TaxTMI 
TaxTMI 
2024 (8) TMI 136
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....s the "Appellant") against the Advance Ruling No. AAR No. 13/AP/GST/2023 dated 15.12.2023 issued by Authority for Advance Ruling, Andhra Pradesh. 1. Background of the Case: • M/s. Saddles International Automotive & Aviation Interiors Private Limited (hereinafter referred to as "the Appellant") is engaged in the business of manufacture and supply of car seat covers, car accessories, engineer design services, graphic design services, etc. The Appellant has premises at Survey No. 151/2, Budili Village, Gorantla Mandal, Anantapur, Andhra Pradesh - 515241 and is registered under Goods and Services Tax (hereinafter referred to as "GST") with GSTIN No. 37ABBCS7194N1ZK covered by jurisdiction of Central Goods and Services Tax Commissionerate, Tirupati. • In the course of its business, the Appellant manufactures and supplies car seat covers (hereinafter referred to as "original seat covers") made of fabric or Polyurethane (hereinafter referred to as "PU") which are designed to permanently fit over the raw foam seat installed in the car and becomes an integral part of the car seats. The original seat covers are supplied to the Original Equipment Manufacturers (he....
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.... vehicle by the OEMs as well as the seat manufactures who further sell to OEMs and are sold with me vehicle as an essential and integral of part of seat is classifiable under HSN 9401 as "Seats (other than those of heading 9402) whether or not convertible into beds, and parts thereof other than seats of kind used for aircraft" and is liable to GST @ 18 % vide Sl. No. 435Aunder Schedule III of Notification No. 1/2017-Central tax (rate) dt. 28.06.2017 as amended by Notification no. 41/2017 Central Tax (rate) dt. 14.11.2017 The Authority for Advance Ruling Andhra Pradesh in its orders in AAR No. 13/AP/GST/2023 dated 15.12.2023 held: Answer: No, original car seat covers which are manufactured and designed to permanently fit over the raw foam seat of the vehicles by the OEMs as well as the seat manufacturers who further sell to OEMs and are sold with the vehicle as an essential and integral part of seat is classifiable under HSN 8708 and is liable to pay @28%(CGST@14%+SGST@14%). Aggrieved by the impugned order, the appellant has filed the present appeal on the following grounds. 2. Grounds of Appeal: A. ORIGINAL SEAT COVER IS CLASSIFIABLE UNDER TARIFF ITEM 9401 9900 AND I....
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....used for aircraft]] ... Schedule IV- 9% S.No. Chapter/Heading/ Sub-heading/Tariff Item Description of Goods 170 8708 Parts and accessories of the motor vehicles of headings 8701 to 8705 [other than specified parts of tractors] ..." A.4 Explanation (iii) to the Rate Notification provides that "Tariff Item," "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. Further, Explanation (iv) provides that the rules for the interpretation of the First Schedule, including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this Notification. A.5 Thus, the classification of the goods/final products of the taxpayers shall be determined as per the provisions of the Customs Tariff, the Explanatory Notes, etc. made thereunder. A.6 However, the Appellant submits that the original seat cover merits classification under the Tariff Item 9401 9900 as per the provisions of the Customs Tariff, the Explanatory Notes, etc. which are discussed infra and is cov....
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....e the aforementioned submission that seats of a kind used for motor vehicles and the parts thereof i.e., including the seat cover are classifiable under Chapter Heading 9401, the Appellant hereunder refers to the Explanatory Notes under Harmonized System of Nomenclature (hereinafter referred to as "HSN Explanatory Notes"). A.14 Chapter Note 2 to Chapter 94 of the First Schedule of the CT Act and also under the HSN Explanatory Notes provides as under: "2.- The articles (other than parts) referred to in headings 94.01 to 94.03 are to be classified in those headings only if they are designed for placing on the floor or ground. The following are, however, to be classified in the above-mentioned headings even if they are designed to be hung, to be fixed to the wall or to stand one on the other: (a) Cupboards, bookcases, other shelved furniture (including single shelves presented with supports for fixing them to the wall) and unit furniture; (b) Seats and beds. 3.- (A) In headings 94.01 to 94.03 references to parts of goods do not include references to sheets or slabs (whether or not cut to shape but not combined with other parts) of glass ....
