In Re: M/s. Maheshwari Stone Supplying Company,
GST
2018 (12) TMI 1274 – APPELLATE AUTHORITY FOR ADVANCE RULINGS, HYDERABAD TELANGANA – 2019 (20) G. S. T. L. 408 (App. A. A. R. – GST)
APPELLATE AUTHORITY FOR ADVANCE RULINGS, HYDERABAD TELANGANA – AAAR
Dated:- 7-8-2018
AAAR/01/2018 (A. R. ) A. R. Appeal -No. AAAR/01/2018
GST
SHRI V. ANIL KUMAR AND BANKEY SHR BEHARI AGRAWAL MEMBER
A.R. Appeal -No. AAAR/01/2018
Dated: 07th August, 2018
ORDER-IN-APPEAL NO. AAAR/01/2018 (A.R.)
(Passed by Telangana State Appellate Authority for Advance Ruling under Section 101 (1) of the Telangana Goods and Services Tax Act, 2017)
Preamble
1. In terms of Section 102 of the Telangana Goods & Services Tax Act, 2017 (“the Act”, in short), this Order may be amended by the Appellate authority so as to rectify any error apparent on the face of the record, if such error is noticed by the Appellate authority on its own accord, or is brought to its notice by the concerned officer, the juri
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f Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made.
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1. The subject appeal has been filed under Section 100(1) of the Telangana Goods and Services Tax Act, 201 7 (hereinafter referred to as “TGST Act, 2017” or “the Act”, in short) by M/s. Maheshwari Stone Supplying Company, Tandoor, Vikarabad District having GSTIN 36ABNPS1 863M1ZX (hereinafter referred to as M/s. MSSC /the appellant). The appellant had earlier filed an application under Section 97 (1) of the Act before the Telangana State Authority for Advance Ruling (“TSAAR” or “Authority” or “lower authority”, in short), seeking an Advance Ruling with regard to classification of goods viz., “Polished / Processed limestone slabs”. The said applicat
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order by appellant, the appeal is found to be filed within prescribed time,
II. Brief Facts:
3.1. The appellant had initially filed before the TSAAR an application for Advance Ruling, in the prescribed Form GST ARA-01, extracts of which are reproduced hereunder:
“Nature of activity:
“12(1)1: Description in brief: We are a SSI unit with an annual TO of under 1.5 Cr. Our main activities include; to bring rough limestone slabs (a minor mineral) which are by nature uneven in thickness ranging from 15 to 35 mm (or so), to our processing unit and POLISH it's one of the suitable surface with simple table polish machine and further cut it to square or rectangle shape on a table cutting machine. Out of two processes, we also opt for only one process called CUT on these stones. Some other kind of simple processes like CALIBRATION, TUMBLING etc. are also undertaken. But a stone SLAB generally do not need more than two processes before ready for selling into the market. After any kind of the
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re” as mentioned at the start of column of 5% ?
15.3 Statement of relevant facts having a bearing on the questions raised:
“Very recently The GST Council in its GUWAHATI meeting held on 10/11/2017 had reduced the GST on “Marble/Granite other than blocks” from 28% to 18% effective from 15/11/2017. (Kindly see Notification no. 41/2017 dated 14/11/2017 issued to this effect). We draw your kind attention to the description of commodity in particular column mentioned there under, and without writing any adjectives related to any kind of processes such as POLISH, CUT etc. it is still quite evident that they have not been taken out of Chapter 25. Please refer to HSN Code mentioned for Marble/Granite in the said notification of Dated 15/11/2017 whose first four digits are 2515/2516. It does clearly mean that even without mentioning of any kind of processes such as CUT or POLISH etc. it can be presumed that all kinds of processing activities done on these stones were allowed in the Chapter 25
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are allowed under HSN Code 2515/2516 in written form in the description column but our process is POLISH & CUT and to clarify this doubt the present Advance ruling is filed.
There are two kinds of stones available in limestone category. One is BLOCK and the other is SLAB. SAWN is a process performed on Block to derive uniform thickness TILES which are called a CREAM like material and our SSI unit don't do that process and sawn on blocks is mostly practiced in KOTA region of Rajasthan and also in Marble/Granite Industry worldwide.
Whereas surface POLISH is a process which is performed on directly brought rough stone SLABs (minor mineral) of uneven thickness and it is called BUTTERMILK like material which we usually undertake in our small scale industries. The expenses incurred on a sawn TILE is higher than combined processes of POLISH & CUT done on a SLAB of same size. In economic terms also any of the two processes combined together cannot match a single process of SAWN which is allo
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s which have been written clearly in description under HSN Code 2515/2516 and POLISH had not been written which is also a kind of process and the combined effect of CUT+POLISH or any two kinds of processes are less complex and less expensive than a single process of SAWN.
Hardly not even a single processing unit engaged in LIMESTONE SLABs in our region was falling under the jurisdiction of Excise Duty (ED). Hon'ble SC while dealing with many appeals and cases upheld that POLISH & CUTTING done on a Stone slab cannot be equated to manufacturing, hence such stone slabs are not liable to ED. Under VAT regime our “Polished limestone slabs” were charged 5% of Tax. Hence when no ED was charged and VAT was only 5%, then our commodity shall definitely fall in Chapter 25 only, whose GST is also 5% for Limestone category, it is also noteworthy for the competent authority to note that ROYALTY is a kind of Tax as decided by majority of Judges of SC so far and the matter is still sub-judice before
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the competent authority by bringing small pieces of sample stones so that it will become easier for the authority to decide the HSN Code of our commodity on merits. Further clarifications if any will be submitted at the time of arguments.
3.2. The appellant filed additional submissions before the TSAAR vide a letter dated 05-01-201 8, as follows:
“Our further humble submissions are mentioned herein below substantiating that Processed/Polished Limestone slabs cannot be taken out of Chapter 25:
1. A downloaded list (four in no.s) of Rough as well as Processed Kota, Marble and Granite stones exported to different countries from India under Chapter & HSN Code: 25 is enclosed here with as ANNEXURE-A1 as further proof substantiating that polish stone slabs have not been taken out of Chapter 25.
2. A bunch of newspaper clippings clearly stating that how GST/FITMENT Committee, of late, realized its mistake and expressing its concern having wrongly taken into consideration of EXCISE DUTY
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s, surface polish is the only process done that too with much inferiority and simplicity and very less expensive in comparison to Marble/Granite's chain of processing.
4. GST Council says “GST brings good things of great joy for small tax players.” And literally we are small tax players and our good things of great joy can be retained; only when our commodity do not be taken out of Chapter 25 or be assured from competent authorities that it falls in 5% column of GST in light of all the submissions made by us here in this advance ruling case.
5. Our Turn Over is below 1.5 Cr, even if it is in between 1.5 to 5 Cr., then also it is quite enough for us to use only two digit HSN Code as per rules. And Chapter 251s (HSN Code 25) title is most appropriate of all for our polish stone which is mentioning STONE in its title. Whereas Chapter 68's title is ARTICLES OF STONE. Article is defined as “A part or segment of something joined to other parts, or, in combination, forming a structured se
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hat other products coming under 6802 can have a place in Chapter 25. (See ANNEXURE-A3).
9. Tandur rough stones are stones of less value in the market and the marketable quality of these stones is enhanced by polishing and cutting. But the substance of the material is not altered. The stone slab is made more presentable and attractive for the benefit of the end users of low cost housing needs and it cannot be said that the activity is a manufacturing activity. ”
10. In the Hyderabad meeting of GST Council held on 9/09/2017, we saw that much complex processes like “Stone inlay work” (HSN Code 68), have been brought down to 12% from 28%, then POLISH process done on a directly brought rough slab is very less complex but much easy, in comparison to above mentioned. In fact Polish stone slab is a kind of Raw material out of many used for “Stone inlay work”. In this way also it is quite appropriate to keep polished limestone slabs in Chapter 25 . . .”
3.3. The appellant was heard in pers
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ons are attached here with and important matter marked as rounded with ink so that both of you can understand the essence before coming to conclusion. Based on this single point if this Hon'ble Advance Ruling authority can give the ruling that “Polish stones in slab” form are to be classified under HSN Code 25 only then there is nothing wrong in it and nobody can question also.”
