TaxTMI 
TaxTMI 
2021 (3) TMI 448
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....llikulam Village, Melur Taluk, Madurai -625122 (hereinafter called the 'Applicant') is registered under the GST Vide GSTIN 33AABCF1689G1ZQ. They are engaged in the manufacture and sale of "Air Springs" which are used in air suspension system for buses, trucks and trailers. They have sought Advance Ruling on the following question: Whether "Air Springs" manufactured and supplied by them will be correctly classifiable under Tariff heading 40169990 as opposed to Tariff heading 8708 9900 and attract GST at the rate of 18%. The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The Applicant has stated that the composition, function and usage of the 'Air Springs' manufactured and sold by them are as below: * Composition & Description of 'Air Springs': The 'Air Springs' manufactured and sold by the Applicant are composed of a rubber bellow which includes rubber and fabric composite, beadwire, griddle hoop, crimped top plate, piston and a bumper. The material composition of such 'Air Spring' is ap....
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....s of Vulcanised Rubber other than Hard Rubber' of the Customs Tariff and not under tariff heading 8708 9900. 2.3 They have placed reliance on the decision of Supreme Court in LML limited Vs Commissioner of Customs, 2010 (10) SCC (503) = 2010 (9) TMI 12 - SUPREME COURT. They have stated that the product 'Air Spring' is a critical component of the air suspension and lift axle systems in trucks, trailers and buses. They have placed references to the Chapter notes and Section notes of Chapter 40 and 87. They have also submitted that the component which gives the 'Air Spring' manufactured and supplied by them its key characteristic and functionality is 'vulcanized rubber'. They have referred to the decision of Supreme Court in O.K. Play (India) Ltd. V. Commissioner of Central Excise, 2005 (180) E.L.T. 300 (S.C.) = 2005 (2) TMI 114 - SUPREME COURT, wherein it is held that functionality, utility, design, shape and predominant usage have to be taken into account while determining the classification of an item and is in fact more important than the name used in trade or common parlance. They are of the view that from a reading of the relevant Section Notes, Chapter Notes under the Customs ....
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....cation of 'Air Springs' manufactured and supplied by them. 3.1 The applicant was given an opportunity to be virtually heard on 20.08.2020. The authorized representative appeared for virtual hearing. They furnished the written submissions. They reiterated the submissions made along with the application. The representative emphasized that the functionality of the product is extended by the vulcanized rubber which stands classified under CTH 4016, though the product is a part of Motor Vehicle classifiable under CTH 8708. The applicant was asked to furnish the Certificate of Name Change from Firestone TVS Private Limited the ER-1 of which is furnished, technical write up on the products. Further, to the query as to whether any change in the manufacture/usage to change the classification in the pre and post GST regime, the representative answered in negative. They stated that they wish to furnish further submissions which was allowed to be furnished. 3.2 Further to the hearing the applicant submitted the following documents vide their letter dated 29.08.2020: * Write up on difference between main air spring and lift air spring in response to the query raised during PH. They have sta....
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....ferred to the report submitted by Principal, Kamaraj College of Engineering & Technology, wherein it is stated that the rubber is soft, flexible with Hardness (Shore 'A') at 63 while for 'Hard Rubber' it must be '100'. The classification under CTH 4016 is sought stating that the essential function and utility of the Air Springs comes from the Rubber which is Vulcanized Rubber and not Hard Rubber. It was opined by the members that the 'Chemical Examiner' report was not from an authorized Chemical Examiner and if the applicant company agreed the department will be asked to draw samples and test in the authorized labs for the functionality and composition which was acceded by the applicant. 3.5 The applicant falls under the administrative control Central Tax. The Commissioner of GST & Central Excise, Madurai Commissionerate was addressed to draw samples from the applicant's product and test the same from the authorized Central Revenue Control Laboratory for the functionality and composition of the product. 3.6 The applicant vide their letter dated 26.12.2020 submitted the test report issued by Indian Rubber Manufacturers Association (IRMRA), affiliated to DPIIT, Ministry of Commerce....
