In re Maheshwari Stone Supplying Co. (GST AAAR Telangana)
Issue- Polished / Processed limestone slabs are correctly classifiable under heading 6802 of the GST Tariff?
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;
Also Read AAR Ruling- GST AAR on classification of Polished/Processed limestone slabs
FULL TEXT OF ORDER OF APPELLATE AUTHORITY OF ADVANCE RULING TELANGANA
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 jurisdictional officer or the applicant within a period of six months from the date of the order. Provided that no rectification which has the effect of enhancing the tax liability or reducing the amount of admissible input tax credit shall be made, unless the applicant or the appellant has been given an opportunity of being heard.
2. Under Section 103 (1) of the Act, this advance ruling pronounced by the Appellate Authority under Chapter XVII of the Act shall be binding only
(a) On the applicant who had sought it in respect of any matter referred to in sub-Section (2) of Section 97 for advance ruling;
(b) On the concerned officer or the jurisdictional officer in respect of the applicant.
3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed.
4. Under Section 104 (1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-Section (1) of 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, 2017 (hereinafter referred to as “TGST Act, 2017” or “the Act”, in short) by M/s. Maheshwari Stone Supplying Company, Tandoor, Vikarabad District having GSTIN 36ABNPS1863MIZX (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 application was disposed by the Authority vide TSAAR Order No.2/2018 dated 25.03.2018 by pronouncing the Advance Ruling as follows :
“Polished / Processed limestone slabs are correctly classifiable under heading 6802 of the GST Tariff’.
It is against the aforesaid ruling that the present appeal has been filed.
I. Whether appeal filed in time:
2. In terms of Section 100 (2) of the Act, an appeal against Advance Ruling has to be filed within thirty (30) days from the date of communication thereof to the applicant. As seen from record, a soft copy of the Advance ruling (Word document) was mailed to the appellant on 3-4-2018. However, hard copy i.e, signed copy of the impugned Order dated 25.03.2018 was despatched by post on 10-4-2018; and received by the appellant on 17-4-2018, as mentioned in the appeal. Appellant filed the present appeal on 07-05-2018. Accordingly, considering the date of receipt of the signed copy of the 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(B)1: Description in brief: We are a SST 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 process completed on a stone SLAB, the morphology doesn’t change. The stone slab still remains a stone slab only, and no changes occur either in shape or in characteristic or in distinction. In essence both raw material and finished goods contain uniform Physical properties & chemical composition. After processing also our commodity still called STONE in general trade parlance. In other words, a “mineral” after processing remains a “mineral product” or “mineral substance” only and nothing more than that”.
14.2 Questions on which advance ruling is required:
A) In which Chapter the commodity called “Polished/Processed limestone slabs” falls ?
B) Under which HSN Code the above commodity comes ?
C) Can we put them under “Mineral substances not elsewhere specified or included” which is mentioned under HSN Code 2530 ? Or
D) Can we retain them under any of the HSN Codes 2515/2516/2521 ? Or
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% ?
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 itself. Therefore in the light of this statement, we are of the opinion that our commodity called “Polished limestone slabs” comes under any of the HSN Codes of 2515/2516/2521/2530 etc. Or more probably as stated in Chapter 25 of GST column of 5% as “Goods not mentioned elsewhere” in the ‘GST goods rate list of dated 18/05/2017’. The primary commodities such as STONE in our case, which is one of the title of Chapter 25 can be taken to another related Chapter, only when there is a huge difference in extent of finishing of such commodities. But in our case only POLISH is the finish which is added. When Marble/Granite blocks after undergoing a large amount of finishing processes (which are again each one is highly expensive in nature), have not been taken out of Chapter 25, then how our Polish stone slab will be taken out which is just like a peanut in the finish?
416.Statement containing the applicant’s interpretation of law, facts and relevant submissions:
While SAWN & CUT processes 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 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 our 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.
