18% GST leviable on Interactive Flat Panel Screens if used for data processing purposes only

In re Savex Techonologies Pvt. Ltd. (GST AAR Chhattisgarh)

18% GST leviable on Interactive Flat Panel Screens if used for data processing purposes only

The AAR, Chhattisgarh in the matter of M/s. Savex Technologies Pvt. Ltd. [Order No. STC/AAR/06/2022 dated August 17, 2022] has held that, Interactive Flat Panel Screens used only for data processing purposes will attract Goods and Service Tax (“GST”) rate of 18% and in case the same provides any additional function, GST at 28% will be attracted.

Facts:

M/s Savex Technologies Private Limited (“the Applicant”) is involved in the sales and service of electronic items. The Applicant has purchased “BenQ Interactive Flat Panel Screen” (“the Impugned Product”) from M/s. BenQ India Private Limited (“the Supplier”) dated May 19, 2022. The Supplier has classified the Impugned Product as ‘automatic data processing machines’ under tariff heading 8471 41 90 of the Customs Tariff Act, 1975 (“the Customs Tariff Act”) attracting GST at 18% and has also obtained Bureau of Indian Standards (“BIS”) certification for the same.

The Applicant has contended that the Impugned Product has an in-built central processing unit with RAM and storage, an input unit i.e. a virtual keyboard/ an infrared pen and an output unit i.e. a display and that the Impugned Product can be used identically as a regular personal computer. Hence, classifiable under tariff heading 8471 41 90 of Chapter 84 of the Customs Tariff Act, 1975 (“the Customs Tariff Act”).

The Applicant has sought an advance ruling regarding classification of the Impugned Product and the effective rate of GST.

Issue:

Whether the Impugned Product qualifies under tariff heading 8471 41 90 of the Customs Tariff Act?

Held:

The AAR, Chhattisgarh in Order No. STC/AAR/06/2022 of 2022 has held as under:

• Noted that, the BIS certification of the Impugned Goods is not sufficient to conclusively hold that the classification of the same as ‘automatic data processing machine.’
• Observed that, as mentioned Chapter note 6(E) of Chapter 84 of the Customs Tariff Act, if the Impugned Product performs any additional function other than data processing, it would be disentitled from being classified under heading 8471 of the Customs Tariff Act. Further noted that there is no evidence to suggest that the Impugned Product performs any additional functions.
• Stated that, any modifications to the Impugned Product would result in the change in the rate of GST applicable owing to the functionality of such modified product.
• Held that, the Impugned Product needs to satisfy the stipulations as mentioned in the section note and chapter note of Section XVI and Chapter 84 respectively of the Customs Tariff Act. Further, it must contribute to a clearly defined function covered under any of the headings in Chapter 84 or Chapter 85, and then the same would merit classification under the heading appropriate to that function.
• Further held that, according to the Sl. 360 of Schedule – III of the Notification No. 01/2017 – Central Tax (Rate) dated June 28, 2017 (“the Goods Rate Notification”), the Impugned Product will attract 18% GST if it is classified under tariff heading 8471. In case, the Impugned Product are classifiable under any heading other than tariff heading 8471 owing to their functionality, the same shall attract 28% GST as appended by the Goods Rate Notification.

Relevant Provisions:

Note 6 to Chapter 84 of the Customs Tariff Act (w.e.f. January 1, 2022):

“[6]. (A) For the purposes of heading 8471, the expression “automatic data processing machines” means machine capable of :

(i) storing the processing programme or programmes and at least the data immediately necessary for the execution of the programme

(ii) being freely programmed in accordance with the requirements of the user;

(iii) performing arithmetical computations specified by the user; and

(iv) executing, without human intervention, a processing programme which requires them to modify their execution, by logical decision during the processing run;

(B) Automatic data processing machines may be in the form of systems consisting of a variable number of separate units.

(C) Subject to paragraph (D) and (E), a unit is to be regarded as being a part of an automatic data processing system if it meets all of the following conditions :

(i) it is of a kind solely or principally used in an automatic data processing system;

(ii) it is connectable to the central processing unit either directly or through one or more other units; and

(iii) it is able to accept or deliver data in a form (codes or signals) which can be used by the system.

Separately presented units of an automatic data processing machine are to be classified in heading 8471.

However, keyboards, X-Y co-ordinate input devices and disk storage units which satisfy the conditions of (ii) and (iii) above, are in all cases to be classified as units of heading 8471.

(D) Heading 8471 does not cover the following when presented separately, even if they meet all of the conditions set forth in paragraph (C) :

(i) printers, copying machines, facsimile machines, whether or not combined;

(ii) apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network);

(iii) loudspeakers and microphones;

(iv) television cameras, digital cameras and video camera recorders;

(v) monitors and projectors, not incorporating television reception apparatus.