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....ion at the initial phase is not recommended. * It is admitted by the applicant that the product is a critical component of the air suspension system for trucks, trailers and buses i.e, Motor vehicles of Chapter 87. Chapter notes / Section notes and Explanatory notes to HSN are put forth by the applicant. As submitted above, resort to HSN does not warrant to the present case, when classification is possible in the normal course. * Moreover, from the explanatory notes, it is observed that explanatory notes to heading 4016 includes under 51.10 "Chassis mounting rubbers, mudflaps, and pedal covers for motor vehicles, brake blocks, mudguard flaps and pedal blocks for cycles, and other parts and accessories for vehicles, aircraft or vessels of section XVII., whereas, the Explanatory Notes to Headings 8708, provides that Parts and accessories of this heading include: (IJ) Suspension shock absorbers (friction, hydraulic etc.) and other suspension parts (other than springs), torsion bars. The product in question being pneumatic suspension parts, it is covered under clause (IJ). Also, the product is not the conventional spring to be excluded from the heading. Thus, the product is more ....
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....cter is not the sole test for classification. The classification needs to be done as per the Rules of interpretation. The contention that the essential character is derived from rubber is not relevant. Just because rubber is used partly, the said goods could not be classified under Chapter 40. A product is to be classified taking a holistic view and by following the principles of classification. * It may be noted that Joints, washers or the like of any material are items of general use or ready to use whereas the present goods in question i.e., Air springs are specifically manufactured for Motor vehicles and not similar or akin to the common goods viz., joints , washers or the like. Moreover, Air springs are not falling under heading 4016 by any stretch of imagination and therefore section note 2 to Section XVII is not applicable to the present case. * In other words, only articles of vulcanised rubbers of heading 4016 are excluded from Section XVII. It is submitted that the product in question is not an article of vulcanised rubber falling under heading 4016. Mere usage of vulcanised rubber does not make any goods, to fall under heading 4016. However, reading of Section Note 3....
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....Moreover, Rule 3(a) provides, that the heading which provides the most specific description shall be preferred to headings providing a more general description. Accordingly, in terms of Rule 3 (a), when comparing the headings 8708 80 00 and 4016 99 90, it is noticed that the tariff entries of 4016 is a residual entry for chapter 40 covering "other articles of vulcanised rubber other than hard rubber", wherein 4016 99 00 is a further residual entry. In other words, 4016 99 00 is a residual entry of a residual entry. Whereas tariff heading 8708 reads "Parts and accessories of the motor vehicles of heading 8701 to 8705", wherein 8708 8000 reads "Suspensions systems and parts thereof (including shock absorbers)", which shows that the tariff heading is a specific entry heading. Thus the classification 8708 80 00 is more specific than the heading 4016 99 90 and hence merits classification thereunder, even if considering the functionality, utility, design, shape, predominant usage, Air springs manufactured and sold by the applicant are rightly classifiable under 8708 8000 only. In this connection, The Hon'ble SC, in the case of Mauri Yeast India P Ltd., Vs State of UP 2008 (225) ELT 321 (....
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....d under the heading 8708 9900. The applicant had stated that they had subsequently obtained legal opinion on issue and has been advised that the appropriate classification for their product is under Heading 4016 9990. Hence, the applicant has contended that the appropriate classification of 'Air Springs' is under tariff heading 4016 9990 as 'Other Articles of Vulcanised Rubber other than Hard Rubber' of the Customs Tariff and not under tariff heading 8708 9900. 7.2 The main contentions of the applicant is that * the functionality of the 'Air Springs' is extended by the bellow made of vulcanized soft rubber and relying on the decision of Hon'ble S.C. in the case of O.K. Play (India) Ltd Vs. Commissioner of Central Excise [2005 (180) E.L.T. 300 (S.C.)] = 2005 (2) TMI 114 - SUPREME COURT, they contend that the subject product is rightly classifiable under CTH 4016 as 'Other articles of Vulcanised Rubber'. * Once the product falls for classification under Chapter 4016, it is specifically excluded from the purview of Chapter 87(even though it may be a part/accessory of a vehicle falling under Chapter 87) in terms of Section Note 2 to Section XVII They have relied on the US tariff ....
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....ion of goods. 8.3 The CTH, relevant Section/Chapter Notes and HSN explanatory notes for the above cited chapter headings are examined as under: 4016 OTHER ARTICLES OF VULCANISED RUBBER OTHER THAN HARD RUBBER 40161000 - Of cellular rubber kg. - Other : 40169100 -- Floor coverings and mats kg. 40169200 -- Erasers kg. 401693 -- Gaskets, washers and other seals : .......................... 40169400 -- Boat or dock fenders, whether or not inflatable 401695 -- Other inflatable articles : 40169510 --- Air mattresses 40169590 --- Other 401699 -- Other : 40169910 --- Rubber cots for textile industry 40169920 --- Rubber bands 40169930 --- Rubber threads 40169940 --- Rubber blankets 40169950 --- Rubber cushions 40169960 --- Rubber bushes 40169970 --- Ear plug 40169980 --- Stoppers 40169990 --- Others From the above, it is clear that the entry at 40169990 of CTH made applicable to GST is residual of the residual entry of CTH 4016 99. The Explanatory Not....
