulcanised rubber is the key/essential component of both the air springs and gives the product its key functionality. Both of them work on the pneumatic principle as opposed to the bending principle. They have stated that the factual and legal position set out in their AAR application applies equally to both ‘Main Air Spring’ and ‘Lift Air Spring’
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