2024 (7) TMI 156
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....reinafter referred to as applicant), registered under the AP Goods & Services Tax Act, 2017. 3. Brief Facts of the case: 1. M/s. Hindustan Shipyard Limited, (Hereinafter referred to as "applicant") is a Government of India Undertaking located at Vishakhapatnam, Andhra Pradesh. M/s. HSL is the Ship building organization catering to the needs of shipbuilding, ship repairs, submarine construction and refit of offshore and on shore structures. The Applicant is registered under GST Act with registration number: 37AAACH4275P1Z2, in the Malkapuram range, Visakhapatnam South Division allotted to Central Jurisdiction. 2. The Applicant a manufacture of ships and vessels as per the specifications / requirements provided by its customers which are covered under the HSN 8906 - Other vessels, including warships and lifeboats other than rowing boats. Such HSN is covered under Entry No. 250 of Schedule-I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 and Entry No. 250 of Schedule-I of Notification No. 01/2017-Integrated Tax (Rate) dated 28.06.2017 (referred to as 'Notification'). 3. All the inputs including equipment, material, consumables, tools etc., (jointly referred to as ....
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...., 8905, 8906, 8907". Therefore, there lays a conundrum on whether all inputs including material, equipment, consumables and tools will attract GST @ 5%. 8. Applicant reiterates that various goods, i.e., material, equipment, consumables, tools etc., procured are of critical nature, without which the ship would not be permitted to sail and therefore such material or equipment or consumables etc., merits classification as "Parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907" and should be chargeable to GST at the rate of 5%, since such individual Inputs are supplied as a part of the ship or vessel, to ensure that the ship is sea worthy. 4. Questions raised before the authority: The applicant sought advance ruling on the following: * Whether the expression "parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907" in Entry No. 252 of Schedule-I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 and Entry No. 252 of Schedule-I of Notification No. 01/2017-Integrated Tax (Rate) dated 28.06.2017, will include all the inputs including equipment, material, consumables, tools etc., (as listed in Annexure 2A, 2B, 2C and 2D) purchased domestically or imported fo....
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....aw and Notifications. Thus, reference is made to the definitions in various dictionaries - Reference Meaning Oxford Dictionary Part: a piece of a machine or structure Cambridge Dictionary Part: a separate piece of something, or a piece that combines with other pieces to form the whole of something Merriam Webster Part: a constituent member of a machine or other apparatus From a general understanding of the word "parts of a ship", it could be said that all such goods which are meant for fitment into a ship, as such (i.e., in its same form) or as part of certain equipment in the ship, would qualify as parts. Therefore, as long as such criteria is met, the equipment, material, consumables, tools etc., which are fitted into the ship should qualify as parts. 5.5 The Applicant relies on the judgement of Hon'ble Supreme Court in the case of M/s Saraswati Sugar Mills Vs CCE, Delhi - III [2011 (8) TMI 4 - Supreme Court] wherein the Hon'ble Supreme Court while determining on whether items used for fabricating structures to support machinery qualifies as capital goods in terms of Rule 57Q of Central Excise Rules, 1944, held that those items which are used in the manufacture of the ....
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....one of the parts or elements of which anything is made up, or into which it may be resolved". In Oxford Dictionary the meaning of "component" is :- "Contributing the composition of whole" In Webster's Dictionary the meaning given is "A part; a constituent, an ingredient." In our view, the common parlance meaning of the expression "component" is also the same, that is, one of the parts or elements of which anything is made up or into which it may be resolved or a constituent. The meaning in common parlance has to be looked into since the notification itself does not contain any definition of the expression. 19. It has been urged on behalf of the department that since the subject Notifications refer to "Refractory Bricks for use as component parts of.....", that is an indication that the Bricks must be intended for use in the manufacture of furnace and not for use as spares. We have indicated that the word "component" cannot be understood in such a restricted manner. "Component" indicates that it must be an integral part. "Spare" is a component used for replacement. In other words, the word "component" indicates the nature of the article and not the use of the article whi....
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....is also required to meet the specific requirements of the Indian Navy for manufacture of the ship as referred in the column (7) of the Annexure 2A, 28, 2C and 2D in addition to compliance with the above-mentioned Rules and Regulations. Thus, all the goods referred in Annexure 2A, 2B, 2C and 2D being meant for fitment and usage in ship qualify as "parts". 5.10 For each such Input in Annexure 2A, 2B, 2C and 2D, the Applicant has provided the description of the material, its usage in the ship, its requirement in the ship and the requirement as per any of the Rules, Regulations or Guidelines, as applicable. 5.11 The Applicant submits that the Annexure 2A lists various Equipment and machinery which are either fitted into the Ship or are essential parts of the equipment which are used in manufacturing the Ship, without which the ship could not be said to be complete and seaworthy, Such Annexures 2A includes various goods namely: * Main Engines - Internal combustion engines, control panels and systems used to turn the propellers and sail the ship through water, * Diesel Generators - Diesel engines as prime movers with control panels and switch boards to provide power supply to ship/....
