2021 (7) TMI 651 - AAR - GST

GST Classification for Railway Locomotive Parts

The authority concluded that the Brush Holder Assembly and parts, Lead Wires, and Insulating Rods, when manufactured as per Indian Railways' ... Classification of goods - Railway parts such as Brush Holder Assembly and parts, Lead Wires for locomotives and Insulating Rods Locomotives manufactured as per the specification and drawings of Indian Railways - to be classified under HSN Heading 8505, 8544 and 8547 @ 18% or under HSN Heading 8607 @12%? HELD THAT:- As per Note 3 to Section XVII, references in Chapters 86 to 88 to “parts” or “accessories” do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. A part or accessory which answers to a description in two or more of the headings of those Chapters is to be classified under that heading which corresponds to the principal use of that part of accessory - Note 3 to Section XVII mentions that references in Chapters 86 to 88 to “parts” or “accessories” do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. A part or accessory which answers to a description in two or more of the headings of those Chapters is to be classified under that heading which corresponds to the principal use of that part of accessory. In the instant case, as per the applicant's submissions, it is found that the impugned goods are suitable for use solely or principally with Railway Locomotives falling under Chapter 86 and therefore Note 3 does not exclude the subject products, rather the said Note 3 includes the impugned products - the second condition of Chapter 86.07 is also fulfilled in the subject case. The impugned goods i.e. Brush Holder Assembly and parts. Lead Wires for locomotives and Insulating Rods Locomotives manufactured by the applicant as per the specification and drawings of Indian Railways are classifiable under heading 86.07. Issues Involved:1. Classification of Brush Holder Assembly and parts, Lead Wires, and Insulating Rods for locomotives.2. Applicable GST rate for the aforementioned products.Issue-wise Detailed Analysis:1. Classification of Brush Holder Assembly and parts, Lead Wires, and Insulating Rods for locomotives:The primary issue revolves around the classification of Brush Holder Assembly and parts, Lead Wires, and Insulating Rods for locomotives, whether they should be classified under HSN Heading 8505, 8544, and 8547 at 18% GST or under HSN Heading 8607 at 12% GST.Applicant's Contentions:- The applicant, M/s. Arco Electro Technologies Pvt. Ltd., manufactures and supplies Brush Holder Assembly and parts, Lead Wires, and Insulating Rods specifically for locomotives as per the specifications and drawings of Indian Railways.- These products are currently classified under HSN Headings 8503, 8544, and 8547 respectively.- The applicant argues that these items should be classified under HSN Heading 8607 as they are produced according to Indian Railways' specifications and are used solely in locomotives.Jurisdictional Officer's Contentions:- The officer contends that the products should be classified under HSN Codes 8503, 8544, and 8547, as these commodities are not solely used for railway purposes.- The officer also references various judgments to support the classification under the specified HSN codes.Authority's Observations and Findings:- Chapter Heading 86.07 covers parts of railway or tramway locomotives or rolling stock, provided they fulfill two conditions: (1) They must be identifiable as suitable for use solely or principally with such vehicles, and (2) They must not be excluded by the provisions of the Notes to Section XVII.- The authority examines Note 2 and Note 3 to Section XVII to determine if the subject goods are excluded or included under Chapter 86.07.- Note 2 lists exclusions, but the subject goods do not fall under these exclusions.- Note 3 states that parts or accessories suitable for use solely or principally with articles of Chapters 86 to 88 should be classified under the heading corresponding to their principal use.- Based on the applicant's submissions, the authority finds that the impugned goods are suitable for use solely or principally with Railway Locomotives falling under Chapter 86.Conclusion:- The authority concludes that the Brush Holder Assembly and parts, Lead Wires, and Insulating Rods, when manufactured as per the specifications and drawings of Indian Railways and used in traction motors meant for Railway Locomotives, should be classified under HSN Heading 8607.2. Applicable GST Rate:- The classification under HSN Heading 8607 attracts a GST rate of 12%.Order:Question: Railway parts such as Brush Holder Assembly and parts, Lead Wires for locomotives, and Insulating Rods Locomotives manufactured as per the specification and drawings of Indian Railways. Should these be classified under HSN Heading 8503, 8544, and 8547 at 18% GST or under HSN Heading 8607 at 12% GSTRs.Answer: The products Brush Holder Assembly and parts, Lead Wires, and Insulating Rods are to be classified under heading 86.07 only when they are manufactured as per the drawings and specifications given to the applicant by the Indian Railways and only when the said goods are used in traction motors meant for Railway Locomotives.