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TMI Blog2020 (2) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... inafter referred as 'Applicant') is registered under the GST Act 2017 vide GSTIN No. 33AAGCB8401P1Z1. They are engaged in the manufacture of "Natural Fibre Composite Board (NFC) and their manufacturing facility is at 1/138 Ellammankoil Street, Azhinjivakkam Post, Athipedu Village Sholavaram, Chennai 600 067. The applicant has sought Advance Ruling on the following question: Whether the Rice Husk Board manufactured by the applicant comprising of Natural Fibre (Rice Husk Powder); Calcium carbonate, recycling waste and other processing aid as well as PVC resin, wherein PVC acts only as a bonding agent would remain classified as wood and Articles of Wood under Chapter 44 and attract 12% rate of GST. The applicant submitted a copy of challan evidencing payment of application fees of Rs. 5, 000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that one of the products manufactured by them is the Rice Husk Board. They procure rice husk from the farming community, rice mills or other traders who supply rice husk according to their requirement. Firstly, the rice husk, is pulverized into a fine powder and then the powdered rice hu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usk Board. The PVC which is otherwise known as Thermoplastic polymers is a naturally white and brittle plastic. The very purpose of the PVC used by the applicant is to bind the raw materials together in order to get the desired output i.e the Rice Husk Board. Thus, the natural fibre is the dominant raw material used for the production of the said board. Wood and Articles of Wood, etc., is classified under Chapter 44 and Particle Board, Oriented Strand Board (OSB) and similar board (for example, wafer board) of wood or other ligneous materials, whether or not agglomerated with resins or other organic binding substances, other than specified boards, exclusively falls under Heading 44.10. On examination of the explanatory notes to HSN, it is observed that the product in question falls under Heading 44.10 for the reasons explained below. Particle board is a flat product manufactured in various lengths, widths and thicknesses by pressing or extrusion. It is usually made from wood chips or particles obtained by the mechanical reduction of round wood or wood residues. It may also be produced from other ligneous materials such as fragments obtained from bagasse, bamboo, cereal straw or f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to particle boards prescribed "it may also be produced from other ligneous materials such as fragments obtained from Bagasse, Bamboo, Cereal Straw or from flax or hemp shieves." We therefore cannot concur with the submission that boards manufactured out of Rice Husk would be excluded from the purview of particle boards following under Chapter Heading 44.06 as HSN Note did not limit the items, but only gives the example. Tariff Entry 44.06 is very clear, it reads as "Particle Board and similar board of wood or other ligneous materials whether or not agglomerated with resins or other organic binding substances." The word 'lignin' as explained in 'NEW WEBSTERS' Dictionary of English, indicates the same to mean a (sic) Botanical origin, it covers an organic substance associated with cellulose in the cell walls especially of the xylem on wood of many plants. This meaning of 'lignin' would indicate that the word 'ligneous' used in the Entry 44.06, would cover a particle board, made up by using any part of plant material with Resin. 'Rice Husk' is part of Rice Plant being other cover of the Rice grain, which is used in this case, along with Resin/ Glue, Bamboo, Cereal Straw, flax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeared for the hearing. They submitted copies of HSN clarification and explanatory notes quoting General Note stating that they should be classified under chapter 44. They stated that the product uses rice husk which is made into fine powder and mixed with resin and extruded into moulds. This product is a Rice Husk Board, a new product. They submitted copies of CESTAT judgment which classified under 4406 which is now 4410. The product does not have a layer of insulation but the PVC resin is mixed into it. They undertook to submit copies of sale invoices and invoices for all inputs. They reuse any waste generated back into the compound before putting it into a mould. The final rate will be 12% as per SL. No. 92 of Schedule II under 4410. 3.2 The Jurisdiction State Officer appeared for hearing and reiterated the written submissions. In the written submissions, it is stated that no case is pending on the Rate of Tax issue and that the Rate of Tax on the Rice Husk Board manufactured by the applicant is leviable @12% GST, since it comprises Natural Fibre i.e., Rice Husk Powder, Calcium Carbonate, recycling waste and PVC resin which is bonding agent remain classified as Woods and Artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding, heading and chapter shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 and the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975, including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall be applied for the interpretation and classification of goods. 5.2 The applicant has submitted that the product under consideration is a Natural Fibre Composite (NFC) Board made of Natural Fibre, i.e, Rice Husk Powder which constitutes 30% by weight, Calcium Carbonate (Lime Powder) 14% by weight, Recycling Waste 18% by weight, PVC 26% by weight, Processing aids such as thermos-coupling agents, etc 8% by wt and lubricant 4% by weight. They claim that the product is classifiable under CTH 4410. The relevant CTH and the related Chapter/ Section notes along with the Explanatory Notes of HSN are examined as under: CTH :4410 4410 PARTICLE BOARD, ORIENTED STRAND BOARD (OSB) AND SIMILAR BOARD (FOR EXAMPLE, WAFERBOARD) OF WOOD OR OTHER LIGNEOUS MATERIALS, WHETHER OR NOT AGGLOMERATED WITH RESINS OR OTHER ORGANIC BINDING SUBS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, foaming agents, foam regulators, heat stabilizers, etc. PVC resin is used as a binding agent. If the rice husk was directly added with binders etc without extracting the fibres, the product would be a particle board, which is not the case here. 5.4 We examine the other possible classification for the product. CTH 44 11 4411 FIBRE BOARD OF WOOD OR OTHER LIGNEOUS MATERIALS, WHETHER OR NOT BONDED WITH RESINS OR OTHER ORGANIC SUBSTANCES - Medium density fibre board (MDF): 44111200 -- Of a thickness not exceeding 5mm 44111300 -- Of a thickness exceeding 5mm but not exceeding 9mm 44111400 -- Of a thickness exceeding 9mm - Other: 441192 -- Of a density exceeding 0.8 gm/cm3 : --- Not mechanically worked or surface covered: 44119211 ---- Hardboard 44119219 ---- Other --- Other: 44119221 ---- Hardboard 44119229 ---- Other 441193 -- Of a density exceeding 0.5 gm/cm 3 but not exceeding 0.8 gm/cm 3 : --- Not mechanically worked or surface covered: 44119311 ---- Insulation board 44119319 ---- Other --- Other: 44119321 ---- Insulation board 44119329 ---- Other 441194 -- Of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es also referred to by the trade as "high density fibreboard (HDF)" (B) Fibreboard obtained by the "wet production process" This group includes the following types of fibreboard: (1) Hardboard, which is manufactured in a wet production process in which the wood fibres in suspension in water are compressed in the form of a mat under high temperature and high pressure on a metallic mesh. In the unworked state this type of fibreboard has one smooth and one rough surface with a mesh pattern. However, it can sometimes also have two smooth surfaces obtained by special surf e treatment or a special production process. It generally has a density exceeding 0.8 g/cm3. Hardboard is mainly used for furniture, in the automotive industries, for doorskins and for packaging, especially fruit and vegetable packaging. (2) Mediumboard, which is manufactured in a way similar to the one for hardboard but at a lower psessure. It generally has a density exceeding 0.35 g/cm3 but not exceeding 0.8 g/cm3. The main application is in furniture production and for interior or exterior walls. (3) Softboard. This fibreboard is not compressed as the other types of fibreboard obtained the wet production ..... X X X X Extracts X X X X X X X X Extracts X X X X
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