2018 (5) TMI 646 - AAR - GST

Classification of Caesarstone - an article made from artificial stone - MGST Act - whether the product Caesarstone imported by the applicant can be classified under HSN Code 2506 or 6810? Held that - Chapter 25 covers the naturally occurring quartz which has undergone changes without changing the structure of the product. The way the impugned product comes into existence should leave no doubt that the same would not be covered by the Chapter 25 and the Heading 2506. The rules for interpretation of the Customs Tariff would not apply herein as the Chapter 25 specifically excludes goods of the nature as the impugned product - the impugned product would not be covered by the Heading 2506. The entire description as appearing in the Customs Tariff Heading 6810 has been taken for the purposes of the GST entry. It, therefore, means that all item falling in the Customs Tariff Heading 6810 would fall in the description against the Heading 6810 for the purposes of the schedule entry under the GST Act - the Heading covers artificial stone. The impugned product is an article made from artificial stone. It is a product made using artificial or engineered stone. The product certification explains things, beyond doubt - It can, therefore, be understood as to why the impugned product is being cleared under the Heading 6810. We have also found a Ruling in respect of the product classification of Silestone TM (as seen above) agglomerated stone slabs under the Harmonized Tariff Schedule of the United States (HTSUS). The information about the product was thus - The slabs are composed of 93% quartz and 7% resm binder. After he slabs are imported. they are sold only to U.S distributors who use then to produce various counter tops. vanities and fireplace surrounds. It was held that the agglomerated quartz sheets are classified under subheading 6810.99.00, HTSUS, which provides for other articles of artificial stone. Ruling - Caesarstone imported by the applicant is to be classified under HSN code 6810.

Summary

Issues Involved:
1. Classification of Caesarstone under HSN code 2506 or 6810.

Detailed Analysis:

Applicant's Contentions:
1. Company Background: The applicant, Hafele India Pvt. Ltd., is engaged in importing kitchen and bathroom fittings, including Caesarstone quartz surfaces, and is registered under GST in Maharashtra and other states in India.
2. Pre-GST Classification: Under the pre-GST regime, Caesarstone was taxed at 13.50% VAT under the residuary entry in Schedule E of the Maharashtra Value Added Tax Act, 2005.
3. Need for Reclassification: With the introduction of GST, the classification of goods has been aligned with the HSN classification under the Customs Tariff Act, leading to inconsistencies that necessitate re-determination of Caesarstone's classification.
4. Possible Classifications: The applicant suggests Caesarstone could be classified under HSN 2506 (Quartz) or 6810 (Articles of artificial stone).
5. Composition and Manufacturing Process: Caesarstone consists of 93% crushed quartz combined with polyester resins and pigments, compacted under vacuum and pressure into slabs.
6. Classification Under HSN 2506:
- Quartz Content: Caesarstone, being 90% quartz, should be classified as quartz under HSN 2506.
- Mechanical Process: The manufacturing process involves mechanical processes permissible under Chapter Note 1 to Chapter 25 of the Customs Tariff Act.
- Explanatory Notes: The HSN Explanatory Notes support the classification of quartz that is in the crude state or has undergone permissible processes.
7. Exclusion from HSN 6810: Chapter Note 1 to Chapter 68 excludes goods falling under Chapter 25, implying that if Caesarstone qualifies under Chapter 25, it should not be classified under Chapter 68.

Concerned Officer's Contentions:
1. Chemical Processes: The manufacturing process involves chemical processes that change the character of the mineral product, making it ineligible for classification under Chapter 25.
2. Chapter 68 Inclusion: Caesarstone, being an article of artificial stone, fits the description under HSN 6810, which includes tiles, flagstones, and similar articles.

Authority's Observations:
1. Product Description: Caesarstone is an engineered quartz surface containing 90% crushed quartz, polyester resins, and pigments, used for various residential and commercial applications.
2. HSN 2506 Analysis:
- Crude State Requirement: HSN 2506 covers quartz in the crude state or subjected to mechanical or physical processes without changing the structure.
- Exclusion by Processing: The addition of resins and pigments and the extensive manufacturing process change the structure of quartz, disqualifying it from HSN 2506.
3. HSN 6810 Analysis:
- Artificial Stone Definition: Engineered stones like Caesarstone, made from quartz aggregates, pigments, and resins, fall under the category of artificial stone.
- Supporting References: Various references, including the Harmonized Tariff Schedule of the United States and industry definitions, support the classification of engineered quartz surfaces under HSN 6810.

Conclusion:
The Authority concluded that Caesarstone, being an engineered quartz surface containing significant non-quartz materials and undergoing extensive manufacturing processes, does not qualify under HSN 2506. Instead, it fits the description of articles of artificial stone under HSN 6810.

Order:
Caesarstone imported by the applicant is to be classified under HSN code 6810.