2019 (3) TMI 831 - AAR - GST

Classification of goods - jewellery or watch - jewellery consisting of gold, diamond and precious stones also contains a small wrist watch - whether the item is falling in chapter 71 tariff item 7113 liable to 1.5% CGST 1.5% SGST for sale within state of Gujarat? - Held that - The applicant gets the jewellery prepared by artisans, which consist of gold, diamond, precious stones like ruby, emerald, sapphire etc. and pearls. A small watch is fitted in it. As per the Explanatory Notes to heading 9101, watches of this heading must have cases wholly of precious metal or of metal clad with precious metal, which may be set with gem stones or with natural or cultured pearls and may be fitted with a cover or have a bracelet of precious metal (gem set or not). The product of the applicant is thus undisputedly watch with case of precious metal and covered by Chapter Heading 9101 in view of Chapter Note 2 of Chapter 91 as well as Explanatory Notes to heading 9101. In view of the Explanatory Notes to heading 9101 read with Explanatory Notes to Heading 9102, timekeeping instruments with case and movement, of a kind intended to be worn or carried and designed to function in all positions, which indicate the time or measure intervals of time are covered under the said heading, which include wrist-watches, pocket-watches, fob-watches, watches for carrying in handbags, watches mounted in brooches, rings, etc. Therefore, the watches in the design of butterfly with a ring, bracelet, bangle, necklace, ring etc. supplied by the applicant are covered under heading 9101. The product in question is specifically covered under heading 9101 in view of the terms of that heading read with the relevant Chapter Note. Therefore, the product is not required to be classified in accordance with Rule 3(b) of the Rules for Interpretation.

Summary

Issues Involved:
1. Classification of goods for GST purposes.

Detailed Analysis:

1. Classification of Goods:

Applicant's Submission:
The applicant, M/s. House of Marigold, purchases gold, diamonds, precious stones, pearls, and watches, and then hands them over to a specialized job worker to create jewelry. The jewelry, which includes a nominally valued wristwatch, is sold to customers. The applicant sought an advance ruling on the classification of these goods, arguing that they should fall under Chapter Heading 7113, attracting 1.5% CGST and 1.5% SGST.

Previous Determinations and Judgments:
The applicant referenced a prior determination under the VAT Act, 2003, where similar products were classified as jewelry and taxed at 1%. Additionally, the applicant cited the Gujarat High Court’s decision in the case of State of Gujarat Vs. Titan Industries Ltd., where a product with a watch was classified as jewelry under the VAT Act.

Applicant's Argument:
The applicant argued that the jewelry articles, which include a watch for value addition, should be classified under Chapter 71, specifically tariff item 7113, based on the high value of the gold and precious stones compared to the minimal value of the watch. They emphasized that the primary component and value of the product is the jewelry, not the watch. Various dictionary definitions of "jewelry" and Chapter Note 9 of Chapter 71 were cited to support this classification.

Authority's Analysis:
The Authority examined the relevant provisions and notes of the Customs Tariff Act, 1975, and the Harmonized System of Nomenclature (HSN). Chapter Note 3 of Chapter 71 explicitly excludes articles of Chapter 91 (clocks and watches) from being classified under Chapter 71. The Authority noted that the applicant's product, which includes a watch with a case of precious metal, falls under Chapter Heading 9101.

Relevant Chapter Notes and Explanatory Notes:
- Chapter Note 3(l) of Chapter 71 excludes articles of Chapter 91.
- Chapter Note 2 of Chapter 91 specifies that Heading 9101 covers watches with cases wholly of precious metal or metal clad with precious metal.
- Explanatory Notes to Heading 9101 and 9102 of the HSN further clarify that watches designed to be worn or carried, including those mounted in jewelry, fall under Heading 9101.

Authority's Conclusion:
The Authority concluded that the applicant's product, which includes a watch with a case of precious metal, is classifiable under Chapter Heading 9101. This conclusion is supported by the terms of the heading, relevant chapter notes, and explanatory notes, as well as the precedent set by the Customs, Excise, and Service Tax Appellate Tribunal in the case of Titan Industries Ltd. vs. Commissioner of Central Excise, Chennai.

Ruling:
The product "Marigold Butterfly Bridal with Watch" and similar jewelry products containing a watch supplied by M/s. House of Marigold are classifiable under Heading 9101.