TaxTMI 
TaxTMI 
2018 (10) TMI 1871
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....t 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 "ICAT") dated 13.05.2015 and 27.02.2017 for Ciaz and Ertiga models supplied by the Applicant are enclosed as Annexure-A and B ....
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....VANCE 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 supplies under the said Act or the rules made thereunder" .........................Emphasis Supplied 11. in view of the above referred provision of the Compensation Cess Act, it can be concluded that all the pro....
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....n 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 recommendations of the Goods and Service Tax Council. 19. The relevant portion of Section 8 of the Compensation Cess Act is reproduced hereinunder: "8. (1) There shall be levied a cess on such intra-state supplies of goods or services or both, as provided for in section 9 of the wo Central Goods and Services Tax Act, and such inter-state supplies of goo....
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....i 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 issuance of the above referred Notification 05/2017-CC dated 11.09.2017, the Applicant filed a letter dated 19.09.2017 with Sh. R.K. Mahajan, Member-Budget and legal, CBEC seeking clarification on classification of the Ertiga and Ciaz models of the Applicant under sub-heading 5703 50 of the Customs Tariff Act, 1975 (hereinafter referred to as "CTA"). A copy of the letter dated 19.09.2017 is enclosed as Annexure-D. 23. In the interim period (since the billing and sales dispatches to the dealer....
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....ternal 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 2017, proposed to amend the HSN Explanatory Notes to Heading 8703 to cover the hybrid vehicles i.e. the vehicles which consist of both diesel engine as well as electric motor. Following this decision of the review sub-committee, the explanatory notes were amended. Corresponding amendment was brought in CTA in the year 2017 and new customs tariff entries 8703 40, 8703 50, 8703 60 and 8703 70 were introduced under the heading 8703. 29. On perusal of the above referred Heading 8703 of the CTA, it is clear that all motor cars and motor vehicles will be covered under t....
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.... 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. (General), New Delhi vs. Perstorp Electronics Ltd., reported at [2005 (186) ELT 532 (SC)] = 2005 (8) TMI 657 - SUPREME COURT. The relevant portion of the said decision is as under: "50. In our opinion, the Counsel is right in submitting that when the expression 'book' is not defined in the Act, natural and ordinary meaning of the said expression must be kept in view. ..... Emphasis Supplied 35. It is submitted that as the words 'both' and 'propulsion' are not defined/explained in the aforementioned notification, reference is made to the dictionaries to understand the meaning of the terms. 36. Mean....
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....icles 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 motor vehicle should consist of the IC engine as well as the electric motor. Thus, for the purpose of interpreting scope of SI. No. 48,the presence of both IC engine and motor is crucial, which is present in HEVs. The HEVs manufactured by the Applicant has both IC engine as well as electric motor which act as motors for propulsion 42. Now the next question to be determined is whether such electric motor can be said to be a 'motor for propulsion'. 43. In this regard, reference is drawn to the 44" Session along with 53 Session of the Harmonised System Review Sub-Committee. At these, sessions, it was proposed to introduce new tariff entries covering hybrid vehicles. Accordingly, customs tariff subheadings 8703 40 & 8703 50 were introduced the year 2017. Notably, these entries, when proposed, used the phrase 'as mo....
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....ittee, 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 40 or 8703 50, as the case may be. 49. In view of the above, it is submitted that HEVs manufactured by the Applicant has IC engine as well as electric motors and both these motors are used as motors for propulsion /driving. Therefore, HEVs manufactured by the Applicant clearly fall within the ambit of sl. No. 48 referred above. IC engine and electric motor work together to move HEVs forward 50. It has been explained in the facts stated earlier that pre-dominantly, the IC engine provides the force required for propulsion of HEVs and the IC engine is assisted by the electric motor at certain instances whenever the power demand from the vehicle is higher like acceleration. Thus, in certain instances like extra acceleration, if the vehicle requires additional force, the same is provided by the electric motor. Similarly, at the time of starting the vehicle, the electric motor provides the....
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....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, [2010 (258) ELT 321 (SC)) = 2010 (9) TMI 12 - SUPREME COURT, in which it was held that in order to resolve a dispute on tariff classification, internationally accepted nomenclature emerging from HSN explanatory nates, is a safe guide for classification. 58. The Hon'ble Tribunal in Mumbai the case of Nestle India Ltd vs. Commissioner of Central Excise, reported at, [2008 (227) ELT 631 (Tri. -Mum)] = 2008 (7) TMI 37 - CESTAT, MUMBAI following the ratio laid down by the Supreme Court held as under: "25. Moreover, it is now well settled by various decisions of the Hon'ble Apex Court that HSN Explanatory notes are not only of persuasive value, but are entitled to far greater consideration in classifying goods under the Central Excise and the Customs Tariff as held by the Hon'ble Supreme Court in the case of Collector of Customs, Bombay v. Business Forms Ltd - 2002 (142) E.L.T. 18 (S.C.) = 2002 (1) TMI 68 - SUPREME COURT following its earlier decision in the case of ....