(E) Machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings.”

Sl. No. 360 of Schedule – III to the Goods Rate Notification:

“Schedule III – 9%

FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, CHHATTISGARH

M/s Savex Techonologies Pvt. Ltd., E-718, Sector-5, Devendra Nagar, Raipur, Chhattisgarh. 492009, GSTIN: 22AAACS5547H2ZH [hereinafter also referred to as the applicant) has submitted application for advance ruling dated 21.5.2022 enclosing duly filled form ARA-01 (the application form for Advance Ruling) along with certain annexures and attachments U/s 97 of the Chhattisgarh Goods & Services Tax Act, 2017 seeking advance ruling on the following questions –

a) Whether product i.e. Interactive Flat Panels (IFPs) being traded by the Applicant qualifies under Chapter heading 84714190?

b) Rate of tax applicable on such goods is 9% COST and 9% SGST in terms of Entry No. 360 of Schedule- III of Notification No. 03/2017 -Central Tax (Rate) dated 28-06-2017.

2. Facts of the case:-

2.1 M/s Savex Technologies Private Limited (herein after referred to as “Applicant”) is registered under GST vide GSTIN 22AAACS5547H2ZH and is engaged in the trading of electronic items such as projectors, LCD monitors, LCD screens and its after sales service& is also the distributor of Information Communication and Technology Products and allied services. Applicant has approached this authority under Section 97(2)(a) & (b) of the COST Act, 2017 on the following questions: –

a. Whether their product Interactive Flat Panels (IFPs) being traded by the Applicant qualifies under Chapter heading 8471 41 90?

b. Rate of tax applicable on such goods is 9% COST & 9 % SGST in terms of Entry No. 360 to Schedule – Ill to Notification no. 01/2017-CT(Rate) dated 28.6.2017

2.2 Applicant has purchased goods i.e., “BenQ Interactive Flat Panel RP7502 Black 75”, from supplier namely i.e., M/s Benq India Private Limited vide Invoice NumberTN-23-INV-10570 dated 19-May-2022.

2.3 That, the supplier in the present case has classified the goods under tariff Item 847141 90 charging IGST @ 18%. Heading 8471 of the GST/Customs Tariff covers “automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data on to data media in coded form and machines for processing such data, not elsewhere specified or included” and CTI 84714190 covers “Other” Automatic Data Processing Machines ‘Comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined’.

3. Contentions of the applicant: –

About the Product – Interactive Flat Panels: –

3.1 The Interactive Flat Panels (“IFP/IFPs”) are of different sizes i.e., 55 inches, 65 inches, 75 inches, 86 inches, and 98 inches& also of difference models which may vary depending upon the size, year of manufacture & generation. Despite having so many varieties in sizes & models, the basic character of machine (IFP) remains same. Depending upon the requirement of the customer the same are sold and the features and specifications of the aforesaid goods are as follows:

• It comprises of LCD panels with an LED backlight and allow multi touch interaction. It has an in-built Central Processing Unit of 1.5GHz processing speed (hereinafter referred to as the “CPU”), Graphics Processing Unit Mali-651 MP4 (hereinafter referred to as the “GPU’ ). The IFP comes with 4 GB RAM and it has an internal storage capacity of 32 GB.
• It has a pre-installed operating system i.e., Android 8.0. In addition, it has OPS Slot which can be used to download and operate other operating systems such as Windows/ Linux.
• The IFP has capability to connect with range of Wi-H printers. Internet can be accessed on the aforesaid goods by connecting external USB Wi-Fi dongle or by the use a LAN cable. It can also be connected to other monitors, laptops and PC’s and input can be given either from the aforesaid goods to the monitor, the laptops and PC’s or vice versa.
• It allows the user to download and install new programs & applications according to the requirements of the user.
• It has additional features such as multitouch interaction, handwriting recognition, freehand touch, on-screen key board typing/go typing, etc. along with applications such as calcu’ator, stopwatch, buzzer, etc.The catalogue of the aforesaid goods explaining the above specification/features has been enclosed.

3.2 The Applicant’s Supplier i.e.,Benq India Private Limited has also obtained BIS Certification dated 27.11.2020 for the aforesaid goods under the description -Interactive Flat Panel (Automatic Data Processing Machines)”.

