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TMI Blog2019 (1) TMI 1021X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication 2. Tile Grout i. Cement based Tile Grout ii. Epoxy based Tile Grout At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act". FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- Statement of relevant facts having a bearing on the question(s) raised 1.1. The Applicant is a manufacturer and dealer in paints and other chemical based products and adhesives. 1.2. Applicant is, inter alia, in the business of the buying and selling Tile Adhesives and Tile Grouting material. 1.3. The Applicant has been classifying the below mentioned two products under 24 of Schedule IV of Notification No. 1/2017- Central Taxes (Rate) dated 28.06.2017 and paying CGST thereo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n applied on the surface (where tiles have to be fixed using trowel. The said surface is then combed with notch trowel and tiles are fixed. This product is used under the tiles to join the tiles together in order to provide strength to the walls, floors, etc. where the tiles are applied. It is used an adhesive for bonding of tiles. 1.5.4 Tile Adhesive for Stone & Heavy Tile application: The product Tile Adhesive for Stone & Heavy Tile Application is single component Grey cement based polymer modified tile adhesive specially designed for heavy stone tile applications like granite, marble on internal as well as external vertical surfaces. The product is sold as free flowing powder. This product is mixed with water to form a slurry and is then applied on the surface (where tiles have to be fixed) using trowel. The said surface is then combed with notch trowel and tiles are fixed. It is used an adhesive for bonding of tiles to surface. 1.6 Tile Grout: Tile grout is compound used as joint filler between tiles. The product has to two version i.e. Cement based and epoxy based which are described as below: 16.1. Cement based on tile grout: This product is a single component pol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above two categories of products. 2.3. Entry 97 of Schedule III to Notification No. 1/2017-Central Taxes (Rate) dated 28.06.2017 is extracted below for ready reference: Schedule III 9% S.No. Chapter [Heading/Sub-heading/Tariff item Description of Goods 1 2 3 97 3824 Prepared binders for foundry moulds or cores; chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included 2.4. The other competing entry is Entry 24 of the Schedule IV to Notification No. 1/2017 - Central Taxes (Rate) dated 28.06.2017. The same is extracted below for ready reference: Schedule IV 14% S.No. Chap/Hdg/Sub-hdg Tariff item Description of Goods 1 2 3 24. 3214 Glaziers putty, grafting putty, resin cements, caulking compounds and other mastics; painters fillings; non- refractory surfacing preparations for facades, indoor walls, floors, ceilings or the like 2.5. The Applicant submits that on a plain reading of the description in the above two competing entries, it is clear that the aforesaid two categories of products of the applicant will fall under Entry 97 of Schedule III being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst Schedule shall, so far as may be, apply to the interpretation of this notification. 3.3. In view of the Explanation (iv), the Chapter Heading under consideration shall be interpreted on the basis of rules of interpretation of the First Schedule to the Customs Tariff Act, 1975. Before resorting to the Chapter Notes and Sub Heading Notes Of the Customs Tariff Act, the relevant Tariff Items Of the Customs Tariff Act are extracted below for ready reference: (A): Relevant Extract of Chapter Heading 32 14: Tariff Item Description of goods Unit Rate of duty Standard Preferential areas 3214 GLAZIERS' PUTTY, GRAFTING PUTTY, RESIN CEMENTS, CAULKING COMPOUNDS AND OTHER MASTICS; PAINTERS' FILLINGS; NON-REFRACTORY SURFACING PREPARTIONS FOR FACADES, INDOOR WALLS, FLOORS, CEILINGS OR THE LIKE 32141000 - Glaziers' putty, grafting putty, resin cements, caulking compounds and other mastics; painters' fillings kg. 10% 321490 - Other : 32149010 --- Non-refractory surfacing preparations kg. 10% 32149020 --- Resin cement kg. 10% 32149090 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, of synthetic rubber or acrylic polymers, asbestos fibres mixed with a pigment, and water. These are applied on facades with paint brush or spray gun and form a much thicker layer than paint. 3.7. The Applicant submits that on a plain reading of the above HSN Explanatory Notes, it can be seen that the said Chapter Heading 3214 only includes Non-refractory surfacing preparations to make facades, indoor walls, floors and ceilings, swimming pool walls and floors, etc. water proof and improve their appearance. Further the said non-refractory preparations contained in Chapter Heading 3214 generally remain visible as final surfacing. 3.8. In the present case, all the above two categories of products are non-refractory preparations. However, they are not used for water-proofing or improving the appearance of the wall of tiles. The said two categories products are used for bonding of the tiles either horizontally or vertically and to grout the gaps between tiles. Further in no case, the above two categories of products emerge as final visible surface. In fact, the Tile Adhesives are never used on the surface. 