TaxTMI 
TaxTMI 
2019 (3) TMI 1013
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....2018 = 2018 (10) TMI 1314 - AUTHORITY FOR ADVANCE RULING - MAHARASHTRA. BRIEF FACTS OF THE CASE A. The Appellant, having Goods and Service Tax ('GST') Registration No. 27AAMCA4160E1ZT is inter alia engaged in the business of sale and distribution of Marine Distress Signals, EPIRB and SART, SSAS, Marine Chemicals, Navigation and Communication (NAVCOM) Equipment and also providing Life Saving equipment such as Life raft, Lifeboat and Fire-fighting services, including Pyrotechnic Disposal, Electronic Services and Training Services related to the Marine Industry. B. Appellant imports various goods/spares, which are supplied on ships and these equipment form an essential part of the ship, and makes the ship "sea worthy." C. Appellant was levying GST on most of the parts/equipment supplied by it at the rate of 18%. Appellant was receiving purchase orders for such parts/spares/equipment from reputed customers wherein orders were placed on specific terms that applicable GST rate on items ordered was 5% as all such parts and equipment, ordered, are forming part of ship. The customers strongly contended that the relevant tax entry for taxing such goods is Sr.No.252 of Notificatio....
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....rforming its essential function. Such items are liable to GST at the rate of 5% (2.50% CGST and 2.50% SGST or 5% IGST) under entry no. 252 of Schedule 1 of Notification no. 1/2017-Central Tax (rate) dated 28.06.2017 (as amended from time to time). Appellant accepted this part of order passed by Advance Ruling Authority. H. Advance Ruling Authority was of the view that remaining items listed at Sr. No. F, J, L, N, O, P, Q, R, T, U and V of Annexure I-A are additional equipment and therefore cannot be considered as parts of ship. These items, therefore, would not qualify for tax rate of 5% (2.50% CGST and 2.50% SGST or 5% IGST) under entry no. 252 of Schedule 1 of Notification no. 1/2017-Central Tax (rate) dated 28.06.2017 (as amended from time to time). These parts would be classified in appropriate entry as per relevant HSN code and taxed accordingly. Being aggrieved by this part of ruling, appellant preferred an appeal against the AAR Order for modifying the order of Advance Ruling Authority in respect of following specific goods dealt with by the appellant (herein after referred to as "specified goods"): Sr.No. Equipment Full Form Description F AIS A....
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....red to as "specified goods"): Sr.No. Equipment Full Form Description F AIS Automatic Identification System Used for identifying other ships details ** J SAT-C/FBB Satellite Communication / Fleet broad Band Used for communication between ship and shore V NAVTEX & 2 way RT Navigational telex and Walkie Talkie Used for receiving navigational weather and other warnings throughout globe and internal communication. N VDR Voyage Data Recorder Used for recording and analyzing data of own ship like aircraft black box p FCV Fish Finder Used for higher level of accuracy and clear fish shoal images Q SONAR Sound Navigation and Ranging Used for searching under water fishing T SART Search and Rescue Transponder Used in emergency to assist the coastguard in search and rescue operations if the ship is in distress ** ARA concluded that said part is an essential part of ship in their observation paragraph no. 05 of their order. However, while pronouncing final ruling, item listed in Sr. No. J has been excluded from final list of essential part of ship which are entitled to concessional rate of tax at 5....
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.... be additional equipment liable to tax under their respective HSN at higher rate of 18%. 5. Appellant strongly contends that like parts stated in (a) to (d) above, SART, NAVTEX and 2 way RT are also integral components of GMDSS. All the above components (a) to (f) including SART, NAVTEX and 2 way RT are essential components to ensure compliance with GMDSS which is an internationally agreed upon system. All the parts / components collectively ensure compliance of GMDSS.GMDSS cannot be complied with if any of the above parts or components are missing. 6. The Physical fitment of both SART, NAVTEX and 2 way RT is done when the ship is being built and it requires hot work etc; which makes the SART, NAVTEX and 2 way RT physically, a part of a Ship. In view of above we humbly submit that SART, NAVTEX and 2 way RT [item no. (e) (f) and (g)] should be treated at par with item (a) to (d) [which ARA has held to be essential part of ship liable to tax at 5%) for classification and applicable tax rate. 7. The Automatic Identification System (AIS) is an Automatic Tacking System that uses transponders on ships and is used by vessel traffic services (VTS). AIS information supplements m....
