TaxTMI 
TaxTMI 
2020 (1) TMI 793
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....mmasandra Jigani Link Road, Industrial Area, Jigani Hobli, Anekal Taluk, Karnataka 560105 (hereinafter referred to as Appellant) against the Advance Ruling No. KAR ADRG 54/2019 dated 19.09.2019 = 2019 (10) TMI 669 - AUTHORITY FOR ADVANCE RULING, KARNATAKA pronounced by the Karnataka Authority for Advance Ruling. Brief facts of the case: 1. Parker Hannifin India Pvt. Ltd. is engaged in the manufacture of Oil/ fuel/ air filters for various industrial sectors such as Railways, automobiles etc. One Of the products manufactured by the Appellant is Oil/ fuel/ air filters which are tailor-made for the Indian Railways based on the specifications provided by the Indian Railways. In certain cases, the purchase order for the filters is placed on the Appellant by an intermediary who may then further supply the same to the Indian Railways. 2. The Appellant sought an advance ruling before the Karnataka Authority for Advance Ruling in respect of the following questions: a) Whether filters manufactured solely and principally for use by / in Indian Railways and supplied directly to Indian Railways are classifiable under HSN Heading 8421 or under HSN Heading 8607 of the Customs Tar....
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....t the rules for the interpretation of the First Schedule to the CTA, including the Section and Chapter Notes and the General Explanatory Notes, shall apply for the purpose of classification under GST. It is also submitted that erstwhile Central Excise Tariff ("hereinafter referred to as "CET") was aligned with the Customs Tariff and that there was no difference in the respective description of Tariffs entries i.e. Heading 84.21 and Heading 86.07 under the CTA and CET, or any Section or Chapter Notes applicable thereto Thus, Classification interpretation provided under the Circular under the erstwhile CET remains equally applicable under the GST. 4.3. The Appellant reiterated that the Subject Filters are manufactured strictly as pet the designs provided by the Indian Railways, that the filters are meant either for fuel-based locomotives or those which are electrically operated. The manufacturing process for the subject filters is based upon design and specification received from the Indian Railways; that they are customized for form, fitment and function and consequently cannot be used by any other entity. They relied on Section Note 3 to Section of the First Schedule to the CTA ....
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....aluminum doors and windows manufactured by the assessee according to the design and specifications provided by the Railways would merit classification under Heading 86.07 and not under any other heading, based on their sole use in railway locomotives. The aforesaid decision was followed in the Case of Hindustan Welding Engineers vs. CCE, Calcutta[2001 (133) ELT 770 (Tri.-Kolkata)] = 2000 (7) TMI 557 - CEGAT, KOLKATA wherein it was held that doors, windows and frames of iron, Steel and aluminum are correctly classifiable under Heading 8607 and not under any other heading in Chapters 73 or 76, owing to their Sole and principal use in railway locomotives. 4.6. The Appellant also relied on the following decisions wherein classification under Heading 8607 was held to be applicable when the goods in question were meant solely and principally for use in railway locomotives: a) Chief Workshop Manager, Central Railway vs. Commissioner of Central Erase, Nashik [2018-TIOL-3398-CESTAT-MUM] = 2018 (3) TMI 759 - CESTAT MUMBAI, wherein C.I. Rollers and Separators used by the Railways Were sought to be classified under Chapter 84 by the revenue authorities. However, owing to the fact t....