3.9. The Applicant relies on the decision of Hon'ble CESTAT in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the question of Whether the word "coal" covers Charcoal, held that the meaning of the word 'coal' in the statute as understood in its commercial or popular sense would include "charcoal". The Apex Court upheld the decision of High Court Wherein the High Court had observed that while construing entries in a statute like the Sales Tax Acts, the Court should prefer the Popular meaning of the terms used in such entries and not their dictionary meanings and that so construed charcoal would be included in the word 'coal'. 3.16. The Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs. Connaught Plaza Restaurant (P) Ltd. - (2012) 13 SCC 639 (SC) = 2012 (12) TMI 149 - SUPREME COURT was concerned with the question of whether the soft serve ice cream would be covered under the term ice cream. The Apex Court while holding against the revenue and in the favour of the assesse to hold that ice cream would cover the soft serve ice cream. The Apex Court held that in the absence of a Statutory definition in precise terms; words, entries and items in taxing statutes must be construed in terms of their commercial or trade understanding, or according to their popular meaning. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The Applicant has been classifying the below mentioned six products under 24 of Schedule IV of Notification No. 1/2017- Central Taxes (Rate) dated 28.06.2017 and paying CGST thereon. The description of the products is explained below and the invoices for the products are annexed along with the application. Table - 1 Sr. No. Product Description Classification adopted by NM 1. Tile Adhesive for Normal Application Entry 24 of Schedule IV 2. Glass Tile Adhesive Entry 24 of Schedule IV 3. Tile - on - Tile Application Entry 24 of Schedule IV 4. Tile Adhesive for Stone & Heavy Tile Application Entry 24 of Schedule IV 5. Cement based Tile Grout Entry 24 of Schedule IV 6. Epoxy based Tile Grout Entry 24 of Schedule IV 1.3. The Applicant submits that, in the present Advance Ruling Application the Applicant has raised the question for classification of 6 products which can be broadly classified in two categories; 1) Tile Adhesives and 2) Tile Grouting Material. 1.4. Before. going to the description of each of the products, below is the composition of the each of the product based upon the two broad category: Type of Input Tile Adhesive Tile Grouting material Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with notch trowel and tiles are fixed. This product is used under the tiles to join the tiles together in order to provide strength to the walls, floors, etc. where the tiles are applied. It is used an adhesive for bonding of tiles. 1.10. Tile Adhesive for Stone & Heavy Tile Application: 1.10.1. The product Tile Adhesive for Stone & Heavy Tile Application is Single component white cement based polymer modified tile adhesive specially designed for heavy stone tile applications like granite, marble on internal as well as external vertical surfaces. The product is sold as free flowing powder. This product is mixed with water to form a slurry and is then applied on the surface (where tiles have to be fixed) using trowel. The said surface is then combed with notch trowel and tiles are fixed. This product is used under the tiles to join the tiles together in order to provide strength to the walls, floors, etc. where the tiles are applied It is used an adhesive for bonding of tiles. 1.11 Cement based Tile Grout: 1.11.1. This product is a single component polymer modified tile grout for filling tile joints upto 5mm width. It is a specially formulated premium, fast selling, low shrinkag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries, the aforesaid six products will be classifiable under Entry 97 of Schedule Ill liable to CGST at 9%: 2.1. The Applicant submits that above six products sold by the Applicant is non refractory chemical based preparation. The said product contains predominantly cement, sand / grit and additives mixed in powder form. The said powder is converted into slurry by adding water before application. 2.2. The above six products do not have any refractory properties and hence will fall under the non-refractory category. 2.3. The Applicant submits that there are two competing entries relevant for present classification of above six products, 2.4. Entry 97 of Schedule III to Notification No. 1/2017 - Central Taxes (Rate) dated 28.06.2017 is extracted below for ready reference: Schedule III 9% S.No. Chapter/Heading/Sub-heading Tariff item Description of Goods 1 2 3 97. 3284 Prepared binders for foundry moulds or cores, chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included 2.5. The Other competing entry is Entry 24 of the Schedule IV to Notification No. 1/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which delays the process of drying the mortar. If a mason binds the tiles with a normal mortar, then depending upon the environmental conditions, the mortar will dry up quickly. Once the mortar has dried, the mason cannot then set the tiles or remove it without damaging the tile. On the Other hand, if the mason uses the tile adhesive, the mason, the slurry remain slipper for a longer period of time and the mason can then set the tile or uproot the tile without damaging the tile. Thus, a tile adhesive basically is a mortar with an added capability of prolonging the period of drying and binding. 