TaxTMI 
TaxTMI 
2021 (1) TMI 492
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.... position inside the car by using it to move the seat forwards and backwards as per their convenience to maintain safe posture and position while driving. • It helps in adjusting the position of the seat. • Additionally, 'seat adjuster' contain necessary safety features to protect the occupants in case of a collusion/accident. • Further, the major impact load in a collision is transferred through the 'seat adjuster', so it must be ensured that the mechanism has adequate strength to withstand the load because it plays an important role in protecting the car driver and co-passenger in the event of a crash. The 'seat adjuster' needs to be carefully designed, manufactured and fitted in way to meet the properties of a good car seat besides an attractive style. 2. The applicant has stated that prior to implementation of the Goods and Services Tax, they used to classify 'seat adjuster' under HSN 9401 and discharged applicable excise duty on the same and the specific HSN is mentioned below: Tariff item Description of Goods Unit Rate of Duty 9401 Seats (other than those of heading 9402, whether or not convertible into beds and part....
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.... applicant as a measure of caution and to avoid any steep interest liability changed the classification of 'seat adjuster' from HSN 9401 to HSN 8708 with effect from April 1, 2019 and paid the applicable GST from November 2017 and also paid the differential duty arising for which they have submitted a copy of the challan. However, the applicant believes that 'seat adjuster' is rightly classifiable under HSN 9401 and the applicable rate of CGST/GGST ought to be 9%. The applicant has also filed a letter with the jurisdictional officer on 29.05.2019 asserting their views and indicating that the payment of additional GST on account of change in classification is being made under protest and have submitted a copy of the said letter. They submitted that the present application is being preferred by the applicant to seek clarity on the appropriate classification of 'seat adjuster'. 3. The applicant has further stated that the product 'seat adjuster' attracted a net rate of 28% (CGST+GGST) under both the competing entries under Notification no.1. The relevant entries of Notification No.1 is tabulated herein below: S.No. Chapter/Heading/Sub-Heading/Tariff Item Description of Goo....
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....t adjuster'. The key functions can be summarized as below: • Seat Adjuster helps the driver and the passengers to get into the most comfortable position inside the car by using it to move the seat forwards and backwards as per their convenience; • It helps in adjusting the position of the seat; • Additionally, it also contains necessary safety features to protect the occupants in case of a collusion/accident; • Further, it is to be noted that the major impact load in a collision is transferred through the 'seat adjuster', so it must be ensured that the mechanism has adequate strength to withstand the load during a crash. It needs to be carefully fitted, designed and manufactured in way to meet the properties of a good car seat besides an attractive style. 4. The applicant has submitted that keeping in mind the above functions, the product can be classified either under Serial No. 170 or Serial No. 435A of Notification No.1. The necessary concomitant which follows is that if 'seat adjuster' is classified at Serial No. 170 under Chapter 87, the applicable net rate would be 28% cumulative of CGST/GGST and if the same is classified....
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....ein the meaning of part was held to be: "part as something essentially belonging to a larger whole, an integral portion". (iv) The applicant also places reliance on the Advance Ruling in the case of Mazagaon Dock Shipbuilders Limited [2019 (020) GSTL 0475 (AAR)] = 2018 (12) TMI 1153 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA wherein while referring to Cambridge Dictionary, the AAR observed that: "Part as a noun - a separate piece of something or a piece that combines with other pieces to form the whole of something. One of the pieces that together form a machine or some type of equipment." 5. The applicant has stated that on a cumulative analysis of the aforestated judicial precedents, the fact which crystallizes is that 'part' per se means a portion of an equipment or a machinery which is essentially linked to the functioning of that particular equipment or machinery. In other words, 'part' is an integral element of a machinery or an equipment without which the specific product cannot function. The 'part' in question should be so inextricably be linked to the product that the same cannot be brought into any form without the 'part' in question; that t....
