2021 (12) TMI 466 - AAAR - GST

Bellow Ducts Classified Under Customs Tariff Act: Appellate Authority Decision

In Re: M/s. Concord Control Systems Private Limited,

The Appellate Authority ruled that the 'Bellow Ducts' should be classified under Chapter Heading 8607 of the Customs Tariff Act, 1975, as parts of railway ... Classification of goods - Bellow Ducts - classified under HSN 8424 attracting GST @18% or not - supply of “Bellow Duct” to RDSO Ministry of Railways for use in Indian Railways Coaches - Advance Ruling Authority has classified the impugned product under HSN 8424 whereas as per the appellant the said product merits classification under Chapter Heading 8607 of the Customs Tariff Act, 1975, as parts of railways - HELD THAT:- It is observed that as per the appellant, the product in question is specifically designed as per specifications of Indian Railways and they supply it to Indian Railways only and nowhere else. It is observed that though the Advance Ruling Authority has classified the products under Chapter Heading 8537 but the fact that aforesaid product is specifically designed as per specification of Indian Railways and supplied only to the Indian Railways is not discussed by the Authority - Advance Ruling Authority was in unison with the appellant that the said “Bellow Duct” which are specifically designed for Indian Railways, would be used for coach work only and nowhere else. In the case of COMMISSIONER OF C. EX., BANGALORE VERSUS RAMSONS UDYOG (P) LTD. [1999 (9) TMI 284 - CEGAT, NEW DELHI] the Hon'ble Tribunal has observed that “Sanitary wares are also designed for fitment into the coach and they would be classifiable under Heading 86.07” - Similarly, in the case of SUNFLEX AUTO PARTS VERSUS COMMISSIONER OF C. EX. (APPEALS) MUMBAI-II [2004 (5) TMI 398 - CESTAT, MUMBAI], it was observed by the Hon'ble Tribunal that “Parts made out of rubber and metal bonded together as per specification of Indian Railway and meant for use solely and exclusively for them, classification under Sub-heading 8607.00 of Central Excise Tariff.” Thus, the “Bellow Ducts”, specially meant for the Railways, as per the design and layout provided by them, are integral part of the coach and rightly classifiable under chapter heading 8607 of the Customs Tariff Act, 1975. Issues Involved:1. Classification of 'Bellow Duct' under the appropriate Harmonized System of Nomenclature (HSN) code.2. Applicable GST rate for the supply of 'Bellow Duct' to the Ministry of Railways.Issue-wise Detailed Analysis:1. Classification of 'Bellow Duct' under the appropriate HSN code:The appellant, M/s. Concord Control Systems Private Limited, contended that 'Bellow Ducts' should be classified under Chapter Heading 8607 of the Customs Tariff Act, 1975, as parts of railway or tramway locomotives or rolling stock. They argued that these ducts are designed and manufactured per the specifications of the RDSO, Ministry of Railways, and are used exclusively in the AC coaches of Indian Railways.The Authority for Advance Ruling (AAR) had previously classified the 'Bellow Ducts' under HSN 8424, which pertains to mechanical appliances for dispersing, spraying, or projecting liquids or powders, attracting a GST rate of 18%. The appellant contested this classification, asserting that their product is not used for dispersing or spraying liquids or powders but as a flexible conduit for air in railway AC units.Upon review, the Appellate Authority observed that Chapter 86 covers 'Railway or Tramway Locomotive, Rolling-Stock and Parts thereof; Railway or Tramway Track Fixtures and Fittings and Parts thereof; Mechanical (Including Electro-Mechanical) Traffic Signalling Equipment of all kinds.' The authority noted that the 'Bellow Ducts' are specifically designed for and used solely in railway coaches, aligning with the provisions of Chapter Note 3 of Chapter 86, which emphasizes the 'suitability for use solely or principally' with railway articles.The Appellate Authority also referenced several case laws supporting the classification of custom-built parts designed exclusively for railways under Chapter Heading 8607. These included judgments from the Hon'ble Supreme Court and various tribunals, which consistently classified such parts under Chapter 86 when they are specifically designed for and used solely in railway applications.2. Applicable GST rate for the supply of 'Bellow Duct' to the Ministry of Railways:Given the classification of 'Bellow Ducts' under Chapter Heading 8607, the applicable GST rate would align with the rate prescribed for parts of railway or tramway locomotives or rolling stock. The Appellate Authority concluded that the 'Bellow Ducts,' being integral parts of railway coaches and designed per the specifications of the Indian Railways, should be classified under Chapter Heading 8607, thus attracting the GST rate applicable to parts under this heading.Ruling:The Appellate Authority ruled that the classification of 'Bellow Ducts,' manufactured as per the specific design and layout provided by the Railways and supplied exclusively to the Indian Railways, falls under Chapter Heading 8607 of the Customs Tariff Act, 1975. This classification aligns with the legal precedents and the specific use of the product in railway applications, ensuring the correct application of the GST rate.