TaxTMI 
TaxTMI 
2020 (4) TMI 694
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....llite Transponder which is covered under SAC Code 997319 be charged at 5% GST as per HSN Code 8803 - Parts Goods of Heading 8802 (Satellites)? 2) Whether the applicant can levy GST @5% for Leasing of Satellite Transponder Services which is covered under SAC 997319 as per HSN Code 8803-parts goods of Heading 8802 (Satellites) from the date of commencement of the service-Leasing of Satellite Transponder? 3. The applicant furnishes the following facts relevant to the stated activity: a. The applicant stated that they are a commercial arm of Indian Space Research Organisation (ISRO) and are a Government of India company (CPSE) under the administrative control of the Department of Space (DOS). They entered into an agreement MOU with DOS, inter alia, for leasing of Satellite Transponder capacity to service providers, as part of the mandate to carry out production and marketing of space based services. b. The applicant enables satellite communication service providers with necessary transponder capacity on INSAT/GSAT fleet in C, Ext C, Ku and Ka-Ku bands to Indian users for Television Broadcasting (TV), Direct to Home (DTH), Digital Satellite News Gathering (....
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....ving transfer of title in goods"; Transponder is a part of Satellite, falling under Chapter Heading 8803 as "Parts of goods of Heading 8802 Satellites"; Goods of Heading 8802 60 00 i.e. Spacecraft (including satellite) and suborbital and spacecraft launch vehicles are charged at Nil rate of Tax (GST) vide Sl.No.140 of Notification No.2/2017-Integrated Tax(Rate) dated 28.06.2017, as amended till date; Parts of goods of Heading 8802, falling under Heading 8803 i.e. Transponder, is charged at 5% IGST under SI.No.245 of Schedule I to Notification No.1/2017-Integrated Tax(Rate) dated 28.06.2017, as amended. PERSONAL HEARING: / PROCEEDINGS HELD ON 10.03.2020. 5. Sri Radha Krishnan D, Director and duly authorised representative of the applicant appeared for personal hearing proceedings held on 10.03.2020 86 reiterated the facts narrated in their application and also made the following written submissions inter alia stating that: 5.1 The Applicant, New Space India Limited in short 'NSIL' has been incorporated on 05/03/2019 under the provisions of Companies Act 2013 as a wholly owned Government of India undertaking/ Central Public Sector Enterprise(CPSE), under the administrative c....
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....ract Manager" and is vested with the rights and powers to administer the agreements/ MOUs in its entirety. Towards this, NSIL carries out activities related to interfacing with customers and SATCOM-PO for formulating and finalizing the Agreements, amendments, securing caution deposits and bank guarantees, invoice raising and payment receipts. Provisioning of space segment capacity on a transponder from a satellite to user, involves leasing of transponder capacity to the user for a specific period of time for his use. For ease of understanding, this activity could be considered analogous to leasing out a Flat to a tenant, wherein the owner (in case of transponder it is DOS /NSIL) lets out the flat (equivalent of transponder) and the tenant (transponder capacity user) utilizes the flat ( transponder capacity) for his purpose for a specific period of time. Following relevant clauses of the agreement indicating provisioning of space segment capacity as leasing of transponder capacity is indicated below for reference (Copy of agreement enclosed as Annexure-2). I. Article 2, Transponder capacity of the Agreement - It states that DOS provides certain bandwidth capacity on a satellit....
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.... System - This consist 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 the Satellite to ensure that all vital operating parameters are working. e. Thermal System - This protects the satellite and its sub-system from external environment. f. Propulsion System - This is used for station keeping and orbit correction, to ensure that the satellite stays in its orbit. ii) Satellite Payload: The payload of a communication satellite is Transponders. Transponder is an electronic part of the satellite that receives the signal at a particular frequency, amplifies it and transmits it back to earth. The transponder has the following parts i. Band Pass Filters ii. Low Noise Amplifier iii. Mixer and Oscillator iv. High Power Amplifier a. The Band Pass Filter is a device that passes frequencies within a certain range and rejects (attenuates) frequencies outside that range. b. Low Noise Amplifier: - An electronic amplifier that amplifies a very low power signal with....
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....onder) is charged at 5% Rate of tax as per Sl. No. 245, HSN 8803 - Parts of Goods of Heading 8802 of Schedule 1 of Notification No. 1/2017 - Integrated Tax (Rate) dated 28.06.2017 as amended till date. Further the Applicant submits that the transponder cannot be classified under the heading 8525 60 92 as "Other Satellite Equipment" since it consist of ground segment that comprises of the following: • Uplink Station (to send signals from earth to Satellite). • Downlink Station (to receive signals from earth to Satellite). Ground Segment is established at earth and which transmits (uplink) the signals to satellite transponders and receive (downlink) the signals from satellite at ground. Whereas, the Space segment comprises of Satellite located at a Specified orbital slot in space with transponder for catering various application/ user needs. The Applicant further submits that, the tariff heading 8525 60 92 of the Customs Tariff Act - "Other Satellite Communication Equipment" covers those equipment's which are in the Uplink Station and Downlink Station on earth which are not part of Space Segment. Some of such equipment are as follows: a) Am....