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....or the-purpose of mechanical propulsion, these vehicles draw energy from both a consumable fuel and an electrical energy/power storage device (e.g., electric accumulator, capacitor, flywheel / generator). There are various types of Hybrid Electric Vehicles (HEVs), which can be differentiated by their powertrain configuration (such as, parallel hybrids, series hybrids, power-split or series-parallel hybrids) and degree of hybridization (i.e., full hybrids, mild hybrids and plug-in hybrids)" ' ................Emphasis Supplied 66. it Is pertinent to note that the HSN Explanatory Notes, extracted above, should be understood keeping in mind the intention of the sedan committee. Further, the HSN Explanatory Notes for heading 8703 expressly provides that this heading covers Hybrid Vehicles. It also provides that these hybrid vehicles draw energy from both consumable fuel and electrical energy for the purpose of mechanical propulsion. . It also clarifies that this heading will include Hybrid Vehicles of all types and degrees of hybridization including mild hybrid vehicles. Thus, in terms of the HSN Explanatory Notes, the vehicles which draw energy for mechanical propulsion, from th....
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....At this juncture; attention is invited to the definition of the term 'Hybrid Electric Vehicles' provided by US Department of Energy-Energy Efficiency and Renewable Energy, Alternative Fuels Data Centre, which is reproduced as under Https://afdc.energy.gov/vehicles/electric basics hev.html/): "Hybrid Electric Vehicles (HEVs) are powered by an internal combustion engine or other propulsion source that can run on conventional or alternative fuel in combination with an electric motor that uses energy stored in a battery. HEVs combine the benefits of high fuel economy and low tail pipe emissions with the power and range of conventional vehicles". 73. The International Energy Agency defines a 'Hybrid Electric Vehicle' as under [http://www.ieahev.Org/assets/1/7/lA-HEVAnnualReportMay20133MB.pdf/): "Hybrid Electric Vehicle (HEV) The 1990s definition of IA-HEV Annex I was "a hybrid electric vehicle (HEV) is a hybrid road vehicle in which at least one of the energy stores, sources or converters delivers electric energy". The International Society of Automotive Engineers (SAE) defines a hybrid as "a vehicle with two or more energy storage systems, both of which pro....
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.... configurations. * Mild hybrids - also called micro hybrids-use a battery and electric motor to help power the vehicle and can allow the engine to shut off when the vehicle stops (such as at traffic lights or in stop-and-go traffic), further improving fuel economy, Mild hybrid systems cannot power the vehicle using electricity alone. These vehicles generally cost less than full hybrids but provide less substantial fuel economy benefits than full hybrids. 'Full hybrids have larger batteries and more powerful electric motors and larger batteries, which can drive the vehicle on only electric power for shorter distances and at low speeds. These systems cost more than mild hybrids but provide better fuel economy benefits", 80. Further, reference is also made to the definitions provided by The International Energy Agency which is reproduced hereunder (http://www.ieahev.org/assets/1/7/IA-HEVAnnualReportMay20133MB.pdf/): "Full HEV: A full HEV; has the ability to operate all-electrically, generally at low average speeds. At high steady speeds such a HEV uses only the engine and mechanical drivetrain, with no electric assist At intermediate average speeds with intermittent load....
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....entions these models as Hybrid Engine Model. A copy of the certificate issued by international Centre for Automotive Technology dated 13.05.2015 (for Ciaz) in this regard is already enclosed as Annexure-A. Similarly, the certificate issued by ICAT. dated 27.02.2017 for Ertiga model of HEVs produced by the Applicant mentions this model as Hybrid Engine Model. A copy of the certificate issued by ICAT dated 27.02.2017 is already enclosed as Annexure-B. Further, the certificate issued by the Automative Research Association of India dated 18.08.2017 for S-Cross model of HEVs produced by the Applicant also mentions this model as a HEV. A copy of the certificate dated 18.08.2017 issued by Automotive Research Association of India is already enclosed as Annexure-C. 84. it is submitted that the brochures of the vehicles on basis of which the product is marketed to the customers specifically mentions these Vehicles as HEV. The full brochures and advertisement issued by the Applicant describing its vehicles as HEVs are already enclosed as Annexure H (for Ciaz), I (for Ertiga) and J (for S-Cross). 85. Once it is established that HEVs supplied by the Applicant are supplied in the market as &....