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....c entry'. To be classified under this heading, the product should be an article of vulcanised rubber other than hard rubber and should not be covered under any specific preceeding entries. 8.4 The next competing heading being, CTH 8708, the same is examined as under: 8708 PARTS AND ACCESSORIES OF THE MOTOR VEHICLES OF HEADINGS 8701 TO 8705 870810 - Bumpers and parts thereof : 87081010 --- For tractors kg. 87081090 --- Other kg. - Other parts and accessories of bodies (including cabs ) : 87082100 -- Safety seat belts u 87082900 -- Other kg. 87083000 - Brakes and servo-brakes and parts thereof kg. 87084000 - Gear boxes and parts thereof kg. 87085000 - Drive-axles with differential, whether or not provided with other transmission components Non-driving axles and parts thereof kg. 87087000 - Road wheels and parts and accessories thereof kg. 87088000 - Suspension system and parts thereof (including shock-absorbers) kg. - Other parts and accessories : 87089100 -- Radiators and parts thereof kg. 87089200 -- Silencers (mufflers) and exhaust pipes; parts thereof kg. 87089300....
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....ing to their constituent material or in heading 84.84) and other articles of vulcanised rubber other than hard rubber (e.g., mudguard-flaps and pedal covers) (heading 40.16). (B) Criterion of sole or principal use. (1) Parts and accessories classifiable both in Section XVII and in another Section. Under Section Note 3, parts and accessories which are not suitable for use solely or principally with the 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. Thus the steering gear, braking systems, road wheels, mudguards, etc., used on many of the mobile machines falling in Chapter 84, are virtually identical with those used on the lorries of Chapter 87, and since their principal use is with lorries, such parts and accessories are classified in this Section. (2) Parts and accessories classifiable in two or more headings of the Section. Certain parts and accessories are suitable for use on more than one type of vehicle (motor cars, aircraft, motorcycles, etc.); examples of suc....
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....ts and accessories fulfil both the following conditions : (i) They must be identifiable as being suitable for use solely or principally with the above-mentioned vehicles; and (ii) They must not be excluded by the provisions of the Notes to Section XVII (see the corresponding General Explanatory Note). Parts and accessories of this heading include : (IJ) Suspension shock-absorbers (friction, hydraulic, etc.) and other suspension parts (other than springs), torsion bars. From the above, it is seen that CTH 8708 covers 'Parts and accessories of vehicles falling under CTH 8701 to 8705. Section Note 2(a) of Section XVII, states that the expression 'Parts' of this Section do not apply to articles covered under 'CTH 4016-other articles of vulcanised rubber other than hard rubber'. We find that the applicant relies on this Section Note and claim classification under CTH 40169990. 8.5 It is seen from the reports of the Chartered Engineer that the functionality of the product is extended by the rubber part of the product and the reports of Chemical examiner provided by the department and that of the Kamaraj university faculty provided by the applicant states that the rubber used in....
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....t being classified as 'Parts and accessories' under CTH 8708 is examined as under: (1) The product is not excluded by the specific exclusions of the relevant Section/Chapter Notes as it is concluded that Just because vulcanised soft rubber makes for 40% of the product, the product cannot be termed as article of vulcanised rubber and therefore not covered under exclusion of Section Note 2(a) of Section XVII; (2) The Air springs are designed for use in the Motor Vehicles and are sold to Auto-Manufacturers; (3) The functional utility of the product is to provide 'Suspension' and maintain levels irrespective of the load or to act as 'Shock absorber' and its predominent usage is in the Motor vehicles falling under CTH 8701 to 8705. Thus as per the explanatory notes in respect of 'Parts and accessories' of Section XVII above, the appropriate heading for the product is CTH 8708 80 which specifically covers 'Suspension Systems and parts thereof(including Shcok absorbers)'. In this connection, we find that Hon'ble Apex Court in the case of GS Auto International Ltd., VS CCE, Chandigarh 2003 (152) ELT 3 (SC) = 2003 (1) TMI 700 - SUPREME COURT has handed out the moot point to be consid....