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....articles of Section XVII; c) Articles of Section XVII (inter alia covering Heading 86.07) are excluded from Section XVI (inter alia covering Heading 84.21) by Section Note 1 (l) to Section XVI, which states as follows: "1. This Section does not cover: (l) articles of Section XVII;" 4.9. In view of the above, they contended that where. by virtue of specific provisions, If goods are covered in Section XVII (i.e. Chapter 86; Heading 86.07) their coverage under Section XVI (i.e. Chapter 84; Heading 84.21) is automatically ruled out, that they had already factually established that the principal use of the subject filters is with articles of Chapter 86 i.e. as pans thereof and also that the goods are so custom made that they cannot be put to an alternate use at all. Accordingly, the correct classification of the subject filters should be under the heading that covers parts of locomotives i.e. under Heading 86.07. They further submitted that the provisions of Note 2(e) are rendered inapplicable where the goods are squarely covered by operation of Note 3 of Section XVII i.e. owing to their sole and principal use, that the AAR, in the impugned Advance Ruling, ....
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....eading occurring last if the numerical order. The above is in terms of rule 3(c) of the General Rules for the Interpretation of Import Tariff Further, even if for the sake of argument, Section Note 2(e) and Section Note 3 to Section XVII are seen competing and irreconcilable, and hence, repugnant to each other, Settled rules of statutory interpretation also suggest that the last provision (i.e. Section Note 3) must prevail over the Other (i.e. Section Note 2(e)), The principle finds absolute Support in the case of K.M. Nanavati vs. State Of Bombay [AIR 1961 SC 112] = 1960 (9) TMI 117 - SUPREME COURT]. The Supreme Court has repeatedly approved the said principle and held that the last provision stands later in the enactment and thus, Speaks the last intention of the makers of the Statute and therefore; must be given effect to. Therefore, applying the aforesaid principles in the present Case, the Appellant contended that the subject filters should be Classified according to Note 3 of Section XVII i.e. under Heading 86 by applying the test of 'sole or principal use'. The Appellant submits that the AAR has erred in not according due credence to the aforesaid settled principles of inter....
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....e customized specifically to filter the air/fuel in electric/diesel locomotives thereby preventing malfunction of the railway locomotives. The subject Filters are manufactured Strictly as per the technical specifications, drawings and designs provided by the Indian Railways and are peculiar products meant for the exclusive use in locomotive engines of Railways and has no other application / function and cannot be used elsewhere. 7. The dispute in the present case is whether the subject filters manufactured by the Appellant exclusively for use by the Indian Railways would merit classification under Heading 84.21 - as filtering or purifying machinery/apparatus or under Heading 86.07 - as parts of railway locomotives. For ease of reference, it would be beneficial to refer to both these Chapter headings of the Customs Tariff. Heading Heading description as per Customs Tariff Description as per GST Rate Notification Schedule / entry no GST Rate 84.21 Centrifuges, including centrifugal dryers, filtering or purifying machinery and apparatus, for liquids or gases Centrifuges, including centrifugal dryers, filtering or purifying machinery and apparatus, for liquid....
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.... article manufactured specifically for locomotives and not having any use elsewhere, would be considered as parts of locomotives, it would not be the correct way to classify an article. Rule 1 of the General Rules of Interpretation of the HSN exhorts us to classify ".....according to the terms of the headings and any relative section or chapter notes...." (Emphasis supplied). The notes to Section XVII provide guidance on classification of 'parts' and 'accessories' of goods falling under the Chapters of the said Section. Note 2(e) to Section XVII states that the expression 'parts and 'parts and accessories' do not apply to the machines or apparatus of heading 84.01 to 84.79, whether or not they are identifiable as for the goods of this Section. As mentioned earlier, filtering apparatus is covered under heading 84.21 of the Tariff. By virtue of Note 2(e) to Section XVII, the filtering apparatus falling under Chapter Heading 84.21 will not be considered as 'parts' or 'parts and accessories' even if they are identifiable as being for railway locomotives. 11. The Appellant has argued that Note to Section XVII is generic in nature and primacy should be given to Section Note 3 to Secti....