It is noteworthy to mention here that, 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 meeting held on 10/11/2017. The rate of GST on these stones have been reduced from 28 to 18 classifying under the same chapter of 25. It does mean that without mentioning of word POLISH or any other process for Marble/Granite under description column, they have been retained in Chapter 25 only and further bear a meaning of such as Polished, Cut etc. Likewise we are also expecting the same treatment for our processed limestone SLABs. In fact SAWN & CUT are also the processes 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 a larger bench now. And our commodity in its raw form suffers additional juicy fiscal burden in the form of ROYALTY at the hands of Mining authorities of State Govt. The point we want to clarify and prove before this authority is that the process of expensive and luxurious category Marble/Granite is very complex in comparison to our 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.
Therefore looking from any angle it is appropriate that our commodity called “Polished/Processed limestone slabs” should not be taken out from chapter 25. Therefore in light of our submissions we request the advance ruling authority to declare that POLISHED or PROCESSED LIMESTONE SLABS comes under any of the HSN Codes of Chapter 25.
If an opportunity be given, we will come personally and demonstrate to prove the substance in our discussions before 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 05-01-2018, 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.$) 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-Al 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 aspect, though more than 95% of industries in India are of small scale in nature. (See ANNEXURE-A2). But in our case of Tandur region almost 100% stone processing industries fall in SSI Category only. Even if they do fall in Medium scale category i.e. above TO of Rs. 1.5 Cr, then also Polishing the surface of a rough slab cannot be equated to manufacturing. If no manufacturing taken place in a factory means it is against the very spirit of EXCISE DUTY. Hence no ED can be levied on such products. If no ED levied and VAT was only 5% means definitely Polish stone slabs must also be charged 5% under GST also.
3. Classification of goods depends on the extent to which they have been finished. When Granite/Marble which require many an expensive chain of finishing/processing activities on them have not been taken out of Chapter 25. (See Notification no. 41 of date 14/11/2017 after Guwahati GST Council meeting where they have been reduced from 28 to 18%). But in our case of Tandur stone slabs, 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 25’s (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 set”. But we prepare no such articles of stone in our small industry.
6. Note 6 of Chapter 25 clearly mentioning that converting of Stone BLOCK into SLABS or TILES amounts to manufacture. But we bring rough slabs only (and not blocks) from quarry to Polish it’s surface and certainly this activity doesn’t change either its shape or character or distinction. In this way also it is quite evident that the polish stone slabs cannot be taken out of Chapter 25. (See ANNEXURE-A3)
7. Note 1 of Chapter 25 also allows other mechanical or physical processes on minerals without changing the structure of the product. It is very clear that “Polish” done on a stone slab is a process comes under mechanical or physical process by using simple machine and the shape and structure of stone slab still remaining stone slab only and not changed. (See ANNEXURE-A3).
8. Note 2(e) of Chapter 25 is also mentioning that “Chapter 25 does not cover mosaic cubes or the like of heading 6802”, it does clearly mean that 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 person by the Advance Ruling Authority (TSAAR) on 27-1-2018, wherein he put forth the following written submissions:
“….Now coming to the very important point is that Notification no. 41/2017 dated 14/11/2017 (central tax) while reducing the GST on Marble & Granite, it clearly mentioned on page no. 11 of the said notification that “Marble and travertine, other than blocks” as HSN Code 25151220/90 and “Granite other than blocks” as 25161200. It does clearly mean that they are SLABS/TILES and they were reduced from GST 28% to 18%. Now when 18% is the highest tax bracket for Marble/Granite other than blocks, it does further clearly mean that without mentioning the Processes such as Polish, sizing etc. they were also allowed in HSN Code (i.e. Chapter) 25 only. We want the same treatment with our “Polish stone slabs” also that they should not be taken out of. Chapter 25 or in other words their HSN Code must be 25 only. That’s all. For your ready reference page no. 9 to 11 of said notifications 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 I 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 hardcore minerals which are expenditure wise also much costlier than POLISH done on surface of a rough slab by using a simple polish machine”.
III. Advance Ruling Order:
4. After examining the issues, the Authority (TSAAR) passed the impugned order, wherein (after briefly summarising facts, application-contents etc.), the submissions made by the applicant during personal hearing and the Authority’s discussion/findings are recorded as follows:
“………..
