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TMI Blog2018 (8) TMI 523X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, the rate Schedule under the respective VAT/CST laws was not linked to the HSN classification of the commodity. Under the Maharashtra Value Added Tax Act, 2005 ( MVAT Act ), Caesarstone was taxed at 13.50% VAT in terms of the residuary entry contained in Schedule E to the MVAT Act. D. GST has been introduced w.e.f. July 1, 2017 which seeks to subsume most of the existing Indirect taxes. Further, the Government has also released various Schedules for classification of goods/services along with applicable GST rates. It is pertinent to note that unlike the VAT/CST laws, the GST rates have now been aligned to the HSN classification of the goods. E. The classification of goods as per the GST rate Schedules has been aligned as per the classification adopted in the tariff entries provided under the First Schedule of the Customs Tariff Act, 1975 (hereinafter referred to as the Customs Tariff Act ). F. The Appellant realized that Caesarstone merits classification under HSN 2506 of the GST Schedule, however, at the time of importation, the same is being classified in heading 6810 for the purpose of levy of BCD and IGST on the same. G. The Appellant had initiated an applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s two separate entries and not as a single entry. 4. In any case, it must be noted that scientifically, quartz and quartzite cannot be used interchangeably. Quartz is a mineral comprising silicon and oxygen atoms and having the chemical composition Si02 and is the second most abundant mineral found in the Continental crust of the earth. On the other hand, Quartzite is a hard, non-foliated metamorphic rock that was originally Quartz Sandstone and underwent metamorphic processes like tectonic compression to form quartzite. From a combined reading of the two, it is evident that quartz and quartzite cannot be used interchangeably and as such the factors relating to quartzite, as mentioned under heading 2506, cannot be applied to products sought to be classified as quartz. 5. In view thereof, it is clear that the Learned AARM has sought to exclude the classification of the said goods as quartz based on an incorrect reading of what Heading 2506 actually covers and how the same is to be read. Accordingly, on this ground alone, the appellant prays that the Impugned Advance Ruling be set aside. B . The said goods fall squarely within the provisions of Heading 2506 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nent, the said goods can be said to be quartz by application of the said rule. If the same is called as quartz, classification needs to be undertaken on the basis of the same i.e. quartz in the said case. 10. In order to further buttress this submission, recourse may be taken to the judgment of the Hon ble Supreme Court in Khandelwal Metal and Engineering Works and Anr v. Union of India and Ors. (AIR 1985 SC 1211) wherein the manner and applicability of the General Rules of Interpretation was discussed. First and foremost, the Apex Court had held that-.................. we can not decide the question of classification of goods under the Import Tariff by implications, when there are Rules of Interpretation which are specially framed to aid and assist the classification of goods under appropriate Headings. Those Rules must have precedence over other aids of interpretation. 11. The clear implication that follows this statement of the Apex Court is that in cases where there exists uncertainty over classification of products based on the wordings of headings in the Customs Tariff Act, the Rules of Interpretation must be resorted to before any other extraneous sources for inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co-relation of classification under the Customs Tariff Act, we are hereby evaluating the 8-digit classification provided under the Customs Tariff Act. In this connection, it is pertinent to note that Quartz under the first part of heading 2506 can either be in powder form or in the form of lumps. 16. The term lump has not been defined under the Customs Tariff Act. Therefore, recourse needs to be made to the dictionary definition of the term lump. This has been defined in The Concise Oxford Dictionary [Pg. 846] as A compact mass, especially the one without a defined or regular shape .Applying the aforesaid definition, the said goods can be constured to be in the form of lumps as a lump may or may not have a definite shape. 17. Further, in the context of the second reason given by the Learned AARM in the Impugned Advance Ruling, we refer to the Chapter Notes provided under Chapter 25 of the Customs Tariff Act. Chapter Note 1 to Chapter 25 provides the various processes that are permitted to be conducted on a product to qualify for classification under this Chapter. The relevant extract of the said Chapter Note 1 is reproduced hereunder: 1. Except where their context or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly from the first part of the explanatory note that states that only quartz in its crude state is covered under heading 2506 of Chapter 25 of the Customs Tariff. In other words, products that have undergone inter-alia the mechanical or physical processes are permitted to be classified under Chapter 25 of the Customs Tariff. 20. Thus, while a product may not be supplied in crude form, if the same is subjected to the processes mentioned under Chapter Note 1 to Chapter 25, such product would also be construed to form part of Chapter 25 of the Customs Tariff ActSchedule. For this, it needs to be evaluated whether the processes carried on by the Appellant s vendor falls within the purview of the term mechanical process as specified in Chapter Note 1 to Chapter 25. 21. The term mechanical process has been defined in the Advanced Law Lexicon (5th Edition) as A process involving the use of machine . While this definition explains the meaning of the term mechanical process , we can also refer to the individual meanings of the terms mechanical and ^process to understand the meaning in greater depth. For reference, the definitions of the terms mechanical and process are rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23. On a combined reading of the definition of the term mechanical process with the manufacturing process carried on by the Appellant s vendor, it can be construed that entire manufacturing process is within the scope of the term mechanical process. Consequently, in terms of Chapter Note 1 to Chapter 25, the manufacturing operations conducted by the Appellant s vendor are within the ambit of permissible processes. 