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....' in question can only be used with 'seats' and nothing else. They are manufactured keeping in mind the purpose and functions of a 'seat' and are designed in a way so that they can be affixed only with 'seats'. Hence, they cannot be termed as mere 'accessory'. As a corollary, if the 'seat adjuster' in question do not qualify as 'accessory', the same has to be classified as 'part' at Serial No. 435A under Chapter 94 of Notification No.1 as amended by Notification No. 41. Thus, the applicant submits that based on the settled judicial cases and the nature of 'seat adjuster', they ought to be rightly classified under at Serial No. 435A under HSN 9401 of Notification No.1 as amended by Notification No.41. The 'seat adjuster' is an essential 'part' of 'seats' which helps the 'seats' to function properly, thereby completing it. The Applicant submits that without 'seat adjuster', 'seat' per se would be incomplete and therefore, the same needs to be treated as an essential 'part' of the 'seat' thereby classifiable under HSN 9401. 6. The applicant has submitted that on basis of the 'functional test' as well, 'seat adjuster' ought to be classified at Serial No. 435A under HSN 9401 and that....
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...., reference can be placed on Explanatory Notes to HSN to understand the scope and applicability of a particular Chapter. That HSN Explanatory Notes can be referred to for determining the classification of a product was observed in the case KSE Ltd v Comm. Of Customs, Cochin [2017 (352) ELT 46 (Tri-Bang)] = 2017 (5) TMI 1434 - CESTAT BANGALORE wherein it was held that "it is not disputed that the HSN explanatory notes have persuasive value. The Customs Tariff at the relevant time is fully aligned with the HSN and as such we are of the view that reference may be made to HSN for guidance as a legal aid." Further, in S. Narendrakumar & Co v Commissioner of Excise, Mumbai, 2011 (268) ELT 538 (Tri-Mum) = 2011 (3) TMI 64 - CESTAT, MUMBAI, the Hon'ble CETSAT also held that the Explanatory Notes serve as a proper aid of interpretation and classification while reference is being made to the Tariff schedule. 6.4 The applicant has submitted that Explanatory Notes to Chapter 94 states that "The heading also covers identifiable parts of chairs or other seats, such as backs, bottoms and arm-rests (whether or not upholstered) with straw or cane, stuffed or sprung) and spiral springs assembled f....
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....of the goods to attract it to the category it serve purposes of that entry. Although end-user is not the criteria for classification, but the very character and nature of goods when subscribe to a specific entry, that prevails over a general entry for classification. Therefore the classification sought by Revenue under CTH 9022 is appropriate for which appeal is dismissed." 7.2 The Applicant submits that on an analysis of the Explanatory Notes, it is stated that Chapter 94 is a specific entry with respect to 'seats' and its 'parts'. Classifying an essential 'part' of the 'seat' under Chapter 87 would render Chapter 94 otiose and redundant. As explained hereinabove, Explanatory Notes to Chapter 94 covers various aspect of 'seat' and 'seat adjuster' in question by virtue of their function form an essential 'part' of the 'seats'. On the other hand, Explanatory Notes of Chapter 87 covers 'parts' of motor vehicles and there is no specific entry per se which covers any part of the 'seats' under Chapter 87. Hence, as a corollary, the same ought to be appropriately classified under Chapter 94 since a specific entry prevails over a general entry. 8. The Applicant submits that 'common ....
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.... present factual scenario, it is to be analysed as to how the products in question are treated in the market. It can be said that the products in question by their very nomenclature gives the impression that the same is treated as 'part' of 'seats'. Even otherwise as well, the products in question are manufactured in conjunction with 'seats' by the applicant. Further, the purchase orders as raised by the customers on the Applicant also classify the same under Chapter 94 only. 8.2. The applicant places reference in the treatment accorded to the same at an international level. In USA, the 'seat adjuster' in question is also classified under Chapter 94 of HSN. The same has been fortified in Ruling CLA-2OT dated November 10, 2015 wherein 'seat adjuster' was specifically held to be part of the 'seat' and hence, classifiable under Chapter 94. It was held "Thus, the car seat adjuster is an essential part of the car seat, not an accessory, and is provided for in heading 9401, HTSUS, as seats and parts thereof. Again, this office said, under GRI 3(a), heading 9401, HTSUS provides a more specific description for car seat adjusters than does heading 8708, HTSUS. Therefore, the fully assemb....
