Case Law Details

Case Name : In re Radiant Corporation Private Limited (GST AAR Telangana)
Appeal Number : TSAAR Order No. 03/2022
Date of Judgement/Order : 21/01/2022
Related Assessment Year :

In re Radiant Corporation Private Limited (GST AAR Telangana)

In the present case, the applicant has submitted certain utilization certificates from the Naval authorities. The certificates categorically state that the goods supplied are used ‘as stores for consumption onboard of Indian Navy Ship’ (Certificate dated: 29.08.2016 & 08.11.2016). Similarly, in the certificate dated: 24.02.2017 it is stated that they are exclusively for use onboard Indian Naval Ships. In the certificate dated: 30.03.2017 it is stated that these goods are required for ATV program.

When the above (2) evidences are read in tandem, it is clear that the appellant is supplying special types of cables to the Naval authorities.

Therefore the supplies made by the applicant to Defence Machinery Design Establishment (DMD) for the purpose of use in warship building of Indian Navy will qualify for the concessional rate of tax of 5% under CGST & SGST.

What is the applicable rate of CGST on the supply of pressure tight cables, non-pressure tight cables and special cables for use in S4 submarine supplied by the Applicant to DMDE, Ministry of Defense, Govt of India.

2.5% CGST & SGST each.

Whether these goods would be considered to be as parts of warships and accordingly classifiable under Sl.No.252 read with Sl.No.250 of Schedule I in Notification No. 01/2017 dated: 28.06.2017.

Yes.

GST on Supply to Defence Machinery Design Establishment for use in warship building of Indian Navy

FULL TEXT OF THE ORDER OF AUTHORITY OF ADVANCE RULING, TELANGANA

1. M/s. Radiant Corporation Private Limited, Plot No.19B/P1, Radiant Estate, Tsiic Automotive Park, Muppireddypally Village, Manoharabad Mandal, Medak, Telangana, 502336 (36AABCR 0719B1ZX) has filed an application in FORM GST ARA-01 under Section 97(1) of TGST Act, 2017 read with Rule 104 of CGST/TGST Rules.

2. At the outset, it is made clear that the provisions of both the CGST Act and the TGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the TGST Act. Further, for the purposes of this Advance Ruling, the expression ‘GST Act’ would be a common reference to both CGST Act and TGST Act.

3. It is observed that the queries raised by the applicant fall within the ambit of Section 97 of the GST ACT. The Applicant enclosed copies of challans as proof of payment of Rs. 5,000/- for SGST and Rs. 5,000/- for CGST towards the fee for Advance Ruling. The Applicant has declared that the questions raised in the application have neither been decided by nor are pending before any authority under any provisions of the GST Act. The application is therefore, admitted.

4. Brief facts of the case:

M/s. Radiant Corporation private Limited are supplying pressure tight cables and non-pressure tight cables and special cables for use in the S4 submarine by the Defense Machinery Design Establishment(DMDE), Ministry of Defense, Government of India. The applicant is desirous to clarify the goods supplied by them are eligible for a concessional rate of tax under Sl.No.252 read with Sl.No.250 of Schedule I in Notification No. 01/2017 dated: 28.06.2017.

5. Questions raised:

a. What is the applicable rate of CGST on the supply of pressure tight cables, non-pressure tight cables and special cables for use in S4 submarine supplied by the Applicant to DMDE, Ministry of Defense, Govt of India.

b. Whether these goods would be considered to be as parts of warships and accordingly classifiable under Sl.No.252 read with Sl.No.250 of Schedule I in Notification No. 01/2017 dated: 28.06.2017.

6. Personal Hearing:

The Authorised representatives of the unit namely Ramachandra Murthy, CA & K. Janardhan, AGM Finance attended the personal hearing held on 25-11-2021. The authorized representatives reiterated their averments in the application submitted and contended as follows:

1. That, they are exclusively manufacturing cables for Indian Navy.

2. That, by virtue of Sl.No.252 read with Sl.No.250 of Schedule I of Notification No. 01/2017 dated: 28.06.2017. they are eligible for concessional rate of tax @5% (CGST + SGST)/IGST.

3. That, the Indian Navy issued end user certificate regarding their usage in Warships, etc.,

4. That, in view of the above a clarification may be issued regarding the correctness of the concessional rate claim.

7. Discussion & Findings:

The applicant claims to be supplying cables to Warships and that such parts of warships are eligible for concessional rate of tax of 5% under CGST & SGST by virtue of Entry 252 read with Entry 250 of Schedule I to the Notification No. 01/2017.

The goods supplied by the applicant are electrical cables used for electronic communication. which are specifically enumerated initially at Sl.No.161 of the Schedule IV of Notification No. 01/2017 as item 8544. These goods are taxable initially at the rate of 28% and later at a reduced rate of 18%.

