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TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 455
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.... to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act". 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- I. BRIEF BACKGROUND OF THE TRANSACTION: * The Applicant, M/s Premium Transmission Private Limited is a supplier, exporter and manufacturer of various industrial products mainly specialized in manufacturing geared boxes, geared motors, fluid couplings, etc. * One of the product 'Geared Motor', manufactured by applicant is a combination of gear box' and electric motors'. Both the products have specifically been classified under the Harmonized System of nomenclature (HSN). While the product Gear Box' is classified under the HSN Code '8483', 'Electric Motors' are classified under the HSN Code '8501'. However, the product 'Geared Motor' is not specifically classified under any of the HSN Codes. * In the erstwhile Indirect Tax regime, Applicant has been discharging Central Excise duty on removal of such product. The applicant was classifying the product under the HSN Code 8483 of the....
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....) Geared Motor refers to a combination of an electric motor and a gearbox. (ii) Typically gear boxes are used to increase torque while reducing the speed of a prime mover output shaft. This means that the output shaft of a Gear Box rotates at a slower rate than the input shaft, and this reduction in speed produces a mechanical advantage, increasing torque. In short, the gearbox monitors the speed of the electric motor to which it is attached thereby converting the speed into torque. (iii). Hence, primarily the function of a gear box is to control the speed of electric motors and hence, in order for a gearbox to function, it has to be attached to an electric motor. In short, Gearbox cannot have any use without being rotated and coupled with motor affixed to it. (iv) Following raw components/ inputs materials are primarily used in the manufacture of Geared Motor Major Raw Materials HSN Code Rate of GST Bearing 8482 18% Casting - raw or finished 7325 18% Fasteners 7318 18% Pinion & wheel 8483 18% Motor 8501 18% Oil seal 4016 18% (v) Geared box is a separate marketable commodity and hence can be sold separately as well. (vi) The geared motors ma....
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....m store It is process where material is issuing as per BOM to Assembly section. Housing Assembly It is process where internal gear will be assembled in main housing with the use of bearing and circlip. Adaptor Assembly It is process where Input pinion body will be assembled in adaptor with the use of bearing and circlip. End Cover Assembly It is process where out wheel with shaft will be assembled in end cover with the use of bearing and circlip. Final Assembly It is process where the main housing assembly is assembled with adaptor assembly and end cover assembly Testing It is process of confirming noise level & ear head ratio as per requirement. Electric Motor Assembly It is process where Gear head will be assembled with electrical motor which is bought out item and new product will be gear motor which is sold in market as a final product. Painting It is process where the geared motor will be cleaned by hand with the help of cleaning agent and washed. Then it is painted using a gun and dried with the help of a dryer. Final Pre-delivery Inspection It is process of confirming the product as per GA (General Arrangement) drawing/Outbound. Packing It is process wher....
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.... CUSTOMS TARIFF ACT (a) As regards classification of 'Geared Motor', it would be pertinent to note that there is no separate tariff entry for this combined product. Hence, it would be important to refer to tariff entries in which 'Gear Boxes' and 'Electric Motor' fall. We would like to draw your attention to the extract of description of goods falling under Customs Heading 8483 and 8501 : 8483- Transmission shafts (including cam shafts and Crank shafts) and cranks; bearing housings and plain shaft bearings, gears and gearing; ball or roller screws; gear boxes and other speed changers, including torque converters; Flywheels and pulleys, including pulley Blocks; clutches and shaft couplings (including universal joints) 8501 - Electric motors and generators (Excluding generating sets) (b) Further it is also imperative to look at the relevant section and chapter notes to the Customs Tariff Act, 1975 for classification of products. For the tariff entries under discussion there are no relevant chapter notes to the chapter 84 and 85. However, below section note to Section XVI of which the chapters 84 and 85 are a part of is relevant in such classification "Note no. 4 Where ....
