1.At the outset we would like to make it clear that the provisions of CGST, Act 2017 ST, Act 2017 are in pari materia and have the same provisions in like matter and each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the KGST Act.

2.The present appeal has been filed under section 100 of the Central Goods and Service Tax Act 2017 and Karnataka Goods and Service Tax Act 2017 (herein after referred to as CGST Act, 2017 and SGST Act, 2017) by M/S Sivantos India Pvt Ltd, No 78, 4^th Floor, Salarpuria Sattva Magnificia — Phoenix, Near Tin Factory, Old Madras Road, Doorvani Nagar, Bengaluru Urban, 560016 (herein after referred to as Appellant) against the Advance Ruling order No. KAR ADRG 27/2022 dated 12^th August 2022.

Brief Facts of the case:

3.The Appellant is engaged in the business of trading of hearing aids and their parts and accessories. Hearing aids are classifiable under HSN 9021 40 90 and are exempt from GST by virtue of Sl.N0 142 of Notf No 2/2017 CT (Rate) dated 28-06-2017. The parts and accessories supplied by the Appellant are imported from the manufacturer and supplied for use solely with the hearing aids. The Appellant is currently supplying the parts and accessories of hearing aids by classifying them under HSN 90219010 and charging GST at 18% under Sl.N0 453 to Schedule 111 to NotfN0 01/2017 CT (Rate) dated 28-06-2017. In order to understand the correct classification and rate of tax on the supply of parts and accessories which are suitable for use solely with hearing aids, the Appellant approached the Authority for Advance Ruling (AAR) seeking a ruling on the following questions:

a. “Classification of parts and accessories suitable for use solely with the hearing aids?

b. Rate of tax on supply ofsuch parts and accessories which are suitable for use solely with the hearing aids?

c. Whether such parts and accessories, suitable for use solely with the hearing aids, are exempt by virtue ofSl.No 142 of2/2017 CT (Rate) dated 28-06-2017 as amendedfrom time to time? 

4. The AAR vide its order KAR ADRG No 27/2022 dated 12^th August 2022 gave the following ruling in respect of the above questions:

a. The parts and accessories of hearing aids are covered specifically under heading 9021 9010 and thus merit classification under the said heading.

b. The rate of tax (GST) applicable on supply of such parts and accessories of hearing aids is 18% in terms of entry No 453 of Schedule 111 to the NotfNo 01/2017 CT (Rate) dated 28-06-2017.

5. Aggrieved by the ruling given by the AAR, the Appellant has filed this appeal on the following grounds.

5.1.The Appellant submitted that the Explanation (iii) and (iv) of Notf No 1/2017 CT (Rate) dated 28-06-2017 makes it clear that the rules of interpretation under the Customs Tariff Act, 1975 is equally applicable to GST law; that the meaning of the term ‘heading’, ‘sub-heading’ and ‘tariff heading’ and General Explanatory Notes of First Schedule to the Customs Tariff Act are equally applicable under GST law. The Additional notes under the General Rules for the interpretation under the First Schedule to the Customs Tariff Act defines ‘heading’, ‘sub-heading’ and ‘tariff item’ as below:

5.2.The Appellant submitted that in view of the above, it is clear that “Tariff item” is at 8 digit level; “Sub-heading” is at 6-digit level and includes ‘tariff item’; “Heading” is at 4-digit includes ‘sub-heading’. Thereby, ‘heading’ includes ‘tariff item’ at 8-digit level

PERSONAL HEARING

6.The appellant was granted a virtual hearing on 27^th September 2022. The hearing was conducted on the Webex platform following the guidelines issued by the CBIC vide Instruction F.No 390/Misc/3/2019-JC dated August 2020. The Appellant was represented by Shri. Sandesh S Kutnikar, CA and authorised representative.

6.1. The CA explained the facts of the case and the circumstances leading to the present appeal. It was submitted that the Appellant is engaged in trading of hearing aids and their parts and accessories; that the parts and accessories are manufactured by the parent entity and are used solely and principally with the hearing aids. The Appellant had sought for a ruling on the classification of parts and accessories suitable for use solely with hearing aids and the rate of tax applicable; that the Authority had held that the parts and accessories are classifiable under heading 9021 9010 and the rate of tax was held to be 18% under entry of Schedule 11 Of rate Notification No 01/2017 CT (Rate) dated 28-06-2017. He submi eå that the rules of interpretations under the Customs Tariff Act is applicable to the GST law and accordingly, the meaning of the terms ‘heading’, ‘sub-heading’ and ‘tariff heading’ used in the Customs Tariff Act are applicable to GST law.