However, the Entry 252 of the Schedule I of Notification 01/2017, dated. 28-06-2017 as amended i.e., “parts of goods of headings 8901, 8902, 8904, 8905, 8906 & 8907” falling under any chapter are made eligible for a concessional rate of tax of 5% under CGST & SGST.

In support of their contention that they are supplying cables to warships, the applicant submitted purchase orders of Defence Machinery Design Establishment (DMD), Secunderabad with purchase order no. HCL/85/SPL Cables (06 TYPES) S4/236 dated: 17.06.2019 and HCL/85/PT-10 (04 TYPES) S4/224 dated: 26.03.2019. Perusal of the work orders reveals that the applicant is entrusted with manufacture certain types of special cables by the DMD. The purchase order does not mention that these will be specifically used in the manufacture of warships or as spare parts in warships. However, at clause 4.2 of 1st purchase order a passing reference is made wherein it is stated that “Only those Indian Standards, which are relevant for Naval ships and submarines, would be considered for approval”. Rest of the clauses are technical specifications without any indication regarding the end use.

The specifications for one cable i.e., CAT6 (PT-10) cable has in its scope the development of “communication and signalling cables for marine applications” and at clause 1.2 of these specifications it is mentioned that these cables are required for safe transmission of electrical energy between selected devices or points. These narrations in the purchase order indicate that certain cables are used to connect different devices without any indication that such devices are present on the warship. However, the design data in the appendix for certain types of cables in both the contracts pertain to MIL-DTL categories of cables which are used on ships.

As seen from the Internet, the MIL-DTL-24640 Cable Specification covers lightweight, low smoke, electrical cables suitable for use in Navy shipboard applications. The M24640 Shipboard Cable is used in a variety of constructions, including watertight, watertight with circuit integrity, and non-watertight and shielded or unshielded. As both the contracts contain these specifications, it is clear that the cables manufactured by the applicant are used in Navy.

The end utilization certificate issued by the defence department show that such cables are used as parts of goods mentioned under headings 8901 to 8907 except 8903.

The word ‘Component’ or ‘Part’ is not defined in the CGST Act, 2017. The meaning and import of this word has to be obtained from the catena of case law decided by the Hon’ble Courts of India. In this connection, law declared by the Hon’ble Apex Court of India in the case of Collector of Central Excise, Calcutta-II and Ors. vs. Eastend Paper Industries Ltd. and Ors. (29.08.1989 -SC) AIR1990SC1893 comes to our aid wherein it was held that anything that enters into and forms part of that process must be deemed to be raw material or component part of the end product and must be deemed to have been used in completion or manufacture of the end product.

In the present case, the applicant has submitted certain utilization certificates from the Naval authorities. The certificates categorically state that the goods supplied are used “as stores for consumption onboard of Indian Navy Ship” (Certificate dated: 29.08.2016 & 08.11.2016). Similarly, in the certificate dated: 24.02.2017 it is stated that they are exclusively for use onboard Indian Naval Ships. In the certificate dated: 30.03.2017 it is stated that these goods are required for ATV program.

When the above (2) evidences are read in tandem, it is clear that the appellant is supplying special types of cables to the Naval authorities.

Therefore the supplies made by the applicant to Defence Machinery Design Establishment (DMD) for the purpose of use in warship building of Indian Navy will qualify for the concessional rate of tax of 5% under CGST & SGST.

8. The ruling is given as below:

In view of the above discussion, the questions raised by the applicant are clarified as below:

Questions Ruling
a. What is the applicable rate of CGST on the supply of pressure tight cables, non-pressure tight cables and special cables for use in S4 submarine supplied by the Applicant to DMDE, Ministry of Defense, Govt of India. 2.5% CGST & SGST each.
b. Whether these goods would be considered to be as parts of warships and accordingly classifiable under Sl.No.252 read with Sl.No.250 of Schedule I in Notification No. 01/2017 dated: 28.06.2017. Yes

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2 Comments

  1. Sujit Kumar Das says:

    Dear Sir, I did not go through the article in full but understood the problem of fixing the rate of Tax… What could have been the effect if the law makers keep the general tax rate.. who would be the gainer or who would have been the looser? After all the recipient is Govt. of India. If tax was collected by the supplier in general rate and deposited to the govt. what would have been bad to the nation? Nothing …only the system of taxation was easy which we do not want to make. We can not come out from our old concept simply. Why do not we think about the supplier.. due to lower tax rate he may have to apply for refund and there are the reasons behind it… None will speak… every one knows the situation bu no body will speak out.. who will tell the king that he does not wear the minimal clothing which should have been…
    Thanks & Regards

  2. KISHORE GANDHI says:

    really sir it’s a very helpful & knowledgeable article. pls also write on if A contractor provides services of road construction to govt. department with scn-995421

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