TaxTMI 
TaxTMI 
2021 (1) TMI 542
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.... 18% 6 ACCEL Make Refrigeration System Spares 8414 18% 7 ACCEL Make Air Cooling Unit 8419 18% 8 ACCEL Make Air Cooling Unit Spares 8419 18% 9 ACCEL Make Air Conditioning System 8415 28% 10 ACCEL Make Air Conditioning System Spares 8415 28% 11 Works Contract of Cold Storage Plant with installation & Commissioning 9954 12% 12 Goods supply to Navy (Other Vessels) vide Notification No.01/2017-IT (Rate), S. No. 252 (Any Chapter) Part of Goods of Heading 8906 8906 5% 13 Service of Maintenance & Repair of ACCEL Made Items 9987 18% 2. The applicant further submitted that they also provide works contract of Cold Storage Plant with installation & Commissioning. Further, the applicant is also engaged in supplying Air Conditioning Plants on board to the Indian Navy (Other Vessels), vide Notification No.01/2017-IT (Rate), S. No. 252 (Any Chapter)-Part of Goods of Heading 8906. The applicant also undertakes the repair and maintenance of various "ACCEL" made items as above. 3. The applicant has received an enquiry from the Naval Dockyard (Vishakhapatnam) for composite supply entailing "Supply, Te....
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....0 TR Chilled Water Plant to Naval Dockyard (Vishakhapatnam). Question-2: Clarification in details is sought with regard to the HSN/SAC code applicable regarding the "Supply, Testing and Commissioning of 160 TR Chilled Water Plant" to Naval Dockyard (Vishakhapatnam). Question-3: Clarification is also sought on applicability of the Notification No. 01/2017-IT (Rate), S. No. 252 (Any Chapter) whether Chillar Water Plant may be categorised as "Any Parts" and subject to GST @ 5% under HSN 8906. 8. Further, the applicant, vide their letter dated 27.07.2020, submitted the additional submission, as below: I. Facts of the Case: (i) The applicant sought Advance Ruling in respect of the following question as below: "Whether Water Chiller Plants and other Refrigeration Systems and Air Conditioning Systems supplied by the Applicant intended for use in relation to the Warships, Vessels and Submarines meant for Indian Navy and Shipbuilders, attract 5% GST" (ii) The applicant also received Works Contract of Cold Storage Plant with installation and commissioning. (iii) Further, subject matter of present application relates to supplie....
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....art from the supply of the Water Chillar Plant, the contract also requires the applicant to provide services of "Testing & Commissioning" of the plant at the Dockyard. The plant being installed shall be mobile and movable since it will be installed on a Trailer to enable movement of same from one ship to another. (x) The applicant further submitted that the supply made of the Water Chillar Plant is essential for smooth operations of stationed Naval Ships since the engines and machines installed in the Naval ships need to be maintained under a fixed temperature to provide efficacy in operation and also prevent damage due to overheating. (xi) In the light of facts as given above, supplies made by applicant to Naval Dockyard for use in Warship, Vessels and Submarines being used by the Indian Navy, the applicant is required to determine the classification of the subject supplies and rate of tax applicable for the same. (xii) As per Section 2(30) of the CGST Act, 2017, "Composite Supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally....
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.... for the following reasons: (i) "Part of ships" do not have separate heading in the Tariff: (a) Explanation (iii) to Notification No.1/2017-IGST provides that the "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). (b) Further, Explanation (iv) provides that 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. (c) Section XVII of the First Schedule to the Customs Tariff Act, 1975, relates to "Vehicles, Aircrafts, Vessels and Associated Transport Equipment" including four chapters namely 86 (Railways), 87 (Vehicles Other than Railways), 88(Aircrafts) and 89 (Vessels). (d) While other three chapters have separate heading for parts and accessories (8607, 8708, 8714 & 8803). Chapter 89 does not have separate heading for parts and accessories. The heading in the Chapter, from ....
