TaxTMI 
TaxTMI 
2018 (10) TMI 1871
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.... 2. The HEVs so supplied by the Applicant consist of a compression-ignition internal combustion piston engine (IC engine), also known as diesel engine, paired with an integrated starter generator (ISG) which supplements the engine's power and enables acceleration. The relevant specifications of the three HEVs are provided in the following table: Technical Specifications Models S-Cross Ertiga Ciaz Overall width (mm) 4300 4296 4505 Overall width (mm) 1785 1695 1730 Overall height(mm) 1595 1685 1485 Engine Capacity(cc) 1248 1248 1248 Fuel Tank Capacity(1) 48 45 43 3. It is pertinent to mention that the aforementioned specifications in regard to HEVs supplied by the Applicant are determined as per Rule 93 and 124 of the Motor Vehicles Rules, 1989, as amended from time to time, which provides the methodology to determine the dimensions, safety standards and fuel efficiency of the vehicle. 4. A copy of the certificate issued by International Centre for Automotive Technology (A Division of NATRIP Implementation Society (NATIS), Govt, of India) (hereinafter referred to as "ICA....
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....TEMENT CONTAINING APPLICANT'S INTERPRETATION OF LAW AND/OR FACTS. AS THE CASE MAYBE. IN RESPECT OF THE QUESTION(S) ON WHICH ADVANCE RULING IS REQUIRED. APPLICANT'S ELIGIBILITY FOR ADVANCE RULING: 10. Section 11(1) of the GST (Compensation to States) Act, 2017 (hereinafter referred to as the 'Compensation Cess Act') provides that all provisions of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the 'CGST Act') and the rules made thereunder, shall be applicable in relation to the levy and collection of the cess leviable under Section 8 of the Compensation Cess Act. The relevant portion of Section 11(1) of the Compensation Cess Act is reproduced hereunder: "(1) The provisions of the Central Goods and Services Tax Act, and the rules made thereunder, including those relating to assessment, input tax credit, non-levy, short-levy, interest, appeals, offences and penalties, shall, mutatis mutandis, apply in relation to the levy and collection of the cess leviable under section 8 on the intra-state supply of goods and services, as they apply in relation to the levy and collection of central tax on such inter-State s....
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....ING ADVANCE RULING: 16. The Applicant submits the following question for Advance Ruling and its interpretation on the question as under: c. Whether HEVs supplied by the Applicant are leviable to Compensation Cess at the rate of 15% as prescribed under Sl. No. 48 of Notification No. 01/2017-Compensation Cess (Rate) dated 28.06.2017 (hereinafter referred to as Notification No. 01/2017-CC} as amended by Notification No. 05/2017-Compensation Cess (Rate) dated 11.09.2017 (hereinafter referred to as Notification No. 05/2017-CC)? Applicant's understanding: 17. In the understanding of the Applicant, HEVs supplied by the Applicant are leviable to concessional rate of Compensation Cess i.e. 15% under SI. No. 48 of Notification No. 01/2017-CC as amended by Notification No. 05/2017-CC. Applicable provisions: GST (Compensation to States) Act, 2017 18. Section 8 of the Compensation Cess Act, is the charging section which provides that a compensation cess shall be leviable on supplies of goods or services or both as specified in column (2) to the Compensation Cess Act, at such rate, as may be notified by the Government on the reco....
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.... 21, The above referred Notification No. 01/2017-CC was amended by Notification No.05/2017-CC which substituted SI. No. 48 and 52 of Notification No. 01/2017-CC. The amended SI. No. 48 and 52 are as under: S.No. CHAPTER/HEADING/SUB-HEADING/TARIFF ITEM DESCRIPTION OF GOODS RATES OF GOODS AND SERVICES TAX COMPENSATION CESS 48 8703 60, 8703 70 Following Vehicles, with both compression- ignition internal combustion piston engine (diesel or semi diesel) and electric motor as motors for propulsion; a) Motor vehicles cleared as ambulances duly fitted with all the fitments, furniture and accessories necessary for an ambulance from _ the factory manufacturing such motor vehicles c) Motor vehicles of Nil engine capacity not exceeding 1500cc and of length not exceeding 4000 mm. NIL d) Motor vehicles other than those mentioned at (a), (b) and (c) above, 15% Explanation- For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under. 52 8703 Motor vehicles of engine capacity not exceeding 1500cc 17% 22. After the iss....