2.12. The Applicant submits that, from the above description it is clear that the Tile Adhesive is nothing but a mortar and cannot be considered as surfacing preparation. Thus, the tile adhesive cannot be classified under Chapter Heading 3214 of the Customs Tariff Act, 1975 and consequently for the GST purpose also the said products cannot be classified under Entry 24 to Schedule IV. 2.13. Thus, once it is not included in the Entry 24 of Schedule IV, it will be covered under Entry 97 of Schedule III liable to CGST at 9% which is more specific entry than any Other entry. 2.14. Entry 97 inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication. 3.3. In view of the Explanation (iv), the Chapter Heading under consideration shall I con be interpreted on the basis of rules of interpretation of the First Schedule to the Customs Tariff Act, 1975. Before resorting to the Chapter Notes and Sub Heading Notes of the Customs Tariff Act, the relevant Tariff Items of the Customs Tariff Act are extracted below for ready reference: (A): Relevant Extract of Chapter Heading 3214: Tariff Item Description of goods Unit Rate of duty Standard Preferential areas 3214 GLAZIERS' PUTTY, GRAFTING PUTTY, RESIN CEMENTS, CAULKING COMPOUNDS AND OTHER MASTICS; PAINTERS' FILLINGS; NON-REFRACTORY SURFACING PREPARTIONS FOR FACADES, INDOOR WALLS, FLOORS, CEILINGS OR THE LIKE 32141000 - Glaziers' putty, grafting putty, resin cements, caulking compounds and other mastics; painters' fillings kg. 10% 321490 - Other : 32149010 --- Non-refractory surfacing preparations kg. 10% 32149020 --- Resin cement kg. 10% 32149090 --- Other kg. 10% (B): Relevant Extract from Chapter Heading 382 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, and water. These are applied on facades with paint brush or spray gun and form a much thicker layer than paint. 4.1. The Applicant submits that on a plain reading of the above HSN Explanatory Notes, it can be seen that the said Chapter Heading 3214 only includes Non refractory surfacing preparations to make facades, indoor walls, floors and ceilings, swimming pool walls and floors, etc. water proof and improve their appearance. Further the said non-refractory preparations contained in Chapter Heading 3214 generally remain Visible as final surfacing, 4.2. In the present case, all the above six products are non-refractory preparations. However, they are not used for water-proofing or improving the appearance of the wall of tiles. The said six products are used for bonding of the tiles either horizontally or vertically. Further in no case, the above six products emerge as final visible surface. In fact, the Tile Adhesives are never used on the surface. 4.3. The Applicant relies on the decision of Hon'ble CESTAT in the case of Sika India Pvt. Ltd. Vs. Commissioner of Central Excise, Jaipur - 2018-TIOL-243 CESTAT-DEL = 2017 (12) TMI 892 - CESTAT NEW DELHI wherein while deciding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial or popular sense would include "charcoal". The Apex Court upheld the decision of High Court wherein the High Court had observed that while construing entries in a statute like the Sales Tax Acts, the Court should prefer the popular meaning of the terms used in such entries and not their dictionary meanings and that so construed charcoal would be included in the word 'coal' 4.10. The Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs. Connaught Plaza Restaurant (P) Ltd. - (2012) 13 SCC 639 (SC) = 2012 (12) TMI 149 - SUPREME COURT was concerned with the question of whether the soft serve ice cream would be covered under the term ice cream. The Apex Court while holding against the revenue and in the favour of the assesse to hold that ice cream would cover the soft serve ice cream. The Apex Court held that in the absence of a statutory definition in precise terms; words, entries and items in taxing statutes must be construed in terms of their commercial or trade understanding, or according to their popular meaning. In other words, they must be constructed in the sense that the people conversant with the subject-matter of the statute, would attribute to it. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Heading 3824. 5.2. The Applicant submits that the products sold by the Applicant is mixture consisting of different goods such as cement, sand and additives. 5.3. Thus, the said products will be classifiable as per Rule 3 read with Rule 2(b) of the General Interpretation Rules to First Schedule. Rule 3 of the said Rules is extracted below for ready reference: 3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per HSN code 3214, but applicant has raised the issue that no such product has clearly mentioned in chapter heading of Central Excise Tariff Act and he urged that his product should fall in HSN Code 3824 instead of HSN Code 3214 and levy of ta be 18% instead of 28%. He has further stated that the product is a "non-refractory mortars" and "concretes" under sub heading 382450. He further stated that as per such heading 38245010 description is "concretes ready to use known as readymix concrete (RMC)". He stated that the goods manufactured by applicant is nothing but "mortars" as per tariff heading 382450 & product should fall 38245090 whose description is "other" for proving the claim Of the dealer he has given documents such as invoices, and application. After scrutiny of documents submitted along with