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....ifies the above aspect as under: "Contrary to the provisions related to the transport equipment falling in other Chapters of Section XVII, this Chapter excludes all separately presented parts (other than hulls) and accessories of vessels or floating structures, even if they are clearly identifiable as such. Such parts and accessories are classified in the appropriate headings elsewhere in the Nomenclature, for example: (1) The parts and accessories specified in Note 2 to Section XVII; (2) Wooden oars and paddles (heading 44.21); (3) Ropes and Cables of Textile Materials (heading 56.07); (4) Sails (heading 6306); (5) Masts, hatchways, gangways, rails and bulkheads for ships or boats and parts of hulls, having the character of metal structures of heading 7308; (6) Cables of iron or steel (heading 7312); (7) Anchors of iron or steel (heading 7316); (8) Propellers and paddle wheels (heading 8487); (9) Rudders (heading 4421, 7325, 7326, etc.) and other steering or rubber equipment for ships or boats (heading 8479). (k) Hence, the classification of "parts" of ships, particularly wh....
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....efore clearance of the said goods, a certificate from an officer not below the rank of a Rear Admiral of the Indian Navy or Coast Guard or Director General of Coast Guard or any other officer of the Indian Navy or Coast Guard equivalent to the Joint Secretary to the Government of India, to the effect that the said goods are intended for the said use, is produced to the proper officer. (g) Further, Notification No.12/2012-Cus also had the following entry: 459 Any Chapter Capital goods and spares thereof, raw materials, parts, material handling equipment and consumables, for repairs of ocean going vessel by a ship repair unit. (h) Notification No. 82/84-CE exempted all capital goods, components and raw materials falling under the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) and cleared for repair of goods falling under Heading Nos.8901, 8902, 8904 and 8905 (excluding floating or submersible drilling or production platforms) and 8906, by ship repair units from whole of excise duty. (i) From the above, the applicant states that it can be seen that whenever exemption is provided to goods meant for ships, etc. falling under Chapter 89, e....
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....r effectiveness in the use of the car as a whole is not a correct test. In our view, the correct test would be whether the article or articles in question would be an adjunct or an accompaniment or an addition for the convenient use of another part of the vehicle or a supplementary or secondary to the main or primary importance. Whether an article or part is an accessory cannot be decided with reference to its necessity to its effective use of the vehicle as a whole. General adaptability may be relevant but not by itself conclusive--------." (b) In the case of systems supplied by the applicant, the systems are a combination of parts as explained earlier, and are essential for the functioning of the warship, vessels and submarines and, hence, would qualify as parts of the ships. 8.4 The GST Notification is applicable so long as the goods are used in warships, vessels and submarines, whether for construction or repair or replacements: (a) The applicant submitted that they are of the view that the rate of 5% GST in terms of Sl. No.252 of Schedule I would apply whenever goods falling under any chapter are supplied, either as individual parts/ components or as syste....
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....e applicant prayed to pass an order holding that the water chillar plants supplied by the applicant for use in the warships, vessel and submarines to be deployed by the Indian Navy attract 5% IGST [OR 2.5% CGST + 2.5% SGST depending on the Place of Supply] in terms of Sl. No. 252 of Schedule I of Notification No.1/2017-Central Tax (Rate)/ Integrated Tax (Rate)/ SGST. 9. At the time of personal hearing held through Video Conferencing on 17.08.2020, the Authorised Representative of the applicant, CA Neha Vatsal Shah, reiterated the facts as stated in the Application and as mentioned herein above. DISCUSSION & FINDINGS: 10. We have considered the submissions made by the applicant in their application for advance ruling as well as at the time of personal hearing. We also considered the issue involved, on which advance ruling is sought by the applicant, relevant facts & the applicant's interpretation of law. 10.1 At the outset, we would like to state that the provisions of both the CGST Act and the GGST 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 ....
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....C Plant; (f) Chilled Water piping/Hoses; (g) Flat Bed mobile trolley on which the Chilled water plant is mounted. (v) After supplying said items, they will install the same at Dockyard and conduct the testing to see whether the water cooling work has been done properly and after successful testing, the commissioning would start. (vi) Thus, apart from the supply of the Water Chillar Plant, the contract also requires the applicant to provide services of "Testing & Commissioning" of the plant at the Dockyard. (vii) The plant being installed shall be mobile and movable since it will be installed on a Trailer to enable movement of same from one ship to another. (vi) The applicant further submitted that the supply made of the Water Chillar Plant is essential for smooth operations of stationed Naval Ships since the engines and machines installed in the Naval ships need to be maintained under a fixed temperature to provide efficacy in operation and also prevent damage due to overheating. (vii) In the light of facts as given above, supplies made by applicant to Naval Dockyard for use in Warship, Vessels and Submarines being used....