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....ommunication, * Flight Deck, Visual Landing Decks and LED Horizon system are used for landing helicopter onboard ships and this system controls and monitor aviation weather, ship movement and wind limitations for safe landing of helicopter which are either fitted into the vessel or are essentially required on board for carrying out repairs and maintenance of the ship while at sea. 5.15 The Applicant submits that the Merchant Shipping (Crew Accommodation) Rules, 1960 prescribes various requirements and amenities which are mandatorily required to be made available in a ship for the crew, to make such ship seaworthy. Such rules prescribe the various requirements in relation to Heating, Lighting, Air conditioning & ventilation facilities, availability of sleeping rooms with Beds and other Furniture and fixtures, availability of Mess room, recreation spaces along with furniture and equipments, Laundry facilities along with washing accommodation, Galley's for preparation of food, Cold storage rooms with equipments, Medical rooms. Thus, it is mandatory for the Ships to have such equipment for usage of the officers and the crew of the ship and only when such equipment is fitted into....
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....tal water, shoreline is also required to be superimposed on the chart. Theodolite is fitted on a tripod and used on board the vessel for the purpose of superimposition of the shoreline. (3) Radio Telephone Equipment is used for communication between two vessels or between the vessel and the board. (4) Echo Sounder is an instrument which measures the depth of water at any given instant using ultrasonic wave. (5) Water and Grab Samplers are used for taking samples of water and sediments on the sea-bed for analysis and for basically correcting the echo-sounder. (6) Radio Tide Gauge instantaneously provides tide height corresponding with the depth measured so that the depth can be corrected to the mean sea level. The vessel on which the above equipment is placed and used is a survey launch owned by the Dredging Corporation of India, a Govt. of India undertaking for hydrographic survey in the harbour and along the coast. From the functions of the items as set out above, it is clear that they are parts of boats and launches as they are required for the function of the survey vessel falling under CTH 89.06. As per Sl. Nos. 2 to 9 of the Table to Notification No. 23/98, raw mater....
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.... manner. 5.20 Though the above referred Customs Circular and judgments are with respect to exemption Notifications under the Customs law and erstwhile Excise law, the principle based on which the exemption is held eligible, can be said to be squarely applicable to the instant facts in the case of HSL. The intention of the Board at the relevant time of issuance of the Circular, is evident that the benefit of exemption should be extended to all such goods as long as they are essential for completing the manufacture of vessel. Thus, HSL believes that the subject inputs (as listed in Annexure 2A, 2B, 2C and 2D) procured either domestically or imported by HSL and used in manufacture of vessel, which are also statutorily required to be so fitted into the ship, will qualify as parts and thereby would attract GST @ 5%. 6. Personal Hearing: Sri VVR Ravindra , GM (finance) along with Mohammed Kagalwala, Chartered Accountant has attended for personal hearing on 04.03.2024 and requested for adjournment to submit clarification certificate and other documents. Further Sri VVR Ravindra , GM (finance),Sri S.Thiramalai, Advocate and sri B Jagadeesh Kumar, Manger (Finance) duly authorized represe....
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....in question in that case i.e., "Submarine Fired Decoy System" and in that context the Appellate Authority of Advance Ruling had referred to Rulings in other States classifying "Lubrication and Screw pumps", "Batteries supplied directly and exclusively" and also relied upon the certificate of the Naval authorities to decide on the aspect of essentiality for purpose of classification of the Submarine Fired Decoy System as "parts" under the Entry No. 252 of Schedule-I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017. The Appellate Authority of Advance Ruling relying on the write-up on the usage of such Submarine Fired Decoy System, held that such system is a defence mechanism without which the very existence of submarine is at stake, and therefore this is in itself irrevocable proof / evidence that it is an essential part of the said submarine. 2.4. The Applicant submits the following to establish the essentiality of the items sought to be procured by the Applicant and used as "parts of ship" - (i) The critical aspect of the present case of the Applicant (manufacturer and supplier of ship) and the use of the items in the Annexures to the Application is that the ship....
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....that all the items listed in the Annexure to this applicant are mandatorily required and thus qualify as "parts of ship". 2.7. In support of our above submissions, the Applicant hereby submits an Essentially Certificate issued by the IR Class Systems and Solutions Pvt Ltd (promoted by Indian Register of Shipping) which certifies that the material listed in the annexure to the present application are essential for construction of the vessel to meet the shipbuilding functional requirements and also to meet the operational efficiency of the vessel. 2.8. The Applicant hereby also submits a Certificate issued by Warship Production Superintendent of Warship Overseeing Team of the Indian Navy certifying that the material listed in the annexure to the present application are as per the specific requirement of Indian Navy for construction of the Fleet Support Ships to be manufactured and supplied by the Applicant to the India Navy. It is also certified that such items are essential to ensure the seaworthiness of the ships and providing the technical features to meet the functional requirement of the Naval Vessels. 2.9. Therefore, in view of the above submissions, the Applicant submits th....
