TMI Blog2018 (5) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... . The impugned product is an article made from artificial stone. It is a product made using artificial or engineered stone. The product certification explains things, beyond doubt - It can, therefore, be understood as to why the impugned product is being cleared under the Heading 6810. We have also found a Ruling in respect of the product classification of Silestone TM (as seen above) agglomerated stone slabs under the Harmonized Tariff Schedule of the United States (HTSUS). The information about the product was thus - The slabs are composed of 93% quartz and 7% resm binder. After 'he slabs are imported. they are sold only to U.S distributors who use then to produce various counter tops. vanities and fireplace surrounds. It was held that the agglomerated quartz sheets are classified under subheading 6810.99.00, HTSUS, which provides for other articles of artificial stone. Ruling:- Caesarstone imported by the applicant is to be classified under HSN code 6810. - GST-ARA-10/2017/B-13 - - - Dated:- 20-3-2018 - Shri B.V. Borhade, Joint Commissioner of State Tax and Shri Pankaj Kumar, Joint Commissioner of Central Tax PROCEEDINGS (under section 98 of the Central G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of supply, the applicant 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. 4. In the pre-GST regime, the Company, 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 rate schedule provided in the respective States VAT Act. Further, 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. 5. 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. 6. It is pertinent to note that the classification of goods as per the GST rate Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore be covered within the scope of the term applicant as defined under Section 95(c) of the CGST Act; b. The question on which advance ruling is sought is in relation to the classification Of Caesarstone thereby fulfilling the condition provided under Section 97(2) of the CGST Act; and c. The question raised in the application is neither pending nor decided in any proceedings in the case of the Applicant under any provisions of the CGST Act. 2. Having complied with the pre-requisite conditions for filing the present Advance Ruling Application, we may now proceed to determine the classification of Caesarstone under the GST regime. The guiding principles determining the classification of a product under the GST regime can be broadly bifurcated as under: a. Classification under the Customs Tariff Act 1975 ('Customs Tariff Act ) along with relevant Chapter Notes pertaining to Chapter 25 and 68 (attached and annexed as Exhibit C); b. General Rules for Interpretation of the First Schedule to the Customs Tariff Act (hereinafter referred to as the General Rules for Interpretation ) which is attached and annexed as Exhibit D', c. HSN Explanatory No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed quartz. Consequently, Caesarstone imported by the Applicant shall be construed as a Quartz. 9. Further the tariff entry 2506 specifically excludes 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, Caesarstone is the processed form of quartz in the form of slabs and thus, the same would not be construed as a natural sand. 10. Although the GST' regime do not seek to classify goods in excess of 4-digit classification, for a better 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 heading 2506 can either be in powder form or in the form of lumps. 11. 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. 8461] as A compact mass, especially the one without a definite or regular shape . Applying the afore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m or machinery [Advanced Law Lexicon (5 th Edition)]; b. process: - i. A series of actions or steps towards achieving a particular end, perform a series of operations to change or preserve [The Concise Oxford Dictionary - Tenth Edition. Page 1139] ii. A method, operation, or series of actions intended to achieve some end or result; The natural meaning of the word process is a mode of treatment of certain materials in order to produce a good result, a species of activity performed on the subject matter in order to transform or reduce it to a certain-stage; process connotes a substantial measure of uniformity of treatment or system of treatment. According to the Oxford English Dictionary, it means a continuous and regular actions, taking place or carried on in definite manner' [Advanced Law Lexicon Edition)]. Copies of the relevant extract of the aforesaid definitions have been collectively attached and annexed as Exhibit G. 15. In view of the above, the term mechanical process can be understood to mean a series of operations with the use of machines. We shall co-relate this with the manufacturing processes carried on by the Applicant's vendor. The ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a process permitted by Chapter Note 1. (b) It must not be of a variety and quality suitable for the manufacture of gem-stones (e.g., rock crystal and smoky quart, amethyst and rose quart). Such quart is excluded (heading 71.03), even if intended to be used for technical purposes, e.g as pie-electric quartz or for the manufacture of parts of tools. Quartzite is the name of the very hard compact rock composed of grains of quartz agglomerated by a siliceous binder. Quartzite falls in this heading when in the crude state or when it has not undergone any process beyond that allowed by Note I to this Chapter or when it has been roughly trimmed or merely cut, by sawing or otherwise, into blocks or slabs of a rectangular (including square) shape. 