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....or sub-heading 8703 50,8703 70. The relevant extract of Heading 8703 of the CTA is provided below for quick reference: TARIFF ITEM DESCRIPTION OF GOODS (1) (2) 8703 Motor Cars and other motor vehicles principally designed for the transport of persons (other than those of heading 8702), including station wagons and racing cars. 8703 40 Other vehicles, with both spark-ignition internal combustion reciprocating piston engine and electric motor as motors for propulsion, other than those capable of being charged by plugging to external source of electric power 8703 50 Other vehicles, with both compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor as motors for propulsion, other than those capable of being charged by plugging to external source of electric power. 8703 70 Other vehicles, with both compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor as motors for propulsion, capable of being charged by plugging to external source of electric power 28. It is pertinent to note that the Harmonised System Review Sub-Committee during its 44" session in 201....
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....l entry for vehicles falling under Heading 8763 of the CTA and thus, would be leviable to the compensation cess at the rate mentioned in column (4) corresponding to SI. No. 52 which is 17%. Analysis of SI. No. 48 of Notification No. 01/2017-CC as amended by Notification No. 05/2017-CC 32. On a careful perusal of amended Sl. No, 48 of Notification No. 01/2017-CC referred above, it is clear that this entry would cover all those vehicles which have both compression-ignition internal combustion piston engine (diesel or semidiesel); and electric motor as motors for propulsion. Further, depending on the specifications of the motor vehicles, as provided in column (3), the appropriate cess provided in column (4) shall be levied. 33. To analyse SI. No 48, it is necessary to understand the meaning of the terms 'propulsion and 'both' used therein. 34. It is a settled principle of law that to understand meaning of any word used in a statute, but not defined therein, reference can be made to the meanings given in any other statute or dictionary. Reliance in this regard can be placed on the decision of Hon'ble Apex Court in the case of C.C. (Ge....
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....r propulsion' it is dear that any action or activity which causes or urges to cause movement in a body is called propulsion. Thus, the act of pushing or causing a body to move is propulsion. 38. Meaning of the term 'both': i. I Major Law Lexicon (4" Edition, 2010): 'the one and the other; the two without the. exception of the other'. 39. In view of the above referred meaning of the term 'both', it is Clear that the usage of the term 'both' suggests that the two things are indispensable and out of the two, none can be excepted or ignored. 40. Thus, while Interpreting the scope of SI, No. 48 in light of the above referred meanings of the terms 'propulsion' and 'both', it is amply clear that SI. No. 48 would cover all those vehicles which have IC engine, and an electric motor. Further, the IC engine and electric motor should be the motors for propulsion i.e. these motors should be able to move or push the vehicle in forward direction. 41. As discussed above, it is submitted that the use of the term 'both in Sl. No. 48 clarifies that to fall within the ambit of SI. No. 48, a mo....
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....re driven by the IC engine and thus, the IC engine is acting as a motor for propulsion in as much as it is providing the necessary push to move the vehicle. 47. Further, at certain points viz. at the time of starting the HEVs, the electric motor starts the engine and thereafter, the IC engine takes over for further movement of HEVs. It is pertinent to note that the activity of starting the engine is to put HEVs in moving condition and therefore, the electric motor is acting as motor for propulsion. Also, at certain instances the electric motor provides additional push to the IC engine to accelerate HEVs and thus, acting as a motor for propulsion. 48. Further, on the basis of the functions performed by such electric motor, it can be said that the electric motor is used in the HEVs towards the driving of such vehicle. Therefore, in view of the reasons put forth by the Committee, it can be said that the electric motor is, though not independently, contributing towards the driving of the vehicle, can be said to be acting as a 'motor for driving or 'motor for propulsion. Therefore, the same would be covered within the ambit of customs tariff sub-headings 8703 4....
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....em Description of goods (1) (2) 8703 50 Other vehicles, with both compression-ignition internal combustion piston engine (diesel or semi diesel) and electric motor as motors for propulsion, other than those capable of being charged by plugging to external source of electric power 55. It is pertinent to note that the above referred sub-heading 8703 50 of the CTA is pari materia to SL No. 48 and thus, the interpretation and scope of this sub-heading would be equally applicable to the scope of SI. No. 48: 56. At this juncture, it is submitted that the HSN Explanatory Notes constitutes the official interpretation of the nomenclature at the international level While not legally binding, they do represent the considered views of classification experts of the Harmonized System Committee, ft is well settled that the explanatory notes have persuasive value and in the event of disputes, the Indian Courts have upheld seeking recourse to the explanatory notes while determining classification of products. 57. Reliance in this regard is placed on the decision of Hon'ble Supreme Court in L.M.L. Limited vs. Commissioner of Customs, reported at, [....
