Customs classification of stone preforms turns on actual stage of processing, with unfinished goods treated as rough stones for nil duty.

Imported preforms of precious and semi-precious stones were treated as rough semi-precious stones for customs classification because they remained unfinished and required further processing before use as jewellery stones. Under Notification No. 12/2012-Cus, the pre-01.03.2013 tariff structure distinguished rough semi-precious stones attracting nil duty from cut and polished stones attracting 2% duty. The later insertion of a separate entry for preforms confirmed that such goods were not already covered by the cut and polished category. The goods therefore qualified for nil duty under the rough stones entry, and the duty demand was unsustainable.

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Issues: Whether preforms of precious and semi-precious stones imported prior to 01.03.2013 were classifiable for the benefit of Notification No. 12/2012-Cus dated 17.03.2012 under the entry for rough semi-precious stones attracting nil rate of duty, or under the entry for cut and polished stones attracting 2% duty.

Analysis: The imported goods were not cut and polished stones, because further working was still required before they could be used as jewellery stones. For the period before insertion of Sl. No. 312A on 01.03.2013, the notification contained only the entries for rough semi-precious stones at nil duty and cut and polished stones at 2%. Since preforms were still in an unfinished stage and required further processing, they were covered by the expression rough semi-precious stones rather than cut and polished stones. The later insertion of a separate entry for preforms confirmed that the goods were not already covered by the cut and polished category.

Conclusion: The imported preforms were eligible for nil rate of duty under the entry for rough semi-precious stones for the period prior to 01.03.2013, and the demand was unsustainable.

Ratio Decidendi: Where a notification grants nil duty to rough stones and concessional duty to cut and polished stones, goods that are still in an unfinished and further workable stage are to be classified according to their actual stage of processing, and not treated as cut and polished goods merely because they have been partially shaped.

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