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....ought to classified at Serial No. 435A under Chapter 94. 9. The applicant has concluded his submission by stating that 'seat adjuster' rightly merit classification under Chapter 9401 at Serial No. 435A to Notification No. 1 as amended by Notification No. 41. Therefore, the said product ought to be taxable at 9% CGST and 9% GGST. He has put forward the following question on which advance ruling is required: "Whether the product namely 'seat adjuster' merits classification under Serial No.170 as per Notification No.1/2017-Central Tax (Rate) dated 28.06.2017 or under Serial No.435A of Notification No.1/2017-Central Tax(Rate) dated 28.06.2017 as amended by Notification No.41/2017-Central Tax(Rate) dated 14.11.2017?" DISCUSSION & FINDINGS 10. We have considered the submissions made by the applicant in their application for advance ruling as well as the arguments/discussions made by their representative Shri Omkar Sharma at the time of personal hearing. We have also considered the issues involved on which Advance Ruling is sought by the applicant. 11. At the outset, we would like to state that the provisions of both the Central Goods and Services Tax Act, 2017 and th....
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....14% CGST). The applicant, as a measure of caution and to avoid any steep interest liability, changed the classification of 'seat adjuster' from HSN 9401 to HSN 8708 with effect from April 1, 2019 and paid the applicable GST from November 2017 and also paid the differential duty arising for which they have submitted a copy of the challan. However, the applicant believes that 'seat adjuster' is rightly classifiable under HSN 9401 and the applicable rate of CGST/GGST ought to be 9%. The applicant has also filed a letter with the jurisdictional officer on 29.05.2019 asserting their views and indicating that the payment of additional GST on account of change in classification is being made under protest and have submitted a copy of the said letter. They submitted that the present application is being preferred by the applicant to seek clarity on the appropriate classification of 'seat adjuster'. The applicant has put forward the following question on which advance ruling is required: "Whether the product namely 'seat adjuster' merits classification under Serial No.170 as per Notification No.1/2017-Central Tax (Rate) dated 28.06.2017 or under Serial No.435A of Notification No.1/....
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.... 8708 10 90 --- Other -- Other parts and accessories of bodies (including cabs) : 8708 21 00 -- Safety seat belts 8708 29 00 -- Other 8708 30 00 - Brakes and servo-brakes; parts thereof 8708 40 00 - Gear boxes and parts thereof 8708 50 00 -Drive-axles with differential, whether or not provided with other transmission components, non-driving axles; parts thereof 8708 70 00 - Road wheels and parts and accessories thereof 8708 80 00 - Suspension systems and parts thereof (including shock absorbers) - Other parts and accessories: 8708 91 00- Radiators and parts thereof - 8708 92 00- Silencers (mufflers) and exhaust pipes; parts thereof 8708 93 00 -- Clutches and parts thereof 8708 94 00 --Steering wheels, steering columns and steering boxes; parts thereof 8708 95 00 -- Safety airbags with inflater system; parts thereof 8708 99 00 -- Other 15.1 We find that Heading 8708 of the First Schedule to the Customs Tariff Act covers "Parts and accessories of the motor vehicles of headings 8701 to 8705". Motor vehicles covered under the headings 8701 to 870....
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....'seat' which helps the driver or passenger to slide the seat back and forth, as per his convenience/requirement and comfort, with the operation of a lever forming part of the rail assembly. However, it cannot be considered a 'part' of the seat as stated by the applicant as it is not an essential component of the seat i.e. the seat is complete and fully functional even without it. We find that the 'seat adjuster' merely helps in the adjustment of the seat i.e. moving it back and forth as per requirement/convenience and merely improves the efficiency and convenience of the seat but does not form a part of the seat. Thus it can be concluded that the 'seat adjuster' is just an 'accessory' which improves the efficiency and convenience of the seat. Since the 'seat adjuster' is an accessory of the seat which is an essential part of the motor vehicle, it would be aptly covered under the Sub-heading 87089900 as 'accessory' of the motor vehicle under the head "Parts and accessories of the motor vehicles". 15.4 In this regard, the applicant has submitted that reference is also to be made to Explanatory Notes to Chapter 87, which covers various equipments affixed to a motor vehicle and it g....