3.4. Vide a further letter dated 1-2-2018, the appellant had submitted as follows:
“This is to inform you that in Note 1 of Chapter 25, the word LEVIGATED is allowed on mineral products and I have gone through the Oxford dictionary meaning of LEVIGATE which had been taken from Latin word LEVIGAT, and the literal meaning of the same is “made smooth, polished”. In this context also it is becoming so clear that the process of POLISH is allowed on surface of rough limestone slabs in Chapter 25 itself@ GST 5%.
secondly there allowed many processes in Chapter 25 under GST 5%, such as CRUSHING, POWDERING etc. on ha
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o in Marble/Granite Industry worldwide._
b) That surface POLISH is a process which is performed on directly brought rough stone SLABs (minor mineral) of uneven thickness and it is called BUTTERMILK like material which they usually undertake in their small scale industries. The expenses incurred on a sawn TILE is higher than combined processes of POLISH & CUT done on a SLAB of same size. In economic terms also any of the two processes combined together cannot match a single process of SAWN which is allowed in written form under HSN Code 2516. Selling price wise and quality wise also there is a huge difference in these both varieties of stones and their cheap polish slabs are mostly used in low budget housing needs. These cheap quality Polish stones are also a last resort for a customer to select from.
c) Processed or Mirror Polished Marble/Granite SLABs have also not been taken out of Chapter 25 which is evident from the Notification No. 41/2017 issued after GST Council's Guwahati m
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VAT regime their “Polished limestone slabs” were charged 5% of Tax. Hence, when no ED was charged and VAT was only 5%, then their commodity shall definitely fall in Chapter 25 only, whose GST is also 5% for Limestone category it is also noteworthy for the competent authority to note that ROYALTY is a kind of Tax as decided by majority of Judges of SC so far and the matter is still sub-judice before a larger bench now. And their commodity in its raw form suffers additional juicy fiscal burden in the form of ROYALTY at the hands of Mining authorities of State Government. The process of expensive and luxurious category Marble/Granite is very complex in comparison to their Polish slabs; to such an extent that processing expenses incurred only on SAWN process of Granite/Marble is 2-4 times higher than the entire material cost of Processed Limestone slab itself of same surface area.
e) Hence, finally it was submitted that at any angle it is appropriate that their commodity called “Polished
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stone slabs” are classifiable under chapter 25 of the GST tariff, we would like to draw attention to the Explanatory notes to the Harmonized Commodity Description and coding system:
* Section V of the HSN deals with classification of Mineral products and in Chapter 25 classification of Salt; sulphur; earths and Stone; plastering materials, lime and cement are dealt with.
* As per the chapter notes to chapter 25, the headings of this chapter covers mineral products only in the crude state. Minerals which have been otherwise processed (e.g., made up into articles by shaping, carving etc,) generally fall in latter chapters (for example, chapter 28 or 68).
7. The heading 25.15 covers Marble, Travertine, Ecaussine and other Calcareous Monumental or Building stone of an apparent specific gravity of 2.5 or more and Alabaster whether or not roughly trimmed or merely cut and is restricted to the stones specified, presented in the mass or roughly trimmed or merely cut, by sawing or otherwis
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d after quarrying, to form blocks or slabs, still having some rough, uneven surfaces. This working involves removing superfluous protuberances by means of hammer or chisel type tools.
> This subheading does not cover blocks or slabs which have been cut to a rectangular (including square) shape.
9. Similarly, the subheading explanatory notes for subheading 2515.12 are given below:
> To fall in this subheading, the blocks and slabs which have been merely cut by sawing must bear discernible traces of the sawing (by wire strand or other saws) on their surfaces.
10. The heading 25.16 covers Granite, Porphyry, Basalt, sandstone and other monumental or Building stones, whether or not roughly trimmed or merely cut, by sawing or otherwise into blocks or slabs
> The stones of this heading may be shaped or processed in the same ways as the stones of heading 25.15 (including building limestone or Portland stone) and that stones in shapes identifiable as road or paving setts, flagstones or
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tones which have undergone the process of polishing are not classifiable under chapter 25, we would like to draw our attention to the Explanatory notes to heading 68.02 which were reproduced below for ease of reference:
> This heading covers natural monumental or building stone (except slate) which has been worked beyond the stage of the normal quarry products of chapter 25.
> The heading therefore covers stone which has been further processed than mere shaping into blocks, sheets or slabs by splitting, roughly cutting or squaring by sawing(square or rectangular faces).
> The heading thus covers stone in the forms produced by the stone-mason, sculptor, etc., viz:
(A)……..
(B) Stone of any shape (including blocks, slabs or sheets), whether or not in the form of finished articles, which has been bossed (i.e., stone which has been given a “rock faced” finish by smoothing along the edges while leaving rough protuberant faces), dressed with the pick, bushing hammer, or chisel,
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Tariff.
15. The issue has been examined with reference to the provisions of the CGST/TGST Act, 2017 and the Rules made there under and the notifications issued till date; and the Advance Ruling is given as under: –
“Polished/Processed limestone slabs” are correctly classifiable under heading 6802 of the GST Tariff.
The application filed by M/S Maheshwari Stone Supplying Co., Tandur, Vikarabad, is disposed accordingly”.
IV: Appeal filed by the Appellant, Personal Hearing & Further submissions :
5.1. Against the above Advance ruling Order, the appellant filed the present appeal on the following grounds:
“..We have received the copy of order no. 2/2018 of AAR on 17/04/2018 by regd. post which is enclosed here with as ANNEXURE-AAI.
We are a tiny & SSI unit involved in processing of limestone slabs. In any of the processing activity at our unit, a rough stone slab brought as a raw material always remains a stone slab only even after processing and the morphology of slab doesn't ch
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s bunch of ANNEXURE-AA2 along with above statement in opening paragraph of this submission shall be treated as “The facts of the case” under Serial no. 14 of the Appeal form GST ARA-02.
6(15). The Grounds of Appeal under serial no. 15 of the said form are as under:
First of all we are very much confused with Customs tariff Act being taken as the base for interpretation of rules and explanatory notes for classification of goods in domestic market. While in May 2017 it was announced by all the heads of concerned GST that the Rate of ED coupled with VAT had been fixed the rate of a product under GST. Then instead of Customs, the Excise Tariff could have been taken as a base. There is huge a difference in Chapter notes of Customs & Excise for same Chapter, which can change the meaning, definition and interpretation of a product/commodity. Hence it is becoming very difficult for us to digest this fact of contradictory statement.
The AAR had not taken all the submissions made by us int
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erived without bringing a BLOCK to a factory for splitting by subjecting to SAWN or CUT processes which are highly expensive than mere POLISH+SIZING combined together done on our Rough limestone slabs. If the AAR/GST is so particular about WORKED definition to be only interpreted for heading 6802, then why “Marble/Granite other than blocks” which are also WORKED have been given a place in Chapter 25 is our question?
2. The GST council while rolling it out said that they bring “Good things of great joy for small tax players.” Can this AAAR explain us how good things of great joy can be brought for us when our processed stone's Tax rate which was 5% under VAT regime had suddenly been increased to 18% under GST as per AAR's ruling of classification of HSN 6802?
3. We are of the strong view that for domestic trade; norms of Excise tariff act shall be taken into consideration and not that of Customs which deals mainly with IMPORTATION of Goods.
4. If Excise were taken as a base, then
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hus it is once again very clear that whether the raw or finished, our goods is unchanged either in Nature, description, purpose & usage. The AAR had forgotten this aspect to consider before entering into explanatory notes and interpretative rules.
5. It is evident that the AAR had forgotten the fact that Explanatory notes and interpretative rules for classification under Customs have no legal backing but of persuasive value and AAR had taken it as a base to define commodity of Processed limestone slabs which is uncalled for and without merits. Even when a classification of a product takes place under general interpretation rules, the trade parlance of the product must be checked first while classifying the product and not its technological manipulation. Where the product is classified on the very first level, then there is no need to drill down further in the strata below.
Whether RAW or FINISHED our stones are called STONES, BUILDING STONES, FLOORING STONES in the market but not W
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I in nature and throwing a mineral product called processed limestone slab of these SSI units in high bracket of GST in the name of HSN classification will definitely kill this industry in longer run or create a kind of friction amongst the trading community and concerned department or give fake invoice selling mafias to crop up or create an unhealthy competition amongst the industrial fraternity.