3.3 Further, that the aforesaid goods are indeed ADPM and thusare classifiable under CTI 8471 41 90 for the reasons explainedabove and that CTI 8471 41 90 covers “Other” ADPM comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined. Relevant portion of CTH 8471 has been extracted below for reference:

3.4 that Note 5(A) under Chapter 84 defines the expression ‘automatic data processing machines’ as any machine capable of fulfilling the conditions specified therein. The relevant Note is extracted below for easy reference;

“5. (A) For the purposes of heading 8471, the expression “automatic data processing machines” means machine capable of:

(i) storing the processing programme or programmes and at least the data immediately necessary for the execution of the programme

(ii) being freely programmed in accordance with the requirements of the user;

(iii) performing arithmetical computations specified by the user; and

(iv) executing, without human intervention, a processing programme which requires them to modify their execution, by logical decision during the processing run;”

3.5 Further, HSN Explanatory Notes to CTH 8471 further elucidates on what constitutes an ADPM. The relevant portion of the Explanatory Notes are extracted below:

“(I) AUTOMATIC DATA PROCESSING MACHINES AND UNITS THEREOF

Data processing is the handling of information of all kinds, in pre-established logical sequences and for a specific purpose or purposes.

Automatic data processing machines are machines which, by logically interrelated operations performed in accordance with pre-established instructions /program), furnish data which can be used as such or in some cases, serve in turn as data for other data processing operations.

This heading covers data processing machines in which the logical sequences of the operations can be changed from one job to another, and in which the operation can be automatic, that is to say with no manual intervention for the duration of the task. These machines mostly use electronic signals but may also use other technologies. They may be self-contained, all the elements required for data processing being combined in the same housing, or they may be in the form of systems consisting of a variable number of separate units.

This heading also covers separately presented constituent units of automatic data processing systems described above.

However, the heading excludes machines, instruments or apparatus incorporating or working in conjunction with an automatic data processing machine and performing a specific function. Such machines, instruments or apparatus are classified in the headings appropriate to their respective functions or, failing that, in residual headings (See Part (E) of the General Explanatory Note to this Chapter).

(A) AUTOMATIC DATA PROCESSING MACHINES

The automatic data processing machines of this heading must be capable of fulfilling simultaneously the conditions laid down in Note .5 (A) to this Chapter. That is to say, they must be capable of:

(1) Storing the processing program or programs and at least the data immediately necessary for the execution of the program:

(2) Being freely programmed in accordance with the requirements of the user;

(3) Performing arithmetical computations specified by the user and

(4) Executing, without human intervention, a processing program which requires them to modify their execution by logical decision during the processing run.

Thus, machines which operate only on fixed programs i.e., programs which cannot be modified by the user, are excluded even though the user may be able to choose between a number of such fixed programs.

These machines have storage capability and also stored programs which can be changed from job to job.

Automatic data processing machines process data in coded form. A code consists of a finite set of characters (binary code, standard six bit ISO code, etc.). The data input is usually automatic, by the use of data media such as magnetic lopes, or by direct reading of original documents, etc. There may also be arrangements for manual input by means of keyboards or the input may be furnished directly by certain instruments (e.g., measuring instruments).

The input data are converted by the input units into signals which can be used by the machine, and stored in the storage units.

Part of the data and program or programs may be temporarily stored in auxiliary storage units such as those using magnetic discs, magnetic tapes, etc. But these automatic data processing machines must have a main storage capability which is directly accessible for the execution of a particular program and which has a capacity at least sufficient to store those parts of the processing and translating programs and the data immediately necessary for the current processing run. Automatic data processing machines may comprise in the same housing, the central processing unit, an input unit (e.g., a keyboard or a scanner) and an output unit (e.g., a visual display unit), or may consist of a number of interconnected separate units. In the latter case, the units form a “system” when it comprises at least the central processing unit, on input unit and an output unit (see Subheading Note 2 to this Chapter). The interconnections may be made by wired or wireless means.

A complete automatic data processing system must comprise, at least :

(1) A central processing unit which generally incorpoates the main storage, the arithmetical and logical elements and the control elements; in some cases, however, these elements may be in the form of separate units.

(2) An input unit which receives input data and converts them into signals which can be processed by the machine.

(3) An output unit which converts the signals provided by the machine into an intelligible form (printed text, graphs, displays, etc.) or into coded data for further use (processing, control, etc.).

Two of these units (input and output units, for example) may be combined in one single unit.”

(emphasis supplied)

3.6 That, therefore, in light of the above Chapter Note and Explanatory Notes, an ADPM is any machine which can store a processing programme; is freely programmable; performs arithmetical functions; and can execute logical decisions without intervention of humans.

3.7 Further, an ADPM must have a Central Processing Unit, an input unit and an output unit either in the same housing or separate processing, input and output unit interconnected to each other.

