2021 (10) TMI 148 - AAAR - GST

Appellate authority affirms Fly Ash Bricks classification under Tariff item 68159910 & GST rates.

The appellate authority upheld the original ruling, determining that Fly Ash Bricks are classifiable under Tariff item 68159910. The applicable GST rate ... Classification under Harmonized System of Nomenclature (HSN) - Interpretation of GST rate notifications with reference to Customs Tariff entries - Primacy of specific descriptive condition in notification entry (90% fly ash content) for exclusion - Application of General Rules for Interpretation of Customs Tariff (Rule 1 and Rule 2(a)) - Extension of limitation for filing appeals under Notification No.35/2020 and No.55/2020Extension of limitation for filing appeals under Notification No.35/2020 and No.55/2020 - Condonation of delay - Admissibility of the appeal by condoning delay in filing the appeal. - HELD THAT: - The appellant received the GAAR order on 09.07.2020 and was required to file appeal within 30 days. The appeal was filed on 31.08.2020. Notification No.35/2020 (as amended by Notification No.55/2020) extended time limits for actions falling between 20.03.2020 and 30.08.2020, permitting filing up to 31.08.2020. The appellant's filing date therefore falls within the extended period and no delay is found in filing the appeal. [Paras 11]Delay in filing the appeal is condoned and the appeal is admitted for regular hearing.Classification under Harmonized System of Nomenclature (HSN) - Interpretation of GST rate notifications with reference to Customs Tariff entries - Primacy of specific descriptive condition in notification entry (90% fly ash content) for exclusion - Application of General Rules for Interpretation of Customs Tariff (Rule 1 and Rule 2(a)) - Whether the product 'Fly Ash Bricks' manufactured and supplied by the appellant is classifiable under entry Sr.No.225B of Schedule I (and thereby taxable at 5%) or excluded therefrom and taxable under Sr.No.453 of Schedule III (at 18%). - HELD THAT: - The product is classifiable under Customs Tariff heading 6815 (specific sub heading 68159910 'Bricks and tiles of fly ash'), a fact not in dispute. The rate notifications incorporate the First Schedule to the Customs Tariff Act and the rules for its interpretation. Notification No.01/2017 initially placed Fly Ash Bricks at Sr.177 (12% up to 14.11.2017). Amendment by Notification No.41/2017 inserted an entry (Sr.225A) in Schedule I for 'Fly ash bricks or fly ash aggregate with 90 percent or more fly ash content' (5%) w.e.f.15.11.2017; subsequently re numbered as Sr.225B by Notification No.24/2018. The description in Sr.225B expressly confines the concessional entry to (a) Fly Ash Bricks with 90% or more fly ash content, (b) Fly Ash Aggregate with 90% or more fly ash content, and (c) Fly Ash Blocks. The appellant has asserted, and produced test evidence, that their Fly Ash Bricks contain only 60% fly ash. On a plain reading, the specific descriptive condition (90% or more fly ash content) operates to exclude Fly Ash Bricks containing less than 90% fly ash from Sr.225B. Rule 2(a) of the General Rules (inclusion of unfinished/incomplete articles) is inapplicable because Fly Ash Bricks are finished goods. The Court therefore applies Rule 1 principles (primacy of heading and notes and notification text) and gives effect to the specific condition in the rate notification. Consequently, Fly Ash Bricks of the appellant do not fall under Sr.225B and, being not listed in Schedules I, II, IV, V or VI after omission from Sr.177, are classifiable under Sr.453 of Schedule III w.e.f. 15.11.2017. [Paras 14, 18, 23, 25, 26]The product 'Fly Ash Bricks' of the appellant is classifiable under Tariff item 68159910; taxable at 12% up to 14.11.2017 and, being excluded from the concessional Sr.No.225B by reason of containing less than 90% fly ash, taxable under Sr.No.453 of Schedule III at 18% with effect from 15.11.2017.Final Conclusion: The appeal is dismissed. The Advance Ruling No. GUJ/GAAR/R/20/2020 dated 02.07.2020 is confirmed insofar as appealed: Fly Ash Bricks are classifiable under Tariff item 68159910, taxable at 12% up to 14.11.2017 and at 18% w.e.f. 15.11.2017, and the appellant's challenge to classification under the concessional entry Sr.No.225B is rejected. Issues Involved:1. Classification of Fly Ash Bricks under GST.2. Applicable GST rate for Fly Ash Bricks.3. Interpretation of GST Notifications and HSN Codes.4. Consideration of GST Council Recommendations.5. Delay in filing the appeal.Detailed Analysis:1. Classification of Fly Ash Bricks under GST:The primary issue was whether Fly Ash Bricks should be classified under Tariff item 68159910 or another heading. The appellant argued that their Fly Ash Bricks should fall under entry 225B of Schedule I of Notification No.1/2017-Central Tax (Rate) dated 28.06.2017, which would subject them to a 5% GST rate. The Advance Ruling Authority had classified Fly Ash Bricks under entry 453 of Schedule III, subjecting them to an 18% GST rate, due to the bricks containing less than 90% fly ash content.2. Applicable GST Rate for Fly Ash Bricks:The appellant contended that Fly Ash Bricks should be taxed at 5% under entry 225B of Schedule I, arguing that the condition of 90% or more fly ash content was erroneously applied. However, the authority maintained that since the bricks contained only 60% fly ash, they did not meet the criteria for the 5% rate under entry 225B and were correctly classified under entry 453 of Schedule III, attracting an 18% GST rate.3. Interpretation of GST Notifications and HSN Codes:The appellant cited the Supreme Court judgment in the case of Collector Of Central Excise v/s Wood Craft Products Ltd, arguing that the classification should follow the HSN codes. The authority agreed that Fly Ash Bricks fall under HSN 6815 but emphasized that the specific GST notification required 90% or more fly ash content for the lower tax rate, which the appellant's product did not meet.4. Consideration of GST Council Recommendations:The appellant referred to GST Council minutes suggesting a 5% rate for Fly Ash Bricks irrespective of fly ash content. However, the authority noted that the official notifications issued post-GST Council meetings clearly stipulated the 90% fly ash content requirement for the 5% GST rate. The authority held that the legislative intent was to apply the 5% rate only to Fly Ash Bricks with 90% or more fly ash content.5. Delay in Filing the Appeal:The appeal was filed 24 days after the due date. The appellant cited hospitalization of their advocate due to pneumonia and subsequent quarantine as reasons for the delay. The authority considered the notifications extending the filing deadlines due to COVID-19 and found the appeal to be filed within the extended time limit.Conclusion:The appellate authority upheld the original ruling, confirming that:1. Fly Ash Bricks manufactured and supplied by the appellant are classifiable under Tariff item 68159910.2. The applicable GST rate is 12% up to 14.11.2017 and 18% from 15.11.2017 onwards, as per Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 (as amended from time to time).3. The appeal was rejected, and the classification and tax rate determined by the Advance Ruling Authority were affirmed.