2023 (3) TMI 424 - AAAR - GST

Air conditioning units for railway coaches classified under HSN 8415 at 28% IGST not as railway parts at 18%

In Re: M/s. Ess Ess Kay Engineering Company Pvt Ltd.,

The AAAR Punjab held that roof mounted air conditioning units manufactured for railway coaches are classifiable under HSN 8415 1090 (IGST 28%) rather than ... Classification of goods - Scope of advance ruling issued in the another cases - right in rem or right in personam - roof mounted Air conditioning unit especially for use in railway coaches (manufactured as per railway design) - classifiable under HSN- 8415 1090- IGST 28% or under HSN 8607 99 - IGST 18% as parts of Railway Coaches/ Locomotives? - HELD THAT:- The parts or accessory which are not suitable for use solely or principally with the articles of Chapter 86 to 88 are not to be included in the said chapter. On the obverse, parts or accessory which are suitable for use solely or principally with the articles of Chapter 86 to 88 are to be included in the said chapter. But the said section note has to be read in conjunction with the Section Note 2 of the said section. The harmonious construction of the said section notes brings out the fact that section note 2 excludes certain goods from the domain of the expression, “parts” or “parts and accessories”. As for the remaining good that is not excluded by virtue of the said section note the same can be classified as “part” or “accessory” only if it is suitable for use solely or principally with the goods of the said Section. The appellant has cited certain judgments in his submissions. Some of them are Westinghouse Saxby Farmer Ltd vs. Commissioner of Central Excise Kolkata [2021 (3) TMI 291 - SUPREME COURT], G.S. Auto International Ltd. Vs Collector of Central Excise, Chandigarh [2003 (1) TMI 700 - SUPREME COURT], Diesel Component Works Vs. Commissioner of Central Excise [2000 (6) TMI 68 - CEGAT, COURT NO. I, NEW DELHI]. The discussions in these judgments as well as the factual matrix detailed therein, it is clear that the specific exclusion provided to HSN 84.01 to 84.79 do not apply in above judgments. Accordingly, the judgment cited by the appellant varies from the instant appeal both on law and facts. The judgments mentioned above relates to the Chapter 73 and 76 of the erstwhile Central Excise Tariff Act, 1985 and not applicable in the instant case. The appellant has conveniently overlooked the basic nature of the ruling given by the Authority for Advance Ruling. The said rulings are in the nature of “in personam” and not “in rem” and therefore their applicability as well as their protection cannot be sought by the others who were not party to the said proceedings. Thus, the subject goods i.e. Roof Mounted Air-Conditioning unit manufactured by the appellant are classifiable under HSN Heading 8415. Issues Involved:1. Classification of Roof Mounted Air Conditioning Unit for Railway Coaches.2. Applicability of specific versus general tariff headings.3. Relevance of Section and Chapter Notes in Customs Tariff.4. Applicability of previous judicial decisions and advance rulings.Issue-wise Detailed Analysis:1. Classification of Roof Mounted Air Conditioning Unit for Railway Coaches:The appellant, engaged in manufacturing roof-mounted air conditioning units for railway coaches, sought clarification on whether these units should be classified under HSN 8415 (IGST 28%) or HSN 8607 (IGST 18%). The Authority for Advance Ruling (AAR), Punjab, classified the units under HSN Heading 8415, stating that the classification does not change even if supplied to Railways.2. Applicability of Specific versus General Tariff Headings:The judgment emphasized the fundamental rule of classification, which prefers a specific entry over a general one. Heading 8415 is specific to air conditioning machines, while Heading 8607 is general, covering parts of railway locomotives or rolling stock. Rule 3 of the Classification Rules supports this preference for specific descriptions over general ones.3. Relevance of Section and Chapter Notes in Customs Tariff:The GST Tariff, based on the Customs Tariff, includes Section Notes and Chapter Notes that define the scope of sections and chapters. Section Note 2(e) of Section XVII excludes machines and apparatus of headings 8401 to 8479 from being classified as 'parts' or 'accessories' of vehicles. Since the air conditioning units fall under Heading 8415, they are excluded from Section XVII by virtue of Section Note 2(e).4. Applicability of Previous Judicial Decisions and Advance Rulings:The appellant cited several judicial decisions and advance rulings to support their classification under HSN 8607. However, the judgment noted that these decisions did not consider the specific exclusions provided in Section Note 2(e). Additionally, advance rulings are binding only on the applicant and the concerned officer, not on other parties.Discussion and Findings:The judgment reiterated that Heading 8415 covers air conditioning machines, including those used in railway coaches, without regard to their specific installation. The explanatory notes to Chapter 84 further support this classification, focusing on the function of the goods rather than their deployment field. The explanatory notes to Chapter 86 require that parts must not be excluded by Section Notes, which in this case, the air conditioning units are, due to Section Note 2(e).The appellant's argument based on Section Note 3 of Section XVII was also addressed. This note allows classification of parts suitable for use solely or principally with the articles of Chapters 86 to 88, but must be read in conjunction with Section Note 2, which excludes certain goods.Conclusion:The judgment upheld the AAR Punjab's classification of the roof-mounted air conditioning units under HSN Heading 8415. The appeal was dismissed, affirming that the units are not classified under HSN 8607 due to the specific exclusions in the Section Notes of the Customs Tariff.Order:The order of AAR/GST/PB/016 dated 16th August 2022 was upheld, and the appeal by M/s ESS ESS KAY ENGINEERING COMPANY PVT LTD was dismissed on all counts.