8. The AAR instead of relying on legal backing aspects such as describing heading of HSN with Chapter notes etc. had relied upon non-legal backing aspects such as explanatory notes and interpretative rules in deciding the classification of processed limestone slabs which is not correct. First they could have exhausted the legal backing aspects of Chapter notes and if they found any ambiguity then they might have entered into explanatory notes and interpretative rules. Even Chapter note 1 of both customs & excise permitting that mineral in crude form undergone the processes such as mechanica
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ORKED? If GST is saying as in heading 6802, then “MARBLE/GRANITE other than BLOCKS” as mentioned under 18% GST column of Chapter 25 (heading 2515/2516) are also to be called as WORKED only. Because a block without being brought to the factory and splitting it with a highly expensive processing machine, this is not possible. More over a BLOCK is being converted into TILES/SLABs of even thickness.
It does clearly mean that NATURE, DESCRIPTION, PURPOSE & USAGE have completely been changed and even after that it had been retained in Chapter 25 only!!! A block is no longer remained a Block but split into tiles/slabs thus changing its shape and usage.
12. Even there are many Excise judgments for Polished Marble/Granite not taking them out of Chapter 25. One such being in case of Classic Marble Company Pvt. Ltd. Vs Commissioner of Central Excise & ST., Vapi in 2013(11) TMI 384 – CESTAT Ahmedabad delivered in Nov 2013, where it was held that Polished Marble/Granite cannot be taken out of C
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all stone processing industries in Tandur belong to SSI category and even if one or two falls in medium scale, they are of EOU category belonging to politically very strong people who by exporting their processed material derive lot of benefits in the form of various kinds of incentives from Govt. For them or him it doesn't matter whether HSN is 6802 or 2515/2516. In these circumstances the point we want to stress before this AAAR is in entire Telangana region not a single limestone slab processing industry was either falling under excisable goods category nor Govt, earned a single paisa towards ED under VAT regime. When there was no gain in ED and VAT was only 5% even for processed slabs, then on what basis the AAR/GST Council is increasing our Tax base to 18% in the name of heading 6802? It is also not proper to take EOU as a benchmark in fixing the GST rate for our commodities, because there in EOU not only chain of value addition would be very high and more but also lot of transfor
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ind of favour extended to Corporate manufacturers who are financially so sound? The funny thing is MRP for each water bottle under both regimes remained same as Rs. 20/- on lower side and Given the fact of daily sales of water bottles in India, the Govt, is at a net loss of around INR 2000 Crores per annum. And this amount is very smartly entering into the pockets of financially well settled corporate houses, where as no benefits had been passed on to consumers. On the other hand if GST Council fix the rate of Tax on all kinds of low cost processed limestone slabs (produced from RAW slabs only and not to be confused produced from BLOCKS) in India to 5%, then also it may not amount to a decrease of INR 500 Crores per annum, though in actual terms it is not at all a decrease because under VAT regime our finished product was also charged only 5%.
17. From the above statement of point 16, at one end GST Council by reducing a TAX base unnecessarily has bringing loss to itself, where as sm
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e for cheaper quality of Tandur processed stones and tiny & small scale industry owners herein our region are appalled, agitated and frustrated with this arbitrary decision of GST Council which is highly unjustified and either will lead small players to close down their business in longer run or force them to adopt unethical means of moving their material through Bogus bill making mafias since the value of each truck will not exceed Rs. 40,000 (in most cases) which are exempted from e-way bills. So our humble request to the AA/GST Council is not to make honest people to become dishonest.
19. The GST had been rolled out with another great slogan-“One nation, one market and one tax”, whereas ROYALTY is a kind of Tax being paid by a quarry owner on Raw material at pit's mouth and ultimately that burden has to be bear by a RD like us. In this way also at least it is not proper to classify our processed stones under heading 6802 of higher tax bracket rates.
20. In paragraph no. 6 of the
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uts into slabs or tiles and does all other activities thereafter such as POLISHING & SIZING etc. But in our case no such activity is undertaken. Our job is very simple; to bring rough stone slabs and brush polish it's one of the suitable surface, without changing the shape, structure of the stone slab. Therefore the AAR had failed to notify that the reliance placed by them in defining heading 6802 apply only when processes specified therein are undertaken for conversion of blocks into slabs or tiles only.
22. On harmonious reading of Note 1 and Note 6 of Chapter 25 of CET and in view of the opening qualifying phrase Except where the context or Note 4 to this Chapter otherwise requires, used in Note 1 and 'sizing' and 'polishing' being specifically included in Note 6, the inference is obvious that even after the natural stone slabs are subjected to the said processes, the final product would remain classified under Chapter 25; > that, further, the said Chapter Note 1 does not state no
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otes instead of exploring the chapter notes first. Moreover as per the rules of HSN code, we have to mention not more than two digits, which the AAR didn't talk about or considered but explaining us the descriptions of such headings of 4 & 6 digits, which are not relevant to us. When we have raised this issue in our submission, why they have not passed any comment on this is dismaying us a lot!!!
24. Therefore in these circumstances stated herein and submissions made by us, we humbly request this AAAR to declare that our Processed limestone slabs cannot be taken out of Chapter 25. Since we have submitted all possible material which might .helpful this AAAR to declare our goods in Chapter 25, hence there is no need for personal hearing and further AAAR is requested to pass the order on merits of our submissions at the earliest possible.
25. If at all this AAAR finds it difficult to take out processed limestone slabs from Chapter 68 on legally backed grounds unknown to us and better
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2018 of AAR in ANNEXURE-AAI, the AAR while classifying our GOODS had relied upon HCDCS alone but in the above appeal under citation no. 2 the contention of the appellant (who were succeeded with relief) was that HCDCS cannot be relied upon for the classification of GOODS. It is only the Tariff that can be relied upon for the purpose of classification. Therefore the said order of AAR is liable to be quashed and our appeal is to be allowed with relief as asked for.
Therefore it is very clear from the above statement, that even if Customs Tariff taken into consideration though without our admission of the fact (Since Excise Tariff is genuine), then also Chapter note 1 of Chapter 25 is allowing mechanical processes such as CRUSHING, GRINDING / LAVIGATING etc. on minerals in crude form to be retained in said chapter 25 only. Moreover physical processes have also been allowed in said chapter note. If one were to go through the meaning of mechanical process then it states as under:
“Made,
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to get the tiles/slabs which is not possible without atomization of machines which further means no physical force of a labour is required in that process and shape is also changed.
And the AAR had failed to understand this distinguishing factor between a SLAB derived from a natural BLOCK and NATURAL SLAB as brought in by our Unit.
Hence, we humbly request this AAAR to consider these submissions also and declare that our “polished/processed limestone slabs” cannot be taken out of chapter 25″.
5.3. The Appellant was given personal hearing before this Appellate authority on 07-06-2018. Sri Rajgopal Sarda, Proprietor appeared for the hearing and reiterated and explained the various submissions in his appeal. As to the arguments made by the AAR w.r.t. the Explanatory Notes, he mentioned that the AAR was legally not justified in relying upon the Explanatory Notes. He had nothing further to add.
5.4. Vide a letter dated 12/06/2018, the appellant put forth the following further submissio
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3. There is a sequence to be followed for AAR in the following manner:
First connect heading of 2515/2516 with Note 1 of Chapter 25 under Customs Tariff. If still any ambiguity persists in classification of GOODS, then move on to interpretative rules and then explanatory notes. But the AAR have directly gone into second & third option without going into Note 1 of Chapter 25 of Customs Tariff which is actually the first option to explore!!!
4. In note 1 of Chapter 25 under Customs Tariff, It is clearly mentioned that the further processes such as GRINDING, LEVIGATING, MECHANICAL, PHYSICAL done on raw material in crude form are still allowed in same Chapter of 25. Hence our job is nothing but to bring rough limestone slabs which are in crude form and perform polish & cut processes on them which are all nothing but comes under Mechanical processes. Polishing on a rough slab is nothing but grinding only. Even the literal meaning of Levigating is nothing but smooth or polished.
