In Re Daebu Automotive Seat India Private Limited (GST AAR Tamilnadu)
The product ‘Track Assembly’ manufactured and supplied by M/s. Daebu Automotive India Private Limited, is classifiable under CTH 8708 of the First Schedule to the Customs Tariff Act, 1975 as applicable to GST as per Explanation (iii) to Notification 1/2017-Central Tax (Rate) dt 28.06.2017 and G.O. Ms No. 59, Commercial Taxes and Registration (B1) dt 29th June 2017.
The applicable rate of tax is CGST @ 14% as per entry Sl.No.170 of Schedule -IV of the Notification 1/2017-Central Tax (Rate) dt 28.06.2017 as amended and SGST @14% as per entry sl. No. 170 of Schedule-IV of Notification No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017 as amended.
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 Subsection (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.
DAEBU AUTOMOTIVE SEAT INDIA LIMITED, 492, Mannur Village, Vallarpuram Post, Sriperumbudur Taluk, Kancheepuram-602105 (hereinafter called the Applicant) are registered under GST with GSTIN 33AACCD4599E1ZO. They are in engaged in the business of manufacture of seat components and accessories which is added to the manufacturing of full seat of four wheelers. The applicant has preferred an application seeking advance ruling on the following question:
i. What is the correct classification of goods manufactured by the applicant viz. “Automotive Seating System”?
ii. Will the goods manufactured fall under CH 87089900 attracting GST 28% or under CH 940199990 attracting GSTCv 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 they are engaged in the manufacture of Seat Components and Accessories, which is added to the manufacturing of Full Seat of four wheelers. The parent company which is situated in Korea is called as DAS Corporation and they are engaged in the manufacture of automobile seats. The products manufactured by the applicant are Base Sub Assembly, Set Bracket, Floor Mounting Bracket, Track Sub Assembly, Base Plate, Pipe Assembly, Pipe Assembly height, Cushion Frame Assembly, Cushion Frame Sub Assembly, Recliner + Set Bracket Nut Assembly, Rail + Link Assembly, Spring + Track Lever Assembly etc. The major raw material is Mild Steel (CR) Coil of various category, thickness & size. The manufacturing process involves feeding the CR coils into Pressing Machine for Stamping Process. Stamped products are then sent for Nut Welding. Pipe squeeze Machine is used for Link Squeezing of piped parts. Then such piped parts are linked together as per requirements by link welding. The individual parts so manufactured are assembled to get Recliner + Set Bracket Nut Assembly, Rail + Link Assembly, spring + Track Lever Assembly etc. High end CNC machinery with robotic arms is used in the entire manufacturing process of stamping, welding, piping etc. The applicant has submitted the details of raw material suppliers, the description of goods and HSN, rate adopted by them. It is seen from the details that the goods supplied include covering wire, slider lever, plate base, cushion panel, side bracket, bas assembly. The HSN adopted is 87089999 and GST is levied at 28%. They have submitted that they are mainly supplying to M/s Hyundai Transys Lear Automotive Limited, Sriperumbudur, who in turn manufactures automotive car seats and supply to M/s Hyundai Motors India P Ltd., Irunkkattukottai. Their other customers are Harita Seating System Ltd., Hosur, M/s Adient India P Ltd., Singaperumalkoil, M/s Daechang India Seat Company P Ltd., Sriperumbudur etc. The applicant has also stated that they have been paying GST regularly and has been a regular filer of statutory returns etc. The goods manufactured by them are classified by them under HSN: 8708 99 00 and they are paying GST ct28%.
2.2 On interpretation of law, the applicant has stated that divergent practices are being adopted among the manufacturers of similar goods and the automobile/automobile seat manufacturers many times, insist on classifying the goods under HSN 9401 99 00, which attracts lower rate of GST. Since HSN cannot be changed according to the needs of the customer and as they follow, HSN 8708 99 00, they are unable to cater to the demands of such customers and lose business on this account. They have submitted that the reasons for classifying the products manufactured by them under HSN 8708 99 00 are as follows:
i. Tariff Heading 9401 covers “Seats including seats of a kind used for motor vehicles”. 94019900 covers “Parts” of such seats. HSN explanatory notes states that: PARTS — The heading also covers identifiable parts of chairs or other seats, such as backs, bottoms and arm rests (whether or not upholstered with straw or cone, stuffed or sprung) and spiral springs assembled for seat upholstery.
ii. Thus, it could be seen that HSN 9401 99 00 covers only those items which constitute as specific part of a seat like backs, bottoms, arm rests etc. They do not cover those items which are basically fitted under a seat on the floor of the motor vehicle. Seat could be complete without such items like Rail assembly, LH Rail assembly, etc., which are manufactured by the applicant.