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....o be delivered to the applicant to provide services of installation, testing & commissioning of the "Trailer Mounted 160TR Chilled Water Plant" at the Naval Dockyard (Vishakhapatnam). Without these goods, the services cannot be supplied by the applicant and, therefore, we find that the goods and services are supplied as a combination and in conjunction and in the course of their business where the principal supply is supply of goods. Thus, we find that there is a composite supply with supply of goods being the principal supply i.e. 'Chilled Water Plant'/ 'Chiller' in the subject case. 16. We further find that the principal supply as mentioned above in this case is a supply of goods and, therefore, the GST will have to be paid on the goods at the appropriate rate after classification under the appropriate heading. The principal goods in the subject case is a 'Chilled Water Plant', which are most important for the applicant to render supply as per the Tender/ Purchase Order. We find that the final deliverable is nothing but ready to operate 'Chilled Water Plant'/ 'Chiller', which supply chilled water through flexible insulated hoses to Ships under refit i.e. ships under repair who....
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....uded in any of the headings of Chapters 84 and 85 are in all cases to be classified in their respective headings as per Note 2(a). 18.3 Note 4 to Section XVI are for classification of machines based on function which they perform: "Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function". 18.4 The chiller is mainly consisting of compressor (used to increase the pressure & temperature of the refrigerant vapour), evaporators (where cool liquid refrigerant absorbs heat from the chilled water circuit), expansive valve (used to maintain the pressure difference between the high pressure & low pressure sides of the chiller system) and condensers (where the refrigerant vapour is converted to liquid as it rejects heat). 18.5 This continuous, uses of refrigeration cycle by chiller for compression, evaporation and condensation of refrigerant ....
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....lant" ('Chiller'), we have gone through the respective entries of the Chapter heading 8418 in the Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 (hereinafter referred to as the said notification) and find that the goods of Chapter heading 8418 are covered in Entry at Sl. No.120 of the Schedule IV of said Notification, which read as under: Schedule IV-14% (CGST) S.No. Chapter/Heading/ Subheading/ Tariff item Description of goods 120. 8418 Refrigerators, freezers and other refrigerating or freezing equipment, electric or other; heat pumps other than air conditioning machines of heading 8415. It can be seen from above that goods of Chapter heading 8418 attract GST @ 28% (CGST: 14% + SGST:14%). 20.1 We further note that the Notification No.18/2018-Central Tax (Rate) dated 26th July, 2018 amended the Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 (w. e. f. 27th July, 2018, resulting that the goods of Chapter heading 8418 would be liable to be taxed @ 9% CGST and @ 9% SGST (in total taxable @18%) as per new entry No. 319A in Schedule III, as extracted below: Schedule III-9% S.No. Chapter/Heading/ Subheading/ Tariff item De....
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.... the 'Chilled Water Plant'/ 'Chiller' falling under Chapter sub-heading No. 8418 10. 23. The Contentions of the Applicant are that the GST Notifications do not mention any specific purpose, as has been done in the Customs/ Central Excise Notifications, it is the humble view of the applicants that Sl. No. 252 of Schedule I of the GST Notifications apply to all goods supplied independently or as an assembly/system for use in the ships, whether for manufacture/ construction or for repair etc.; that GST is a destination based consumption tax. GST rates are determined by the end use of the product by the consumers. The Water Chiller Plant being supplied by the applicant is meant for consumption by the Indian Navy for the Naval Ships stationed at the Dockyard to maintain the temperature and humidity of the Ships for machines and human comfort. Since the supplies effected by the applicant are meant for Indian Navy and Government of India is the end user of the said supplies for smooth operations of the priority sector being National Defence, GST rate applicable for essential sector-5% is in consonance with the intention of law; that the Chilled Water Plant/ Chiller supplied by the appl....