TaxTMI 
TaxTMI 
2019 (9) TMI 930
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....covered under SAC Code 997319 be charged at 5% GST as per HSN Code 8803 Parts Goods of Heading 8802 (Satellites)? 3. The applicant furnishes the following facts relevant to the stated activity: a. The applicant stated that they are a company wholly owned by the Government of India (GOI) and under the administrative control of the Department of Space, incorporated under the provisions of the Companies Act, 1956 as a private limited company on 28th September, 1992 - (a) For the promotion and commercial exploitation of space based services and products, (b) To provide technical consultancy services; (c) To carry out transfer of technologies developed by Indian Space Research Organisation (ISRO); and (d) To facilitate development of space related industrial capabilities in India. b. The applicant is engaged in a variety of activities, inter-alia, including (a) Leasing of space segment capacity on INSAT/GSAT satellites; (b) Leasing of space segment capacity procured from Foreign Satellite Service Providers / Operators ("FSSP"); (c) Launch services; (d) Satellite Services; (e) Remote Sensing and Data Services; (f) Host Facility Services; (g) Scientific and Techni....
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....rbital and space craft launch vehicles vide Notification No.2/2017 - Integrated Tax (Rate) dated 28.06.2017 as amended till date. Parts of goods of Heading 8802 (Transponder) is charged at 5% Rate of tax as per Sl. No. 245, HSN 8803 - Parts of Goods of Heading 8802 of Schedule I of Notification No. 1/2017-Integrated Tax (Rate) dated 28.06.2017 as amended till date. Similar Notifications exist under the CGST and SGST Acts also. PERSONAL HEARING: / PROCEEDINGS HELD ON 29.05.2018. 4. Sri Ganesh Shankararaman, Advocate and duly authorised representative of the applicant appeared for personal hearing proceedings held on 29.05.2018 & reiterated the facts narrated in their application and also made the following written submissions inter alia stating that: (a) A Communication Satellite has the following basic parts: (i) Satellite Bus: a. Satellite Structure: This is the mechanical structure of the satellite which supports and integrate various subsystems. b. Power System - This consists of Solar Panels as well as Batteries to power the Satellite. c. Antenna System - This is to receive / transmit signals between earth stations. d. Command and Control System - This monitors ....
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....e down-converters that are used to receive (downlink) satellite signals. (f) Equalizers : are satellite communications equipment used to alter or adjust the frequency response of a device. b) Considering the above, the applicant states that it is clear that Transponders cannot be categorized in the Tariff heading Other Satellite Communication Equipment covered under 8525 60 92. 5.3 The applicant further placed reliance on the following judgments wherein a discussion on HSN Code 8525 60 92 and various equipments covered in the context of exemptions under notifications is dealt with. These decisions are referred only with the intent to show that the entry "Other Satellite Equipment" refers to the equipments which are in either, Uplink Station or Downlink Station (together can be categorised as On Ground) and not in Space Segment. Further, Satellite Communication Equipments as such are categorized as HSN 8525 60 92 - Other Satellite Communication Equipment. (a) U & I System Design Ltd. V. Commissioner of Customs (Appeals), Bangalore - 2007 (218) ELT 603 (Tri-Bang) = 2007 (8) TMI 139 - CESTAT, BANGALORE (b) Modern Communication & Broadcasting Systems P. Ltd v. Chief Commissione....
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....lates to the classification of Satellite Transponders used in Communication Satellites. The transponders leased by the applicant to its customers form part of a communication satellite and do not form part of any other equipment / aircraft/ navigational device, etc. The applicant also submitted that the transponder is a specific part of the satellite without which the Satellite is of no use. Such a satellite transponder cannot be used in any other navigation equipment. It is specifically used only in a satellite. This Satellite Transponder is not of generic use. Any goods, specifically designed for a particular product (Satellite in this case) will be classified as part of that machine and not a part of generic use. This is the rule of classification. The applicant has placed reliance on the following pronouncements which explicitly brings out what is a part and also the classification of specific use of the part: (a) Commissioner of Central Excise, Delhi v. Insulation Electrical (P) Ltd. 2008 (224) ELT 512 (SC) = 2008 (3) TMI 22 - SUPREME COURT - where in para 19, it is stated ... "Chapter 9401 covers all types of seats and not only the seats of a car and a sea....