iii.The goods manufactured by them are not essential parts of a seat. They are basically adjuncts affixed on the floor of the motor vehicle, on which seats are mounted. These goods/mechanisms enable the passengers and drivers of automobiles to adjust seat positions for their comfort and convenience.
iv. The goods manufactured by them are installed under the seat for varying the positions of seats basically intended to improve efficiency and to enhance travel comfort.
v. Therefore, the goods manufactured by them cannot become essential pieces/parts of the seats. The seats are complete by themselves without these mechanisms. In the products manufactured by the applicant, a person cannot directly sit and rest.
vi. Hence seat assembly mechanisms cannot be called as parts of seats falling under H5N 9401 99 ON& 94012000. Alternately, they can be termed as accessories of motor vehicle and classifiable under 8708 99 00.
2.3 The applicant has placed reliance on the ruling of the Hon’ble Supreme Court in the case of Commissioner of C.Ex., Delhi Vs. Insulation Electrical (P) Ltd., 2008 (224) ELT 0512 SC. In the appeal filed by the Department on the classification of similar goods under CETH: 8708 or 9401, the Apex court, has held that such goods are classifiable under CETH: 8708. They have submitted that the facts of the case dealt by the Hon’ble Apex Court are similar to the case on hand. They have also referred to the CBIC Circular No. 52/26/2018-GST dated 09/08/2018 wherein under Para 13.1 to 13.4, applicability of GST on “Disc Brake Pad for Automobiles” has been discussed and the same is applicable to the products manufactured by them also. Further, the applicant has submitted that Customs & DGFT Departments have also classified the products manufactured by the applicant under HSN 8708 as parts and accessories of motor vehicles and not under HSN 9401 as “Parts of Seats”.
2.4 In view of the aforesaid facts, they have sought the authority to issue necessary ruling as to whether the products manufactured by them falls under HSN 8708 99 00 as “parts and accessories of motor vehicles” or under HSN 9401 99 00 as “Parts of Seats” and the applicable rate of tax under GST.
3.1 Due to the prevailing PANDEMIC situation and in order not to delay the proceedings, the applicant was addressed through the Email Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital media. The applicant consented and the hearing was held on 09.04.2021. The authorised representative appeared for the hearing. They stated that they are supplying as sub-assembly and fully assembled. They were asked to furnish the copy purchase orders and write up on the products regarding functionality of the sub-assembly and assembly for which the ruling is sought. They were asked to furnish the supreme court decision relied upon by them along with the gist on the applicability of the same to their case.
3.2 The applicant vide their letter dated 10.04.2021 has submitted for clarity that they have requested for determination of the classification of only the finished goods viz., Track assembly meant for front Left/right. seat. The various subassemblies (which are also named in their typed set to their application) that go in to making their product viz., Track assembly are essentially parts of the track assembly. They had submitted the following documents: •
> Purchase order PO NO 4200000917 of their client Hyundai Transys Lear Automative India Private Limited.
> Product description of the Track assembly
> copy of Hon’ble Supreme Court Case law Commissioner .C.Ex., Delhi Vs Insulation Electrical (P) Ltd., reported in 2008(224) ELT 0512 (SC).
3.3 On the write-up of the Functions of the product, they have stated that
(i) This Track Assembly is fitted on to the floor of the car,. Essentially, it enables the movement as forward and backward of the seat. When seats are fixed on this TRACK ASSY it can slide back and forth with the operation of a lever for varying the positions of the seats, which is basically intended to improve the comfort and efficiency of the persons sitting thereon. This mechanism enables the passengers and drivers of the automobile to adjust seat positions for their comfort and convenience. Thus the Track assembly manufactured and supplied by them is an adjunct to the car seat.
(ii) They do not qualify to become parts of the seats as enunciated in the decision cited viz., AAR Ruling GUJ/GAARJR/42/2020 dated 30-07-2020 and the decision of the Hon`ble Supreme Court in the case of Commissioner .C.Ex., Delhi Vs Insulation Electrical (P) Ltd., reported in 2008(224) ELT 0512 (SC)
(iii) Car seat could complete themselves without these mechanisms. Hence, Track assembly mechanisms independently could not be called as parts of seats falling under HSN 94019000 whereas, they could at best be identified as accessories to the seats and hence would appropriately classifiable under the Heading 87089900.
4.1 The central Jurisdictional authority who has administrative control over the applicant has stated that there are no proceedings pending in respect of the question raised by the applicant and further offered the following comments:
