GST AAAR: Roof Mounted Air-Conditioning unit classifiable under HSN Heading 84151090 IGST 28%

The Punjab Appellate Authority of Advance Ruling(AAAR Punjab) in the matter of M/s ESS ESS KAY ENGINEERING COMPANY PVT LTD has ruled out that Roof Mounted Air-Conditioning unit classifiable under HSN Heading 84151090 IGST 28%.

M/s ESS ESS KAY ENGINEERING COMPANY PRIVATE LTD, Kapurthala, Punjab (hereinafter referred to as, “the appellant”) holding GSTIN 03AAACE5057G 1Z1 is engaged in the manufacturing of “Roof Mounted Air Conditioner unit for Passenger Coaches of railways as per Research design and Standard Organisation (RDSO) specification and drawing”.

Discussion and Findings:

The primary issue that emerges from the appeal filed by the appellant is regarding the classification of the roof mounted Air conditioning unit. The AAR Punjab, vide its Order No. AAR/GST/PB/016 dated 16″ of August, 2022 ruled that the Roof Mounted Air-Conditioning unit manufactured by the applicant are classifiable under HSN Heading 8415 and the classification of the goods shall not alter on account of supply by them to Railways.

In order to comprehend the issue under consideration it would be pertinent to reproduce the contentious entries of the tariff so that a clarity can be developed regarding the classification of the goods. The Heading 8415 reads as under:

8415 AIR CONDITIONING MACHINES, COMPRISING A MOTOR DRIVEN FAN AND ELEMENTS FOR CHANGING THE TEMPERATURE AND HUMIDITY, INCLUDING THOSE MACHINES IN WHICH THE HUMIDITY CANNOT BE SEPARATELY REGULATED

The GST Tariff is entirely based upon the Customs tariff and therefore the provisions and entries of Customs Tariff are required to be considered for fixing correct classification of goods in GST Tariff. The Customs Tariff is structured into Sections, Chapters, Headings and sub- headings. Each Section and Chapter under the Tariff is accompanied by the notes known as “Section Notes” and “Chapter Notes” which define the scope of the concerned Section and Chapter. The section notes are more comprehensive in nature as they apply to each chapter in that particular section. As these notes are part of the Tariff They enjoy the full statutory backing of the law.

Now coming to the issue of classification of the said goods it is important to look at the concerned Chapter Nate of the said entry to identify as to what kind of goods are falling within the ambit of the said chapter as well as the entry therein. Chapter Note 2 to Chapter 86 of the Customs Tariff states as under:

“2. Heading 8607 applies, inter alia, to:

(a) axles, wheels, wheel sets (running gear), metal tyres, hoops and hubs and other parts of wheels;

(h)frames, underframes, bogies and bissel-bogies;

(c) axle boxes, brake gear;

(d) buffers for rolling-stock; hooks and other coupling gear and corridor connections;

(e) coachwork,”

The chapter note details the various good which may fall within the scope of the said entry i.e. 8607. It is perceptible that the air conditioning machines are not mentioned in the said Chapter note. The only aspect that requires consideration here is that the said chapter note mentions the word “inter-alia “which literally means “among other things. Thus, it can be deduced that the Chapter Note (2) is not the exhaustive chapter note detailing all the goods that may fall within the ambit of the said entry

A bare perusal of the said section notes with specific reference to the clause (e) highlights the fact that the expressions “parts” and “parts and accessories” do not apply to machines and apparatus of headings 8401 to 8479 or parts thereof. This clearly implies that the said section has been designed in such a manner whereby those goods which acquire the character of machines and apparatus and fall within the domain of headings 8401 to 8479 shall not be treated or classified as “parts” or “parts and accessories” for the Section XVII. So, the important question to be answered here is whether the good under contention falls within the ambit of the headings 8401 to 8479. If the said good falls within the scope ofthe said entries, then by virtue of the Section Note 2 (e) the same shall be excluded from the said section and therefore cannot claim the right to be treated as an accessory or part of the goods mentioned in the said section.

The Question and Ruling as follows:

Whether roof mounted Air conditioning unit especially for use in railway coaches (manufactured as per railway design) should be classifiable under HSN- 8415 1090- IGST 28% or under HSN 8607 99 – IGST 18% as parts of Railway Coaches/ Locomotives?

RULING

AAR Punjab, vide its Order NO. AAR/GST/PB/016 dated 16″ of August,2022 ruled that the Roof Mounted Air-Conditioning unit manufactured by the applicant are classifiable under HSN Heading 8415 and the classification of the goods shall not alter on account of supply by them to Railways.

For Official Ruling Download PDF Given Below: