2020 (2) TMI 32 - AAR - GST

Classification of goods - Rice Husk Board - whether classified as wood and Articles of Wood under Chapter 44 and attract 12% rate of GST? - HELD THAT - Fibreboard manufactured by bonding fibres extracted from wood chips or other lingo-cellulose material. They are bonded together by adding thermosetting resins and find application such as furniture, interior decoration and in building are classified under this heading. The product in hand is a Natural Fibre Composite Board with density of ranging from 0.65 - 0.8g/Cm3(as given in the brochure) and finds application in furniture, interior decoration, building, etc. In this case as per the manufacturing process, fibres are extracted from the rice husk and then mixed with lime powder (calcium carbonate), processing additives such as lubricants, foaming agents, foam regulators, heat stabilizers, etc. PVC resin is used as a binding agent. Hence, the product is a Fibreboard and is more aptly classifiable under CTH 441193 as Others as it is not a Medium Density Fibreboard. Further classification will depend on the individual properties of the product. NFC Board manufactured by the applicant with main content as Rice husk, will more appropriately be classified under CTH 441193, the applicable rate of GST is taken up for consideration. The rate of CGST is notified vide Notification No. 01/2017-C.T.(Rate) dated 28.06.2017 as amended in respect of goods and that of SGST is notified vide Notification No. vide G.O. (Ms) No. 62 dated 29.06.2017 as amended. As per Sl.No 92 of Schedule-II of the Notifications, specifies the following goods falling under Chapter 44 or any other Chapter are subject to 6% CGST. Rice Husk Board or fibre board manufactured from agricultural crop residues, irrespective of the Chapter under which the same are classified, are subjected to CGST @ 6% and 6 % SGST.

Summary

Issues Involved:
1. Classification of the Rice Husk Board.
2. Applicable rate of GST on the Rice Husk Board.

Issue-wise Detailed Analysis:

1. Classification of the Rice Husk Board:

The applicant, engaged in manufacturing "Natural Fibre Composite Board (NFC)" using rice husk powder, calcium carbonate, recycling waste, PVC resin, and other processing aids, sought an advance ruling on whether their product should be classified under Chapter 44 as wood and articles of wood, attracting a 12% GST rate.

The applicant argued that the dominant raw material is rice husk, with PVC acting merely as a binding agent. They referenced the Harmonized System of Nomenclature (HSN) explanatory notes and a previous tribunal decision (M/s. Padmavathy Panel Boards vs The Commissioner of Central Excise) to support their claim that the product should fall under Heading 44.10, which includes particle boards and similar boards made from wood or other ligneous materials.

The ruling authority examined the manufacturing process, which involves pulverizing rice husk into powder, mixing it with other materials, and extruding it into boards. The authority noted that the product does not fit the definition of particle board under Heading 44.10 because it involves extracting fibers from rice husk rather than using whole husk particles.

Instead, the product was found to align more closely with the definition of fiberboard under Heading 44.11, which includes boards made from defibred ligno-cellulosic materials bonded with resins or other organic substances. The NFC board, with its density and application in furniture and construction, was thus classified under CTH 441193 as "Other fiberboard."

2. Applicable Rate of GST on the Rice Husk Board:

The ruling authority referred to Notification No. 01/2017-CT (Rate) dated 28.06.2017, which specifies the GST rates for various goods. According to Sl.No 92 of Schedule-II of the notification, goods falling under Chapter 44 or any other chapter, including rice husk boards, are subject to a 6% CGST and 6% SGST.

The authority concluded that the "Indowud Natural Fibre Composite (NFC) Board" manufactured by the applicant should be classified under Chapter 441193 of the Customs Tariff and attract a total GST rate of 12% (6% CGST and 6% SGST).

Ruling:

The "Indowud Natural Fibre Composite (NFC) Board" manufactured by the applicant merits classification under Chapter 441193 of the Customs Tariff and attracts 6% CGST as per S.No. 92 of Schedule II under Notification 1/2017-Central Tax (Rate) dated 28.06.2017 and 6% SGST under Notification No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017 as amended.