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....tly fixed into motor vehicles for the protection of persons; floor mats (other than of textile material or unhardened vulcanised rubber), etc. Assemblies (including unit construction chassis-bodies) not yet having the character of incomplete bodies e.g. not yet fitted with doors, wings (fenders), bonnets (hoods) and rear compartment covers, etc., are classified in this heading and not in heading 87.07. (C) Clutches (cone, plate, hydraulic, automatic, etc., but not the electro-magnetic clutches of heading 85.05), clutch casings, plates and levers, and mounted linings. (D) Gear boxes (transmissions) of all types (mechanical, overdrive, preselector, electro-mechanical, automatic, etc.); torque converters; gear box (transmission) casings; shafts (other than internal parts of engines or motors; gear pinions; direct-drive dog-clutches and selector rods, etc. (E) Drive-axles, with differential; non-driving axles (front or rear); casings for differentials; sun and planet gear pinions; hubs, stub-axles (axle journals), stub-axle brackets: (F) Other transmission parts and components (for example, propeller shafts, half-shafts; gears, gearing; plain shaft b....
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....o any specific item (in the instant case 'seat') or its parts or accessories, it does not necessarily mean that the parts or accessories, which are not covered in the ambit of this list, cannot be or should not be classified under the said heading. From a bare reading of the Chapter Heading 8708.00, it can be derived that it covers parts and accessories of motor vehicles and this chapter heading is wide enough in its scope so as to cover all accessories of motor vehicles which would also cover accessories to seats. We are therefore of the opinion that the parts and accessories of motor vehicles, subject to relevant conditions, which are not covered under any of the Sub-headings starting from 87081010 to 87089500 under the Heading 8708 would be invariably covered under the Sub-heading 87089900. In the instant case, heading 8708 covers "parts and accessories of the motor vehicles of headings 87.01 to 87.05 (other than specified parts of tractors). Further, as discussed earlier, 'seat adjuster' does not form a part of the seat of a motor vehicle but is just an 'accessory' of the seat and since the seat is an essential part of the motor vehicle, the said accessory automatically becomes....
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....e of duty. The classification list filed by the assessee was approved. Acting on specific information that the assessee was short paying the excise duty by classifying its products as motor vehicles parts and accessories, the factory premises of the assessee was visited by a team of officers of Central Excise MOD-III on 8.12.1998. They physically verified the items being manufactured by the assessee. As per the statement of the authorized signatory of the assessee, they were supplying Rail Assembly Frost Seat Adjuster and Assembly Slider Seat to M/s. Bharat Seats Ltd. and M/s. Krishna Maruti Ltd. which were manufacturing car seats falling under chapter heading 9401.00 and were supplying to M/s. Maruti Udyog Limited. After completion of investigation, two show cause notices dated 4.2.1999 and 5.7.1999 were issued to the assessee demanding Rs. 9,50,995/- on the ground that they had misclassified the product as parts and accessories of motor vehicles under Chapter heading 8708 paying 15% excise duty whereas it was correctly classifiable under Chapter Heading No.9401 on which excise duty payable was 18%. The same were confirmed by the adjudicating authority vide order dated 24.11.1999.....
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....oduced above, it is clear that Chapter Heading 8708.00 covers parts and accessories of motor vehicles and this chapter heading is wide enough in its scope so as to cover all accessories of motor vehicles whereas Chapter heading 9401.00 covers all type of seats and parts thereof. This is an admitted position that the assessee was supplying the products manufactured by it directly to M/s Maruti Udyog Limited which manufactures cars and not seats. M/s Maruti Udyog Limited has given a specific part number to the goods in question and issued purchase orders in the name of the assessee. However, later on, only invoicing pattern was changed for some goods wherein the assessee received purchase orders directly from M/s Maruti Udyog Limited but invoices were raised to M/s Krishna Maruti Udyog Limited and M/s Bharat Seats Limited just for the sake of convenience and economy. The payment for the same was received directly from M/s Maruti Udyog Limited. Merely supplying the material through M/s Bharat Seats Limited and M/s Krishna Maruti Limited which are manufacturing seats classifiable under chapter heading 9401.00 does not lead to the conclusion that the products in question fall u....
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....ck and forth with the operation of a lever forming part of other rail assembly front seat adjuster. This enables the driver or the passenger, to adjust the position of the seat to suit his comfort and convenience. These are merely to improve the efficiency and convenience of the seat and does not form part of the seat. The seats are complete in themselves without these mechanisms and therefore it cannot be held that the parts manufactured by the assessee merit classification under chapter 9401. Rather the same would be accessories to the motor vehicle as claimed by the assessee and would merit classification under chapter heading 8708, because they are fitted in the motor car for adjustment of the seats for the convenience and comfort of the passengers. The Rail Assembly front seat (Omni), Adjuster/assembly slider seat, YE-2 rear back lock assembly and 1000cc rear back lock assembly being manufactured by the assessee can at best be termed as accessories to the motor vehicle for better convenience of the passengers/drivers travelling in the car. For the reasons stated above, we do not find any merit in the appeal filed by the revenue and dismiss the same with no order as to....
