AI Drafter 
TaxTMI 
TaxTMI 
2021 (8) TMI 529
X X X X Extracts X X X X
X X X X Extracts X X X X
....y) by M/s. Bharat Dynamics Limited (hereinafter referred to as applicant), registered under the AP Goods & Services Tax Act, 2017. 3. Brief Facts of the case: • Bharat Dynamics Limited (hereinafter referred to as 'Applicant'/BDL'), a Government of India Enterprise under the Ministry of Defence was established to be a manufacturing base for guided missiles and allied Defence equipment. • The clarification sought by the applicant relates to supplies to be effected against a supply Order No. 1/W/005/03/S4 dated 28.09.2019 from the Government of India, Ministry of Defence (MOD), AAKANKSHA, New Delhi, India for supply of Submarine Fired Decoy System (hereinafter referred to as 'SFDS') along with associated services. The aforesaid supply shall be executed at the applicant's unit in Andhra Pradesh with principal place of business at Autonagar, Gajuwaka, Visakhapatnam, Andhra Pradesh. • The SFDS in question is a component proposed to be fitted to the submarines operated by the Indian navy for protection/safety of the submarines against incoming torpedoes/missiles. 4. Questions raised before the authority: Whether the Submarine Fired Decoy Sys....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aunched against an attacking torpedo in order to mask the submarine echo by increasing the noise level received by the torpedo acoustic homing system. • The decoy is an underwater echo repeater. It is an expendable device launched against an attacting torpedo in order to simulate false target ecshoes seducing the torpedo acoustice system.) • The Central Government had issued Notification No. 01/2017-Integrated (Rate) dated 28th June, 2017 (the Notification) specifying the rate of tax applicable on all the taxable goods. Schedule I of the aforesaid Notification provides the list of goods on which GST is applicable at the rate of 5%, Under the said Schedule, serial no. 250 covers 'other vessels, including warships and lifeboats, other than rowing boats.' Submarines used by the Indian Navy are classifiable under the said entry. The relevant extract of said entry is reproduced hereunder: Schedule I-5% S.No. Chapter/Heading/Subheading/Tariff item Description of goods 250 8906 Other vessels, including warships and lifeboats, other rowing boats • Further, serial No. 252 of Schedule I covers 'parts of goods of headings 8901, 8902,....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... suitable for use primarily with articles of Chapter Heading Nos. 87.01 to 87.05. It follows that the goods in question cannot be treated as falling under Chapter Heading No. 73.18 and that they can properly be classified under Chapter Heading No. 87.08 of the Central Excise Tariff Act, 1985." Having observed thus, the Supreme Court held the parts in question to be classifiable as parts of automobile. According to the Supreme Court, the test to be applied is whether the goods are suitable for use solely or primarily with articles of the said chapter. If the answer to this question is in the affirmative, the goods will be classifiable as part of any good. • In CCE, Chennai v. Besmak Components (P) Ltd., 2007 (213) ELT 533 (Tri-Chennai), the Chennai bench of the Hon'ble CESTAT had to decide upon the classification of plastic parts used in automobiles. Following the decision in GS Auto International Limited (cited supra), on ascertaining the plastic goods in question designed for use in motor vehicles, the Tribunal sustained the classification of these goods as parts of motor vehicles and not parts of general use. The relevant extract of the decision is as hereun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ence. • Notification no. 12/2012-Cus,, dated 17-3-2012 contained the following entry: 469 Any Chapter Raw materials and parts, for use in the manufacture of goods falling under heading 8901, 8902, 8904,8905 (except sub-heading 8905 20) or 8906, in accordance with the provisions of section 65 of the Customs Act, 1962 (52 of 1962) Nil Nil 83 The above entry was inserted with effect from 24.11.2015. Further, the above Notification has since been superseded by Notification No. 50/2017, dated 30.06.2017; however, the above exemption entry continues underSI.No.559 in the new Notification. Similarly, Notification No.12/2012 - C.E. also exempted 'raw materials' and parts of ships etc. The relevant entry 306C, which was inserted by Notification No. 44/2015- C.E., dated 24-11-2015 reads as under 306C Any Chapter Raw materials and parts, for use in the manufacture of goods falling under heading/tariff item 8901, 8902, 8904 00 00, 8905 (except tariff item 8905 20 00) or 8906.... Notification N0.64/95-C.E. included the following exemption 21 All goods If, - (a) the said goods are supplied for use in construction of warships of the Ind....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e goods classified in Chapter 89 and the Hon'ble Bench agreeing to the contention has ordered at para 5.12 to 5.20 of the relied order. • Furthermore, applicant relied on following cases wherein it has been held that the intention of use of the part would solely depend on the nature of use to which items are put to use. • Advance Ruling Authority in case of Alekton Engineering Industries Pvt. Ltd. 2019 (26) G.S.T.L. 143 (A.A.R.- GST) has held that Triple Screw Pumps and parts fall under 8413 attract GST at the rate of 18%. However, Triple Screw Pumps manufactured by the applicant therein supplied to the India Navy for commissioning in its Vessels and Warships are parts of 'All types of Vessels & Warships' and are covered under entry at Si.no.252 of Schedule I of the Notification No.1/2017-C.T. (Rate), dated 28.06.2017. • Advance Ruling Authority in case of S.S. Diesel Engineering Pvt. Ltd.(2019 (26) G.S.T.L. 506 (A.A.R.-GST)), has held that Marine Parts - Engine, Gear Box and Generator supplied by the applicant therein would fail in Chapter 84/85 of Customs tariff. However, classification of goods under Sr. No.252 depends solely on the nature ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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." • Further, the applicant submits that each of the systems are essential for the overall functioning of the warships and Submarines and therefore the expression "parts" in the subject entry of the Notification(s) should be construed to include all such systems/assemblies. • The applicant would like to submit that S.No.252 of Schedule I of the GST Rate Notification is applicable so long as the goods are used in warships, vessels and submarines, whether for construction or repair or replacements. Any equipment which is required for enhancing the safety of the warship would be considered as an essential part of warship. • As seen from above, in case of warships, SFDS is an integral part for the safety of warships. • It was held by the Maharashtra Appellate Authority for Advance Ruling in the case of A.S. Moloobhoy Pvt. Ltd. that "35. We agree with conte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....omplete vessels, assembled, unassembled, or disassembled, or a complete vessel unassembled or disassembled, is to be classified in heading 8906 if it does not have the essential character of a vessel of a particular kind". A plain reading of the above connotes that the heading 8906 constitutes all kinds of structures that make any floating vessel but not of a particular kind. All the assembled, unassembled, or disassembled structures which are integral and essential to the making of a vessel fall in this category. In addition to the above, the description of goods under 51.No. 252 is "Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907." In the instant case the product supplied by the applicant i.e., SFDS is basically not part of goods falling under headings 8901, 8902, 8904, 8905,8906, 8907 as claimed by him. It is neither integral nor essential to the 'basic structure and intended general functioning of the submarine', Besides, this anti-torpedo decoy system detects and locates the incoming torpedo with the help of SONAR & deploys decoys to confuse incoming torpedo attack It is an anti-torpedo counter measure system for submarines and not an indispensable part of ....