2021 (8) TMI 538 - AAR - GST

Car seat covers classified as motor vehicle accessories, subject to higher tax rate.

In Re: M/s. Saddles International Automotive & Aviation Interiors Private Limited,

The Authority for Advance Ruling (AAR) determined that car seat covers are classified under HSN 8708, not HSN 9401, as sought by the applicant. This ... Classification of goods - product namely 'Car Seat Covers' - merits classification under HSN 9401 or not? - applicability of SI.No.435A of Schedule IV of the Notification No 1/2017-Central Tax (Rate) dt: 28.06.2017 to 'Car Seat Covers' - applicable entry under the said Notification? - HELD THAT:- The applicant being the manufacturer of seat covers and other allied accessories, sell the manufactured 'seat covers' to car seat makers who in turn affix the seat covers to the seats and there after the seat is fixed to the motor vehicle. After a clear examination of both the terms i.e., 'parts' and 'accessories', 'seat covers' cannot be a part of seats by any means, in the instance case. They are meant for the protection of the seats and the functional value of 'seat covers' is the comfort and convenience it extends to the driver and the passengers. Thus, the 'seat covers' are not essential parts of the seats but accessories that enhance their functional value - Even in general trade parlance or in terms of their specific usage, the 'seat covers' are considered as accessories and customized as per the preferences of the clients. Trade circles consider the automotive accessories as a category of articles relating to non-essential automotive parts which embellish the look and feel of an automobile or add functionality. 'Seat covers' provide new look to the interior of the car, and also make it more comfortable for passengers. Car seat covers were classified under heading 87.08 as accessories of car seats vide Guru Overseas Private Limited Vs. Commissioner of Central Excise [2001 (5) TMI 87 - CEGAT, COURT NO. IV, NEW DELHI] - It was further strengthened by a clarificatory circular issued by CBEC vide circular no.541/37/2000-CX dt:16.08.2000, in which it was clearly mentioned that car seat covers were classified under heading 87.08 as accessories of car seats. Car seat covers fall under the entry at Serial No.170 under HSN 8708 Schedule IV of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 attracting tax rate of CGST+SGST @ 28% - SI.No.435A of Schedule IV of the Notification No 1/2017-Central Tax (Rate) is not applicable to 'Car Seat Covers'. Issues Involved:1. Classification of 'Car Seat Covers' under HSN 9401.2. Applicability of SI.No.435A of Schedule IV of Notification No.1/2017-Central Tax (Rate) to 'Car Seat Covers'.Detailed Analysis:Issue 1: Classification of 'Car Seat Covers' under HSN 9401The applicant, M/s. Saddles International Automotive & Aviation Interiors Private Limited, is engaged in the manufacture of car seat covers and sought clarification on the appropriate classification of their product under the GST regime. They argued that 'seat covers' should be classified under HSN 9401, which pertains to seats and parts thereof, asserting that seat covers are integral to the functionality and completion of car seats.The applicant cited various judicial precedents and explanatory notes to support their claim that seat covers should be considered as essential parts of seats. They emphasized that seat covers contribute to the comfort, protection, and overall functionality of car seats, thus meriting classification under HSN 9401.However, upon examination, the Authority for Advance Ruling (AAR) determined that 'seat covers' do not qualify as essential parts of seats but rather as accessories. The AAR differentiated between 'parts' and 'accessories' by defining 'parts' as integral to the completion of an article or equipment, while 'accessories' enhance the functional value without being essential. The AAR concluded that seat covers are designed for protection and comfort, making them accessories rather than essential parts of seats.Issue 2: Applicability of SI.No.435A of Schedule IV of Notification No.1/2017-Central Tax (Rate) to 'Car Seat Covers'The applicant also sought clarification on whether the entry at SI.No.435A of Schedule IV of Notification No.1/2017-Central Tax (Rate), which pertains to seats and parts thereof, is applicable to car seat covers. They argued that if seat covers are classified under HSN 9401, they would benefit from a reduced tax rate of 18% as per the amended notification No.41/2017-Central Tax (Rate) dated 14.11.2017.The AAR, however, ruled that the entry at SI.No.435A is not applicable to car seat covers. Instead, the correct classification for car seat covers falls under HSN 8708, which pertains to parts and accessories of motor vehicles. This classification attracts a higher tax rate of 28% (CGST+SGST). The AAR referenced previous classifications under the pre-GST regime and clarificatory circulars issued by CBEC, which consistently classified car seat covers as accessories under heading 87.08.Conclusion:The AAR concluded that car seat covers are classified under HSN 8708 at Serial No.170 under Schedule IV of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017, attracting a tax rate of 28% (CGST+SGST). The entry at SI.No.435A of Schedule IV of the Notification No.1/2017-Central Tax (Rate) is not applicable to car seat covers.