5. Lit
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s such order as it thinks fit, confirming or modifying the ruling appealed against.
7. We now proceed to record our discussions and findings.
8.1. At the outset, it is observed that in the Grounds of Appeal (as also initial application for Advance Ruling), reproduced above, some of the submissions put forth by appellant are to the effect of disputing the GST levy-rate of 28% on limestone slabs (as goods falling under HSN Code 6802) or questioning the basis of and rationale behind fixing such quantum of levy; arguing as to purported discrimination / inequity by citing lesser rate of GST-levy fixed in respect of other products / commodities – Water bottles, marbles, granites etc., and industries/sectors having highly mechanised processes etc., compared to small-scale units and so forth. Certain other submissions are also made by referring to newspaper reports/clippings, GST-captions/slogans, effects of the higher rate on small scale units, employment-aspects, etc.
8.2. We find that su
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the course of the discussion and findings enumerated in the following paragraphs.
8.3. We further observe that the lower Authority's findings in the impugned order are rather concise and do not reflect a detailed examination and analysis of the headings, Chapter Notes vis-d-vis the goods/processes, as ought to have been done in the given context. Moreover, as against totally 5 (five) questions framed for the Advance Ruling by appellant, the Advance Ruling as rendered addresses only the first two questions and not the remaining questions. Though the ruling rendered covering the first two questions would lead to and imply a negation / negative ruling in respect of the remaining three questions, propriety of the proceedings required specific ruling with regard to each question raised.
8.4. Notwithstanding the aforesaid, we note that the statutory mandate vide Section 101 (1) of the Acts, requires this Appellate authority to pass an order, inter-alia, confirming or modifying the Ruling
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the Central Tax (Rate) Notifications8 as also the Headings, Chapter Notes etc., applicable in the given context.
10.2. Levy of GST came into effect from 1-7-2017. The charging Sections, Section 9 (1), in both the Central Goods and Services Tax Act, 201 7 (“CGST Act”/ “the Act”, in short) and the Telangana Goods & Services Tax Act, 201 7 (“TGST Act” / “the State Act”) – collectively referred to as “the Acts” – read as follows:
“9. Levy and collection. (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent. , as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person”.
10.3. Notification No. 1/2017-CT (Rate)
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ng or otherwise, into blocks or slabs of a rectangular (including square) shape.
125.
2516 11 00
Granite crude or roughly trimmed
130.
2521
Limestone flux; limestone and other calcareous stone, of a kind used for the manufacture of lime or cement.
137.
2530
Mineral substances not elsewhere specified or included.
SCHEDULE II – 6%
S.No.
Chapter/ Heading/Sub heading/ Tariff item
Description of Goods
(1)
(2)
(3)
51.
2515 12 10
Marble and travertine blocks
52.
2516
Granite blocks
176.
68
Sand lime bricks 10or Stone inlay work
11176A
6802
Statues, statuettes, pedestals; high or low reliefs, crosses, figures of animals, bowls, vases, cups, cachou boxes, writing sets, ashtrays, paper weights, artificial fruit and folia e, etc.; other ornamental goods essentially of stone”;
SCHEDULE III – 9%
S.No.
Chapter/Heading/Sub-heading/Tariff item
Description of Goods
(1)
(2)
(3)
12″26A
2515 12 20, 2515 12 90
Marble and travertine, other than blocks
26B
2516 12 00
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d foliage, etc.; other ornamental goods essentially of stone] 16{except the items covered in Sl.No. 123 in Schedule I}
SCHEDULE IV – 14%
(all these entries later omitted, as indicated below in footnotes)
S.No.
Chapter/Heading/Sub-heading/Tariff item
Description of Goods
(1)
(2)
(3)
1716.
2515 12 20, 2515 12 90
Marble and travertine, other than blocks
1817.
2516 12 00
Granite, other than blocks
1970.
6802
20All goods of marble or granite [other than Statues, statuettes, pedestals; high or low reliefs, crosses, figures of animals, bowls, vases, cups, cachou boxes, writing sets, ashtrays, paper weights, artificial fruit and foliage, etc.; other ornamental goods essentially of stone]”
10.5. The Notification contains an Explanation, relevant portion thereof being as under:
“Explanation. – For the purposes of this notification, –
……….
(iii) “Tariff item “sub-heading” “heading” and “Chapter” shall mean respectively a tariff item, sub-heading, heading and chapter as
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e defined, by the Explanation to the Notification, to be those specified in the First Schedule to the Customs Tariff Act, 1975. The Explanation further provides for application of the Rules for Interpretation, Section Notes, Chapter Notes and General Explanatory Notes, for interpreting the entries in the Notification, as far as the case may be.
11.1. The appellant has contended against lower Authority's reference to and application of Customs Tariff Act / Schedule, entries and Explanatory Notes thereto, on the ground that these have no legal backing; and instead Excise Tariff should have been considered/adopted. However, as detailed supra, the GST-rate notification specifically provides for applicability of the Customs Tariff and related Rules for Interpretation/Explanatory Notes. Thus, appellant's contentions in this regard are found to be not valid, as the statutory Notification makes it abundantly clear that for classification of goods in GST, the Customs Tariff is to be followed.
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t on/in relation to/with regard to the concept/aspect 'manufacture'. The questions of whether or not processes undertaken amount to 'manufacture' or whether it entails change in the characteristics of the products such as nature / description / usage etc., , are not germane for determining the classification of the goods, unless such an aspect is indicated in or made a relevant/integral part of Tariff entries/Chapter Notes etc. In the Customs Tariff.
12.1. Another set of grounds/contentions put forth by appellant in this context, are that the HSN (Harmonised System of Nomenclature) Notes have no legal backing or support and hence, reference to the same by the lower Authority is not correct / not tenable. Reliance in this regard was also placed on the decision of Hon'ble Tribunal in the case of Madhusudan Ceramics vs Collector of Central Excise 1991 (53) ELT 90 Tri Del = 1990 (11) TMI 244 – CEGAT, NEW DELHI. We have examined the contention. The HSN (Harmonised System of Nomenclature) E
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substantive principle of law laid down therein which is applicable to the instant case, since there can be no dispute that the Customs Tariff (which is made applicable by the GST-rate Notification) is based upon and aligned with I-ISN. Hence, we find that reference to HSN Notes for deciding the classification issue involved, as done by the lower Authority, is in principle legally correct and tenable.
12.2. The appellant relied on the case law of Madhusudan Ceramics cited supra, to urge that in the said case the party had contended that HCDCS cannot be relied upon for classification of goods; that the Hon'ble Tribunal decided the issue in favour of the party by allowing their appeal and thereby, it should be considered that Hon'ble Tribunal had upheld the contention as to non-applicability of HCDCS. On perusal of the said case-law, it is observed that though the party made such a plea, the same was neither part of ratio decidendi of the decision nor was the said plea either expressly o
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aragraphs.
14.1. Reverting to the issue in dispute as to the classification of subject goods, the relevant extracts of Chapter 25 of the First Schedule to the Customs Tariff Act, 1975 (hereinafter referred to as Customs Tariff / First Schedule, in short); the Headings 251 5, 251 6, 2521 and 2530 (cited by appellant) as well as Chapter 68 i.e, Heading 6802, along with the relevant Chapter Notes, are reproduced below: (Reference to HSN Explanatory Notes would come into consideration, only in case of any doubt / ambiguity in interpreting / applying these headings/Notes etc. and the same has accordingly been dealt, in the subsequent paragraphs).
“SECTION V MINERAL PRODUCTS
Chapter 25
Salt; sulphur; earths and stone; plastering materials, lime and cement
Notes:
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
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OF A RECTANGULAR (INCLUDING SQUARE) SHAPE
–
MARBLE AND TRAVERTINE :
2515 11 00
CRUDE OR ROUGHLY TRIMMED
kg.
2515 12
Merely cut, by sawing or otherwise , into blocks or slabs of a rectangular (including square ) shape :
2515 12 10
Blocks
kg.
2515 12 20
Slabs
kg.
2515 12 90
Other
kg.
2515 20
–
Ecaussine and other calcareous monumental or building stone; alabaster :
2515 20 10
Alabaster
kg.