19. It is pertinent to note that Chapter Note 1 to Chapter 25 of the HSN is identical to the Chapter Note 1 of the Customs Tariff Act and hence, the same is not replicated again for the sake of brevity, Therefore, on a harmonious reading of the Customs Tariff Act and HSN Explanatory note, it can be construed that the impugned goods merit classification under tariff heading 2506 of the Customs Tari ff Act. 20. It ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the residuary category of tariff entry 68109990. 24. Further, it would be worthwhile to refer to Chapter Note I 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; 25. Thus, if Caesarstone qualifies to be classified under Chapter heading 2506, it automatically gets excluded from the applicability of tariff entry 6810. Consequently, the entire issue that merits consideration in the instant case is whether Caesarstone can be classified under Chapter heading 2506 of the Customs Tariff. 26. At the cost of repetition, it is humbly submitted that the manufacturing processes carried on by the Applicant's vendor would be considered to be a mechanical process and therefore, merit classification under heading 2506. 27. Further, we would also refer to Rule 3(a) of the General Rules for Interpretation which provides the manner of determination of classification when the goods are classifiable under two or more headings. The analysis pertaining to the same is as follows: a. At the outset, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hapter Note 1 to Chapter 25 of the Customs Tariff; b. Chapter Note I to Chapter 68 specifically excludes goods falling under Chapter 25. Thus, if the goods are capable to be classified under Chapter 25, classification under Chapter 68 is automatically excluded; c. On analyzing the dominant-composition test, it appears that the product has approximately 90% quartz sand classifiable under Chapter 25 of the Customs Tariff Act. Consequently, applying the Rule 2 / Rule 3(b) of the General Rules for Interpretation, Caesarstone would also be classified under Chapter heading 2506 of the Customs Tariff; and d. The description used by the vendor is in line with the Explanatory Notes to Chapter 25 issued by the WCO. 29. However, the GST law in India is at its infancy and the Applicant intends to ensure minimum litigations under the GST regime, Therefore, the Applicant has approached this Hon'ble Advance Ruling Authority to determine the correct classification of Caesarstone under the GST regime. 30. In light of the above, the Applicant has approached the Hon'ble Advance Ruling Authority to seek the following reliefs: a. Determination of classification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is very much essential to examine the chapter notes of both the chapters i.e. Chapter 25 Chapter 68 before deciding to classify the product under particular chapter. 7. The Chapter Note 1 of Chapter 25 clearly states that ------, the headings of this Chapter cover only products which are in the crude state or which have been washed (even with chemical substances eliminating the impurities without changing the structure of the product), crushed, ground, powdered, levigated, sifted, screened, concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallization), but not products that have been roasted, calcined, obtained by mixing or subjected to processing beyond that mentioned in each heading. 8. As per chapter note 1 of Chapter 25 only mineral products which are in crude state or have been mechanically or physically processed without changing the character of the mineral product can only be classified under Chapter 25. 9. As submitted by the claimant, the mineral product quartz is crushed, combined with pigments and resins and then under intense vacuum and pressure the product caesarstone is manufactured. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritten submission and also submitted copies of Bill of Entries of their imports during the last three years. On dt. 31.01..2018 Ms. Farah Zachariah, Assistant Commissioner appeared and made oral submission. On dt.15.02.2018, Sh. Sudhakar Pandey, Dy. Commissioner GST Central Excise, Div- II, Navi Mumbai attended and furnished a writ-ten submission. 05. OBSERVATIONS We have gone through the facts of the case. We have been called upon to decide the classification of the product 'Caesarstone' under the GST Act. Before we move on to determine the classification, we need to understand the product. Let us see how the product has been described - Composition Caesarstone is 90 percent crushed quartz (silicon dioxide - SiO2), one of nature's hardest minerals. Quartz is combined with high-quality polyester resins and pigments , and then compacted under intense vibration, vacuum, and pressure into dense, non-porous slabs. The slabs are gauged to precise thickness, and polished to an enduring shine or attractive honed finish, After passing inspection, the back of each Caesarstonc slab is imprinted with a zigzag trademark to simplify jobsite identification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mould and formed into slab sizes of 3050 x 1440mm Pressing The slab is then compacted by a special vacuum and vibration process at a pressure of 100 tons. Curing The slabs are moved to the curing kiln and heated to 90 0 C for 45 minutes which gives Caesarstone its ultimate strength and solidity. Polishing Slabs are then gauged, calibrated and polished to a perfect finish in a wide range of colours and designs in