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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 ..... THE CASE A. The Appellant is engaged in the business of importation of kitchen and bathroom fittings along with furniture and other home accessories (hereinafter called as 'goods') for onward selling. The Appellant, while importing these goods, is subject to Basic Customs Duty and Integrated Goods and Services Tax ("IGST") under Customs Tariff Act, 1975 on goods cleared for home consumption. B. The Appellant also imports 'Caesarstone Quartz Surfaces' (hereinafter referred to as the said goods") for onward sale to domestic customers in India. The Appellant while importing the said goods is liable to pay Basic Customs Duty, Integrated Goods and Services Tax ("IGST") under Customs Tariff Act, 1975 on goods cleared for home consumption. Further on making the outward supply of the said goods, depending on the nature of supply, the appellant is liable to discharge the applicable tax i.e. Central Goods and Services Tax ("CGST") and State Goods and Services Tax ("SGST") or IGST as the case may be. C. In the pre-GST regime, the, Appellant, being an Importer dealer, was not required to pay Excise duty on its sale to customers. It was merely liable to pay VAT/CST on such sale as per the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phur; earths and stone; plastering materials, lime and cement" whereunder quartz is covered under heading 2506 in the following manner: "Quartz (other than natural sands); quartzite, whether or not roughly trimmed or merely cut, by sawing or otherwise, into blocks or slabs of a rectangular (including square) shape" 3. Based on a plain reading of the above entry, it is clear that "quartz" and "quartzite" are two separate entries, separated by a "semicolon" but clubbed together as a single entry. The Merriam Webster Dictionary defines .'semicolon" and its role in sentence construction in the following manner: "a punctuation mark; that can be used to separate parts of a sentence which need clearer separation than would be shown by a comma, to separate mainclauses which have no conjunction between, and to separate phrases and clauses containing commas" Further, the Oxford English Dictionary defines "semicolon" and its role in sentence construction in the following manner: "indicating a discontinuity of grammatical construction greater than that indicated by a comma but less than that indicated by a full stop". In view thereof, it is clear that "quartz" and "quartzite" should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompacted under intense vibration, vacuum and pressure into dense and non-porous slabs. This is clear from Section 6 of the Technical Data Manual provided by the Appellant's vendor. Similarly, a Guide Specification for these goods, released by the Appellant's vendor, uses the words "Caesarstone" and "quartz" synonymously such that "Caesarstone" and "quartz" are considered to be interchangeable. 8. Reference must be made to Rule 2(a) of the General Rules for Interpretation. A bare perusal of the said Rule provides that a reference to a material or substance shall be taken to include a reference to mixture or combination of that material or substance with other materials or substances. 9. Further, Rule 3(b) of the General Rules for Interpretation provides that mixtures or composite goods that consist of different materials or are made up of different components. shall be classified as such material or component that gives the product its essential character. Applying the said rule to the present set of circumstances, it can be deduced that even in case the goods are said to be a mixture of more than one material/compound, since in the present case, quartz is the main component, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urities. Thus, it cannot be said that Heading 2506 does not envisage a mixture of quartz in any form. In view thereof, the observation of the Learned AARM that Heading 2506 does not contemplate mixtures of any sort is incorrect and without proper understanding of the facts. 14. Additionally, it must be noted that even though Explanatory Note 1 to Chapter 25 does state that the products that have undergone processes other than those provided by the relevant Heading are excluded from the ambit of Heading 2506, it is important to note that the only exclusion provided in the first part of Heading 2506 is "natural sand". Sand is a naturally occurring material composed of finely divided rock and mineral particles. Sand is characterized by the size which is finer than gravel and coarser than silt. However, the said goods is the processed form of quartz in the form of slabs and thus, the same would not be construed as a natural sand. Thus, it is clear that the goods in question does not fall within the ambit of the only exclusion provided under Heading 2506. 15. Although the GST regime does not seek to classify goods in excess of 4-digit classification, for a better co-relation of classi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uses it connects". It is additionally defined as "having the property of disjoining; characterized by separation". In page 523 of the same book, the Learned Author mentions that in general, a distinction might be made between positive and negative conditions prescribed by statute for acquiring a right or a benefit - positive conditions separated by .'or" are usually read in the alternative. In the case of Indian Medical Association v Union of India [AIR 2011 SC 2365], the word "or" has been said to denote "an alternative in a series of exclusive arrangements". 19. From a plain reading of the above interpretations, it is clear that the use of the word "or" in a sentence denotes that the words coming before "or" and after/or" are mutually exclusive of each other. The Explanatory Note to Chapter 25 provides the "positive conditions" on the fulfillment of which goods may be classified thereunder. Applying the above-mentioned principles of interpretation, it is clear that the words preceding "or" and succeeding it should be read in the alternative. In view thereof, the phrase "or other mechanical or physical processes" are to be read separately from the first part of the explanatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on by the Appellant's vendor. The entire process of manufacturing Caesarstone is set out hereunder: a. Inspection of raw materials: The manufacturing process begins with a rigorous inspection of all incoming materials so as to ensure only high quality raw materials are used in the manufacture of Caesarstone. b. Feeding and mixing: The best quality raw materials are blended at a ratio of up to 93% natural quartz aggregates with pigments and polymer resins. c. Moulding: The blended mixture is then poured into a mold and formed into slab sizes of 3050x1440mm. d. Pressing: Subsequently, the slab is compacted by a special vacuum and vibration process at a pressure of 100 tons. e. Curing: The slabs are moved to the curing kiln and heated to 90QC for 45 minutes which gives Caesarstone its ultimate strength and solidity. f. Polishing: Slabs are then gauged, calibrated and polished to a perfect finish in a wide range of colors and designs in one of our three textural surface finishes: Polished, Honed or Viento. The processes explained above have also been elaborated by the Appellant's vendor in its website. - 23. On a combined reading of the definition of the term mechanical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M has made use of a ruling dated 27 August 2002 under the Harmonized Tariff Schedule of the United States to hold that agglomerated quartz sheets are classified under subheading 6810.99.00, which provides for articles of artificial stone ("US Ruling"). As such, as per the Impugned Advance Ruling, basis the US Ruling, the said goods are liable to be classified under Chapter 68 and Heading 6810. 