AAR rejects railway parts classification application as goods already under GST investigation proceedings Section 98(2)

The AAR, Tamil Nadu declined to admit an application seeking classification of Air Spring Failure Indication cum Brake Application (FIBA) goods under tariff heading 86072100. The applicant manufactured and supplied these goods to Indian Railways. DGGSTI, Coimbatore had initiated investigation proceedings in 2019 based on intelligence that the applicant was incorrectly classifying railway parts under Chapter 86 instead of appropriate chapters 84/85. A show cause notice was issued in 2022. The AAR held that since the classification issue was already under investigation proceedings under Section 67 of the Act, it fell under the first proviso to Section 98(2), making the application inadmissible for advance ruling.

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Issues:
Classification of Air Spring Failure Indication cum Brake Application (FIBA) for use in Railways under Section XVII.

Analysis:
The applicant, a registered vendor of Indian Railways, sought an Advance Ruling on the classification of FIBA solely for Railways use. FIBA is a customized product for Indian Railways, indicating air spring failure and applying brakes. The applicant argued FIBA qualifies under Section XVII, Chapter 86, as it is exclusively for Air Brakes of railways, citing the Westinghouse Saxby Farmer Ltd case. The applicant clarified no dispute existed on FIBA's classification as per SCN No. 16/2022.

The Centre Jurisdictional Authority issued a demand notice for classifying products under Chapter 84 instead of 86, demanding a substantial amount. The State Jurisdictional Authority confirmed no pending proceedings. The ruling authority examined the admissibility of the application under Sections 97/98 of the CGST Act. It was noted that the question on FIBA's classification was already part of an investigation by DGGI, making the application inadmissible as per Section 98(2) proviso.

The ruling concluded that the application was not admissible under the first proviso to Section 98(2) of the CGST/TNGST Act 2017 due to the ongoing investigation by DGGI. Therefore, the ruling authority could not provide a decision on the classification of FIBA.

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