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....e, 'seat adjuster' per se might not seem to be 'essential' to the completion of 'seats', the functions it performs are indispensable for the 'seats' to work. 'Seat adjuster' allows the 'seat' to be complete in shape and perform the respective functions. Without affixing the same, a 'seat' can be rendered dysfunctional. (iii) The 'seat adjuster' in question can only be used with 'seats' and nothing else. They are manufactured keeping in mind the purpose and functions of a 'seat' and are designed in a way so that they can be affixed only with 'seats'. Hence, they cannot be termed as mere 'accessory'. As a corollary, if the 'seat adjuster' in question do not qualify as 'accessory', the same has to be classified as 'part' at Serial No. 435A under Chapter 94 of Notification No.1 as amended by Notification No. 41. The 'seat adjuster' is an essential 'part' of 'seats' which helps the 'seats' to function properly, thereby completing it. The Applicant submits that without 'seat adjuster', 'seat' per se would be incomplete and therefore, the same needs to be treated as an essential 'part' of the 'seat' thereby classifiable under HSN 9401. (iv) As per the Explanatory Notes t....
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....ders Limited [2019 (020) GSTL 0475 (AAR)] = 2018 (12) TMI 1153 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA While referring to Cambridge Dictionary, the AAR observed "Part as a noun - a separate piece of something or a piece that combines with other pieces to form the whole of something. One of the pieces that together form a machine or some type of equipment." (v) Supreme Motors v State of Karnataka [1987 (27) ELT 409 (Kar)] = 1983 (8) TMI 65 - KARNATAKA HIGH COURT: While analyzing the meaning of the word 'accessory' observed that accessory is the supplementary or secondary to something of greater or primary importance' 'additional', 'any of several mechanical devices that assist in operating or controlling the tone resources of an organ'. 'Accessories' are not necessarily confined to particular machines for which they may serve as aids. The same item may be an accessory of more than one kind of instrument." (vi) Sanmar Electronics Corporation Limited v UOI [2010 (252) ELT 332 (Mad] = 2009 (12) TMI 259 - MADRAS HIGH COURT: It was held that "the goods must also be classified according to their popular meaning and also the commercial sense as well. The court has to ....
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....the interpretation of items in the list of taxable goods are no more res integra. Various principles or tests have been evolved by the Supreme Court from time to time for interpretation of items of taxable goods. One of the well-known principles of interpretation is that words of everyday use must be construed not in the scientific or technical sense but as understood in the common parlance. If a statute contains a language which is capable of being construed in a popular sense, such a statute should not be construed according to the strict or technical meaning of the language contained in it but it should be construed in its "popular sense", meaning thereby the sense which people conversant with the subject matter with which the statute is dealing would attribute to it. The principles that emerge from the above interpretation can be summed up thus: Where no definition is provided in the statute for ascertaining the correct meaning of a fiscal entry, the same should be construed as understood in common parlance or trade or commercial parlance. Such words must be understood in their popular sense. The strict or technical meaning or the dictionary meaning of the entry is not be resor....
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....omething which means that a 'part' is an essential component of the whole without which the whole cannot be complete or cannot function. Ideally, the parts of a seat would be the seat back (squab), seat base(cushion) and the head-rest i.e. these are the essential parts of a seat required to make it a whole or to complete it and enable it to function as a seat. Absence of a 'seat adjuster' in the seat does not make it incomplete or dysfunctional, as stated by the applicant, as it would continue to be a 'seat' even without a 'seat adjuster'. Also the 'seat adjuster' does not give any shape or structure to the seat but merely helps the seat to slide back and forth as per the convenience/requirement or comfort of the driver or passenger. Therefore, we can safely conclude that a 'seat adjuster' cannot, by any stretch of imagination, be defined as a part of a 'seat' as it is not an essential component of the 'seat' i.e. the 'seat' is complete and fully functional without it. Further, as per definition, 'accessories' are different from parts as it is not an essential component of the whole without which the whole cannot be complete or function, but it is a thing which can be added....