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....lassification". Accordingly, for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the HSN." (d) This case has further been referred in various other cases wherein the harmonized system of nomenclature along with its explanatory notes has been relied on as a safe guide for matters of classification. (e) Hence, it would be imperative to refer to the descriptions provided in the Explanatory Notes to the Harmonized System of Nomenclature. (f) We request your kind attention to the relevant extract of explanatory notes for chapter headings 8483 and 8501 reproduced below 8483- "(E) Gear Boxes and other speed changers, including torque converters'. 'The heading does not cover gear boxes or other variable speed changers combined with a motor; these are classified in the same heading as the motor. 8501- (0) Electric Motors' 'Motors remain classified here even when they are equipped with pulleys, with gears or gear boxes, or with a flexible shaft for operating hand tools,' (g) The explanatory notes to the Harmonized System of Nomenclature has clearly specified that such combined product as manufa....
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.... would be classified under Sr. No 372 of Schedule III of IGST Act, 2017 - Electric motors and generators (excluding generating sets) as the product 'Geared Motors' manufactured by the applicant is a combination of two products and that schedule entry specific to this product is not present in the Harmonized System of Nomenclature, the classification has to be done on the basis of chapter and section notes to the Customs Tariff Act, 1975 and explanatory notes to the Harmonized System of Nomenclature, (b) Under the chapter and section notes to the Customs Tariff Act, 1975 and explanatory notes to the Harmonized System of Nomenclature, it has to be classified under the same heading as that of the Electric Motors at Sr. No. 372 of the schedule III of the GST Tax Schedules and shall be taxed at the rate 18%. 3. SUBMISSIONS OF THE CQNCERNED OFFICER: The submission, as reproduced verbatim, could be seen thus- "The applicant asked for the correct classification of 'Geared Motor' supplied by the applicant. The applicant is manufacturing 'Geared Motor' which is said to be a combination of 'gear box' (Classified under HSN Code 8483) & electric motors (Classified under HSN Code 8501).....
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.... 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. However, parts which are equally suitable for use principally with the goods of headings 8517 and 8525 to 8528 are to be classified in heading 8517; (c) all other parts are to be classified in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate or, failing that, in heading 8487 or 8548. 3. Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function. 4. Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the headin....
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....expressly stated, in the Statement of Objects and Reasons, that the Central Excise Tariffs are based on the HSN and the internationally accepted nomenclature was taken into account to "reduce disputes on account of tariff classification". Accordingly, for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature merging from the HSN." However, the existing classification (i.e.8483) is already based on the harmonized system of nomenclature & therefore an already adopted classification of 'Geared Motor under heading 8483, included in Entry number 135 of Schedule IV of IGST Rate Notification No. 1/2017-lntegrated Tax (Rate) by the applicant is correct & the intended classification of 'Geared Motor' under heading 8501. Entry number 372 of Schedule III of IGST Rate Notification No. 1/2017-lntegrated Tax (Rate) is not correct. The applicant has quoted the view adopted by the Gujarat Authority of Advance Ruling in the case of M/s. Power Build Private Limited = 2018 (6) TMI 515 - AUTHORITY FOR ADVANCE RULINGS, GUJARAT wherein it was held that the product 'Geared Motor' shall be classified under the same heading as that of 'Electric....
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....s and other speed changers, including torque converters'. and (ii) 8501 - Electric motors and generators (excluding generating sets). In view of this, we now refer to relevant Explanatory Notes etc. to section XVI, Explanatory notes to headings 8483 and 8501 to find the appropriate classification for 'geared motors,. (i) Section Notes 4 and 5 of HSN are relevant to this case which are reproduced below: Note : 4 Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function. Note : 5 For the purposes of these Notes, the expression "machine" means any machine, machinery, plant, equipment, apparatus or appliance cited in the headings of Chapter 84 or 85." (ii) Explanatory Note relevant for Motors at Note (1) (A) to heading 8501 : "(I) ELECTRIC MOTORS Electric motors are machines for transforming electrical energy into mechanical p....