2515 20 90
Other
kg.
2516
GRANITE, PORPHYRY, BASALT, SANDSTONE AND OTHER MONUMENTAL OR BUILDING STONE, WHETHER OR NOT ROUGHLY TRIMMED OR MERELY CUT, BY SAWING OR OTHERWISE, IN TO BLOCKS OR SLABS OF A RECTANGULAR (INCLUDING SQUARE) SHAPE
–
Granite :
2516 11 00
Crude or roughly trimmed
kg.
2516 12 00
Merely cut, by sawing or otherwise, into blocks or slabs of a rectangular (including square) shape
kg.
2516 20 00
Sandstone
kg.
2
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and agglomerated amber in plates, rods, etc., not worked after moulding jet
kg.
2530 90 20
Natural arsenic sulphides (such as orpiment)
kg.
2530 90 30
Calcite
kg.
2530 90 40
Ores and concentrates of rare earth metals
kg.
2530 90 50
Wollastonite
kg.
2530 90 60
Earth colour ochre, crude
kg.
2530 90 70
Other processed earth colour ochre
kg.
Other :
2530 90 91
–
Strontium sulphate (natural ore)
kg.
2530 90 99
–
Other
kg.
SECTION XIII
ARTICLES OF STONE, PLASTER, CEMENT, ASBESTOS, MICA OR SIMILAR MATERIALS; CERAMIC PRODUCTS; GLASS AND GLASSWARE
Chapter 68
Articles of stone, plaster, cement, asbestos, mica or similar materials
Notes :
1. This Chapter does not cover :
(a) goods of Chapter 25 :
(b) to (n) not reproduced since pertaining to other goods/Chapters etc and hence not relevant.
2. In heading 6802, the expression “worked monumental or building stone” applies not only to the varieties of s
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:
6802 21
Marble, travertine and alabaster :
6802 21 10
Marble blocks or tiles
kg.
6802 21 20
Marble monumental stone
kg.
6802 21 90
Other
kg.
6802 23
Granite :
6802 23 10
Granite blocks or tiles
kg.
6802 23 90
Other
kg.
6802 29 00
Other stone
kg.
–
Other :
6802 91 00
Marble, travertine and alabaster
kg.
6802 92 00
Other calcareous stone
kg.
6802 93 00
Granite
kg.
6802 99 00
Other stone
kg.
14.2. The Rules for Interpretation of the First Schedule to the Customs Tariff Act, 1975 (also referred in the Explanation to Notification No. 1/201 7- Central Tax (Rate) dated 28.06.201 7), read as follows:
“GENERAL RULES FOR INTERPRETATION OF THE SCHEDULE
Classification of goods in this Schedule shall be governed by the following principles:
The titles of Sections, Chapters and sub-chapters are provided for ease of reference only; for legal purposes, c
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y of such material or substance. The classification of goods consisting of more than one material or substance shall be according to principles of rule 3.
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 reference to (a)
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f the suitable surfaces is polished with simple table polish machine. Further, it is cut to square or rectangle shape on a table cutting machine. Some other kind of simple processes like CALIBRATION, TUMBLING etc. are also undertaken”. (unquote).
(2) It is pertinent to note that appellant's description of activities is that apart from polishing and cutting, “some other simple processes like tumbling, calibration etc., are also undertaken”. What is 'tumbling' or 'calibration' have not been detailed / explained by appellant21. Further, usage of word “etc.” as indicated above, denotes further or other processes (i.e, in addition to those specified in application/appeal), which however have not been disclosed / described or specified, either in the application or the appeal. Appellant's description of goods as “polished / processed limestone slabs” – as given in the question framed for advance ruling – in itself bears elements of vagueness / imprecision. That is, while the pre-fixed term
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labs' i.e, where apart from cutting slabs into rectangular/square shapes, only the activity of 'polishing' is done; and
(b) Classification of 'processed limestone slabs' i.e, where apart from cutting slabs into rectangular/square shapes, all the other specified activities viz., polishing, tumbling and calibration are undertaken (and not as merely one of these or a combination of one or more of these).
15.3. On examining the nature of activities i.e, processes mentioned above, we find as follows:
(i) Polishing is the process of smoothening one suitable surface of a given slab, mechanically. Appellant's description thereof in the application (reproduced at para 3.1 above under Nature of activity) is (quote) “to bring rough limestone slabs (a minor mineral) which are by nature uneven in thickness ranging from 15 to 35 mm (or so), to our processing unit and POLISH it's one of the suitable surface with simple table polish machine” (unquote). Though not specifically describing the process
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rary on record, it is considered that only mechanical grinding is undertaken as the method of polishing in respect of goods in question.
(ii) Cutting is described as mechanical cutting of rough slabs into square/rectangular shapes; appellant's description thereof in their application (para 3.1 under Nature of activity) is (quote) “cut it to square or rectangle shape on a table cutting machine”. And in their submissions vide letter dated 12-5-2018, it has been described as: (quote) “..Even CUTTING of sides of a Stone slab is possible only with the application of physical force of a labour against a cutting wheel of a simple machine.”
(iii) However, as stated above, appellant has not described/explained as to the meaning / nature of the processes 'tumbling' and 'calibration'. Hence, recourse is taken to dictionary/technical literature for ascertaining the same. As per the details available on public domain, 'tumbling'23 and 'calibration'24, with regard to stones/slabs, are found to be
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mately same thickness i.e., fairly regular/even, by sawing off/cutting off the protuberant/uneven portion of the under-side surface (i.e, other than the one polished). .
16. Appellant's plea is for classification of the goods under Chapter 25 and in particular reference, under Chapter Headings 2515 / 2516 and alternatively under Headings 2521 or 2530. The Authority held the goods to be correctly classifiable under Heading 6802 of the GST Tariff, for the reasoning given in the impugned order.
17. Before considering the relevant Headings, Notes in Chapters 25 and 68 (and related Explanatory Notes where required), we deem it fit to deal with one of the grounds put forth by the appellant, whereby classification of the goods under Chapter 25 was sought, based on the Titles of the Sections and Chapters in the Tariff-Schedule. The contention is that title of Section V of the Tariff refers to “Mineral products”, Chapter 25 title contains the word “Stone” and hence, these would be applicable
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.e., Calcareous monumental or building stone, that limestone falls under Heading 2515, if apparent specific gravity thereof is 2.5 or more. (Meaning of “Calcareous” as per standard dictionaries and also in common and technical understanding25 is “mostly or partly composed of calcium carbonate – in other words, containing lime or being chalky”. Further elaboration given herein is that “major materials in Limestone sedimentary rock are the minerals calcite and aragonite, which are different crystal forms of calcium carbonate (CaCO3)”)
c) If specific gravity is less than 2.5 the same would fall under Heading 251 6, notwithstanding that Heading 25.1 6 does not contain the word 'calcareous' and mentions only 'other monumental or building stone'. This is in view of the HSN (Harmonised System of Nomenclature) Explanatory Notes for Headings 25.15 and 25.1 6, which read respectively, as follows (the validity of reference to HSN Notes, has been delineated earlier) :
25.15 : “The heading cover
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said headings are considered as equally applicable in the given context, depending on the actual specific gravity thereof.
e) Appellant also claimed alternative classification under Headings 2521 or 2530 with regard to their goods 'polished / processed limestone slabs'. The former Heading, as seen, is applicable to only specified types/forms of limestone i.e, 'limestone flux, limestone and other calcareous stone, of a kind used for the manufacture of lime or cement'. That is, to fall under this Heading the goods should be either 'limestone flux' or 'limestone of a kind Used for manufacture of lime or cement'. There is nothing on record, nor adduced / claimed by the appellant that the goods in question are either limestone flux (which is chiefly employed as a flux in iron and steel industry26) or of the kind used in the manufacture of lime or cement. On the other hand, it is specifically stated by the appellant that the impugned goods are for use in (quote) 'low budget housing needs'
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herefore first examined whether the goods fall under Chapter 25. Classification under Chapter 25 is primarily governed by Note 1 to the said Chapter. The said Chapter Note specifies certain criteria for classification under Chapter 25. These can be analysed as follows: The Note starts with the phrase “Except where their context (..27) otherwise requires, the headings of this Chapter cover..”. This denotes that the description in the Headings is the first and foremost criterion to be considered. If the Headings do not otherwise require/provide, then headings would cover :
(a) only products which are in the crude state, or
(b) products “which have been washed, crushed, ground, powdered, levigated, sifted, screened or concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallisation) This phrase and construction thereof indicates that the words used therein denote both the state/form in which the goods should be, and the corresponding proc
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cted to other processes i.e, either those specified i.e, roasted, calcined etc., (except when the Heading description allows); or any process beyond that mentioned in the Heading.