application, tariff heading 3824 & 3214 & description therein, primafacie it appears that applicant is manufacturer of "tile adhesive & tile grout". Basic properties & composition of above mentioned product is as under: 1) Tile adhesive: - As per applicant tile adhesive is mixture of cements & sand and polymer i.e. methyl cellulose. This mixture is called as "polymers concrete" and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % GST as per the classification of goods under tariff heading 3214 of Central Excise tariff Act. The HSN Code 3824 is not applicable to the goods manufactured by applicant i.e. tile adhesive and tile grout, because no doubt it is mortar i.e. mixture of sand, cement and polymer and ready mix concrete (RMC) is mixture of aggregate sand, cement, water but not polymer. After adding polymer as a adhesive, polymer reduces the water holding capacity of concrete and make it hard instantly. Polymer contained mixture also reduces compressive strength of the concrete, which is basic property of the cement / concrete mixture. Polymer i.e. methyl cellulose is act as plasticizer and in rightly fall in non-refractory surfacing preparation as per HSN Code 3214. The description of non-refractory surfacing preparation is as under: Non refractory surfacing preparations are used on facades, indoor walls, floors and ceilings, swimming pool walls and floors, etc., to make them waterproof and improve their appearance. Generally they remain visible as the final surfacing. This group includes: 1) Powdered preparations consisting of equal parts of plaster and sand with plasticizers. 2) Preparations in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sulting plasters, hand-troweled and machine-sprayed plaster, stucco, self-leveling flooring, extruded cement panels, skim coats, joint & crack fillers, and tile grouts. Typical usage is about 0.2% - 0.5% Of total dry powder weight for dry mixtures. Derivatives of methyl cellulose which improve performance characteristics include hydroxypropyl methyl cellulose (HPMC) and hydroxyethyl methyl cellulose (HEMC). These derivatives typically improve the characteristics such as water retention, vertical surface slip resistance, open time, etc. A large number of air bubbles can reduce the wet density of mortar, and after hardening of the slurry, pores will be formed inside the slurry, so that the internal structure of mortar will become loose, and thus the mortar strength will also be significantly reduced. Adding HPMC into the mortar, there will be a smaller decrease in the flexural strength of mortar but a larger decrease in the compressive strength. On the basis of structural engineering and common parlance test ready-mix concrete is rightly classified in description non refractory mortars and concretes under heading 3824 of central excise tariff act. Applicant has given number of ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. 05. OBSERVATIONS We have gone through the facts of the case, documents on record and submissions made by both, the applicant and the department. The issue before us is a classification issue. The applicant has requested on a ruling as to whether "Tile Adhesive" (which includes Tile Adhesive for Normal Application, Glass Tile Adhesive, Tile-on-Tile Application, Tile Adhesive for Stone Heavy Tile Application) and "Tile Grout" (which includes Cement Based Tile Grout and Epoxy based Tile Grout) will be classifiable under Entry 24 of Schedule IV of Notification No. 1/2017-Central Taxes (Rate) dated 28.06.2017 (Chapter Heading 3214) liable to CGST at 14% Entry 97 of Schedule III of Notification No. 1/ 2017 - Central Taxes (Rate) (Chapter Heading 3824) liable to CGST at 9%?. The Applicant has submitted that they are in the business of the buying and selling Tile Adhesives and Tile Grouting material and that the said products are not manufactured by them. They have further submitted that they buy the products from separate vendors and sells it under its brand name. Their submissions states that under the erstwhile Central Excise regime, the manufacturers of the Applicant were clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der form based on quartz and cement with small quantities of added plasticizers, used for instance, after adding water, for setting wall or floor tiles. (3) Pasty preparations made by coating minerals fillers (ground marble, quartz, or a mixture of quartz and silicate, for instance) with a binder (plastics or resins), With added pigments and, where appropriate, water or solvent. (4) Liquid preparations consisting, for instance, of synthetic rubber or acrylic polymers, asbestos fibres mixed with a pigment, and water. These are applied on facades with paint brush or spray gun and form a much thicker layer than paint. It is seen from (2) above that this group of Non refractory surfacing preparations which fall under Chapter 32.14 includes "preparations in powder form based on quartz and cement with small quantities of added plasticizers, used for instance, after adding water, for setting wall or floor tiles.". The polymers used in the above mentioned products acts as plasticizers. As mentioned in their application the product Tile Adhesive mentioned by them are specifically used for setting tiles, whether on floor, walls or other tiles, etc and therefore it is apparent that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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