In re M/s Blackstone Diesels (AAR Rajasthan)
The ‘Air Dryer complete with final filter for used in breaking system of locomotive’ has been rightly classified by the supplier under Chapter 8421 of GST Tariff Act 2017 which attracts GST @18% (CGST 9% + SGST 9% ).
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, RAJASTHAN
Note: Under Section 100 of the CGST/RGST Act 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/RGST Act 201 7, within a period of 30 days from the date of service of this order.
The Issue raised by M/s Blackstone Diesels {hereinafter the applicant} is fit to pronounce advance ruling as it falls under ambit of the Section 97(2) (a) and it is given as under:
a. classification of any goods or services or both;
Further, the applicant being a registered person, GSTIN is 08AFOPB8919C1ZE, as per the declaration given by him in Form ARA-01, the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above declarations, the application is ‘admitted* to pronounce advance ruling.
1. SUBMISSION OF THE APPLICANT
a. The applicant is a trader in Air dryer which is used by Railway in breaking system of locomotives. The applicant has received a purchase order number 69185017150035 dated 14.03.2018 from Western Railway for “Air Dryer complete with final filter for MEMU DMC” (02quantity).
b. The applicant also submitted few additional documents during the personal hearing along with copy of invoice (wherein goods are received by the applicant from the supplier-manufacturer, M/s Trident Pneumatics Pvt. Ltd., Coimbatore,) dated 27.03.2018.
c. The applicant is engaged in supply of various goods to the railways. Such Goods supplied to railways have different classification. Now there is an issue regarding the Air Dyer with filter supplied for use in breaking system of locomotive and Repair/Spare Kit supplied to railway.
d. As per the system of classification of HSN Codes the items related to railway locomotives fall under chapter 86. The relevant section heading 8607 reads as follows:-
8607 PARTS OF RAILWAY OR TRAMWAY LOCOMOTIVES OR ROLLING-STOCK
Relevant classification entry under that section is as follows:- 86072100
Air brakes and parts thereof
Thus, as per the use based classification as it is used for railways, the classification can be identified under this heading of chapter 86.
e. However the vendor of the assessee from whom the applicant purchased the material classifies the same under chapter 84 under following heading:-
Filtering or purifying machinery and apparatus for gases 84213990. This classification is based on the assertion that the air dryer and filter is a mechanical appliance classifiable under above heading.
f. It is important to note here that the item supplied by the applicant can be used only for the purpose of railway locomotives. Based on this the most appropriate entry for the classification seems to be 86072100.
g. The Applicant’s opinion:-
The most appropriate chapter heading for classification of the goods in question seems to be chapter 86 based on its use. Still if we go by the rules of interpretation for tariff classification, then the rule 3 applies. Rule 3 is reproduced as below:-
Rule 3: When by application of Rule 2 (b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be affected as follows:-
(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.
(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they 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.
2. As per these rules in case if there is a situation where any commodity falls under two or more heading and where the most specific description also could not be identified then as per rule 3(c) of rules or interpretation as described above the heading which occurs later in the numerical order should be used for classification.
3. Thus by virtue of the classification based on the use of the material under chapter 86 sees to the most specific description and without prejudice to this as per rule 3(c ) of Tariff Classification General Rules of Interpretation, chapter 86 seems for the purpose of classification.
4. Taxability
These items fall under Chapter 86 of the Customs Tariff Act, 1975 under heading 8607 which reads as follows:-
PARTS OF RAILWAY OR TRAMWAY LOCOMOTIVES OR ROLLING-STOCK
Further, item fall under subheading 860721000 which reads as under:
“Air brakes and parts thereof
The item mentioned as above is used in the Air Brakes of locomotives used by railway only.
5. For heading 8607 there is one entry of taxation in notification no. 01/2017 Central Tax (Rate) dated 28.06.2017, as amended from time to time; all of them are given below:-