19.1. Examining the subject goods in the light of above criteria vis-a-vis the relevant Headings 2515/2516 & Chapter Note, we find as follows:
(a) Headings 2515 and 251 6, both contain similar phrase “whether or not roughly trimmed or merely cut, by sawing or otherwise, into blocks or slabs of a rectangular (including square) shape”. There are two processes / stages mentioned in this description i.e, (i) roughly trimmed or (ii) cut, by sawing or otherwise, into blocks/slabs of rectangular/square shapes.
(b) The phrase 'roughly trimmed' is not defined in the Chapter/Tariff/Schedule. However, the same is explained in Chapter 25 of the Harmonised System of Nomenclature (HSN) Notes as follows:
“Roughly-trimmed” stone is stone which has been very crudely worked after quarrying, to form blocks or slabs, still
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he HSN. Hence, calibration would not fall under the category of 'roughly trimmed'. As such, is not a permitted process in the Headings.
(e) Process of cutting limestone slabs into square or rectangular shapes (as per surfaces), is admittedly undertaken by the appellant. The said process is specifically mentioned in the description under Headings 2515/2516; and hence is an 'allowed process'.
19.2. With regard to other processes of polishing (including tumbling), these do not find place in descriptions of either Heading 2515 or 2516. The said descriptions also do not expressly provide for exclusion/prohibition of any other process(es). Hence, it is to be seen whether the subject goods / processes of polishing and tumbling as also calibration (which is not covered in Heading description, as detailed supra) are covered by Note 1 to Chapter 25, as analysed earlier.
19.3. The first criterion in the said Note is that goods should be in crude state. The appellant has not claimed that the go
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VIGAT, and the literal meaning of the same is “made smooth, polished'; or
(ii) Polishing is nothing but 'grinding' the surface of the slab (and therefore covered by the word 'ground' used in the Chapter Note); or
(iii) the words/phrase 'mechanical or physical process' would apply to the activity of polishing undertaken by them, as the same was undertaken without changing the structure of the product.
20.2. Above contentions have been examined. It is observed as follows:
A. With regard to the word 'levigated':
(i) On referring to standard dictionaries29, the meaning of 'levigate' (indicated as 'archaic') is found to be given as “to reduce (a substance) to a fine powder or smooth paste”. It is further mentioned that the origin of the word is in mid-1 6th century: from Latin levigat- 'made smooth, polished', from the verb levigare, from levis 'smooth'. Other dictionaries Collins, Merriam Webster etc., also show the meaning of the word, as verb, to be 'reducing / grinding to a smooth,
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it appears that 'levigated' merits consideration as denoting that the goods/product is in the state/form of 'smooth fine powder'. Or by considering that the term powdered' is separately mentioned in the Note as immediately preceding word (which would cover all forms of powdered state whether coarse or fine), the only alternative meaning of 'levigated' as per contemporary prevalence, would be to denote goods in the state/form of/or subjected to process(es) of making into 'smooth paste'.
B. With regard to the word 'ground':
(i) The word 'ground' used in the Chapter Note, in the given context; has been cited by appellant as covering their activity of 'polishing' by mechanical grinding. However, here again, the said word appears along with the other words 'crushed', powdered etc., which refer to the processes of reducing substances to lesser size / finer particles / powdered forms.
(ii) Further, the said word 'ground' appears in Heading / sub-heading description of various products und
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stand-alone phrase, but used in conjunction with the earlier words/phrases which qualifies it. For ready reference, the said Chapter Note, is again reproduced as under:
“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”.
(ii) In the above text, the words “screened, concentrated” appear in continuation followed by description of processes “flotation, magnetic separation or other mechanical or physical processes..”. This would denote a construction /
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. .” (conjunction highlighted).
(iii) The meaning denoted with the use of the conjunction 'or' as above, appears to be apt, as otherwise, if only the word -'concentrated' has to be reckoned as qualifying the subsequent words/phrases 'flotation, magnetic separation or other mechanical or physical processes' – the same would not reflect a contextually relevant or true meaning, since processes of flotation, magnetic separation cannot be said to be used only for 'concentration'; more so since the earlier words in the Note include sifted / screened etc. Therefore, the above said phrase in Chapter Note I of Tariff, read with the HSN Explanatory Notes, merits to be considered as denoting that the processes mentioned 'flotation, magnetic separation or other mechanical or physical processes' as applicable, to one or more of the earlier appearing words 'washed crushed, ground, powdered, levigated, sifted, screened or concentrated'. Consequently, the phrase “other mechanical or physical process
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sed by appellant for the words 'levigated', 'ground' and 'other mechanical or physical process' appearing in Chapter Note 1, do not find sustainability or legal support, as analysed supra.
20.4. It follows from the above discussion that the processes of 'polishing', 'tumbling' and 'calibration'; or the state of goods as polished / tumbled / calibrated are not covered by Note 1 to Chapter 25 of the Customs Tariff Act, 1 975.
21. Before arriving at a definite conclusion in this regard, we deem it fit to now also refer to the HSN Explanatory Notes pertaining to Chapter 25 and the headings 251 5/251 6 therein; which read as follows: (the relevant extracts are highlighted (underlined)):
“Chapter 25
Salt; sulphur; earths and stone; plastering materials, lime and cement
Notes…………………(Chapter Notes similar to those in Customs Tariff Act Schedule referred earlier hence not reproduced).
GENERAL
As provided in Note 1, this Chapter covers, except where the context otherwise req
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,' provided that such addition does not render the product particularly suitable for specific use rather than for general use. Minerals which have been otherwise processed (e.g., purified by recrystallisation, obtained by mixing minerals falling in the same or different headings of this Chapter, made up into articles by shaping, carving, etc.) generally fall in later Chapters (for example, Chapter 28 or 68).
In certain cases, however, the headings :
(1) Refer to goods which by their nature must have been subjected to a process not provided for by Note 1 to this Chapter. Examples include pure sodium chloride (heading 25.01), certain forms of refined sulphur (heading 25.03 V chamotte earth (heading 25.08), plasters (heading 25.20), quicklime (heading 25.22) and hydraulic cements (heading 25.23).
(2) Specify conditions or processes which are admissible in those cases in addition to those allowed generally under Note 1 to this Chapter. For example, witherite (heading 25.11), siliceous
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by sawing or otherwise, into blocks or slabs of a rectangular (including square) shape (+).
–
Marble and travertine :
2515.11
Crude or roughly trimmed
2515.12
Merely cut, by sawing or otherwise, into blocks or slabs of a rectangular (including square) shape
2515.20
Ecaussine and other calcareous monumental or building stone; alabaster
Heading Notes:
Marble is a hard calcareous stone, homogeneous and fine-grained, often crystalline and either opaque or translucent. Marble is usually variously tinted by the presence of mineral oxides (coloured veined marble, onyx marble, etc.), but there are pure white varieties.
Travertines are varieties of calcareous stone containing layers of open cells.
Ecaussine is extracted from various quarries in Belgium and particularly at Ecaussines. It is a bluish-grey stone with an irregular crystalline structure and contains many fossilised shells. On fracture Ecaussine shows a granular surface similar to granite and is theref
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8.02. The same classification applies to blanks of articles.
The heading also excludes:
(a) Serpentine or ophite (a magnesium silicate sometimes called marble) (heading 25.16),
(b) Limestone (known as “lithographic stone” and used in the printing industry) (heading 25.30 when in the crude state).
(c) Stones identifiable as mosaic cubes or as paving flagstones, even if merely shaped or processed as specified in the text of this heading (heading 68.02 or 68.01 respectively).
