TaxTMI 
TaxTMI 
2022 (2) TMI 651
X X X X Extracts X X X X
X X X X Extracts X X X X
....11/AP/GST/2021 dated 10.02.2021 issued by the Authority for Advance Ruling, Andhra Pradesh. 1. Background of the Case: 1.1 The appellant, M/s Bharat Dynamics Limited (BDL), a Government of India Enterprise under the Ministry of Defence is a manufacturing base for guided missiles and allied Defence equipment. 1.2 The clarification sought by the appellant relates to supplies to be effected against a supply Order No. XXXXX 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. 1.3 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. The Appellant had filed an application for Advance Ruling before the Authority for Advance Ruling on the following questions: Whether the Submarine Fired Decoy System (SFDS) supplied by the applicant is class....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is an integral part of Advanced Torpedo Defense System (ATDS) suit, which is effective against modern and vintage torpedo fired against a ship or submarine. Submarines are warships that can travel both above and below the surface of the sea. Apart from surveillance, these are usually built and used for warfare and armed with torpedoes or guided missiles. A submarine is equipped with a torpedo launching system as well as a decoy system. As mentioned in the above paras, certain essential components are required in a warship to protect the warship and the defence forces. Therefore, in case of warships, systems/ parts required for protecting the warship are an essential and requisite system of warship. The appellant submits that one such part is the decoy system (SFDS) which is to be integrally incorporated in the submarines i.e., warships for effective functioning of the submarine. SFDS launches decoys as an anti-torpedo countermeasure system for submarines, designed to counter the attacks of acoustic homing torpedoes, active/ passive, lightweight and heavyweight, wire and non- wire- guided, by deploying the expendable, light-weight, high-performance stationary jammers and stationa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the true purport of the term 'parts of goods'. The dictionary meanings of the term 'parts' are as below: "Cambridge Dictionary: a separate piece of something or a piece that combines with other pieces to form the whole of something; one of the pieces that together form a machine or some type of equipment." Basis the above general dictionary meanings, it can be inferred that anything can be considered as a part of other if it forms an essential component or assists in performing a functionality of the main product. Chapter 89 does not have a separate heading for parts and accessories. The headings in the chapter, from 8901 to 8908, do not include sub-heading/items for 'parts and accessories'. In the absence of separate heading of classification for parts of ships, the expression 'any chapter' in Column 2 of the Schedule assumes significance. The appellant submits that the column 2 of the Schedules in the CGST Rate Notification refers to "Chapter/Heading/Sub-heading/Tariff item". Whereas for every SI.No, the respective chapter/Heading number has been mentioned, in respect of SI.No.252 of the said notification, in the said column 2 the expressio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....: "For the purposes of classification under chapter Heading 87.08, the test to be applied is whether the goods are suitable for use solely or primarily with articles of chapter heading Nos. 87.01 to 87.05 if the answer is in the affirmative, the goods be classifiable under chapter heading 87.08 but if the answer is in the negative, they would have to be classified under chapter heading no. /3.18. Having regard to the finding that the goods in question cannot but be regarded as parts of automobiles, it has to be held that they are 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." 2.8 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 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.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....res supports the argument of the appellant that SFDS qualifies as part of a submarine. Basis the above, the appellant submits that the SFDS system qualifies as 'parts of submarine' and therefore, the proposed supply ought to attract a tax rate of 5%. 2.13 The appellant places reliance on the case of Mehra Brothers v. Joint Commercial Officer 1990 (11) TMI 144. The Apex court in this case, held that a part or accessory need not necessarily mean an item which is essential for the effective use of a vehicle but also would include any item which adds to the comfort or enjoyment of the vehicle. Further, the appellant 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. 2.14 The appellant submitted that in view of the judicial pronouncements, which though have been rendered in the context of Central Excise law, the fact that they enumerated the scope of 'part' of automobiles, which is broadly the subject matter in this application, it is submitted that the understanding of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate of Acceptance has been issued by the Ministry of Defence to be supplied under the subject order. The inspection note was issued by appropriate authority designated by Ministry of Defence. 3.2. With regard to requirement of the test, the appellant submitted that the Factory Acceptance Trials (FAT) of the product was conducted at the supplier's premises in order to check their compliance with the specifications. The purpose of FAT is to ensure that all equipment to be delivered is fully functional and all faults have been eliminated prior to dispatch and installation. Based on the FAT report, the Inspection Note will be submitted by the Inspection Agency to the appellant for onward dispatch of material to the consignee (Ministry of Defence). 3.3. Therefore, the appellant further submitted that the SFDS is an integral part of the warships and the FAT is carried out to ensure that it complies with all the necessary technical specifications. A copy of the Certificate of Acceptance and the Inspection Note were submitted. 3.4. The appellant placed reliance on the below rulings wherein it was held that any system/sub-system or article or product, that is fitted to the ship or bo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... engines and parts thereof Marine engines to be considered as parts of the ships/vessels without which the ship/vessel cannot Sail. Marine diesel engines to be classified under sl.no.252 of the Notification no.1/2017- CT (Rate), when supplied to ship building companies or Indian Navy for use in manufacture of ships , vessels, boats etc. 6. South Indian Federation of Fishermen Societies (2021 (7) TM1 533 (AAAR -- Kerala) Marine Engines & its parts thereof The marine engine and its spare parts supplied for use in vessels shall attract GST at the rate of 5% as per entry at SL.No.252 of schedule I of Notification No.1/2017 Central Tax (Rate). In view of the grounds of appeal and the additional submissions, the appellant reiterated that the submarine Fired Decoy System supplied by the appellant to the Ministry of Defence is classifiable as parts of submarine falling under heading chapter Heading 8906 and therefore, attract a GST rate of Five (5%) by virtue of entry no 252 of Schedule I in CGST Rate Notification. 3.4.1 SFDS is an essential part of a warship: The appellant submitted that the goods in question i.e., SFDS are integral and essential part of a warship. A reference can....
X X X X Extracts X X X X
X X X X Extracts X X X X
....valent to the submarine and overhauled/maintained periodically. Earlier supplied similar systems to the Indian Navy are being maintained at monthly routine check-up and overhauling. 3.5.2. The SFDS consists of following sub-systems: a) Launching system: Mounted externally on the pressure hull of the submarine and below the submarine superstructure. b) Control Panel: A man machine interface fitted in CIC room of submarine which controls the launching of the Decoys and Jammers. c) Jammers/Decoys: Fired from the launching system and not recoverable, i.e., expendable/consumable. 3.5.3. Clarification with regards to supply order No. XXXXX: The order is for supply of the SFDS System (including the launching system and control panel, interface and loading platform etc.), while Jammers and Decoys are not part of the supplies under this supply order. Jammers and Decoys are expendable devices and are generally supplied against separate orders from Indian Navy. 3.5.4. In view of the grounds of appeal and the additional submissions, the appellant reiterates that the submarine Fired Decoy System (SFDS) supplied by the appellant to the Ministry of Defence is classifiable as parts of su....