3.8 Therefore, for the purpose of being classified under CTH 8471 as an ADPM, a product must perform all the functions as listed under Chapter Note 5 (A) to Chapter 84. Further that the aforesaid goods satisfy all the aforesaid pre-requisites/conditions for the reasons tabulated below:

3.9 That, in view of the above, it is evident that the aforesaid goods satisfy all the four conditions stipulated in Chapter Note 5A to Chapter 84 and therefore, qualify as ADPMs for the purpose of classification under CTH 84.71.

The aforesaid. goods are nothing but an All in One Personal Computer

3.10 that the features and specification of the aforesaid goods, as mentioned supra, also clearly show that the aforesaid goods satisfy the requirement of an ADPM as contemplated under Heading 84.71 of the Customs Tariff. For the ease of reference, the same are extracted below:

(a) Dual Core A73 + Dual Core A53/1.5 GHz (1-1V81 1) Processor;

(b) Input unit (virtual keyboard/infra-red pen), output unit (display) & 4GB RAM along with 32GB Storage;

(c) Android Operating System along with CPS slot which supports Ubuntu 14.04 or above, Windows 7/8/8.1/10, Mac OS X 10.12 or above;

(d) The machine can be programmed or modified in the manner in which the user wants;

(e) That the aforesaid goods can be used identically as a regular personal computer;

(f) The touch screen display feature makes it possible for the user to work with the machine in close proximity.

3.11 In fact, the specification/features are strikingly similar to another form of ADPM, viz., all-in-one Personal Computer (“All in One PCs”). The following table captures the similarity between the aforesaid goods and two other models of All in One PCs which are available and known in the market as such:

3.12 that the above comparison clearly shows that the aforesaid goods have all the characteristics/ features of an All in One PCs and for this reason also, they qualify to be automatic data processing machines.

3.13 Further, with respect to impugned goods, the Applicant enclosed the sample copies of bills of entry filed by the supplier i.e. Benq India Private Limited for importing the said goods from outside India under which the Custom Authorities as well are classifying & clearing the impugned goods under 8471 41 90. Sample copies of few of the latest bill of entries enclosed.

Without prejudice, the Aforesaid Goods are similar to Tablet computer which have been recognized by fhe WCO as ADPM classifiable under CTH 8471

3.14 that the aforesaid goods are also similar to Tablet Computers with respect to its features and specifications. The Tablet Computers have been classified by the World Customs Organization (‘WCO‘) as an ADPM classifiable under Tariff Sub-Heading 8471 30 and consequently, even the aforesaid goods deserve to be treated as ADPM.

3.15 The features of the aforesaid goods have been tabulated alongside the features of a tablet in order to show the similarly between the two products:

3.16 that the specifications/ features of the aforesaid goods are very much similar to that of a Tablet and that the World Customs Organization’s (WCO) Harmonized System Committee in the 49th session (March 2012), also considered certain machines commercially referred to as “tablet computers”, featuring Wi-Fi and Bluetooth connectivity only, and classified them also under Tariff Sub-Heading 8471 30.

3.17 Further, Circular No. 20/2013-Customs dated 14.05.2013 issued by the Central Board of Customs & Excise, India clarified that the function as an Automatic Data Processing Machine (ADF) is the main function of a Tablet and therefore, they are classifiable under CTH 84.71. The relevant portion of the Circular has been extracted below for reference:

4. It is seen that “Tablet Computers” can be programmed in a variety of ways thereby qualifying as machines capable of being freely programmed in accordance with the requirements of the user, as required by Note 5 (A) (ii) to Chapter 84. it is also held that the products at issue have essentially the same functionality as a laptop. The function as an Automatic Data Processing Machine (ADP) is the main function of the product, while other functionalities of said machines are not different from the auxiliary functions that could be seen on any computer, such as desktop or laptop computers. The mobile phone calling function could be provided by the products only as a supplementary function because it could not be activated without running an operating system of the “Tablet Computer”, and in order to use the function a headset had to be used. The size of such machines when exceeding the dimensions mentioned in Note 8 to Chapter 84 relating to the “pocket-size” machines of heading 8470, is too big to be used principally for making voice calls. The tablet computers are not intended to be a substitute for a mobile phone to make voice calls, but, according to its main technical features is designed as a substitute for laptops. The difference between a “Smartphone” and a “Tablet Computer”, is not based on whether the product has a voice calling function or not, but on the principal features that a producer has intended for the device when designing and developing it.

3.18 Further, with respect to aforesaid goods being different from television set, the applicant furnished the differentiation between the goods under question & TV: –

3.19 That, in light of the above it is evident that the aforesaid goods are nothing but ADPM and correctly classifiable under CTH 8471.

