2022 (7) TMI 1097 - AAR - GST

Railway coach AC units classified under GST chapter 86.07.99.10 as integral railway parts, not general air conditioning equipment.

AAR, Madhya Pradesh ruled that roof mounted AC package units specifically designed for railway coaches should be classified under GST tariff chapter ... Classification of goods - principal use rule - Section Note 3 of Section XVII (criterion of sole or principal use) - parts of coach work - Chapter 86 - Heading 8607 (parts of railway or tramway locomotives or rolling-stock)Classification of goods - principal use rule - Section Note 3 of Section XVII (criterion of sole or principal use) - parts of coach work - Chapter 86 - Heading 8607 (parts of railway or tramway locomotives or rolling-stock) - Classification of the Roof Mounted AC Package Unit manufactured as per specifications and drawings of RDSO and supplied exclusively to Indian Railways. - HELD THAT: - The Authority examined Chapter 86 and the Chapter and Section Notes, in particular Section Note 3 of Section XVII which provides that parts and accessories suitable solely or principally for use with articles of Chapters 86-88 are to be classified in those Chapters and that classification where a part answers descriptions in two or more headings is determined by its principal use. The Roof Mounted AC Package Unit is manufactured strictly to specifications and designs provided by the Indian Railways (RDSO) and is meant to be used solely in railway coaches. The product is not covered by the exclusion clauses of Chapter 86. The Authority applied consistent precedent reasoning that components made to railway specifications and usable solely for rolling-stock are integrally part of the coach and classifiable under heading 8607 as parts of coach work. On this basis the Roof Mounted AC Package Unit satisfies the criterion of principal use and falls within tariff heading 8607 (specifically classified as parts of coach work of railway running stock). [Paras 7, 8]The Roof Mounted AC Package Unit, manufactured as per RDSO specifications and supplied exclusively to Indian Railways, is classifiable under Chapter 86, heading 8607 (parts of coach work of railway running stock).Final Conclusion: The Authority rules that the Roof Mounted AC Package Unit made to RDSO specifications and supplied only to the Indian Railways is classifiable under Chapter 86.07 of the GST Tariff; the ruling is issued under Section 98 and is subject to the statutory conditions for advance rulings. Issues Involved:1. Classification of Roof Mounted AC Package Unit under GST Tariff.2. Applicability of Chapter 86 of GST Tariff for parts and accessories used solely or principally with railway coaches.Detailed Analysis:Issue 1: Classification of Roof Mounted AC Package Unit under GST TariffThe applicant, M/s Daulat Ram Engineering Services Pvt Ltd, sought an advance ruling on whether the Roof Mounted AC Package Unit, manufactured as per specifications and drawings issued by organizations under the Ministry of Railways, falls under Chapter Heading 8607 of the GST Tariff. The applicant argued that the product is designed exclusively for railway coaches and cannot be used elsewhere, thus fitting the criteria of Chapter 86.Issue 2: Applicability of Chapter 86 of GST Tariff for parts and accessories used solely or principally with railway coachesThe applicant referenced Note 3 of Section XVII of the GST Tariff, which states that parts and accessories suitable for use solely or principally with the articles of Chapters 86 to 88 should be classified under those chapters. They argued that the Roof Mounted AC Package Unit, being designed exclusively for railway coaches, should be classified under Chapter 8607.Analysis and Findings:Classification under Chapter 8607The Authority for Advance Ruling (AAR) examined Chapter 86, which 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 Signaling Equipment of all kinds.' According to Chapter Note 2 of Chapter 86, heading 8607 applies to various parts of railway rolling stock, including coach work.Exclusion ClauseThe exclusion clause of Chapter 86 specifies items not covered under this chapter, such as railway sleepers of wood or concrete and electrical signaling equipment. The Roof Mounted AC Package Unit does not fall under these exclusions.Judicial PrecedentsThe applicant cited several judicial precedents supporting their view that parts designed exclusively for use in railway coaches should be classified under Chapter 86. These include:- Mak Controls vs Commissioner Of Central Excise (1998): Emphasized that classification should be determined by the principal use of the equipment.- Diesel Components Works vs Commissioner Of C. Ex (2000): Clarified that parts used solely or principally with railway locomotives should be classified under Chapter 86.- Pragati Silicons Pvt. Ltd vs Commissioner Of Central Excise (2007): Reinforced the principle of classifying goods based on their principal use.Comments from Jurisdictional OfficerThe Deputy Commissioner of State Tax, Circle Mandideep, also supported the classification of the Roof Mounted AC Package Unit under Chapter 86079910, 'Parts of Coach work of Railway running stock.'ConclusionThe AAR concluded that the Roof Mounted AC Package Unit, manufactured as per the specific design and layout provided by the Indian Railways and meant solely for use in railway coaches, is classifiable under Chapter 8607 of the GST Tariff. The ruling is valid subject to the provisions under section 103(2) until declared void under section 104(1) of the GST Act.RulingThe Authority ruled that the Roof Mounted AC Package Unit falls under Chapter 8607 of the GST Tariff, aligning with the applicant's and jurisdictional officer's views.This comprehensive analysis ensures that the classification of the Roof Mounted AC Package Unit under Chapter 8607 is well-founded based on the principal use criterion, judicial precedents, and specific design requirements for railway coaches.