TaxTMI 
TaxTMI 
2019 (9) TMI 930
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....er Leasing of Satellite Transponder which is 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 ....
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....atellite, it is covered under HSN 8803 - Parts of goods of Heading 8802. Satellites are charged at Nil Rate of tax as per Sl. No. 140, HSN 8802 60 00 - Space craft (including satellites) and sub-orbital 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.....
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....structures used to radiate electromagnetic waves (c) Modulators : Digital data is sent to the modulator which takes the data and converts it into a modulated signal in the Intermediate Frequency Range. (d) Block up converters (BUC) are used to convert a band or a block of frequencies from lower to higher frequencies. (e) Low-noise block converters (LNB) are 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 ....
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.... news gathering, Outdoor Broadcasting, Direct to Home, VSAT (Very Small Aperture Terminal - ATM, Retail, Banking etc.,) the Department of Space (DOS) identifies and allots Satellite Bandwidth Capacity (in MHz). Based on this, Transponder lease agreement with the Customer is entered into. The Customer starts using the allotted Satellite Bandwidth Capacity after obtaining other regulatory approvals/ clearance. No intervention of Antrix / DOS is involved in either up-linking or down linking. 5.6 The applicant's question relates 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 a....
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....ellite and hence is a part of the Satellite. (c) Regarding the issue as to why a Transponder cannot be categorized as an equipment as it is also made of few more parts, the applicant has submitted that if a part is made of a different part, it does not mean that the resultant part will not be a part of a particular product/ equipment (in this case Satellite). In the context of Part of Part being considered as Part of Equipment, there are several judgments which goes to show case that, even if the primary part of an equipment is made of other parts, still 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 (9....
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.... of the Memorandum of Understanding between the Department of Space and the applicant was submitted to explain the business activity of the applicant. The applicant is a company wholly owned by the Government of India and under the administrative control of the Department of Space. The applicant is engaged in a variety of activities, inter-alia, including leasing of space segment capacity on satellites, leasing of space segment capacity procured from Foreign Service Providers/Operators, launch services, satellite services, remote sensing and data services etc. In respect of Satellite services the applicant is empowered 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....
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....or", then it amplifies the signal, converts the signal to a dissimilar frequency, through "frequency converter", than that of the one received and automatically transmits the signal (down link). Therefore the input and output signals can be sensed concurrently. The device on board the satellite that performs the amplification and frequency conversion and also the main/ key payload of any communication satellite is the "Transponder". In view of the above, the transponder essentially is a repeater which receives the signal transmitted from earth station on the uplink, amplifies the signal, converts to a dissimilar frequency and retransmits 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 ....
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....25 60 99 ---- Other 8525 80 Television cameras, digital cameras and video camera recorders: 8525 80 10 ---Television cameras 8525 80 20 --- Digital Cameras 8525 80 30 --- Video Camera recorders 8525 80 90 --- Other It could be seen from above that the heading 8525 primarily deals with transmission apparatus for radio broadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus in addition to television cameras, digital cameras and video camera recorders. The heading is divided into three major sub-headings namely- (a) Transmission apparatus under heading 8525 50, (b) Transmission apparatus incorporating reception apparatus under heading 8525 60 and (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....
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.... 6.16 We now proceed to examine the Tariff Heading 8803. The transponders are stated to be parts of Communication Satellites. In this regard we find that Heading 8802, and more specifically Heading 88026000) covers Spacecraft including Satellites. Therefore Satellites are covered under Tariff Head 8802. The next Heading in the instant Chapter is 8803 and it covers "Parts of goods of heading 8801 and 8802'. Therefore it now remains to be determined whether the transponders qualify to be considered as parts of Satellite and whether the same are covered under Heading 8803 or not. 6.17 Chapter 88 falls under Section XVII of the Customs Tariff. Section Note 3 to Section XVII of the said Tariff stipulates that "References in Chapters 86 to 88 to "parts" or "accessories" do not apply 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 ....