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.... 94 including seats or parts thereof. A.18 Further, the first paragraph under the HSN Explanatory Notes to Chapter Heading 9401 provides as follows: "Subject to the exclusions mentioned below, this heading covers all seats (including those for vehicles, provided that they comply with the conditions in Note 2 to this Chapter), for example: Lounge chairs, arm-chairs, folding chairs, deck chairs, infants' high chairs and children's seats designed to be hung on the back of other seats (including vehicle seats), grandfather chairs, benches, couches (including those with electrical heating), settees, sofas, ottomans and the like, stools (such as piano stools, draughtsmen's stools, typists' stools, and dual purpose stool-steps), seats which incorporate a sound system and are suitable for use with video game consoles and machines, television or satellite receivers, as well as with DVD, music CD, MP3 or video cassette players.---." (Emphasis Supplied) A.19 On perusal of the aforementioned, it is clear that the furniture includes seats of the motor vehicles and the Chapter 94 covers all furniture and parts thereof, therefore, the seats of a kind use....
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.... at 1997 (91) ELT 13 (SC). c. Collector of Customs v. Business Forms Ltd. reported at 2002 (142) ELT 18 (SC). A.25 In light of the submissions made supra, it is submitted that since seats of a kind used for motor vehicles are specifically covered under Chapter Heading 9401, the parts of the said seats including the seat covers by virtue of their inherent characteristics and functions as being an identifiable and integral part of such seats are also specifically covered under Chapter Heading 9401. A.26 In the instant case, as submitted supra, the original seat covers manufactured and supplied by the Appellant are mounted over the raw foam seats, thereby forming an integral part of the seats which are installed in the motor vehicles/ cars. Without mounting the original seat cover over the raw foam seat, the seat is incomplete since the raw foam seat in itself cannot serve the purpose of seating does not last long, cannot be fixed as such without any damage etc. Thus, it is submitted that the original seat covers, being an identifiable and integral part of the seat, are also specifically covered under Chapter Heading 9401 of the First Schedule of the CT Act. A.27 Tho....
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....t is submitted that on a cumulative analysis of the above judicial precedents, the point which crystallizes is that "part" per se means a portion of equipment or machinery which is essentially linked to the functioning of that particular equipment or machinery. In other words, "part" is an integral element of machinery or equipment without which the specific product cannot function. The "part" in question should be so inextricably linked to the product that the same cannot be brought into any form without the "part" in question. A.37 As submitted supra, the Appellant is engaged in the manufacture and supply of original seat covers which is the primary layer permanently fitted as a first or original cover over the raw foam/ cushion that is attached to the car seat on the car floor, without which, the car seats are incomplete and the vehicle cannot be sold to the customers without such complete seats comprising of the original seat covers. Meaning of "Part of seat." A.38 It is submitted that the crux of the instant case is to determine whether the original seat covers manufactured and supplied by the Appellant would be considered as "part of seat." A.39 The original seat ....
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....not directly used in manufacture of motor vehicle parts. The relevant portion of the decision is extracted hereunder: "5...The limited issue to be decided is whether the child parts imported by the appellant from Japan is classifiable under CTH 9401 90 00 as pads of vehicle seats as declared by the appellant or under CTH 8708 99 00 as parts and accessories of motor vehicles of heading 8701 to 8705 as assessed by the Customs. 8... It is undisputed that child parts used for making parts which are subsequently used in the complete assembly of vehicle seat and the vehicle seat has been classified under (Heading) 9401 then how part of seat can be classified under (Heading) 8708 If Revenue's contention is accepted then the tariff entry i.e seats of a kind used for motor vehicles under (Tariff Item) 9401 20 00 will become redundant. 9. As regards judgments made by the Learned Counsel for the appellant. We find that in the case of JTEKT Sena Automotive India Limited (supra) the Principal Bench of this Tribunal. After analyzing legal provisions of customs tariff. HSN. Drawing a similar interpretation, decided that the assessee imported 'gear reduction blank' is co....