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....hose main purpose is to locate fish, the fish finder and the sonar would be an intrinsic and essential part of the fishing vessels. Fish Finder has a transducer which is fitted into the hull of the ship and is therefore certainly a part of the ship beyond any shadow of doubt. Both these equipment require a lot of hot works for installation during the construction stage of the ship itself as the sensors are part of the Hull. The display unit of the Fish Finder is fixed on the bridge of the ship to enable the Captain to locate the fish in the sea. The appellant have also referred to photographs of FCV and SONAR which are enclosed as part of the submissions. 10. NAVTEX, SART, AIS and VDR are of critical nature and are mandated by IMO (International Maritime Organization) to establish the sea worthiness of a ship. Ship cannot function as a ship unless it is sea worthy. Without above referred parts, ship cannot be certified as sea worthy. 11. In the case of SONAR and FISH FINDER, the very purpose of Fishing Vessel, is to locate fish and therefore in the case of fishing vessels, these items are extremely necessary and physically installed in the hull of the ship. This can ....
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....s marine propellers, rudder set, stern tube set, propeller shaft and M.S. Shaft for couplings are mainly used as a part of fishing/floating vessels and the same would be covered under Entry 252 of Schedule I of Notn.Non.1/2017-CT(R) and taxable @ 5% [CGST + SGST] 19. Appellant strongly relies on the decision of the Honorable Supreme Court in its own case i.e. Commissioner of Customs, Mumbai Appellant(s) VERSUS M/s. A.S. Moloobhoy & sons & Ors. Respondent(s) WITH CIVIL APPEAL NOS. 3115-3117 OF 2015 = 2015 (5) TMI 803 - SUPREME COURT OF INDIA, where the Honorable Court declined to interfere with the order passed by the Tribunal, wherein it was held that these imports of equipment and spares should be treated as one for "the purpose of ship repair." 20. Shri Ravi Krishnamurthy, Chartered Engineer, vide his certificate dated 10.06.2018, has certified that Navigation Equipment and their associated spares, Communication Equipment and their associated spares, lifesaving/firefighting equipment and their associated spares, etc., detailed therein, are integral part of a ship without which ship cannot sail and would not be considered seaworthy as per the IMO/SOLAS/guidelines. It is furt....
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.... form a part of the ship and therefore chargeable to tax @ 5% under Sr.No.252 of the Notification No.1/2017 C.R. (Rate) dt.28.06.2017. The AAR through their order dt.18.07.2018 have ruled that the following products would not come under Sr.No.252 of the Notification No. 1/2017 as they are not essential parts of the ship and are in the nature of additional equipment. F Automatic Identification System L Navtex N Voyage Data Recorder P Fish Finder Q SONAR T SART Search and Rescue Transponder N Two way RT walkie-Talkie In the order passed by the AAR, it was held that certain parts as essential parts of the ship and this includes Radar Ship Security Alert System, EPIRB amongst others. 28. It is seen from the grounds of appeal that NAVTEX, SART and Two Way RT Walkie Talkie, AIS and Voyage Data Recorder along with other equipment constitute the list of equipment comprising GMDSS (Global Maritime Distress & Safety System). GMDSS is an international system which uses terrestrial and satellite technology and ship board radio system to ensure rapid alerting of shore based rescue and communication operations in the event of an emergency. The syst....
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....of a ship in distress. NAVTEX is an international service for receipt and broadcast of weather and other warnings. It can broadcast different classes of mishaps like navigation warnings, meteorological warnings, Ice reports, search and rescue warnings, weather forecast, navigation messages etc. ln an advisory of the Directorate of Lighthouses and Lightships (DGLL) under the Ministry of Shipping and under the title of 'Establishment of NAVTEX Chain', the following is given: ...'NAVTEX (Navigational text messages) is a system to deliver local weather reports and navigational warnings to ships operating in coastal areas. It is an international automated direct printing service for promulgation of navigational and meteorological warnings and urgent information to ships. It has been developed to provide low cost, simple and automated means of receiving maritime safety information on board ships at sea in coastal waters. The NAVTEX system automatically broadcasts localised Maritime Safety Information (MSI) using Radio Telex (also known as Narrow Band Direct Printing, or NBDP). The information transmitted may be relevant to all sizes and types of vessel and the selective message reject....
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....of the AIS and abide by the same. Any violations in this regard may attract appropriate punitive action, including non-issuance of appropriate statutory inspection/certificate." 35. We agree with the contention of the appellant that if EPIRB which is a critical element of GMDSS is classified as part of the ship under Sr.No.252 then there is no reason to exclude SART, NAVTEX and AIS from it. GMDSS includes the following systems:- a) Communication equipment. b) Positioning and localization system. c) Maritime safety information. EPIRB on SART are a part of the positioning and localization system and NAVTEX is a part of maritime and safety information. 36. Voyage Data Recorder, or VDR, is a data recording system designed for all vessels required to in order to collect data from various sensors on board the vessel. It then digitizes, compresses and stores this information in an externally mounted protective storage unit. Like the black boxes carried on aircraft, VDRs enable accident investigators to review procedures and instructions in the moments before an incident and help to identify the cause of any accident. However, they are not a part of the GMDSS and it ca....