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.... 4. Ground Communication Equipment 5. Up/ Down Converter 6. Modulator / Demodulator 7. Antenna System 8. TDMA / TSI 9. Master Earth Station 10. Micro Earth Station 11. Radio Network Terminal 12. Inter-facility Link 13. Pilot Receiver" These entries, which are classifiable under HSN Code 8525 60 92, refer to those equipment which are used to communicate with the Satellite and nowhere Transponders finds a place in this List. This proves that Transponders are not considered as part of the "Other Satellite Communication Equipment". The Applicant submits that the uplink and /or downlink operations carried out by the customers require base station at ground which may be owned by them or leased from the Teleport operators. The customers, through the teleport or through their own ground equipment, uplink their data directly to satellite and it can be down linked in the area covered by satellite by using appropriate ground equipment such as antenna, down converters de-modulators, set top boxes, etc., when a customer intends to start any communication service like, Television, Broadcasting, Digital Sate....
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....the seats of a car and a seat is complete even without the rail assembly from seat, adjuster / assembly slider seat and rear back lock assembly. They are not essential parts of the seat. Chapter heading 9401 covers only the parts of the seats and not accessories to the seat. A "part" is an essential component of the whole without which the whole cannot function". In the aforesaid judgement, the Apex Court has held that a Part is an essential component of the whole without which the whole cannot function and in the present case, the transponder is a part of the Communication Satellite without which the Communication Satellite cannot function. Eureka Forbes Limited v. Commissioner of central Excise, Meerut 2001 (130) ELT 146 (Tri - Del) = 2000 (8) TMI 567 - CEGAT, NEW DELHI wherein it was held in Para 8 as under: "According to note 2(b) parts which are suitable for use solely or principally with particular machines or apparatus are classified in the same heading as those machines or apparatus. This has been confirmed by the Appellant Tribunal and Courts in many cases, including the decision in Sealol industan Ltd., = 1988 (3) TMI 74 - HIGH COURT OF JUDICATURE AT BOMBAY....
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.... of bandwidth capacity on a satellite (part of INSAT/GSAT system) to the user and this space segment capacity is known as transponder capacity. Hence the scope of the agreement covers only Leasing of Satellite Transponder capacity and not Spectrum. 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 classified under HSN 8803. 6. FINDINGS & DISCUSSION: 6.1 We have considered the submissions made by the Applicant in their application for advance ruling as well as the submissions made by Sri. Radha Krishnan D, Director and duly authorised representative of the applicant during the personal hearing. We have also considered the issues involved, on which advance ruling is sought by the applicant, and relevant facts. 6.2 At the outset, we would like to state that the provisions of both the CGST Act and the KGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the KGST Act. 6.3 The Appl....
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....tion, 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 not related to the application. The entry at serial (viii) is a residual entry and applies to the applicant. Therefore the services provided by the applicant are aptly covered under Serial Number 17, sub-serial (viii) of the said Notification. In so far as the rate of tax applicable to the said service is concerned the Notification provides that the rate shall be as mentioned in Column (4) against the description of the service. The entry in Column (4) of the Notification against Serial No. 17 (viii) reads as follows: Same rate of integrated tax as applicable on supply of like goods involving transfer of title of goods. In the instant case satellite transponders had been leased out. Therefore the rate of tax applicable on the service of leasing of the satellite transponders shall be the same as the rate of tax as applicable on the supply of the satellite transponders. This brings us to the question of determination of the rate of tax on supply of service of leasing of sa....
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...., "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 First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification. Accordingly we make a reference to the Section Notes and Chapter Notes of the relevant Chapters of the Customs Tariff and also the corresponding Explanatory Notes. 6.11 Chapter 85 is covered under Section XVI and Chapter 88 is covered under Section XVII of the Customs Tariff Act. We proceed to examine the two competing entries sequentially. 6.12 The applicant has stated that the competing entry in the Tariff is 85256092- "Other Satellite Communication Equipment". The Tariff entry 8525 reads as under: Tariff Item Description 8525 Transmission apparatus for radio broadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing a....
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.... 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 VSAT Terminals' under the category of 'Others' also relates to an earth station. VSATs are Very Small Aperture Terminal (VSAT) and are two-way ground stations that transmit and receive data from satellites. The competing entry "Other Satellite Communication Equipment' immediately follows the VSAT entry. This throws light on the nature of the equipments covered under 'Other Satellite Communication Equipment'. Such equipments ought to be in the nature of equipments located on the ground and used to establish communication with the satellite much as VSATs. This leads one to the conclusion that these equipments shall not be located on the satellite, but on the ground and used to establish communication from the ground up with the satellite. The flow of the classification of the apparatus/equipments, thus, l....
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....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 stands complied with. 6.20 The second condition prescribes criterion of sole or principle use (paragraph (B)) inter alia stating that under Section Note 3, parts and accessories which are not suitable for use solely or principally with articles of Chapters 86 to 88 are excluded from those chapters. The effect of Note 3 is therefore 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. Further in case parts and accessories classifiable in two or more headings of the Section i.e. when certain parts and accessories are suitable for use on more than one type of article/ product they are to be classified in the heading relating to the parts and accessories of the ar....