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....and classification of child parts used in seat of vehicles under Tariff Item 9401 90 00 instead of Tariff Item 8708 99 00 was upheld. A.43 In view of the above, it is humbly submitted that the original seat cover in question is the primary/original layer(cover) of fabric which is permanently attached over the raw foam/cushion and becomes an inseparable and integral part of the car seat. The seat assembly is thereafter mounted/installed on the floor of the car. Thus, without such layer of fabric or cover, the car seat will be incomplete and be in a functional/ marketable state or condition to a prospective customer of the car. Hence, it is submitted that the aforesaid decision of Shiroki Auto (supra) squarely applies to the present case. A.44 Further, reference is made to the Advance Ruling passed by the Customs Authority for Advance Ruling, Mumbai in the case of Steel case Asia Pacific Holdings India Private Limited (2022 (380) ELT 103 (AAR-Cus.-Mum.)), wherein it was held that the components of swivel seats or chairs imported in disassembled form shall be classified under Tariff Item 9401 90 00 only. International rulings/memorandums on classification of permanent seat co....
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....ver. After the seats are installed in the vehicle, the covers cannot generally be removed without first removing the seat from the vehicle. For purposes of this administrative policy. It is understood that these covers are presented separately from the seats. And that "permanent attachment" means at least one of the following: i. the covers are physically incorporated into the seats, for instance, by being attached by an adhesive, stitching or the like; ii. the covers are so affixed to the seats that they become practically inseparable, for instance by being attached by staples, bolts, screws, or the like that would, at a minimum, require tools to remove the covers; or, iii. the covers are so attached to seats that removal of the covers would cause substantial damage to the seats from which they are removed. ..." (Emphasis supplied) A.48 Perusal of the aforesaid Guidelines clearly reveal that the original seat cover is permanently affixed to the raw foam seat and becomes an inseparable and integral part of the car seat without which seat is incomplete and consequently, the vehicle cannot be sold to the buyer. A.49 Thus, it is su....
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....o or more different headings, then the same must be classified under the heading which provides the most specific description as against the heading which provides a general description. A.56 Thus, without prejudice to the other submissions, it is submitted that on this ground also, the original seat covers merits classification under Chapter Heading 9401 which is a specific entry and not under the general entry of sub-heading 8708 99 since by virtue of the above submissions and explanatory notes, it is very clear that the seats and parts thereof are covered under Chapter Heading 9401. Common Parlance Test: A.57 It is submitted that the 'common parlance test' is generally the most applied test, judicially, to determine the appropriate classification of any product. The 'common parlance test' is used to understand the ordinary and everyday meaning of words and phrases. A.58 In this regard, reliance is placed on the decision of the Hon'ble Supreme Court in the case of Naturalle Health Products (P) Ltd. v. CCE reported in 2003 (158) ELT 257 (S.C.), wherein it was observed that the articles enumerated in the tariff schedules must be construed as far as possible in their ord....
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....iginal seat covers as covers designed to permanently fit over the raw foam seats installed in the vehicles and are sold as an integral part of the car seats. The customers directly approach the Appellant for the said seat covers for use in making the seats used in the motor vehicles and perceive them as an integral part of the seat. A.62 In view of the above, the Appellant submits that on applying common parlance test to the present factual scenario, it can be said that the original seat cover by its very nomenclature gives the impression that the same is to be treated as a "part" of a "seat" and not of a "motor vehicle." A.63 Further, without prejudice it is also submitted that the original seat covers are manufactured in conjunction with 'seats' by the Appellant. Thus, it is submitted that by applying the "common parlance test" also, it is clear the original seat cover is a part of seat of a kind used for motor vehicles and not part of a motor vehicle by itself. Inference from other HSN Explanatory Notes of Chapter Heading 9401: A.64 Further, reference here is made to the HSN Explanatory Notes of Chapter Heading 9401 as extracted in Para A.21 supra, which provides tha....
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....ended for the correlated motor vehicle. The distinctive design and the bespoke manufacturing process undertaken for these seats render them an intrinsic and indispensable component of the comprehensive motor vehicle structure. Absent the presence of these highly specialized seating units, the motor vehicle in question would be rendered non-operational and ineligible for lawful sale. c. In summation, it is paramount to recognize that Permanent Seats transcend mere functional contributions to the overall operation of the motor vehicle; they assume a pivotal role in guaranteeing that each seat is purposefully tailored for the precise vehicle with which it is affiliated. This meticulous alignment serves as a safeguard, preserving the structural integrity and performance parameters of the motor vehicle in its entirety. d. Therefore, the original seat covers being sold with the vehicle as an essential and integral part of the seat is classifiable under Chapter Heading 8708. B.2 In this regard, as submitted supra in detail, the seats of a kind used for motor vehicles would be classifiable under Chapter Heading 9401. This is so even though subsequently such seats may b....