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....'). We found that the applicant is a Defence public sector undertaking shipbuilding & Repairs Limited Company under the Ministry of Defence, which is involved in manufacture of warships and submarines as per the specifications/ requirements provided by Indian Navy. All the inputs including raw materials, parts, consumables etc. required for constructing the warships and submarines are directly procured / imported by the applicant (List of the Inputs are mentioned. The applicant had sought the advance ruling, as to "Whether the expression "parts of goods of headings 8901, 8902, 8904, 8905, 8906, 8907" in Entry No. 252 of Schedule-I of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 and Entry No. 252 of Schedule-I of Notification No. 01/2017-Integrated Tax (Rate) dated 28.06.2017, will include all the inputs including equipment, material, consumables, tools etc., (as listed in Annexure 2A, 2B, 2C and 2D) purchased domestically or imported for use in manufacture of ships?" The question raised as above appeared to fall within the u/s 97 (2) (a) of the Central Goods & Services Tax Act, 2017. Hence the application admitted. Now it is relevant to mention the Provisions ....
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....e extracted here under: Customs Exemption [Entry No. 469 of Notification No. 12/2012-Customs dated 17.03.2012]: 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. Excise Exemption [Entry No. 306C of Notification No. 12/2012-Central Excise dated 17.03.2012]: Raw materials and parts, for use in the manufacture of goods falling under heading / tariff item 8901, 8902, 8904, 8905 (except sub-heading 8905 20) or 8906. Thus in view of the above meanings/definitions of part/parts/Spare Part, as to what are the parts of Goods of CTH 8901,8902,8906 and 8907 and whether the subject goods/spares as mentioned by the applicant listed in Annexures 2A, 2A (i), 2A (ii), 2B,2B (i), 2C, 2D and 2D (i) of this ARA application can be taken to be covered within the meaning of Parts for Sr. No. 252 of notification No. 01/2017 Central Tax (Rate) Dated: 28.06.2017. We find that items like Engines, gearbox, Propeller, Diesel generators, shift generator, Engine driven pumps, shaft generator, etc. are very essential parts of a ship or v....
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.... in common parlance, components are items or parts which are used in the manufacture of the final product and without court, in Star Paper Mills (supra) has made a settled distinction while considering whether paper Fare "components' in the manufacture of paper rolls and manufacture of paper sheets. It is stated that paper cores' are component parts in so far as manufacture of roll is concerned, but it is not component part in the manufacture of sheets. It is useful to quote the observations made by this Court: "Paper core would also be constituent part of paper and would thus fall within the term " component parts" used in the Notification in so far as manufacture of paper in rolls is concerned. Paper core, however, cannot be said to be used in the manufacture of paper in sheets as component part. In case of Jindal Strips Vs Collector of Customs, Equivalent citations: 1997 ECR 98 Tri Delhi, 1997 (94) ELT 234 Tri Del. the Two Member Bench of the Tribunal referred the appeal before the larger bench on the following questions: (t) Whether the phrase "component parts" occurring in Notification 77/90 would cover "spare parts" for the purpose of granting of benefit thereund....
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...., 60, 72, 73, 90, 97, 111, 117, 118, 119,123,( annexure 2A (i) 124 annexure 2A (ii), all other equipment's can be considered to be an essential part of a warship/submarine without which the ship would not be complete and would not be able to function. Now we take up the 138 items mentioned in Annexure 2A (i) , list on "Boards spares" The list contains Piping, Outfit, Engineering, Electricals etc. In the instant case, the applicant claims that they are supplying the systems such as Navigational and signal lights, Weather surveillance and threat alert, Signalling Projects, Main board systems, Acoustic warning device meant for use "On Board Ships' of the India Navy, under agreement. But on carefull examination with reference to the definition, it is found that the items mentioned in annexure 2A (i) list on ' Boards on Spares" would not be considered as integral or essential parts warship. We further take up the 89 items mentioned in Annexure 2A (ii), list of B & D Spares such as, oil purifiers, emergency generators, switch boards, cargo lift, aircraft handing system, etc. These are not considered as the essential part of a warship/submarine without which the ship would not be comple....
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....in the manufacturing of the ship without which the ship cannot be said to be completely fit for sailing. Annexure 2C containing 7 entries pertains the list of Consumables, therein cannot be considered as parts of a warship/submarine. They are essentially in the form of Consumables and for reasons mentioned above cannot be considered as parts of a ship. The Applicant submitted that the Annexure 2D lists various Tools and other equipment includes: * Illumination systems required for lighting purpose on ships, * Administrative and OPS LAN used for internal and restricted communication, * Flight Deck, Visual Landing Decks and LED Horizon system are used for landing helicopter on board ships and this system controls and monitor aviation weather, ship movement and wind limitations for safe landing of helicopter which are either fitted into the vessel or are essentially required on board for carrying out repairs and maintenance of the ship while at sea. On verification of the same the list containing 16 items in Annexure-2D mainly consisting of tools. Now it is relevant to mention the definition of tools. "Any devise, instrument or machine for the performance of an operation, exa....