Goods & Service Tax (GST) is introduced from 01st July, 2017. WCO guidelines on classification of goods was accepted by India and is being followed even under GST. But for classification of services, CBIC has devised Service Accounting Codes (SAC). Based on the HSN and SAC, the tariff rates and notifications are issued from time to time. E-way bill provisions were detailed under Rule 138 of CGST Rules, 2017 and these were implemented in each state on different dates.
Now the issue is that Spent Catalyst of precious metals sent on job work for recovery of precious metals is being seized by the enforcement authorities on the ground that the goods are wrongly classified under Ch 71, as they need to be classified under Ch 3815 and e-way needs to be generated and are also proposing penalties under Sec 129 of CGST Act, 2017. This is a serious issue requiring immediate attention for clarity as the amounts involved are huge and the time delays due to the mis-understanding is upsetting the production time lines for many in the chemical industry.
Let us try to understand the legal provisions in order to understand the issue better
A catalyst is a substance, which is able to increase the rate of a chemical reaction without itself being consumed or changed by the reacting chemicals. Hence the catalyst remains the same when it becomes spent catalyst. It is to be understood that spent catalyst is a catalytic material that has lost its effectiveness due to prolonged usage in the chemical process. There is no manufacture involved in the process of catalyst becoming spent catalyst, as is being consistently held in several decisions by the Apex Court under the erstwhile Central Excise laws.
Commissioner Of Central Excise, Chandigarh vs M/S. Markfed Vanaspati And Allied Industries on 9 April, 2003 AIR 2003 SC 3534 CCE Vs Indian Aluminium Co. Ltd 2006 (203) ELT 3 SC Central Board of Indirect Taxes & Customs (CBIC) while specifying the rates of duties for various products, issues Tariff notifications from time to time. While specifying the rates of duties under Customs post introduction of GST, Notification No.50/2017-Cus dt.30.06.2017 was issued, which was amended vide Notification No.01/2020-Cus dt.02.02.2020 wherein Serian No.364A was introduced specifically for “Spent Catalyst” under HSN 7112. There are other notifications for exempting the SWS and levying AIDC under Customs, wherein the Spent Catalyst of precious metals was classified under HSN 7112 only.
Section VI Chapter 38 in the Customs Tariff Act, 1975 covers Miscellaneous Chemical Products. The Chapter Notes 1 specifies the products which are not covered under the Chapter 38, wherein entry (f) states as under:
spent catalysts of a kind used for the extraction of base metals or for the manufacture of chemical compounds of base metals (heading 2620), spent catalysts of a kind used principally for the recovery of precious metal (heading 7112) or catalysts consisting of metals or metal alloys in the form of, for example, finely divided powder or woven gauze (Section XIV or XV). (Emphasis supplied).
Section XIV Chapter 71 covers Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal, and articles thereof; imitation jewellery; coin
The Chapter Notes 4 specifies as under:
(A) The expression ―precious metal means silver, gold and platinum.
(B) The expression ―platinum means platinum, iridium, osmium, palladium, rhodium and ruthenium.
Supply of goods for undertaking job work is exempt from the levy of GST, as Sec 143 (1) of CGST Act, 2017 specifies that A registered person (hereinafter referred to in this section as the “principal”) may, under intimation and subject to such conditions as may be prescribed, send any inputs and/or capital goods, without payment of tax, to a job worker for job-work and from there subsequently send to another job worker and likewise.
Rule 138 (14) of the Central Goods and Services Tax (CGST) Rules, 2017, read with its Annexure S. Nos. 4 and 5, states that goods covered under Chapter 71 viz., Natural or cultured pearls and precious or semi-precious stones; precious metals and metals clad with precious metal, Jewellery, goldsmiths’, and silversmiths’ articles, except those classified under HSN 7117 (Imitation Jewellery), are exempt from the mandatory requirement of generating an E-Way Bill. Vide Advisory On E-Way Bill Generation For Goods Under Chapter 71 dated Feb 6th, 2025 GSTN has withdrawn the facility to generate e-way bill on voluntary basis also for the goods covered under Ch 71 (except HSN 7117) including gold, exception being Kerala which mandates e-way bill generation vide Notification No.10/24-State Tax dated 27/12/24. Hence e-way cannot be generated for spent catalyst classifiable under Ch.71.
SECTION 129. Detention, seizure and release of goods and conveyances in transit. — (1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released, ––
[(a) on payment of penalty equal to two hundred per cent of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such penalty]
(b) on payment of penalty equal to fifty per cent of the value of the goods or two hundred per cent of the tax payable on such goods, whichever is higher, and in case of exempted goods, on payment of an amount equal to five per cent of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such penalty;] (c) upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed :
Provided that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.
Under these circumstances, the enforcement authorities are taking advantage of the situation by seizing the spent catalyst being transshipped under job work challan for recovery of precious metals, alleging wrong classification as well as non-generation of e-way bill. When the transaction under GST being job work and accordingly when no duty is leviable, they are proposing 200% of the tax as if the transaction is of sale. In addition, when a specific classification is readily available under HSN they want to resort to a different classification for insisting on generation of e-way bill under Ch.38. These enforcement measures are causing hardship to the industry causing production delays and costs towards litigation. Hence a clear direction needs to be issued by the higher authorities or else unnecessary litigation continues under good and simplified tax regime.
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