Bureau of Indian Standards considers the goods as ADPM as well

3.20 that the Bureau of Indian Standards has issued BIS Certification dated 27.11.2020 for the aforesaid goods under the description “Interactive Flat Panel (Automatic Data Processing Machines)”. Therein, the certificate has been issued for the aforesaid goods under the category of “Automatic Data Processing Machines”.

3.21 Therefore, the aforesaid goods are in fact ADPM and classifiable under CTH 84.71.

Chapter Note 5(E) to Chapter 84 is not applicable

3.22 Chapter Note 5(E) to Chapter 84 provides that machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings.

3.23 that the aforesaid goods perform the specific function of data processing. In the present case, the aforesaid goods can perform the functions of a laptop or a computer. It is not a machine performing any function other than data processing.

3.24 The aforesaid goods perform an array of functions beyond mere display of content. Thus, they cannot be said to perform function which is other than data processing. In view of the above, Note 5(E) is not attracted to the aforesaid goods and the aforesaid goods are correctly classifiable as ADPMs under CTH 8471.

3.25 In view of the same, the applicant has filed the instant application seeking ruling of this Hon’ble Authority on the following: –

3.26 The goods merit Classification as ADPM’s under Chapter heading 8471.

3.27 The goods qualify in Entry 360 to Schedule – Ill of Notification No. 01 – 2017 & its rate of tax on supply is 9% CGST & 9% SGST?

4. Personal Hearing:-

Keeping with the established principles of natural justice, personal hearing in the matter was extended to the applicant in person, as requested by them and accordingly, Shr. Jitendra Singh Khanuja, C.A.&authorized representative, of the applicant appeared before us for hearing on 10.08.2022 and reiterated their contention.

5. The legal position, analysis and discussion: –

At the very outset, we would like to make it clear that the provisions for implementing the CGST Act and the Chhattisgarh GST Act, 2017 [hereinafter referred to as “the CGST Act and the CGGST Act.] are similar and thus, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the CGGST Act, 2017. Now we sequentially proceed to discuss the issues involved in the ruling so sought by the applicant and the law as applicable in the present case.

6. Section 96 of CGST Act, 2017, Authority fpr advance ruling, stipulates as under: –

Subject to the provisions of this Chapter, for the purposes of this Act, the Authority for, advance ruling constituted under The provisions of a State Goods and Services Tax Act or Union Territory Goods and Services Tax Act shall be deemed to be the Authority for advance ruling in respect of that State or Union territory.

Section 97(2) of CGST Act, 2017 stipulates that: –

The question, on which the advance ruling is sought under this Act, shall be in respect of—

(a)classification of any goods or services or both;

(b) applicability of a notification issued under the provisions of this Act;

(c) determination of time and value of supply of goods or services or both;

(d) admissibility of input tax credit of tax paid or deemed to have been paid;

(e) determination of the liability to pay tax on any goods or services or both;

(f) whether applicant is required to be registered;

(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.

Further section 103 of CGST Act, 2017 stipulates about the ruling pronounced as under: -The advance ruling pronounced by the Authority or the Appellate Authority under this Chapter shall be binding only –

a. On the applicant who had sought it in respect of any matter referred to in sub-section (2) of section 97 for advance ruling;

b. On the concerned officer or the jurisdictional officer in respect of the applicant.

Thus, in view of the above section 103 of CGST Act, 2017, the ruling so sought by the Applicant would be binding only on the Applicant and on the concerned officer or the jurisdictional officer as stipulated above.

7. We have gone through the submissions made by the applicant and have examined the contentions raised by them. At the cutset, we find that the issue raised in the application is squarely covered under Section 97(2)(a) and Section 97(2) (b) of the CGST Act 2017 being a matter related to classification of goods and applicability of a notification issued under the provisions of this Act. We therefore, admit the application for consideration on merits.

8. Now we proceed to decide the issues raised by the applicant on merits. On perusal of the Tax Invoice issued by BenQ India Pvt. Ltd. Tamil Nadu GSTIN: 33AACCA6005CIZ1 to the applicant M/s Savex Technologies Pvt. Ltd. Raipur (C.O.) GSTIN: 22AAACS5547H2ZH it is seen that the same depicts the product name as BenQ INTERACTIVE FLAT PANEL RE 6501 BLACK 65 IN, HSN Code as 84714190 with IGST charged @,18%. The Bureau of Indian Standards has issued BIS certification granted license documents to the BenQ India Pvt. ltd., mentioning the product name as INTERACTIVE FLAT PANEL (Automatic Data Processing Machine) vide Document No. R-41151858 dated 6.2.2020 and document dated 17.2.2020 (inclusion document). Besides this the bill of entry summary issued by the Indian Customs, Chennai Port to the BenQ India Pvt. Ltd. Tamil Nadu (Importer) mentions the goods description as BENQ-9H,F6YTK.DN4-(BIS REG R-41164488) REGULATORY MODEL-RE650 I BENQ INTERACTIVE FLAT PANEL RE6501WITH (ADPM )3GB RAM, A with HSN Code 84714190.