27. At the outset, we submit, based on previously iterated facts that the said goods cannot be classified under Chapter 68 and Heading 6810 of the Customs Tariff Act. Tariff entry 6810 inter alia covers various products like tiles, flagstones, bricks, prefabricated structural components for building or civil engineering and concrete boulder. While it is beyond doubt that Caesarstone is different from tiles, bricks and prefabricated components for building or civil engineering, it would also be important to understand the meaning of the terms "flagstones" and "concrete boulder", a. As per Rule 22 of the Madhya Pradesh Mineral Rules 1996, Flagstone is a natural sedimentary rock which is used for flooring, roof top, etc. and used in the cutting and polishing industry. The meaning of the term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c The Hon'ble Apex Court, in plethora of judgments held that the heading that provides a more specific description shall be preferred to the headings providing a more general description. i. ln Indian Metals & Ferro Alloys Ltd., Cuttack v. Collector of Central Excise, Bhubaneshwar, [1991 Supp (1) SCC 125], the Hon'ble Apex Court held that a residuary item can be referred to and such item can be applied only when goods are shown to be not falling under any other specific item. If they are covered by a specific item, residuary item has no application. It was further held that unless the department can establish that the goods in question can, by no conceivable process of reasoning, be brought under any of the specific items mentioned in the tariff, resort cannot be had to the residuary item. ii. Similarly, the Hon'ble Apex Court in the case of Speedway Rubber Company v. CCE, Chandigarh [2002 (143) ELT 0008 (SC)] has laid down the principle that while determining the classification of a product, the specific entry provided under the Tariff should prevail and overrule a general entry. 31. It must be noted that as per a ruling dated 1 December 1994 by the Area Director of the New ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the product is made of 93% quartz and quartz is mentioned against HSN 2506, the classification of the said goods should be decided under HSN 2506 as specific entry will prevail over generic entry. The Advocates also submitted that their product is made from 93% of natural stone(quartz), hence same can not be classified under HSN 6810 as Artificial Stone. 36. The Jurisdictional Officer opposed the argument of the Advocate citing that 250610 covers Quartz in Lumps and the goods in question are in no way in Lumps as the same are in form of slabs. He further argued that Chapter 25 pertains to Minerals and the goods in question are a manufactured product after undertaking number of processes and thus cannot be classified under 2506 as the said Heading covers natural goods in crude state with minor processes permitted in the Chapter. Discussions 37. The issue involved in the matter is classification of the product 'Caesarstone^iTnpwfTed by the Appellant, under HSN code 2506 or 6810 for the purpose of levy of GST. The Authority for Advance Ruling, after following due procedure, ruled that "Caesarstone imported by the applicant is to be classified under HSN code 6810." Aggriev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant has claimed that 'Quartz' and 'Quartzite' should be read as two entries and not as a single entry as both are separated by a 'semicolon'. From a reading of the Tariff, we find that for the goods 'quartz', there are only two entries at tariff item level (8 digit level) under heading 2506, viz. (i) 25061010--------In lumps (ii) 25061020-------In powder Even if 'Quartz' was to be imported, it would have been classified under 2506 in the above two forms only. However, the form in which the goods are imported, even if we presume for the sake of argument that these are quartz, are neither in form of 'LUMPS' nor in the form of 'POWDER', but are Agglomerated/Fabricated/Engineered stone in slab form, which is evident from the literature provided by the Appellant themselves. Therefore, the argument of Appellant that AAR has passed the order on an incorrect reading of Heading under 2506, holds no ground. 40. The said goods fall squarely within the provisions of Heading 2506. The Appellant has claimed that the composition 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 manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over generic description and as per Rule 3(b), the classification shall be decided based on the material or component which gives the mixture or combination of goods as their essential character. In the instant case, the goods in question are registered as 'Caesarstone and are manufactured by M/s Caesarston Ltd. As per the Technical Data Manual, submitted by the Appellant, Caesarstone is 'engineered quartz surface' which outperforms natural stone. The manufacturer does not use it as a synonym of quartz as claimed by the Appellant. It is being manufactured using various raw materials wherein upto 93% natural quartz aggregates are mixed with pigments and polymer resins. The manufacturer declares the ingredients on the goods as- "Quartz/Silica sand, Polyester Resin, Styrene, Titanium Dioxide, tert-Butyle peroxy-3,5,5-trimethylhexanoate, Pigment mixture". The manufacturing process is also available on the website of the manufacturer which inter-alia includes that 'Caesarstone Quartz Surfaces' are manufactured 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 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the competing entry HSN 6810, which covers Articles of Artificial Stones. As per the Explanatory Notes to HSN 6810, 'Artificial Stone is an imitation of natural stone obtained by agglomerating pieces of natural stone or crushes or powdered natural stone(limestone, marble, granite, porphyry, serpentine etc.) with lime or cement or other bindersfe.g. plastics). Articles of artificial stone include those of "terrazzo", "granito", etc' The Explanatory Notes also state that- "when lumps of quartz of various sizes are introduced into the mixture, artificial type products are obtained." The Explanatory Notes above leave us in no doubt 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. Thus, we find that 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. 41. The Apex Court Judgement in the matter of M/s Khand ..... X X X X Extracts X X X X X X X X Extracts X X X X
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