In re Anabond Limited (GST AAR Tamilnadu)
It is hereby clarified that the ‘Polysulphide Sealant’ manufactured by the applicant and marketed under the trade name ‘Anabond Tuffseald’ is classifiable under CTH 3214 10 00 of the First Schedule to the Customs Tariff Act, 1975 as applicable to GST as per Explanation (iii) to Notification 1/2017-Central Tax (Rate) dt 28.06.2017 and G.O. Ms No. 59, Commercial Taxes and Registration (Bl) dt 29th June 2017.
FULL TEXT OF ORDER OF ADVANCE RULING AUTHORITY TAMILNADU
At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.
1. M/s. Anabond Ltd., Chennai (hereinafter called the applicant or the company) has preferred an application for Advance Ruling on what is the appropriate classification of ‘Polysulphide sealants’ manufactured by them, under GST
2. The Applicant is engaged in the manufacturing of engineering adhesives and sealants, paints & other chemical formulations which are used in various industries such as automobile, aerospace, energy, construction, marine, railway etc. Applicant manufactures, among other products, polysulphide sealants and market it under the trade name Anabond Tuffseald. Polysulphide sealants are commonly used for sealing expansion joints where large movement is anticipated in concrete construction and for joints between diverse construction materials like glass, aluminium, steel, cladding, glazing, tilling, tanks, internal and water retaining structures. It is also used for sealing expansion joints where there is vehicular traffic (e.g. airports and bridges) or pedestrian traffic. Applicant’s product contains two components, viz., polysulphide polymer (resin/rubber) and hardener (acts as the curing agent). Liquid polysulfide polymers form the basic ingredient of the sealant formulation. Applicant uses Manganese dioxide base as the curing agent. Both resin and hardener are packed separately within the same container. After opening the container, hardener is mixed with resin and applied on the surface. After mixing resin and hardener, the polymerisation is initiated at room temperature which proceeds further until it is cured. The applicant has stated that, the relevant product for this application is polysulphide sealants. There are five competing headings in which the said product can be covered. They are: Heading 3214; Heading 2830; Heading 3911; Heading 4002; Heading 3506.
3. The applicant has further stated that
♦ Customs Tariff Heading (hereinafter referred to as CTH) 3214 covers various types of mastics viz., “glaziers’ putty, grafting putty, resin cements, caulking compounds and other mastics; painters’ fillings; non-refractory surfacing preparations for facades, indoor walls, floors, ceilings or the like. Sealants are also known m the trade by their generic name “mastics”. The product in question is a mastic based on rubber which after the addition of hardener is used as mastics. HSN Explanatory Notes provides that “mastics based on rubber” are covered under CTH 3214.Further, in view of Note 3 to Section VI (under which the heading 3214 falls) the fact that the product in question has two components and these two components have to be mixed before use to prepare the sealant is no bar for classification under CTH 3214. The product in question is presented as a “set” containing polysulphide rubber and hardener. It also satisfies the three conditions mentioned in the Section Note. Thus, according to the terms of the Headings and Section Notes, the product is classifiable under Tariff item 32141000 and subject to GST at the rate of 28%. Furthermore, US Customs and Border Protection has classified identical products under Heading 3214 in CROSS Rulings N215915 and N216207.
♦ Chapter 28 covers all inorganic chemicals, organic or inorganic compounds of precious metals of rare-earth metals, or radio-active elements or of isotopes. For a chemical compound to come under Chapter 28, it should be an inorganic compound and the compound should be a separate chemically defined compound also. In the present case, polysulphides are products of a condensation reaction between organic polyhalides (e.g. Bis-2-chloroethyl formal) and alkali polysulphides and therefore, the final product, Viz., the polysulphide is an organic compound. Though there are some exceptions for organic compounds to be covered under Chapter 28 (for instance, organic or inorganic compounds of precious metals of rare-earth metals, or radio-active elements or of isotopes), the polysulphide rubber compound is not covered by such exceptions. From the HSN Explanatory Notes, it is clear that the type of Polysulphides covered under the heading 2830 are mixtures of inorganic polysulphides of the same metal. The polysulphide in question is an organic compound and is a synthetic rubber. Though there are some exceptions for organic compounds to be covered under Chapter 28, the Polysulphide rubber compound is not covered by such exceptions. Therefore, classification of the product in question under Chapter 28 itself could be ruled out.
♦ Polysulphide polymers are of two types. The one containing Carbon-Sulphur-Carbon linkage is covered under CTH 3911 while the other containing Sulphur-Sulphur linkage is covered under CTH 4002. In terms of HSN Explanatory Notes, the Heading 3911 covers “Polysulphide polymers characterised by the presence of mono sulphide linkages in the polymer chain, for example, poly (phenylene sulphide). In polysulphides each sulphur atom is bound on both sides by carbon atoms, as opposed to the thioplasts of Chapter 40, which contain sulphur-sulphur linkages. The synthesis of polysulphide rubber isnNa2S2 +nCl-R-Cl—>2nNaCl+–[R-S-S]. Thus, classification under Heading 3911 can also be ruled out.
♦ Heading 4002 covers “synthetic rubber and factice derived from oils, in primary forms or in plates, sheets or strip; mixtures of any product of heading 4001 with any product of this heading, in primary forms or in plates, sheets or strip”. The term “synthetic rubber” is defined in Note.4 to Chapter.40 to include thioplasts. The product in question contains poly sulphide rubber which is a thioplast, a synthetic rubber covered under CTH 4002.But the product in question is not polysulphide rubber alone but also contains the hardener and is presented together as a set. While the General Rules of Interpretation (GRI) provide means for classification of products presented as sets under Rule 3(b) in terms of GRI I, the application of the Rules could be resorted to only when the Section or Chapter Notes are not of help in classifying the product. Therefore, it would be necessary to look at the relevant Section and Chapter Notes before resorting to the GRIs. In the present case, as discussed above, classification of the product can be done based on the Section, Chapter Notes and Headings and therefore classification under CTH 4002 can be ruled out.
♦ As the product has bonding property, it is relevant to analyse the appropriateness or otherwise of classification of the product under Heading 3506 which deals with adhesives and glues. Heading 3506 covers, “prepared glues and other prepared adhesives, not elsewhere specified or included; products suitable for use as glues or adhesives, put up for retail sale as glues or adhesives, not exceeding a net weight of 1 kg:”. Sub-Heading 350691 specifically covers “adhesives based on polymers of headings 3901 to 3913 or on rubber”. However, HSN Explanatory Notes under Heading 3506 specifically rules out such mastic preparations from that heading. The product in question is in the nature of a mastic or a sealant. Therefore, classification under CTH 3506 can be ruled out. Further, as discussed above, CTH 3214 is more specific to the product. In matters of classification the trade parlance or understanding is a crucial factor. The product in question is understood in the trade as a sealant and not as an adhesive.
4. The authorised representative of the applicant was heard in the matter. The representative furnished a synopsis of the case and also a paper book containing relied upon materials during hearing. The applicant vide their letter dated 14.05.2018 submitted Brochure of the product, Anabond Polysulphide Sealant; Technical data sheet; and photographs of the product (in both open and closed state). The details and documents furnished were examined.
5. The product in question, ‘Anabond Tuffseald, Polysuphide Sealant’ contains two components, viz., polysulphide polymer (resin/rubber) and hardener (acts as the curing agent). Liquid polysulfide polymers form the basic ingredient of the sealant formulation and Manganese dioxide is the curing agent. Both resin and hardener are packed separately within the same container.
Properties of the uncured material are as follows:
