2018 (11) TMI 1827 - AAR - GST

Classification of goods - clear Insoluble Sulphur for export - whether classified under tariff heading under ITC HS 3812 39 30, ITC HS 3824 90 90, ITC HS 2503 00 10, ITC HS 2503 00 90 and ITC HS 4005 91 90 (Pre-dispersed Insoluble Sulphur) as desired by the customers from Thailand, Mexico, Espania (Spain) and Europe respectively? HELD THAT - The objective of HS Codes is to provide a classification system that associates each individual product with a single heading (and, as the case may be, single sub-heading), to which that product can be simply and unequivocally assigned. It also contains certain interpretation rules designed to ensure that a given product is always classified in one and the same heading (and sub-heading), to the exclusion of any others which might appear to merit consideration. As per guidelines by WCO, all classification decisions must be based upon the application of these rules - There are six of these rules, known as the General Rules for the Interpretation, which are applied in hierarchical fashion, i.e., Rule 1 takes precedence over Rule 2, Rule 2 over Rule 3, etc. The General Interpretative Rules are explained at the beginning of Volume 1 of the Explanatory Notes to the Harmonized System. These rules are also adopted for interpretation of Customs Tariff by India. Upon considering of General Interpretative Rules, there seems no possibility that any goods may be classified under more than one heading / sub-heading and therefore, there seem no rationable to allow use of different codes for a commodity while exporting. Prescribing different GST rates (5% and 12% for any good is definitely not the intention of government and it is imperative that the item should be classified properly in view of applicable classification rules - Although, the applicant has submitted that it is supplying the goods in question in domestic market (i.e. within the Country) under the heading 2802 and charging GST @ 18% and intends to continue doing same yet it doesn't seem, logical that the same good for the purpose of export out of country may be classified under different headings. Moreover, the applicant has failed to provide any logical reason on which basis his goods may be said to fall in more than one heading even under the application of interpretation rules. Thus, there seems no reason for the authority to answer the question in affirmative.

Summary

Issues Involved:
1. Classification of "Insoluble Sulphur" for export under various ITC HS codes as requested by customers from different countries.

Issue-wise Detailed Analysis:

Factual Background:
The applicant, a company registered under the GST regime in Haryana, manufactures "Insoluble Sulphur" and exports it under ITC HS 2802. The company faces issues with overseas customers who encounter difficulties clearing "Insoluble Sulphur" under ITC HS 2802 00 10, as their respective customs authorities insist on different classifications.

Question for Advance Ruling:
The applicant sought clarification on whether it could classify and clear "Insoluble Sulphur" for export under various ITC HS codes (3812 39 30, 3824 90 90, 2503 00 10, 2503 00 90, and 4005 91 90) as required by customers from Thailand, Mexico, Spain, and Europe.

Opportunity of Personal Hearing:
The case was initially heard on 23.11.2018 and subsequently on 29.11.2018 and 11.12.2018. The applicant provided detailed flow charts and arguments to support their classification requests. The judgment was reserved and released after thorough examination.

Comments of the Concerned Officer:
The concerned officer confirmed the factual position and stated that the matter was complex and beyond his jurisdiction, needing a decision from higher authorities.

Discussions and Findings of the Authority:
1. GST Notifications and Classification Rules:
- The CGST and HGST notifications specify GST rates based on classification under various Chapters/Headings/Sub-headings/Tariff items.
- The rules of interpretation from the Customs Tariff Act 1975 apply to GST classification.

2. Harmonised System (HS) Code:
- The HS Code is a universal system developed by the World Customs Organization, used by over 200 countries.
- The Indian Trade Classification (ITC) aligns with the HS Code system, adding two additional digits for further classification.

3. General Rules for Interpretation:
- Six General Rules for Interpretation ensure each product is classified under a single heading/sub-heading.
- Rule 1 prioritizes the terms of headings and Section/Chapter Notes.
- Rule 2 covers incomplete/unfinished articles and mixtures.
- Rule 3 addresses goods classifiable under multiple headings.
- Rule 4 deals with new goods not covered by existing headings.
- Rule 5 relates to containers and packaging.
- Rule 6 requires repeated classification exercises for sub-headings.

4. Application of Rules:
- The rules ensure that goods are classified uniquely under a single heading/sub-heading, negating the possibility of multiple classifications for export purposes.

5. GST Rates:
- Different GST rates (5% and 18%) apply to various tariff items, emphasizing the need for proper classification.

6. Applicant's Position:
- The applicant intends to continue classifying "Insoluble Sulphur" under ITC HS 2802 for domestic clearance but seeks different classifications for exports based on customer requirements.
- The authority found no logical reason to classify the same goods under different headings for export.

Ruling:
The authority ruled that the applicant cannot classify and clear "Insoluble Sulphur" for export under the different ITC HS codes (3812 39 30, 3824 90 90, 2503 00 10, 2503 00 90, and 4005 91 90) as requested by customers from Thailand, Mexico, Spain, and Europe. The question was answered in the negative.

Conclusion:
The judgment emphasizes the importance of adhering to the established rules of classification under the HS Code system and the GST regime, ensuring consistency and avoiding multiple classifications for the same product based on export destinations.