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....h vehicles are environment friendly with regard to emission of tailpipe pollutants. 63. It was also pointed out in the meeting that the current nomenclature in the HSN is stipulated on the basis of types of internal combustion piston engines and such a simple nomenclature is not enough to reflect the world trade of motor vehicles, taking into account the remarkable changes in technology. 64. In accordance with the proposals, the committee amended the HSN Explanatory Notes to Heading 8703 to cover the hybrid vehicles, Subsequently, in India, the CTA was amended in the year 2017 and new customs tariff entries 8703 40,8703 50, 8703 60 and 8703 70 were introduced under the heading 8703. 65. Further, to understand the scope and ambit of this customs tariff sub-heading, reference is to be made to the HSN Explanatory Notes to customs tariff heading 8703 which reads as under: "Vehicles, which have the combination of an internal combustion engine and one or more electric motors, are known as "Hybrid Electric Vehicles (HEVs). For the-purpose of mechanical propulsion, these vehicles draw energy from both a consumable fuel and an electrical energy/power stor....
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....961 (3) TMI 55 - SUPREME COURT and M/s Motipur Jamindary Co. Ltd. v. State of Bihar, AIR 1962 S.C. 660 = 1961 (11) TMI 58 - SUPREME COURT and the State of West Bengal v. Washi Ahmed, (1977) 3 SCR 199 = 1977 (3) TMI 127 - SUPREME COURT that in a taxing statute words of everyday use must be construed not in their scientific or technical sense but as understood in COMMON PATIANCE.......... ...............Emphasis Supplied 70. In view of the above referred decision, it becomes clear that in case a word is not defined in statute, the same shall be given the meaning in accordance with the common or commercial parlance. 71, As discussed above, the words 'Hybrid Vehicles' are not defined in any statute and therefore, by applying the principle enunciated in the above referred decision it becomes pertinent to understand 'Hybrid Vehicles' as understood in the common parlance. The Oxford Advanced Learner's Dictionary defines 'hybrid' as 'something that is the product of mixing two or more different things (adj) hybrid flowers, a hybrid language system.': 72. At this juncture; attention is invited to the definition of the term &#....
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.... train configuration: Parallel Hybrids, Series Hybrids, Power Split or Series-Parallel Hybrids. b. On the basis of degree of hybridisation: Full Hybrids, Mild Hybrids or Plug-in Hybrids. 77. For the purpose of instant application, the Applicant is only considering the different types of hybrid electric vehicles on the basis of degree of hybridisation. 78. It is to be noted that the term "Mild Hybrid Electric Vehicle" has not been defined in the HSN Notes or the CTA. However, the said 44"' Session describes "mild parallel hybrid vehicles" as the ones which generally use a compact electric motor (usually <20 kW) to provide auto-stop/start features and to provide extra power assist during the acceleration, and to generate on the deceleration phase (regenerative braking). 79 Besides the above, to understand the different types of Hybrid Electric Vehicles, reference is made to the definitions provided by the US Department of Energy-Energy. Efficiency and Renewable Energy, Alternative Fuels Data Centre, as under (https://www.afdc.energy.gov/vehicles/electric_basics_hev.html/'): "HEVs can be either mild or full hybrids, and ful....
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....this compact motor in such HEVs provides assistance to the IC engine for propelling the vehicle and in other instances such as start-stop etc. These HEVs supplied by the Applicant draws energy from the consumable fuel as well as electrical energy. Further, in such HEV's the degree of hybridization is to the extent that electric motor provides assistance to the IC engine. The electric motor assists the IC engine mainly when driver demands acceleration (press accelerator pedal above certain threshold). This function is enabled subject to battery charging condition up to a certain level Therefore, such HEVs are mild hybrid vehicles. However, it is pertinent to mention that the SI. No. 48 of Notification No. (1/2017-CC does not make a distinction between the types of hybrid vehicles while providing reduced rate of compensation cess. 83. It is further submitted that as per the commercial parlance, HEVs supplied by the Applicant are Hybrid Vehicles and these vehicles are also marketed as Hybrid Vehicles only. A copy of the brochure and advertisement issued by the Applicant describing its vehicles as HEVs are enclosed as Annexure H (for Ciaz), I (for Ertiga) and J (for S-Cros....
