2018 (6) TMI 624 - AAR - GST

Ice Cream Making Machines classified under Tariff Heading 8418 not 8438 under Customs Tariff Act

AAR Gujarat ruled that Ice Cream Making Machines are classifiable under Tariff Heading 8418, not 8438, of the Customs Tariff Act. The authority determined ... Classification under Tariff Heading 8418 - classification under Tariff Heading 8438 - HSN Explanatory Notes as a guide to tariff interpretation - First Schedule to the Customs Tariff Act, 1975 - GST rate determined by tariff classificationClassification under Tariff Heading 8418 - HSN Explanatory Notes as a guide to tariff interpretation - Ice Cream Making Machine is classifiable under Tariff Heading 8418 and not under Tariff Heading 8438. - HELD THAT: - The Authority applied the interpretative mandate that the rules for interpretation of the First Schedule to the Customs Tariff Act, 1975 and the HSN Explanatory Notes shall, so far as may be, apply to the notification (paras 11.1-11.2). The Explanatory Notes to Heading 8418 expressly include ice-cream makers among refrigerating or freezing equipment and the First Schedule contains an entry for industrial ice cream freezer under Tariff Item 8418 69 50 (para 12.2-12.3). The applicant's reliance on Heading 8438 was rejected because Heading 8438 covers machinery for preparation of food not specified elsewhere in Chapter 84, and ice-cream makers are specifically covered under Heading 8418 (para 13.1). Decisions and authorities cited by the applicant were examined and distinguished on facts: the Milk Food Ltd. decision concerned composite systems and components not shown to be similar to the applicant's standalone machines, and earlier authorities on freezing-salt type equipment or insulated tanks were inapplicable as the applicant did not claim their machines to be of those types (paras 13.2-14.3). The applicant's prior practice of classifying the product under 8418 in invoices was noted as consistent with the classification (para 15). [Paras 11, 12, 13, 14, 15]Product 'Ice Cream Making Machine' merits classification under Tariff Heading 84.18.GST rate determined by tariff classification - First Schedule to the Customs Tariff Act, 1975 - The GST rate applicable to the product is the rate corresponding to Tariff Heading 8418. - HELD THAT: - Having classified the product under Heading 8418, the Authority held that the GST rate applicable to the product is the rate notified for Heading 8418. The notification interpretation provisions require application of the First Schedule and HSN-based classification to determine the rate; since ice-cream makers fall under 8418, the rate linked to that heading applies (paras 11.1-11.2; 16). [Paras 11, 16]GST rate applicable to the Ice Cream Making Machine is the rate applicable to Tariff Heading 84.18.Final Conclusion: The Authority ruled that the product 'Ice Cream Making Machine' is classifiable under Tariff Heading 84.18 (and not under 84.38) and that the GST rate applicable is the rate corresponding to Heading 84.18. Issues Involved:1. Classification of 'Ice Cream Making Machine' under the GST Tariff.2. Applicable GST rate for the supply of 'Ice Cream Making Machine'.Detailed Analysis:1. Classification of 'Ice Cream Making Machine' under the GST Tariff:The applicant, M/s. Mitora Machinex Pvt. Ltd., argued that their 'Ice Cream Making Machines' should fall under Chapter Heading 8438 of the GST Tariff, which pertains to 'Machinery, not specified or included elsewhere in this Chapter, for the industrial preparation or manufacture of food or drink, other than machinery for the extraction or preparation of animal or fixed vegetable fats or oils.' They contended that their machines are designed for manufacturing ice cream, a food product, and thus should be classified under this heading, which attracts a GST rate of 18%.However, the Authority for Advance Rulings (AAR) considered the submissions and referred to the descriptions and explanatory notes of the relevant tariff headings. The AAR noted that Tariff Heading 8418 covers 'Refrigerators, freezers and other refrigerating or freezing equipment, electric or other; heat pumps other than air conditioning machines of heading 8415.' The explanatory notes under Heading 8418 specifically include ice-cream makers.The AAR further observed that the First Schedule to the Customs Tariff Act, 1975, lists 'industrial ice cream freezer' under Tariff Item 8418 69 50, indicating that such machines are classified under Heading 8418. Consequently, the AAR concluded that the 'Ice Cream Making Machine' manufactured and supplied by the applicant merits classification under Tariff Heading 8418.2. Applicable GST rate for the supply of 'Ice Cream Making Machine':The applicant argued that since their machines fall under Chapter Heading 8438, they should attract a GST rate of 18%. They supported their contention by referring to previous decisions, such as the case of Milk Food Ltd. Vs. Collector of Customs, New Delhi, where similar machinery was classified under sub-heading 8438 of the Customs Tariff Act, 1975.However, the AAR found that the specific case cited by the applicant involved different products (product forming, conveyor system, and freezing tunnel) and was not directly applicable to the 'Ice Cream Making Machines' in question. The AAR also reviewed other cited cases but determined that they were not relevant to the current classification issue.The AAR concluded that since 'Ice Cream Making Machines' are classified under Tariff Heading 8418, they do not fall under Heading 8438. The GST rate applicable to Tariff Heading 8418, as per the relevant notifications, should be applied to the 'Ice Cream Making Machines'.Ruling:The AAR ruled that the product 'Ice Cream Making Machine' is classifiable under Tariff Heading 84.18 and not under Tariff Heading 84.38 of the Customs Tariff Act, 1975. Consequently, the GST rate applicable to Tariff Heading 84.18 is applicable to the said product.