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....principal use with the goods of the Chapters in the said Section. However, the contention of the Appellant that Note 2 Contradicts the specific test of 'sole or principal use' laid down in Note 3 and hence Note 3 is to be given primacy over Note 2 is not a correct interpretation. There is no contradiction between Section Notes 2 and 3 to Section XVII. The test laid down in Note 3 is to be applied only after it is ensured that the article is not excluded by virtue of Note 2. Section Notes 2 and 3 are to be read harmoniously in sequential order Section Notes 3 cannot be read in isolation or accorded primacy as contended by the Appellant. 13. Our view is Supported by the General Notes to Section XVII on Parts and Accessories wherein it is stated that Chapters 86 to 88 of Section XVII each provide for the classification of parts and accessories of the vehicles, aircraft or equipment concerned. However, it should be noted that these heading apply only to those parts or accessories which comply with all three of the following conditions: a) They must not be excluded by the terms of Note 2 to this Section; and b) They must be suitable for use solely or principally wit....
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.... Tribunal has held that Heading 7610.10 applies only to those doors, windows and their frames which have relevance and use in structures and Since the assessee was manufacturing the said aluminum doors and windows not for use in Structures but for railway coaches, they will be classifiable under 86.07 as parts of railways. The facts being different, this decision does riot help in advancing the case of the Appellant before us. b) The case of Hindustan Welding Engineers vs CCE. Calcutta-II reported is 2001 (133) ELT 770 (Tri-Kolkata) = 2000 (7) TMI 557 - CEGAT, KOLKATA is also not helpful for the Appellant as the -said decision has been passed by relying on the Rail Tech case supra. Hence, for the reasons stated earlier, this decision also is not being considered. c) In the case of Poona Radiators vs CCE, reported in 1990 (48) ELT 93 (Tri) = 1990 (2) TMI 182 - CEGAT, NEW DELHI, the issue of Classification of Radiator Assembly and Radiator cores supplied to Indian Railways was being considered - whether under 86.07 as per the assessee or under 84.09 as per the Department. The Tribunal after taking note of Note 2(e) and 3 to Section XVII well as the Explanatory Notes, held that ....
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....nd hence rightly classifiable under 86.07. This case on the other hand supports our view that Section Notes 2 and 3 to Section XVII must be read together and Note 3 Cannot be read in isolation as contended by this Appellant. 15. The Appellant has tried to make a strong argument that the final classification is to be determined by the principal use, by relying on the decision of the Tribunal in the case of Diesel Component Works vs CCE, Chandigarh reported in 2000 (120) ELT 648 (Tribunal) = 2000 (6) TMI 68 - CEGAT, COURT NO. I, NEW DELHI. In the said case, the Tribunal has held that the effect of Note 3 to Section XVII is that when a part or accessory can fall in one or more other Sections as well as in Section XVII, its final classification is determined by its principal use. We find that this decision has been rendered without taking note of the General Notes on Parts and Accessories given in Section XVII wherein it is stipulated that Classification of parts and accessories of goods under Chapters 86 to 88 apply only to those parts or accessories which comply with all three of the following conditions: a) They must not be excluded by the terms of Note 2 to this Section....
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....the Central Act and hence every ruling pronounced by the Authority will be applicable only within the jurisdiction of the concerned state or union territory Further the ruling given by the Authority is binding only On the applicant who has sought the advance ruling and on the concerned officer or the jurisdictional officer in respect of the applicant. This Clearly means that an advance ruling is not applicable to similarly placed other taxable persons in the State Therefore, the ruling given by the UP Authority for Advance Ruling is not applicable to any Other taxable person within the State of Uttar Pradesh leave alone taxable person outside the State of Uttar Pradesh. Notwithstanding the above, we find that the ruling given by the Authority at Uttar Pradesh has not examined the provisions of Note 2(e) to Section XVII and the General Notes on Parts and Accessories in Section XVII while determining the classification of Air Filters. For the above reasons We are not inclined to give any weightage to the ruling given in the case of M/s. G.S. Products. 18. Before we conclude We draw attention to the Circular No 80/54/2018-GST dated 31.12.2018 issued by the CBIC regarding the classi....