24. Besides this, the Appellant further submits that the HSN system of coding goods is based on the HSN developed by the World Customs Organization ( WCO ). The WCO, periodically releases an Explanatory Note to each of the Chapters/Products of the HSN. C. The Impugned Product cannot be classified under Heading 6810 25. The Learned AARM has observed that since the entire Customs Tariff Heading 6810 has been reproduced for the GST entry, all items classifiable under Heading 6810 of the Customs Tariff Act will fall under the Heading 6810 under the GST Act. It must however be noted that this observation of the Learned AARM has no actual bearing on the facts of this case. As has already been stated, in the pre-GST regime, the Company, being an Importer dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roof top, etc. and used in the cutting and polishing industry. The meaning of the term flagstone clarifies that the same is different from Caesarstone. b. We would also refer to the meaning of the term concrete boulder . The word concrete boulder has not been defined anywhere and thus, we would refer to the dictionary definitions. As per The Concise Oxford Dictionary, the word concrete refers to the building material made from a mixture of gravel, sand, cement and water. Further, the word boulder refers to a large rock. Thus, on a combined reading of both the aforementioned definitions, it can be construed that a concrete boulder would mean a large rock made from a mixture of gravel, sand, cement and water. In view of the above, the product can merit classification only under the residuary category of tariff entry 68109990. 28. Further, it would be worthwhile to refer to Chapter Note 1 to Chapter 68 which clearly provides that Chapter does not cover goods falling under Chapter 25. The relevant extract of the same is as follows: 1. This Chapter does not cover: (a) Goods of Chapter 25;... 29. Thus, if the said goods qualify to be classified under Chapter head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l entry. 31. It must be noted that as per a ruling dated 1 December 1994 by the Area Director of the New York Seaport ( New York Ruling ), an item that consisted largely of silicon dioxide was considered to be natural quartz and classified under heading 25061000 of the Harmonized Tariff Schedule of the United States. As has already been submitted, the Technical Data Manual provided by the Appellant s vendor specifies that Caesarstone is 93 percent crushed quartz (silicon dioxide _Si02)... . 32. At this juncture, it must be noted that Heading 6810.99.00 under United States Customs law is a residuary entry whereby all articles that cannot be classified under other Headings under Chapter 68 are classified under Heading 6810.99.00. In view of our above submissions, it is clear that when a product is classifiable under two Headings, one of which is specific and one generic, the latter will give way to the former. 33. The Learned AARM has relied on the US Ruling that has classified agglomerated quartz sheets under subheading 6810.99.00 which is the residuary clause. However, upon a reading of the aforementioned New York Ruling, it is clear that even within the United States, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter following due procedure, ruled that Caesarstone imported by the applicant is to be classified under HSN code 6810. Aggrieved by the said Ruling, the Appellant is before us. 38. We have heard both the parties, gone through the written submissions made by the appellant as well as the grounds of appeal. We find 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. On this ground alone, the appeal is liable for dismissal. Nevertheless, the questions raised by the appellant cannot be left unanswered, and are discussed as under. 39. Advance ruling has been passed based on an incorrect reading of heading 2506. At the outset here we note that to avoid classification disputes under the GST regime, the Customs Tariff has been adopted for descriptive classific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of goods is 93% crushed quartz and it should be classified as quartz only. And yet, if composition is the only criterion for classification, then all manufactured goods would merit classification in the headings of their raw materials. For example- All furniture of wood will find classification under the heading of wood only as it contains more than 90% of wood and there would not have been any need for a separate heading for wooden furniture. Whereas, the Tariff progresses from Chapter 1 to 99 from materials in their primary form to finished goods, and the later entry is the more specific entry for purposes of classification. Therefore, for correct classification, one needs to understand the processes that the product has undergone from the primary state of the materials used to the finished state of the product being offered off the shelf, so to speak. Let us now see the two competing entries in light of the above guiding principles. We note that Chapter Note 1 to Chapter 25 stipulates that, the headings of this Chapter cover ONLY products which are in the crude state or which have been washed, crushed, ground, powdered, levitated, sifted, screened, concentrated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufactured through a highly automated yet strictly monitored process. Two steps of the said manufacturing process are reproduced hereunder- a. Moulding and Pressing- The mixture is then poured into a mould and formed into slab sizes of 306x144 cm, or 120x57 inches. It is compressed under very high pressure(nearly 100 tons psi) and vibrated in a vacuum. This removes all the air and creates a compressed surface. The slabs are then moved to the curing kiln and heated to 90 degree C for 45 minutes which provides the finishes levels of strength and solidity. From the above, 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. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead 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. 41. The Apex Court Judgement in the matter of M/s Khandelwal Metal and Engineering Works, cited by the Appellant, pertains to application of Rules of Interpretation in cases where there exists uncertainty over classification of products. Firstly, there is no uncertainty over classification here. Secondly, the classification has been decided relying on the Rules of interpretation only. (Rule 1). Therefore, the said judgment is of no help to the Appellant. Two other judgments of Apex Court, cited by the Appellant, are also not relevant in this matter as both pertain to classification of products based on specific entry over general entry. When the goods in question are excluded from Chapter 25 based on the Chapter Notes, there is no question of considering the same under that Chapter as specific entry. Moreso, the said goods are specifically classified as Articles of Artificial Stone under HSN 6810. The Rulings of other countries, referred by the Appellant and Authority for Advance Ruling, are for the purpose of re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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