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....ection (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). ... (C) Parts and accessories covered more specifically elsewhere in the Nomenclature. Parts and accessories, even if identifiable as for the articles of this Section; are excluded if they are covered more specifically by another heading elsewhere in the Nomenclature, e.g. ... (12) Vehicle seats of heading 94.01" (Emphasis supplied) B.7 On perusal of the above, the Chapter Heading 8708 would be applicable for only those parts and accessories which satisfies the following cumulative conditions: (a) They must not be excluded by the terms of Note 2 to this Section; and (b) They must be suitable for use solely or principally with the articles of Chapters 86 to 88; and (c) They must not be more specifically included elsewhere in the Nomenclature (see paragraph (C) extracted above). B.8 On perusal of Paragraph C extracted in Par....
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....be held as part and accessories of the motor vehicle and shall be classified under the Chapter Heading 8705. b. The original seat cover is an essential and integral part of the seat is classifiable under Chapter Heading 8708 and is liable to pay GST at the rate of 28%. c. As per Section 103(2) of the CGST Act, the advance ruling referred to in sub-section (1) shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed. Thus, unless there is substantial change in the facts or circumstances, it does not warrant a new ruling and it will only result in multiple ruling on the same subject. C.2. At the outset, it is submitted that the Ld. AAR has erred in appreciating the factual and legal position in the proper perspective with regard to the above. C.3. The Appellant submits that in the earlier Advance Ruling, the facts and circumstances were such that the Appellant approached the Authority for Advance Ruling seeking clarification in respect of the classification of the car seat covers meant and used as additional / secondary covers over the original seat covers. The car seat covers referred to in the earlier Advanc....
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....omfort, convenience and sleek look of the seats, and therefore would not fall under Chapter Heading 9401. In this matrix, the Hon'ble Court held that such additional covers are not integral part of car seats but are in the nature of accessories and would be classifiable under Chapter Heading 8708 instead of 9401. C.6. In the present case, as stated supra, the issue on which the Advance Ruling was sought is whether the original seat covers manufactured and supplied by the Appellant to the OEMs designed to permanently fit over the raw foam seat installed in the vehicle falls under Chapter Heading 9401 as "Seats (other than those of hearing 9402) whether or not convertible into beds, and parts thereof [other than seats of a kind used for aircraft]" and are liable to GST at the rate of 18% vide SI. No. 435A under Schedule III of the Rate Notification. 3. Personal Hearing: The proceedings of hearing were conducted through video conference on 13.03.2024. The authorized representative Sri. L. Satya Sai, Advocate attended and reiterated the submissions already made. 4. Discussion and Findings 4.1 The seat covers fit to be mounted on the existing seat of the motor vehicle....
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....tax at the rate of 28% - IGST, or 14% - CGST plus 14% SGST. In the instant case also, the relevant entries at chapter heading 8711 and 8714, as it existed during the pre-GST regime, continue to remain the same without any changes in the GST period as well. 4.7 Heading 8708, on the other hand, provides for parts and accessories of motor vehicles of headings 8701 to 8705. "Accessory" is not defined in the HSN. Thus, we employ the common meaning of the term, as the courts did in the past. For example, the Oxford English Dictionary defines "accessory" as: "Of things: Coming as an accession; contributing in an additional and hence subordinate degree; additional, extra, adventitious." The instant seat covers are "extras" that act directly on seats of motor vehicles, adding to the style of the interior of the motor vehicle, protecting the seats from wear and tear, etc. Thus, they are fit to be defined as accessories. 4.8 In the case of M/s. Intel Design Systems (India) P Limited Vs Commissioner of Customs and Central Excise (CA No.4564 of 2002 dated 11.2.2008), Hon'ble Supreme Court held that parts falling under Chapter heading 87 should be classified under this heading, only if the....