TaxTMI 
TaxTMI 
2021 (3) TMI 448
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.... 19/3 86 14/2-A, Poosaripatti Post, Kallikulam 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....
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....s been advised 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. 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 ....
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....€¢ US tariff classification bearing no. N303352 and dated March 28, 2019 2.5 In view of the above facts, the applicant has sought the authority to seek clarification on the correct classification 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 applican....
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....ong with the application and that furnished on 26.08.2020. He drew the attention to the Chartered Engineer Certificate furnished by them, wherein, it is stated that the rubber used in the bellows are 'Vulcanized Rubber' and not in the nature of 'Hard Rubber'. He also referred 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 authoriz....
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....COURT advocates that HSN Explanatory notes are dependable guide for interpretation of Customs Tariff. Thus, only when classification could not be decided based on the principle enunciated in GST Notification 01/2017, other external aids like HSN can be resorted to. Resort to HSN, for classification 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: ....
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....hicles], it is rightly classifiable under 8708 8000 only. • The applicant admits that the subject product is a part and accessories of motor vehicles falling under chapter 87 but pleads classification under chapter 40 mainly on the ground that the essential character of the 'Air Spring' is derived from the 'vulcanized rubber". Essential character 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....
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....Schedule shall, so far as may be, apply to the interpretation of this notification. The crux of the General Rules for the Interpretation of Import Tariff is that classification to be done on perusal of heading with relevant Section Notes and Chapter notes. Thus, on plain reading of the Section /chapter notes of Section 40, the subject goods "Air springs" could not be classified under heading 4016. 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 classi....
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.... the ride smoother and reduces wear and tear in the vehicle. Hence, the sole purpose of Air Spring is to provide a smooth, constant ride quality. In the erstwhile Central Excise regime they were classifying their product under the Heading 4016. Effective 01.07.2017, under GST, they have classified their product under CTH 8708. The sample invoice dated 26.01.2020 submitted by the applicant shows that the product is invoiced 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.)....
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.... (iv) to Notification No. 1/2017 - Central Tax (Rate) dt. 28-06-2017, tariff heading, 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 and the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975, including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall be applied for the interpretation and classification 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 -....
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....bbers, mudflaps and pedal covers for motor vehicles, brake-blocks, mudguard-flaps and pedal blocks for cycle:, and other parts and accessories for vehicles, aircraft or vessels of Section XVII. (11) Plates, sheets and strip merely cut to non-rectangular shapes, and articles excluded from heading 40.08 because they have been milled, turned, assembled by glueing or sewing or otherwise worked. From the above explanatory notes, it is seen that all articles of vulcanized rubber(other than hard rubber) not covered by the preceding headings are included in this heading. Thus the entry 4016 is a residual entry which covers 'Other articles of Vulcanised Rubber other than hard rubber' in which CTH 4016 99 is a further residual entry 'Other' and CTH 4016 99 90 is a residual- residual-residual entry and therefore not a 'specific 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 87....
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....and accessories, even if identifiable as being for ships, etc., are therefore classified in other Chapters in their respective headings. The other Chapters of this Section each provide for the classification of parts and accessories of the vehicles, aircraft or equipment concerned. It should, however, be noted that these headings apply only to those parts or accessories which comply with all three of the following conditions : (a) They must not be excluded by the terms of Note 2 to this Section (see paragraph (A) below). and (b) They must be suitable for use solely or principally with the articles of Chapters 86 to 88 (see paragraph (B) below). and (c) They must not be more specifically included elsewhere in the Nomenclature (see paragraph (C) below). (A) Parts and accessories excluded by Note 2 to Section XVII. This Note excludes the following parts and accessories, whether or not they are identifiable as for the articles of this Section : (1) Joints, gaskets, washers and the like, of any material (classified according to their constituent material or in heading 84.84) and other articles of vulcanised rubber other than....
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....tor vehicles of headings 87.01 to 87.05. 8708.10 - Bumpers and parts thereof - Other parts and accessories of bodies (including cabs) : 8708.21 - - Safety seat belts 8708.29 - - Other 8708.30 - Brakes and servo-brakes; parts thereof 8708.40 - Gear boxes and parts thereof 8708.50 - Drive-axles with differential, whether or not provided with other transmission components, and non-driving axles; parts thereof 8708.70 - Road wheels and parts and accessories thereof 8708.80 - Suspension systems and parts thereof (including shock-absorbers) - Other parts and accessories : 8708.91 - - Radiators and parts thereof 8708.92 - - Silencers (mufflers) and exhaust pipes; parts thereof 8708.93 - - Clutches and parts thereof 8708.94 - - Steering wheels, steering columns and steering boxes; parts thereof 8708.95 - Safety airbags with inflater system; parts thereof 8708.99 - - Oth....
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....ing 'suspension' or 'shock absorbance' is the 'functional utility' of the product. Even if we consider that the functional unit of the air spring, the container which holds the air i.e, bellows made of fabric-reinforced vulcanised soft rubber and therefore should merit classification under CTH 40169990, the suspension, i.e., the functional utility, is not provided only by the vulcanised soft rubber in the 'Air Spring'. It is the entire formation of the product, bellow by the fabric reinforced vulcanised soft rubber, crimped with the bolts and the steel plate which provides the 'functional utility', when air is pumped in through the 'compressor' and let out through the connected valves in the system. It is without doubt that the rubber used in the product is vulcanised soft rubber and mere usage of the same in the product do not merit the product to be termed as an article of vulcanised rubber other than hard rubber and classifiable under CTH 40169990.When it is held that the 'Air Springs' are not products of 'vulcanised rubber other than hard rubber', then there is no application of Note 2 (a) of Section XVII of the Customs Tariff. 8.6 The Air springs are a part of the 'Suspensi....
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....case at hand, it is true that the products are for use primarily with articles of chapter 8701 to 8705. The product Main Air Spring are fitted in the lift axle and act as suspension for lift axle. The product Lift Air Springs are fitted in the lift axle suspension system and operate to move the lift axle up and down. Thus both these air springs are 'Suspension systems and part thereof' and by predominant usage are classifiable under CTH 8708. Following the Apex Court's decision above, the product in hand being suitable for use solely with articles of Chapter Heading No. 8701 to 8705 are classifiable under CTH 8708, more appropriately under 'CTH 8708 80 00- Suspension Systems and parts thereof'. We find that the applicant are classifying their product under the residual entry 'CTH 8708 9900-Other' as seen in the Invoice furnished to us. But specific entry is to be preferred as per the General Interpretation Rules to Customs Tariff and therefore considering the functional utility and the entry being specific, CTH 8708 80 00 is the right classification for 'Air Springs', the product in hand and we hold so. 9. Further, we find that the US tariff classification bearing No. N303352 da....