9. Thus, based on the above and the comparative details furnished by the applicant before this authority, it has been the contention of the applicant that their product namely BenQ Interactive Flat Panel RP7502 Black 75″, received from supplier namely i.e., M/s BenQ India Private Limited merit classification under chapter heading 8471 leviable to 9% CGST and 9% SGST as stipulated under entry no. 360 to Schedule-Ill of Notification no. 01/2017-CT(Rate) dated 28.6.2017.

10. As regards the classification of goods under GST regime, the Central government on recommendation of GST council has notified tt-e rate of applicable tax payable on goods vide Notification no. 01/2017-CT(Rate) dated 28.6.2017. / Integrated tax (rate) dated 28/06/2017. It may be noted that notifications regarding central tax (CGST) are issued by central government and notification regarding state tax (SGST) are issued by respective state government have identical provisions. The said notifications are subject to amendments from time to time by the government. The schedules in notifications issued have reference to chapter, heading. sub heading and tariff items.

10.1 Explanation at the end of above notification inter alia provides that “Tariff item”, “sub-heading” “heading” and “Chapter” shall mean respectively a tariff item, subheading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and further that the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification. Therefore, it is implied by virtue of above explanation that the classification of goods has to be done in accordance with Customs Tariff Act 1975. However, once the heeding/tariff item is arrived at, the rate of GST would be governed by above notification. The Customs Tariff Act 1975 is based on HSN. The Customs Tariff Act 1975 is amended from time to time so as to align the same with HSN Tariff developed by world customs organization.

10.2 In the aforesaid context, it is seen that Section XVI covers chapter 84 as under: –

SECTION XVI MACHINERY AND MECHANICAL APPLIANCES; ELECTRICAL EQUIPMENT; PARTS THEREOF: SOUND RECORDERS AND REPRODUCERS, TELEVISION IMAGE AND SOUND RECORDERS AND REPRODUCERS, AND PARTS AND ACCESSORIES OF SUCH ARTICLES.

Further, Section note at clause 4 to above chapter 84 stipulates that

“4. Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function”.

10.3 Similarly, for the sake of brevity, Chapter note 5 to chapter 84 is reproduced hereunder: –

5.(A) For the purposes of heading 8471, the expression “automatic data processing machine” means machine capable of;-  (i) storing the processing programme or programmes and at least the data immediately necessary for the execution of the programme; (ii) being freely programmed in accordance with the requirements of the user: (iii) performing arithmetical computations specified by the user, and (iv) execu’ing, without human intervention, a processing programme which requires them to modify their execution, by logical decision during the processing run.

(B) Automatic data processing machines may be in the form of systems consisting of a variable number of separate units.

(C) Subject to paragraphs (0) and (E), a unit is to be regarded as being part of an automatic data processing system if it meets all of the following conditions: (1) it is of a kind solely or principally used in an automatic data processing system; (ii) if is connectable to the central processing unit either directly or through one or more other units; and (iii) it is able to accept or deliver data in a form (codes or signals) which can be used by the system. Separately presented units of an automatic data processing machine are to be classified in heading 8471. However, keyboards, X-Y co-ordinate input devices and disk storage units which satisfy the conditions of (ii) and (iii) above, are in all cases to be classified as units of heading 8471.

(D) Heading 8471 does not cover the following when presented separately, even if they meet all of the conditions set forth in paragraph (C): (i) printers, copying machines, facsimile machines, whether or not combined; (ii) apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network); (iii) loudspeakers and microphones; (iv) television cameras, digital cameras and video camera recorders; (v) monitors and projectors, not incorporating television reception apparatus.

(E) Machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings

10.4 Thus from the above it follows that the much important aspect of classification of goods under scheme as envisaged under GST has to be done in accordance with Customs Tariff Act 1975, which in turn is based on Harmonised System of Nomenclature popularly known as HSN. The rules of interpretation, section notes and chapter notes as specified under Customs Tariff Act 1975 are also applicable for classification of Goods under GST. Further, once an item is classified in accordance with Customs Tariff Act 1975, the rate of tax applicable would be arrived at on the basis of notifications issued under GST which in this case is Notification no. 01/2017-CT(Rate) dated 28.6.2017.

