2018 (10) TMI 1871 - AAR - GST

HEVs Excluded from 15% Cess Rate for Lack of Independent Electric Motor

In Re: M/s. Maruti Suzuki India Ltd.,

In Re: M/s. Maruti Suzuki India Ltd., - 2021 (49) G. S. T. L. 50 (A. A. R. - GST - Haryana) Issues Involved:1. Classification of Hybrid Electric Vehicles (HEVs) under the relevant tariff heading.2. Applicability of Compensation Cess on HEVs at the rate of 15% as per Notification No. 01/2017-Compensation Cess (Rate) dated 28.06.2017, as amended by Notification No. 05/2017-Compensation Cess (Rate) dated 11.09.2017.Detailed Analysis:1. Classification of Hybrid Electric Vehicles (HEVs):The applicant, engaged in the manufacture and supply of cars, including three models of HEVs (S-Cross, Ertiga, and Ciaz), sought classification under sub-heading 8703 50 of the Customs Tariff Act (CTA). This sub-heading pertains to vehicles with both compression-ignition internal combustion piston engines (diesel or semi-diesel) and electric motors as motors for propulsion. The applicant argued that their HEVs meet the criteria specified in this sub-heading, emphasizing that the vehicles use both an IC engine and an electric motor for propulsion. The applicant referred to the Harmonized System (HS) Explanatory Notes and various international definitions to substantiate that their vehicles qualify as hybrid vehicles.2. Applicability of Compensation Cess:The core issue was whether the HEVs supplied by the applicant are subject to a 15% Compensation Cess under S.No. 48 of Notification No. 01/2017-Compensation Cess (Rate), as amended. The applicant contended that their HEVs should be classified under clause (d) of S.No. 48, which covers motor vehicles with both compression-ignition internal combustion piston engines and electric motors as motors for propulsion, thereby attracting a 15% cess.Discussion and Findings:Conditions for Eligibility under S.No. 48(d):The Authority examined whether the applicant's vehicles met the following conditions:1. Classification under chapter sub-heading 8703 50 or 8703 70.2. Presence of both compression-ignition internal combustion piston engine and electric motor as motors for propulsion.3. Exclusion from being ambulances, three-wheeled vehicles, or motor vehicles of engine capacity not exceeding 1500cc and length not exceeding 4000 mm.The Authority agreed that the applicant's vehicles fulfilled conditions (iii), (iv), and (v). However, the primary focus was on conditions (i) and (ii).Propulsion Capability of Electric Motor:The Authority scrutinized whether the electric motor in the applicant's HEVs could independently propel the vehicle. The applicant described their vehicles as 'mild hybrids' where the electric motor assists the IC engine but cannot independently power the vehicle. The electric motor provides additional power during acceleration and assists in start-stop functions but does not act as a standalone propulsion system.Certificates and Technical Specifications:The Authority reviewed certificates from the International Centre for Automotive Technology and the Automotive Research Association of India. These certificates confirmed compliance with the Central Motor Vehicle Rules, 1989, but did not explicitly state that the electric motor could independently propel the vehicle.Conclusion:The Authority concluded that the electric motor in the applicant's HEVs does not meet the requirement of being a 'motor for propulsion' as stipulated under S.No. 48(d) of the Notification. Consequently, the HEVs do not qualify for the 15% Compensation Cess rate.Advance Ruling:The HEVs supplied by the applicant are not covered under S.No. 48 of Notification No. 01/2017-Compensation Cess (Rate) dated 28.06.2017, as amended by Notification No. 05/2017-Compensation Cess (Rate) dated 11.09.2017. Therefore, the HEVs are not eligible for the 15% Compensation Cess rate.