6.2. Drawing attention to paras 10 and 11 of the grounds of appeal, he submitted that entry No 221 of Schedule Il of the rate Notification which excludes hearing aids and entry No 142 of exemption notification which includes hearing aids, are both defined at a 4 digit level i.e only heading is mentioned. He submitted that ‘heading’ would include even ‘sub-heading’ and hence hearing aid falling under sub-heading 9021 40 and the parts and accessories of hearing aids falling under sub heading 9021 9010 will both get covered within the heading 9021. Therefore, the hearing aids and its parts and accessories are covered under entry 142 of exemption notification and exempted from GST.

DISCUSSIONS AND FINDINGS

7. We have gone through the entire case records and considered the submissions made by the Appellant in their grounds of appeal, as well as the submissions made at the time of personal hearing and the additional written submissions made thereafter. The Appellant is engaged in the business of trading in hearing aids and its parts and accessories. Hearing aids classifiable under Chapter sub-heading 9021 40 90 of the Customs Tariff Act are exempt from GST by virtue of entry Sl.No 142 of exemption Notification No 02/2017 CT (Rate) dated 28-06-2017. The crux of the matter under appeal before us is regarding the rate of tax applicable to the parts and accessories of hearing aids which are used solely and principally with the hearing aids. Although the Appellant had sought for a ruling on the classification of parts and accessories of hearing aids, we find that they have not disputed the ruling given by the lower Authority that the parts and accessories of hearing aids are classifiable under HSN 9021 90 10. They are particularly aggrieved with the ruling that the parts and accessories of hearing aids are not exempted under Sl.No 142 of the exemption notification but are chargeable to tax at 18% under residual entry Sl.No 453 of Schedule Ill of Rate Notification No 1/2017 CT (Rate) dated 28-6-2017.

8.We will limit our discussion to the applicable rate of tax for the parts and accessories of earing aids falling under tariff item 9021 90 10. The classification of goods under GST regime has to be done in accordance with Customs Tariff Act 1975, which is in turn based on Harmonised System of Nomenclature (HSN). Under the harmonised system, there is an eightdigit code assigned to each commodity. The first two digits represent the “chapter” within the harmonised system. The first four digits collectively represent a “chapter heading” which is a collation of goods with similar characteristics or attributes housed under a chapter. The first six digits represent “chapter sub-heading” which comprises of similar goods under a chapter heading. The eight-digit code is known as the “tariff item” and is housed under a subheading. Since we are concerned with Chapter heading 9021 of the Customs Tariff Act, the same is extracted hereunder for ease of reference:

9.Once an item is classified under a particular sub-heading or tariff item in accordance with the Customs Tariff Act 1975, the rate of GST applicable would be arrived at on the basis of notifications issued under GST law. In the GST Acts, Section 9 (1) of the CGST/KGST Act and Section 5(1) of the IGST Act, creates a charge for the levy of GST on intra-state and inter-state supplies respectively, at the rates which are notified by the Government on the recommendations of the GST Council. Accordingly, the rate of GST applicable to the goods classified under the Customs Tariff Act has been notified vide Notification No 01/2017 Central Tax (Rate) dated 28-06-2017 (for intra-state supplies) and Notification No 01/2017 Integrated Tax (Rate) dated 28-06-2017 (for inter-state supplies). The State Legislature has also enacted similar rate notifications under the State GST law which mirror the above notifications. The scheme of each of the above notifications is such that they set out different rate schedules as follows:

10. Coming to the issue at hand, we are required to determine the rate of tax applicable to ‘parts and accessories of hearing aids’ falling under tariff item 9021 90 10. The entries of the rate notification and exemption notification relevant to heading 9021 are reproduced hereunder:

11.A simple thumb rule in reading the GST rate notification is that, where the entry in any Schedule specifies a description of goods at a four-digit Chapter Heading level and the description matches the Chapter Heading description in the Customs Tariff, the rate of tax will apply to all goods under all the sub headings and tariff items of the said Chapter Heading. However, when the entry in the rate notification specifies a description of goods at a four-digit Chapter heading level which is different from the description in the Customs Tariff Chapter Heading or which excludes certain goods, the rate of tax will apply only to those goods which are described against the respective entry in the rate notification. In other words, when the description of goods under a chapter heading in the GST rate notification is different from the description in the Customs Tariff Chapter heading, it cannot be assumed that all sub-headings and tariff items are automatically covered under the entry. In order to assign a rate of tax to a particular item, it is essential that the item must confirm to the HSN classification at the level 

12. Applying the above principle, we find that the description of goods of heading 9021 at entry Sl.No 221 of Schedule Il of NotfNos 1/2017 Central Tax (Rate) is not the same as the description of the said heading in the Customs Tariff but excludes certain goods. The Customs Tariff Heading 9021 covers the following goods viz:

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