11. For ease of reference, the relevant portion of GST Notification No. 1/2017-Central Tax (Rate) dated 28 June, 2017 is reproduced here under: –

GOVERNMENT OF
INDIAMINISTRY
OFFINANCE
(Department of Revenue)

Notification No.1/2017-Central Tax Rate)

New Delhi, the 28th June, 2017

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby notifies the rate of the central tax of-

(i) 2.5 per cent. in respect of goods specified in Schedule I,

(ii) 6 per cent. in respect of goods specified in Schedule II,

(iii) 9 per cent. in respect of goods specified in Schedule III,

(iv) 14 per cent. in respect of goods specified in Schedule IV,

(v) 1.5 per cent. in respect of goods specified in Schedule V, and

(vi) 0.125 per cent. in respect of goods specified in Schedule VI

appended to this notification (hereinafter referred to as the said Schedules), that shall be levied on intra-State supplies of goods, the description of which is specified in the corresponding entry in column (3) of the said Schedules, falling under the tariff item, subheading, heading or Chapter, as the case may be, as specified in the corresponding entry in column (2) of the said Schedules.

Schedule V – 1.5%

Schedule VI – 0.125%

11.1 To cite an example, it is observed that “Monitors and projectors, not incorporating television reception apparatus; reception apparatus for television, whether or not incorporating radio-broadcast receiver or sound or video recording or reproducing apparatus [other than computer monitors not exceeding [32 inches], set top box for television and Television set (including LCD and LED television) of screen size not exceeding (32 inches]] “falling under Chapter Heading / Sub-heading / Tariff item 8528 finds mention at Sr. no. 154 to Schedule IV appended to Notification no. 1/2017 CT(Rate) dated 28.6.2017 attracting GST @ 14% + 14%(CGST+SGST).

11.2 The applicant in their defense, aiming to bring home their point of contention that the impugned product is Automatic Data Processing machine classifiable under CH 8471 have compared the features and specifications of impugned goods with that of All-in-one personal computer and Tablet computer. The applicant has also tried to distinguish the impugned good from a Television by comparing the features. It has also been their contention that BIS certification has been done under the description “Interactive Flat panel (Automatic Data Processing Machines). This comparison of features with that of personal computer or Tablet computer to claim classification of the impugned goods under CH 8471 hardly comes to their rescue, in as much as CH 8471 pertains to A ufomaticdota processing machines on dunifs there of; magnetic or optical readers, machines for tran scribinci data on of data mediain coded form and machines for processing such dafa, not else where a Decified or included.

Thus, it becomes all the more important to ascertain as to whether the impugned BenQ Interactive Flat Panel RP7502 Black 75 on being supplied / traded by the applicant downstream, owing to it being programmed in a variety of ways thereby qualifying as machines capable of being freely programmed in accordance with the requirements of the user, has changed in functionality or not. The machine being Automatic data processing machine alone would not entitle it being classifiable under CH 8471, rather for it to fall under the said CH8471 it must not be specified elsewhere or included. Thus, the certification of the impugned goods as Automatic data processing machine by BIS in itself is not sufficient to conclysive hold the classification of the impugned goods under CH 8471. To conclusive arrive at a decision regarding the eligibility or otherwise of the claimed classification, it is of paramount importance to ascertain whether each such machine is a machine performing any function other than data processing.

11.3 Thus, irrespective of the fact that the impugned goods received by the applicant from supplier namely i.e., M/s Benq India Private Limited [who had classified the said goods under tariff Item 847141 90 charging IGST @ 18%) subsequent to its import which the applicant now intends to trade / supply in the market downstream, would merit classification under Heading 8471 only if the conditions as stipulated and discussed supra are adhered to. The rules of interpretation for classification, section notes and chapter notes as specified under Customs Tariff Act 1975 are applicable for classification of the impugned goods. It would not be out of place to mention here that chapter note 5 (E) of chapter 84 stipulates that machine performing a specific function other than data processing merits classification in appropriate headings / residual headings. Thus, any additional functionality other than data processing would disentitle the impugned goods from getting classified under heading 8471 ibid. Besides this, the technical information and parameters of the impugned goods intended to be traded by the applicant after its receipt from their supplier, consequent upon its import and supply by the supplierto the applicant is of much relevance for arriving at the appropriate classification of the same. Further this authority would like to mention here that although, there is nothing before us to suggest that the technology, per se, used in the impugned goods imported and thereafter supplied to the applicant, intended to be traded subsequently by the applicant perform any additional function such as receiving the composite video signals or convert input through VGA into an input for a video monitor etc., nevertheless the classification of the goods in question under heading 8471 claimed by the applicant would depend upon the functionality of the same as also the rules of interpretation, section notes and chapter notes as specified and discussed herein above.

11.4 The applicant during the course of Personal hearing before us had referred to Customs AAR ruling in the case of /Vi/s. Audio Distribution House Pvt. Ltd. by the Customs Authority for Advance Rulings, mumbai and AAR ruling in the case of M/s Next Education India (P.) Ltd., passed by AAR, Telangana. In this regard, it has already been discussed that classification of goods which in the impugned case in hand is dependent on the functionality of the machine per se cannot be generalized and ascertainment of classification of goods is much dependent on the circumstances and adherence to the condition stipulated. Further as already. discussed in the preceding para, section 103 of CGST Act, 2017 stipulates about the ruling pronounced as under:

The advance ruling pronounced by the Authority or the Appellate Authority under this Chapter shall be binding only –

a. On the applicant who had sought if in respect of any matter referred to in sub-section (2) of section 97 for advance ruling;

b. On the concerned officer or the jurisdictional officer in respect of the applicant.

Thus, in view of the above section 103 of CGST Act, 2017, the ruling given in the cited case would be binding only on the Applicant and on the concerned officer or the jurisdictional officer as stipulated above

12. In view of the above discussions we are of the considered view that it would be appropriate to conclude that BenQ Interactive Hat Panel RP7502 Black 75”, imported and subsequently supplied to the applicant by their supplier namely i.e., M/s Benq India Private Limited would merit classification under chapter heading 8471 only when the stipulations as mentioned in the Section note and chapter note stands complied. In case the impugned machine consisting of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the same as a whole would merit classification in the heading appropriate to that function, as stipulated in Section note 4 to Section XVI supra. Similarly, chapter note 5(E) to chapter 84 supra stipulates that Machines incorporating or working in conjunction with an automatic data processing machine and performing a specific function other than data processing are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings. It is also observed that chapter note 5(D) to chapter 84 in very unambiguous terms stipulates that Heading 8471 does not cover monitors and projectors, not incorporating television reception apparatus when presented separately, even if they meet all of the conditions set forth in paragraph (C). Needless to point out here that any subsequent modifications / additions / programming in the impugned goods technologically or otherwise before the intended supply/trade to be undertaken by the applicant, would alter the classification of the same based on the functionality of the machine, therein resulting in change in the applicable rate of GST. The rate of tax applicable on such goods depends upon the classification of the same and the effective rates of the same is specified in schedules appended to Notification no. 01/2017-CT(Rate) dated 28.6.2017 and subject to the adherence of stipulations as discussed above, the applicable Rate of tax is 9% CGST + 9% SGST on goods classifiable under 8471, in terms of entry no. 360 to Schedule-III to Notification no. 01/2017-CT(Rate) dated 28.6.2017 In case the goods in question are classifiable under heading other than 8471 owing to it functionality as discussed, the said goods will attract rate of tax as specified in the schedules appended to Notification no. 01/2017-CT(Rate) dated 28.6.2017 on such supplies on the. basis of description specified therein.

Having regard to the facts and circumstances of the case and discussions as above, we pass the following order: –

ORDER

(Under section 98 of the Chhattisgarh Goods and Services Tax Act, 2017)

No. STC/AAR/06/2022

Raipur Dated 17-08-2022

The ruling so sought by M/s Savex Technologies Pvt. Ltd., E-7/8, Sector-5, Devendra Nagar, Raipur, Chhattisgarh GSTIN:22AAACS5547H2ZH the applicant is accordingly answered as under: –

RULING

(a) For the product BenQ Interactive Flat Panel RP7502 Black 75″ being supplied / traded by the applicant to qualify under chapter heading 84714190, it must necessarily satisfy the stipulations as mentioned in the Section note and chapter note of Section XVI and Chapter 84 respectively, as discussed herein above. In case the impugned machine consisting of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the same as a whole would merit classifications in the heading appropriate to that function.

(b) The rate of tax applicable on such goods depends upon the classification of the same and the effective rates of the same is specified in schedules appended to Notification no. 01/2017-CT(Rate) dated 28.6.2017. Subject to the adherence of stipulations as discussed in ruling (a) above, the applicable Rate of tax is 9% CGST + 9% SGST on goods classifiable under 8471, in terms of entry no. 360 to Schedule-Ill to Notification no. 01/2017-CT(Rate) dated 28.6.2017. In case the impugned goods are classifiable under heading other than 8471 owing to it functionality as discussed hereinabove, the said goods will attract rate of tax as specified in the schedules appended to Notification no. 01/2017-CT(Rate) dated 28.6.2017 on such supplies on the basis of description specified therein, including rate of tax @ 14% CGST + 14%  SGST specified in Schedule-IV to the Notification)

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(Author can be reached at info@a2ztaxcorp.com)