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.....C.)] = 1994 (7) TMI 88 - SUPREME COURT. Whether a particular article will fall within a particular Tariff heading or not has to be decided on the bases of the tangible material or evidence to determine how such as article in understood in 'common parlance' or in 'commercial world' or in trade circle or in its popular sense meaning. It Is they who are concerned with It and it Is the sense in which they understand it that constitutes the definitive index of the legislative intension, when the statute was enacted [see D.C.M. vs. State of Rajasthan, 1980 (4) SCC 71 = 1980 (6) E.L.T.383 (S.C.)] = 1980 (5) TMI 31 - SUPREME COURT. One of the essential factors for determining whether a product falls Chapter 30 or not is whether the product in understood as a pharmaceutical product in common parlance [see C.C.E. v. Shree Baidyanath Ayurved, 2009 (12) SCC 413 = 2009 (237) E.L.T. 225 (S.C.)] = 2009 (4) TMI 6 - SUPREME COURT; Commissioner of Central Excise, Delhi v. ishaan Research Lab (P) Lid. - 2008 (13) SCC 349 = 2008 (230) E.L.T. 7 (S.C.)] = 2008 (9) TMI 4 - SUPREME COURT. Further, the quantity of medicament used in a particular product will also not be a relevant factor far, ....
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....ference can be made to the interpretation or scope of any other statute whose language is pari-materia to the statute under consideration. In this regard, reliance is placed on the decision of Hon'ble Apex Court in the decision of CC, Bangalore vs. Maestro Motors Ltd. reported at, [2004 [174) ELT 289 (SC)] = 2004 (12) TMI 86 - SUPREME COURT. In this case, it was held that when in a notification, exemption is with reference to an item in the schedule to CTA then the interpretative rules applicable to, such tariff is equally applicable to interpret such notification. 91. It is submitted that as SI. No. 48 is pari-materia to sub-heading 8703 50 of the CTA and therefore, the scope and ambit of the sub-heading 8703 50 of the CTA, as provided in the HSN Explanatory Notes, shall be equally applicable to determine the scope and ambit of SL No. 48. Thus, the vehicles which are covered under the scope of sub- heading 8703 50 of the CTA are also covered within the scope of SI. No. 48 of Notification No. 01/2017-CC as amended by Notification No. 05/2017-CC. 92. In view of the above discussion, it can be safely concluded that HEVs supplied by the Applicant are Hybrid Vehic....
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....the applicant seeking advance ruling is regarding applicability of S.No.48 of Notification No.1/2017-Compensatibn Cess (Rate) dt.28.06.17, as amended vide Notification No.05/2017-Compensation (Cess) Rate dt. 11.09.17 to the motor vehicles. being manufactured/supplied by the applicant S.No CHAPTER/HEADING/ SUB-HEADING/ TARIFF ITEM DESCRIPTION OF GOODS RATES OF GOODS AND SERVICES TAX COMPENSATION CESS 48 8703 60, 8703 70 Following Vehicles, with both compression- ignition internal combustion piston engine (diesel or semi diesel) and electric motor as motors for propulsion; a) Motor vehicles cleared as ambulances duly fitted with all the fitments, furniture and accessories necessary for an ambulance from the factory manufacturing such motor vehicles c) Motor vehicles of Nil engine capacity not exceeding 1500cc and of length not exceeding 4000 mm. NIL d) Motor vehicles other than those mentioned at (a), (b) and (c) above, 15% Explanation- For the purposes of this entry, the specification of the motor vehicle shall be determined as per the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under. 52 8703 Motor v....
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....refore, the only points which needs to be examined is whether the car models for which advance ruling has been sought by the applicant are "with both compression-ignition internal combustion piston engine (diesel or semi-diesel) and electric motor as motors for propulsion". This phrase also makes clear that there has to be one compression-ignition internal combustion piston engine for propulsion, As per the instant application, this requirement stands fulfilled in all the models of the cars in respect of which the instant advance has been sought The other requirement is that of electric motor and the phrase "motors for propulsion" clearly means that both motors. should be capable of propulsion. Thus, in unambiguous terms the words used "motors for propulsion" makes it mandatory for the electric motor also to be capable or propelling the vehicle on its own. "Motors for propulsion" means that both motors should be capable of propelling the vehicle. 7. The advance ruling application itself says that: - Besides IC engine, an electric motor is also present which provides assistance to the IC engine as and when required - Notably, at certain driving conditions such a....