Subheading 2515.11
For the purposes of this subheading, “crude” refers to blocks or slabs which have been merely split along the natural cleavage planes of the stone. Their surfaces are often uneven or undulating and frequently bear marks of the tools used to separate them (crowbars, wedges, picks, etc.).
This subheading also covers unshaped stone (quarrystone, rubble) obtained by breaking out rocks from the quarry face (using picks, explosives, etc.). They have uneven, broken surfaces and irregular edges. Thi
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faces. If care was taken with the sawing, these traces may be very slight In such cases, it is useful to apply a sheet of thin paper to the stone and to nib it gently and evenly with a pencil held as flat as possible. This often reveals saw marks even on carefully sawn or very granular surfaces.
This subheading also covers blocks and slabs of a rectangular (including square) shape obtained otherwise than by sawing, e.g., by working with a hammer or chisel.
22.1. From the above extracts of the HSN, especially the highlighted portions, it is evident that the HSN Explanatory Notes also reflect the restriction as to only certain specified processes being allowed on the products for a classification under Chapter 25. The said Notes further specify and give illustrative details of other processes which, if undertaken, entails classification under other Chapters, as follows:
(i) The General Notes in HSN under Chapter 25 specify that “Minerals which have been otherwise processed .. generall
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f undertaken would attract application of the said explanation. The list of these mentioned processes, is also not exhaustive as seen from “etc.” appearing after “chamfered”.
22.2. In view of the above, as per HSN notes also, slabs which have been 'polished', tumbled and/or calibrated WOUld be covered by exclusions detailed in both General Note to Chapter 25, as well as the Heading Note to Heading 2515.
23. Based on the above detailed analysis, we find that in sum, the goods in question, limestone slabs, have admittedly been subjected to processes of 'polishing' (including tumbling) and calibration, in addition to being cut to rectangular/square shapes. The said processes, except that of cutting, are not among those specified either in the Heading description or the Chapter Note 1, for an eligible classification under Chapter 25. Hence, classification of the subject goods under Chapter 25 i.e, specific Headings 2515 /2516 remains precluded by virtue of description in said Headings as
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abs under Chapter 25 by considering that in their earlier Final Order No. A/1740-1744/WZB /AHD/2012 dated 27-12-2012 = 2013 (9) TMI 648 – CESTAT AHMEDABAD, the issue was held in favour of the same assessee; and the said Final Order was accepted by the Department and hence that the ratio of the earlier order would apply. Thus, in this decision, Hon'ble Tribunal has not given specific findings. We have therefore referred to the earlier Final Order dated 27-12-2012 = 2013 (9) TMI 648 – CESTAT AHMEDABAD cited therein, which is available with citation Classic Marbles vs CCE„ Vapi 2013 (293) ELT. 563 (Tri-Ahmd.) = 2013 (9) TMI 648 – CESTAT AHMEDABAD. In this decision, Hon'ble Tribunal while deciding the classification issue involved, referred to various other judgments, including Oriental Trimex Ltd. 2010 (249) ELT. 259 (Tri-Dei). =2009 (8) TMI 454 – CESTAT, NEW DELHI, Nitco Tiles Ltd. 2004 (165) ELT.50 (Tri-Mum). = 2003 (10) TMI 467 – CESTAT, MUMBAI.
24.3. We find that in the above j
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Chapter Note incorporated in the Central Excise Tariff, process of 'polishing' came to be included in Chapter 25, which was accordingly considered by the Hon'ble Tribunal. It is pertinent to note that the words “or polishing” in the above said Note 6 to Chapter 25, were omitted by the Finance Act, 2012.
24.4. We therefore find that the aforesaid decisions were rendered in totally different context i.e, Central Excise duty levy which is on 'manufacture', coupled with existence of Chapter Notes deeming 'polishing' to be manufacture in a given period; and further the decisions therein, were based on specific facts of cases vis-d-vis certain applicable clarifications issued by the Board (Central Board of Excise & Customs) etc. We find that in these case-laws, the issue of classification under the competing entries of Chapters 25 and 68 de hors the aspect of 'manufacture' does not find specific examination and analysis. As such, we find that the said case law of Classic Marble cited by ap
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01; mosaic cubes and the like, of natural stone (including slate), whether or not on a backing; artificially coloured granules, chippings and powder, of natural stone (including slate)”.
In the above entry, the relevant part meriting consideration for the issue on hand would be whether subject goods are covered by the expression “worked monumental or building stone and articles thereof”; the subsequent portion of the entry being not relevant. The phrase 'monumental or building stone', is the same as appearing in Headings 251 5/251 6 (with prefix 'calcareous' and 'other' respectively). Notes to Chapter 68 in the Tariff-Schedule, as earlier reproduced, do not define the word “worked” nor contain any explanation / description as to the meaning/scope thereof31. In view of the same, a reference is to be made to the HSN, which as stated supra, is a safe guide for classification purposes, as laid down by Hon'ble Supreme Court.
27.2. Extracts of HSN Notes for Chapter 68, the relevant portion
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orm rather than the nature of the constituent material. Some are obtained by agglomeration (e.g., articles of asphalt, or certain goods such as grinding wheels which are agglomerated by vitrification of the binding material); others may have been hardened in autoclaves (sand-lime bricks). The Chapter also includes certain goods obtained by processes involving a more radical transformation of the original raw material (e.g., fusion to produce slag wool, fused basalt, etc.).
Further text “Articles obtained by …….” to exclusion clause (g) “Original sculptures….”, being not relevant, not reproduced.
Heading description:
68.02
Worked monumental or building stone (except slate) and articles thereof, other than goods of heading 68.01; mosaic cubes and the like, of natural stone (including slate), whether or not on a backing; artificially coloured granules, chippings and powder, of natural stone (including slate).
6802.10
–
Tiles, cubes and similar articles, whether or
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vers stone which has been further processed than mere shaping into blocks, sheets or slabs by splitting, roughly cutting or squaring, or squaring by sawing (square or rectangular faces).
The heading thus covers stone in the forms produced by the stone-mason, sculptor, etc., viz.:
(A) Roughly sawn blanks; also non-rectangular sheets (one or more faces triangular, hexagonal, trapezoidal, circular, etc.).
(B) Stone of any shape (including blocks, slabs or sheets), whether or not in the form of finished articles, which has been bossed (i.e., stone which has been given a rock faced “finish by smoothing along the edges while leaving rough protuberant faces), dressed with the pick, bushing hammer, or chisel, etc., furrowed with the drag-comb, etc., planed, sand dressed, ground, polished, chamfered, moulded, turned, ornamented, carved etc.
The heading therefore includes not only constructional stone (including facing slabs) worked as above, but also articles such as…..
Stone slabs formi
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pecially the highlighted parts, it may be seen that the meaning/scope of the word 'worked' is not separately and specifically delineated in the HSN Notes also. However, the said word is used at various places denoting certain illustrative and not exhaustive list of processes. From a reading of the above Notes and keeping in view those under Chapter 25, referred earlier, it can be seen that:
(i) Minerals / mineral products figure in both Chapter 25 and Chapter 68.
(ii) The distinction for classifying under either of the Chapters lies in the level of activities / processes undertaken on the goods.
(iii) That is, to fall under Chapter 25, the goods should be either crude or subjected to only those processes/stages which are specified in the relevant Heading-description or Note 1 to Chapter 25. Any processes undertaken beyond those specified for Chapter 25 purpose, would take the goods out of purview of the said Chapter.
(iv) Once the goods fall out of Chapter 25, they would fall under
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h is also described as 'beyond the stage of normal quarry products of Chapter 25'.
(viii) Any further process than mere shaping into slabs by cutting, also would render the goods to fall under Heading 6802.
(ix) Amplification / illustrations to the above Note, specifies that the heading covers stone in the forms produced by stone mason, sculptor etc.„( here again, usage of word “etc.”, shows that the same is not exhaustive to restrict it to products made by a stone mason or sculptor only).
