2018 (8) TMI 523 - AAAR - GST

Classification of the product - Caesarstone - whether classified under HSN code 2506 or 6810 for the purpose of levy of GST? Held that - The Appellants are importing the goods in question and are clearing the same by paying Customs duty and IGST through self-assessment method under the Customs tariff heading 6810, and are availing credit of the IGST paid under GST. Thus, when there is no dispute about the classification of the goods in question when the appellants assess these goods on their own under HSN 6810 of the Customs Tariff, the HSN Code for the purpose CGST/SGST ought to be the same. It is evident that Caesarstone is not a natural stone, as its registered name appears to suggest, but is an engineered product, manufactured after a series of processes which are in no way simple mechanical or physical processes covered by Chapter note 1 to Chapter 25. Therefore, the claim of Appellant that Caesarstone, viz that the product is a mixture of 93% Quartz, with some minor additions of other materials; and that the same undergoes only simple mechanical and physical processes; and thus should be classified by invoking Rule 2 (a) and 3(b) of interpretation rules, does not hold ground. If some lumps or powder of quartz would have been presented along with some polyester resins in form of a mixture, the classification would have been decided under heading 2506 only based on the Rule 2(b) read with Rule 3, as it would not have been possible to decide the classification in terms of Rule 1 in that situation. Here, the case is different. The processes being undertaken by the manufacturer for this product are much beyond the processes mentioned in Chapter Note 1 to Chapter 25, and thus the said goods cannot be classified under this Chapter. Competing entry HSN 6810 - Held that - Even though Caesarstone is made from natural quartz, it is clearly classifiable as an article of artificial stone, in view of the processes it has undergone and the form in which it has been presented - the said goods are classifiable under 6810 based on the terms of the heading as Articles of Artificial Stones read with the Explanatory Notes to HSN 6810 and are excluded from Chapter 25 in terms of the Chapter Note 1 of Chapter 25, read with explanatory notes to HSN 2506. Ruling - Caesarstone imported by the Applicant is to be classified under HSN code 6810.

Summary

Issues Involved:
1. Incorrect reading of Heading 2506.
2. Classification of Caesarstone under Heading 2506.
3. Classification of Caesarstone under Heading 6810.

Detailed Analysis:

1. Incorrect Reading of Heading 2506:
The appellant argued that the Maharashtra Authority for Advance Ruling (AARM) misinterpreted Heading 2506, asserting that "quartz" and "quartzite" should be read as two separate entries. The appellant emphasized that scientifically, quartz and quartzite are distinct, with quartz being a mineral and quartzite a metamorphic rock. The appellant contended that the AARM's interpretation excluded the classification of Caesarstone as "quartz" based on an incorrect reading of Heading 2506.

2. Classification of Caesarstone under Heading 2506:
The appellant claimed that Caesarstone, composed of 93% crushed quartz, should be classified under Heading 2506. They argued that the product's essential character is imparted by quartz, supported by Rule 2(b) and Rule 3(b) of the General Rules for Interpretation. The appellant referenced the Supreme Court judgment in Khandelwal Metal and Engineering Works, which emphasized the precedence of the Rules of Interpretation. The appellant also argued that the manufacturing processes for Caesarstone are mechanical and physical, falling within the permissible processes under Chapter Note 1 to Chapter 25.

However, the appellate authority noted that Caesarstone is not in the form of "lumps" or "powder" as required by Heading 2506. The product undergoes extensive manufacturing processes, including mixing with resins and pigments, moulding, pressing, curing, and polishing, which go beyond the simple mechanical or physical processes allowed under Chapter Note 1 to Chapter 25. The authority concluded that Caesarstone does not meet the conditions for classification under Heading 2506.

3. Classification of Caesarstone under Heading 6810:
The appellant contested the classification of Caesarstone under Heading 6810, arguing that it is a natural substance and should not be classified as an artificial stone. They admitted that Caesarstone is classified under Heading 6810 for customs purposes but maintained that it should be classified under Heading 2506 for GST purposes.

The appellate authority emphasized that the Customs Tariff has been adopted for GST classification to avoid disputes. They referenced the Explanatory Notes to HSN 6810, which define artificial stone as an imitation of natural stone obtained by agglomerating pieces of natural stone with binders. The authority concluded that Caesarstone, being an engineered product made from natural quartz and other materials, falls under the category of artificial stone. The authority also noted that Chapter Note 1 to Chapter 68 excludes goods falling under Chapter 25, reinforcing the classification under Heading 6810.

Conclusion:
The appellate authority upheld the ruling of the Maharashtra Authority for Advance Ruling, confirming that Caesarstone imported by the appellant should be classified under HSN code 6810. The authority found no reason to interfere with the initial ruling, emphasizing that Caesarstone is an article of artificial stone and does not meet the criteria for classification under Heading 2506.