one of our three textural surface finishes: Polished, Honed or Viento. Quality Assurance Finally, the slabs pass through quality inspection to ensure our customers receive a top quality product. Labelling Each slab is then marked and labelled with all relevant information necessary for the smooth operation of fabrication and logistics _ Use Caesarstone for: Countertops and backsplashes Shower and tub surrounds Lavatory and sinks Interior wall cladding Table and desk tops Wainscots and wall bases Toilet compartment partitions Fireplace mantles and surrounds* Elevator cab walls Service counters Stair and mezzanine railing systems* Sustainable Standards and Certifications ISO 14001 and 9001 Certificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtz as its major raw material is covered by the natural quartz as falling in the Heading 2606. What we say finds confirmation from the Harmonized Commodity Description and Coding System Explanatory Notes (HSN) Notes of Chapter 25 - 1. Except where their context or Note 4 to this Chapter otherwise requires, the headings of this Chapter cover only products which are in the crude state or which have been washed (even with chemical substances eliminating the impurities without changing the structure of the product), crushed, ground, powdered, levigated, sifted, screened, concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallization), but not products that have been roasted, calcined, obtained by mixing or subjected to processing beyond that mentioned in each heading. The impugned product is not in the crude state. The addition of polyester / polymer resins and pigments alongwith quartz changes the structure of the product. The impugned product is obtained by the process of mixing quartz with other substances. The impugned product contains quartz as a raw material. The final product cannot be said to be one which has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter 25 covers the naturally occurring quartz which has undergone changes without changing the structure of the product. The way the impugned product comes into existence should leave no doubt that the same would not be covered by the Chapter 25 and the Heading 2506. The rules for interpretation of the Customs Tariff would not apply herein as the Chapter 25 specifically excludes goods of the nature as the impugned product. None of the arguments and case laws in support of this Heading fail to make a point. Without any further discussion, we would conclude that the impugned product would not be covered by the Heading 2506. The applicant has argued that the impugned product would not be covered by the Heading 6810 as it falls in Heading 2506. Import documents submitted by the applicant reveals import from Caesarstone, Israel thus- Agglomerated Fabricated Quartz Slab of different grades is under Customs Tariff Heading (CTH) 68109990. Agglomerated Slabs (Artificial Slabs) of different grades under Customs Tariff Heading (CTH) 68109100. Let us look at the Customs Tariff Heading 6810 - 6810 ARTICLES OF CEMENT , OF CONCRETE OR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Some factories have developed a special, low-viscosity, high-strength polyester resin to improve hardness, strength, and gloss and to reduce water absorption. There are two major varieties of engineered stones based on the main composition of its aggregates (stone powders), marbles and quartz. The process is more or less similar except in certain details, however the two product have different commercial applications. Engineered marbles are most commonly used as flooring for large commercial projects. Engineered quartz is widely used in the developed world for counter tops, window sills, and floor and wall coverings. http://www.stone-tech.com.au/stone-products/reconstituted -stone.htm Reconstituted stone Reconstituted stone (also known as Engineered, re-composed agglomerated and synthetic stone) is manufactured from a mix of stone aggregate chips (most commonly quartz or marble, but also igneous rocks such as granite und basalt); mineral fillers (generally the ground aggregate); a resin binder (typically an unsaturated polyester); pigments and additives. The impugned product is described as Caesarsrone(R) is the original engineered quart surf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ariff Schedule of the United States (HTSUS). The information about the product was thus - The slabs are composed of 93% quartz and 7% resm binder. After 'he slabs are imported. they are sold only to U.S distributors who use then to produce various counter tops. vanities and fireplace surrounds. It was held that the agglomerated quartz sheets are classified under subheading 6810.99.00, HTSUS, which provides for other articles of artificial stone. We have also come across an article explaining the nuances of classification of stones as can be seen thus - http://stonebusiness.us/index.php?option=com_content view=article id=380:us-customs-classification-of-building-stone catid=22 showall=1 limitstart= itemid=234 Published 18 DECEMBER 2008 - By Jacob Bunin -National Import Specialist -U.S. Customs and Border Protection Generally, Chapter 25 of the Harmonized Tariff Schedule of the United States (HTS) covers crude stone and minerals, as well as stone and minerals worked in very simple physical ways (e.g., crushed, ground, powdered, washed, etc.). Stone worked beyond the point allowable in Chapter 25 is classifiable in Chapter 68. Importations of worked stone classifiabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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