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....the character of Primary Part of equipment doesn't get lost. The applicant has placed reliance on the following judicial pronouncements where there are decisions considering part of part being considered as part of equipment. There is no view that since part is made of other part, the main part will become an equipment on its own. In fact, even the so called equipment if it is intrinsic to a specific primary equipment, will be treated as part of that equipment: (a) Collector of Central Excise v. MP (I) Ltd - 1990 (46) ELT 68 (Tri) = 1987 (7) TMI 472 - CEGAT, NEW DELHI (b) Collector v. MP (I) Ltd - 1997 (95) ELT A142 (SC) = 1995 (4) TMI 312 - SC ORDER (c) Motor Industries Company Ltd. V. Collector of Central Excise, Aurangabad - 1995 (75) ELT 65 (Tri) = 1994 (11) TMI 219 - CEGAT, NEW DELHI (d) Collector of Central Excise, Aurangabad v. Motor Industries Company Ltd. 2003 (152) ELT 36 (SC) = 2003 (1) TMI 299 - SUPREME COURT Considering the above, the applicant states that it is clear that Satellite Transponder, which is designed for specific use in Satellite is to be classified as Part of Satellite and classifiable under HSN 8803. 5.7 Regarding the Bill of Entry for the....
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....red to market complete satellite systems. Further they are empowered to negotiate with the end user/ customer for finalising the technical, commercial and contractual terms of the work proposed to be done. Further the applicant is christened as the 'Contract Manager' in all the agreements entered by the Department of Space with users for provision of INSAT transponder capacity with rights and powers to administer the agreements/ MOUs in entirety. The MOU shows that the agreement is in respect of INSAT and GSAT satellites, which are purely communication satellites. 6.5 In the instant application the applicant is engaged in the service of leasing/ rental of satellite transponders and seeks clarification on the rate of tax applicable in respect of the said service. 6.6 In the subject matter and in relation to the question for Ruling we examine the provisions of Notification No. 08/2017-Integrated Tax (Rate) dated 28.06.2017 and as amended subsequently. Serial Number 17 of the Notification, Heading 9973, pertains to Leasing or rental services, with or without operator. Against the aforementioned Heading the entries in Column (3) of the Notification from (i) to (vii) pertain to issues....
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....nsmits the same on the downlink. Therefore the essential / significant features of amplification and frequency conversion are done by the key payload of the communication satellite i.e. the transponder. Therefore the transponder becomes an integral part of the communication satellite, without which the communication satellite becomes defunct. 6.9 The Applicant contends that the said transponders merit classification under Tariff Heading 8803 as part of Spacecraft (including satellites) falling under Tariff heading 8802. The alternate classification is under Tariff heading 8525 as "Other Satellite Communication Equipment". We proceed to examine the two Tariff Headings. 6.10 In respect of Tariff Headings and determination of Classification, Explanations (iii) and (iv) appended to the Notification No. 01/2017-Central Tax (Rate), dated 28.06.2017 are relevant. The said explanations are reproduced below for ease of reference. (iii) "Tariff item", "sub-heading" "heading" and "Chapter" shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). (iv) The rules for the interpretation of the Fi....
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....c) Television cameras etc., under heading 8525 80. Further 8525 60 1 series covers two way communication equipment and 8525 60 9 series covers others which include VSAT terminals, other satellite communication equipment. 6.13 In this regard our attention is drawn towards the brief outline of the basic satellite communication set-up. The basic elements of a satellite communication system include the ground segment and the space segment. The ground segment comprises the transmitting and the receiving Earth stations together with their associated instruments, antennae, electronic circuits etc.,. These earth stations provide access to the space segment by transmitting/receiving information to/from the satellite. The space segment comprises one or more satellites, which act as repeater stations. 6.14 The tone and tenor of the goods covered under Heading 8525 shows that the transmission apparatus (i.e. Radio broadcast transmitter, TV broadcast transmitter, wireless microphone etc under Heading 852550), transmission apparatus incorporating reception apparatus (i.e. two way radio communication equipments etc.) are apparatus and equipments based on the land. Further the entry CVSAT Termin....
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....ly to parts or accessories which are not suitable for use solely or principally with the articles of those chapters. A part or accessory which answers to a description in two or more of the headings of those Chapters is to be classified under that heading which corresponds to the principal use of that part or accessory" 6.18 Further we are draw reference to the Explanatory Notes of the relevant Section and Chapter. Explanatory Notes to Section XVII at General (III) Parts & Accessories stipulate that all the following three conditions should be satisfied, for a product to be classified as a Part under the said Section. (a) They must not be excluded by the terms of Note 2 to Section XVII (see paragraph (A) below) (b) They must be suitable for use solely or principally with the articles of Chapters 86 to 88 (see paragraph (B) below) (c) They must not be more specifically included elsewhere in the Nomenclature (see paragraph (C) below) 6.19 The communication satellite transponders are not covered in the list of parts/ parts and accessories appearing under Note 2. Therefore the transponders are not excluded by the terms of Note 2 to Section XVII. Therefore the first condition st....