(x) Stone of any shape, including slabs, which may or may not be in the form of finished articles but which have been, among others, 'polished' is also covered in the heading. Herein again, the list of processes i.e., bossed, dressed with the pick, bush-hammer, chisel Polished, chamfered, turned… is not exhaustive, as evident from the multiple usage of “etc.” therein. Also, the enumeration of processes is not cumulative so as to require that all the processes should be undertaken on a give
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s grounds/contentions against classification of the subject goods under Chapter 68 / Heading 6802 are that Heading 6802 applies only to shaped articles and further worked by a stone-mason or sculptor, whereas the limestone slabs are simply polished & cut which does not change morphology, character, name, description, purpose and usage of the stone; hence, these processes would not take the classification out of Chapter 25. We are unable to accept this contention. As detailed above, the Heading 6802, apart from articles, also specifically covers stone in the description itself i.e. “worked monumental or building stone.. and articles thereof”. The same, coupled with the HSN Explanatory Notes, as detailed and analysed above, show that such stone (limestone slabs, in the instant context) which have been 'worked' beyond the processes mentioned in Chapter 25 on the one hand and 'polished' as specified under Chapter 68 in particular reference to slabs (blocks etc.,) has to be classified under
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was further urged that by the very description of the said goods, without any prefix or adjective also, these would include polished varieties and hence, the same analogy would apply to the goods limestone slabs.
On examining, we find that in the Central Tax Rate Notification, the goods Marble and Granite are mentioned by description in certain entries, with the classification under Chapter 25 (Headings 2515 or 251 6, as the case may be) with reference to specific subheading / Tariff Item Number. However, the description against said sub-heading numbers, is given with a qualification/restriction as 'blocks' or 'other than blocks'. The same corresponds to the fact that Marble and Granite, by the said names, are specified in the Headings 2515, 251 6 respectively; and again in respect of certain specific sub-headings.
Appellant's argument that by mere description, the words 'marble' or 'granite' in the Notification would include polished, is only an assumption; since no such indication
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pend upon criteria for classification, as per Chapter Notes, Rules for Interpretation etc, read with HSN notes. In essence, here again it depends on the nature / level of processing undertaken; whereby if these are in crude state or subjected to specific processes (detailed in HSN also), they would be classifiable under Chapter 25 and if worked beyond that, including polishing, they would be classifiable under Chapter 68 under any of the above subheadings, as applicable. In Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017; against the Heading 6802, the description appearing in Heading 6802 of Customs Tariff has been as such incorporated (with certain specified exceptions/exclusions), pursuant to the amendment effective from 15-11-2017 (Sl.No. 177E of the Notification refers). As such, specific mention of Marble, Granite does not appear in the description against Heading 6802 in the Notification, since the said Heading along with the description, encompasses coverage of Marbl
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ication of goods, for GST-levy purposes; and as such cannot be of any relevance.
(c) It has further been contended that 'as per rules of HSN Code', the appellant has to mention only two digits, whereas the Authority has considered 4-digit or 6-digit classification which are not relevant to them. We find that this contention of the appellant is also not in proper appreciation of the facts and statutory provisions. Classification of goods, as per the GST-Notifications, merits to be determined by considering the relevant entries, Notes in the Customs Tariff Schedules, which provide for upto 8-digit classification, at the ultimate specification levels. The mention of 'two-digit' classification, under GST, is only a procedural relaxation given in respect of reporting in the statutory returns. The same has no bearing/relevance with regard to the primary question of determination of classification of the goods, as per the Tariff Schedule.
(d) Appellant also contended that findings of lower
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fied under Heading 6802 of the Tariff Schedule.
31.1. In view of the foregoing, we find that the appellant has not made out a case against the decision in impugned Advance Ruling in so far as it has been ruled that “Polished / Processed Limestone slabs are. correctly classifiable under heading 6802 of the GST Tariff (sic)”. The classification under Chapter Heading 6802 of the First Schedule to the Customs Tariff Act, 1975 is the appropriate classification of the said goods (both 'polished' only as well as 'processed', as referred at para 15.2 supra), in view of the relevant Heading-description read with the Chapter Notes and HSN Explanatory Notes; as discussed and analysed above.
31.2. In terms of sub-classification under Heading 6802, the said goods would fall under Tariff Item No. 6802 92 00 – “Other calcareous stone”; considering that limestone slabs are 'calcareous stone', as stated earlier and keeping in view the structure of grouping under Heading 6802 read with Rules for Inter
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pter Heading 6802 (Tariff Item No. “6802 92 00 – Other calcareous stone”) of the Schedule.
C)
Can we put them under 'Mineral substances not elsewhere specified or included” which is mentioned under HSN Code 2530?
The goods Polished/ Processed Limestone slabs do not fall under HSN Code – Chapter Heading 2530 of the Schedule.
D)
Can we retain them under any of the I-ISN Codes 2515/2516/2521 ?
The goods Polished / processed Limestone slabs do not fall under HSN Codes i.e, Chapter headings 2515 / 2516 / 2521 of the Schedule.
E)
Can we retain them under HSN Code 25 with inaugural phrase of “Goods not mentioned elsewhere” as mentioned at the start of column of 5% ?
The goods would not fall under Chapter 25 of the Schedule, in view of the above discussion and findings.
33. Accordingly, we pass the following
ORDER
The Advance Ruling given vide TSAAR Order No. 02/2018 dated 25-03-2018 = 2018 (6) TMI 458 – AUTHORITY FOR ADVANCE RULING HYDERABAD TELANGANA passed by the Telangana State
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form for Advance Ruling', which requires furnishing “Statement containing applicant's interpretation of law……”.
5. Para No. (14) as given in the appeal, apparently referring to the said Sl.No. in the prescribed format Form GST ARA-02 for 'Appeal to the Appellate Authority for Advance Ruling'. Sl.No. 14 as per format is athe facts of the case (in brief)”.
6. Para No. (15) as given in the appeal, apparently referring to the said Sl.No. in the prescribed format Form GST ARA-02 for 'Appeal to the Appellate Authority for Advance Ruling'. Sl.No. 15 as per format is “Grounds of Appeal”.
7. Questions framed by the appellant for Advance Ruling, and consequently this appeal pertain to only the classification under specified headings. The said questions, as framed, do not require ruling with regard to applicable rates of GST for the subject goods. Accordingly, the issue is considered w.r.t. the appropriate classification of the subject goods. Needless to state, rates of GST applicable on s
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erted by (B)(xiv) of Notification No.27/2017-Central Tax (Rate) dated 22.09.2017.
11. Inserted by (B (xv) of Notification No.27/2017-Central Tax (Rate) dated 22.09.2017.
12. Entry Sl.No.s 26A and 26B inserted by (C)(xii) of Notification No. 41/2017- Central Tax (Rate) dated 14-11-2017 with effect from 15-11-2017.
13. Inserted by C (xii) of Notification No. 34/2017- Central Tax (Rate) dated 13.10.2017
14. Entries in Col. (2) & (3) against Sl.No.177A above, were substituted vide C (xlix) of Notification No. 41/2017- Central Tax (Rate) dated 14.11.2017 w.e.f. 15-11-2017.
15. Inserted by C (1) of Notification No. 41/2017- Central Tax (Rate) dated 14.11.2017 w.e.f. 15-11-2017.
16. Phrase in {} inserted by (C)(v) of Notification No.18/2018-Central Tax (Rate) dated 26th July, 2018, effective from 27th July, 2018.
17. Sl.No. 16 omitted by (D)(i) of Notification No. 41/2017- Central Tax (Rate) dated 14-11-2017 effective from 15-11-2017.
18. Sl.No. 17 omitted by (D)(i) of Notification No
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l goods essentially of stone]” by (D)(iv) of Notification No.27/2017-Central Tax (Rate) dated 22.09.2017.
21. In fact, in the application as well as grounds of appeal, in entirety, only the process of 'polishing' has been referred/emphasised/highlighted by appellant, without any further reference to tumbling or calibration which are only mentioned in the description of 'nature of activity involved').
22. This Order would not be applicable in case of any difference / deviation, in respect of the one or more of above facts/aspects, which has not been brought on record by appellant in the present proceedings, in view of provisions vide sub-Section (2) of Section 103 and sub-Section (1) of Section 104 of the Acts.
23. https://En.wikipedia.org
24. www.pavingexpert.com
25. https://en.wikipedia.org
26. HSN Explanatory Notes to Heading 25.21 refers.
27. The phrase herein reads “or Note 4 to this Chapter otherwise requires” which is not relevant since Note 4 deals with goods falli
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