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....P) Ltd. v. C- C E., Nagpur -2006 (3) SCC 266 = 2006 (196) E.L.T. 3 (S.C.)] = 2006 (3) TMI 141 - SUPREME COURT; State of Goa v. Colfoax Laboratories - 2004 (9) SCC 83 = 2003 E.L.T. 18 (S.C.)] = 2003 (10) TMI 48 - SUPREME COURT; B.P.L. Pharmaceuticals v. C.C.E. - 1995Supp (3) SCC 1 = 1995 (77) E.L.T. 485 (S.C.)] = 1995 (5) TMI 98 - SUPREME COURT. ......................Emphasis Supplied 87. Reliance is also placed on the decision of Hon'ble Delhi Tribunal in the case of CCE vs. Kohinoor Rubber Mills, reported at, [1993 (67) ELT 816 (Tri. -Del)] = 1992 (12) TMI 144 - CEGAT, NEW DELHI, this case, the Hon'ble Delhi Tribunal, by applying the common parlance test held that the goods in dispute i.e. rubber rolls were classifiable under Heading 4016 and not as tubes, pipes, etc. under Heading 4009 as the rubber rolls are not known as tubes, pipes in common or commercial parlance. This decision of the Hon'ble Tribunal has been upheld by Hon'ble apex court in Kohinoor Rubber Mills vs. CCE, Chandigarh, reported at, [1997 (92) ELT 36 (SC) = 1997 (2) TMI 125 - SUPREME COURT. 88. Further, reliance is also placed on the decision of CCE, Delhi vs. Carrier Aircon Ltd., reported a....
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....upplied by it are covered under SI No. 48, it is necessary to determine the clause of column (3) within which these HEVs will fail. Evidently, HEVs supplied by the Applicant is neither an ambulance nor a three-wheeled vehicle. Further, HEVs supplied by the Applicant are of engine capacity not exceeding 1500ce but the length of these HEVs exceed 4000 mm. it is already provided in the facts above that these specifications in regard to HEVs supplied by the Applicant are determined as per the Motor Vehicles Act, 1988 and the rules made thereunder. 94. Thus, HEVs supplied by the Applicant is not of the specifications provided under clause (a), (b) and (c). Therefore, these HEVs would be covered under clause (d) of column (3) and are leviable to compensation cess at the rate of 15% as provided in column (4) of SI. No. 48 of Notification No. 01/2017-CC as amended by Notification No. 05/2017-CC. ISSUE REQUIRING ADVANCE RULING AND APPLICANT'S UNDERSTANDING: In the light of aforementioned, the Applicant seeks to enter the following question for Advance Ruling and its interpretation of the question will be as under: Question: Whether HEVs supplied by the Applicant are leviable t....
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.... 50 or 8703 70 (ii) have both compression-ignition internal combustion piston engine [diesel or semi- diesel] and electric motor as motors for propulsion (iii) other than 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 (iv) other than three wheeled vehicles (v) other than motor vehicles of engine capacity not exceeding 1500ce and of length not exceeding 4000 mm. 4. The applicant seeks advance ruling for three cars with model names "S-Cross", "Ertiga" and "Ciaz". As per the submissions made by the applicant, cars of these three models fulfill conditions (iii), (iv) and (v) above. We are also of the opinion that these conditions mentioned at S.No. (iii), (iv) and (v) mentioned the preceding para, have indeed been fulfilled. Hence, the matter which requires examination is as to whether the conditions mentioned at serial number (i) and (ii) in the preceding para is fulfilled by the models "S-Cross", "Ertiga" and "Ciaz". Further, as per the application filed by the applicant, these models are classifiable under chapter heading 8703 50. 5. Chapter hea....
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....During braking/ deceleration condition, the motor acts as a generator and charges the special high capacity battery. - The regeneration of energy assists the power function of the car. This helps the engine in providing optimal acceleration and performance. - The vehicle has idle start-stop function which helps the vehicle conserve precious fuel in certain idling conditions. 8. As per advance ruling application, this is a case of "Mild hybrids",- also called micro hybrids-use a battery and electric motor to help power the vehicle and can allow the engine to shut off when the vehicle stops (such as at traffic lights or in stop-and-go traffic), further improving fuel economy, Mild hybrid systems cannot power the vehicle using electricity alone. Further, the application also says that HEVs manufactured and supplied by the Applicant have a compact electric motor (Ciaz, Ertiga and S-Cross have electric motor of 1.779 kW, 1.779 kW and 1.772 kW capacity, respectively); that 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....