2022 (2) TMI 992 - AAR - GST

Glass-fibre reinforced gypsum board using mined gypsum cannot be classified as GRG board under Serial No. 92

In Re: M/s. USG Boral Building Products (India) Private Limited,

AAR Rajasthan ruled that the applicant's proposed glass-fibre reinforced gypsum board cannot be classified as GRG board under Serial No. 92 of Schedule II ... Classification of goods - Glass- fibre Reinforced Gypsum Board which the Applicant is contemplating to manufacture would qualify as GRG board or not - new variant of gypsum board - Entry No. 92 of Schedule II of the Notification No. 1/2017-Central Tax (Rate) dated 28 June 2017 - manufacture as per BIS standard IS-2095 is necessary' for all GRG board to be covered under the entry Serial No. 92 of Schedule II of Notification No. 1/ 2017- Central Tax (Rate) dated 28 June 2011 or not? HELD THAT:- Serial No. 92 of Schedule II of Notification No. 1/ 2017- Central Tax (Rate) dated 28 June 2017 provides specific rates for GRG board - an explanation (iii) to the said notification provides that 'Tariff item', 'sub-heading', 'heading' and 'Chapter' shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). Whether the supply to be made by the appellant would be covered under the term 'Glass fiber Reinforced Gypsum Board (GRG)' or otherwise? - HELD THAT:- The main raw material of Gypsum Plaster board is 'Gypsum' (more than 90%), which is mainly procured from mines and other raw material is paper and additives, whereas, the Glass Fibre Reinforced Gypsum Board is made-up of Phosphogypsum (more than 90%), which is a by product of phosphoric acid plant. Other raw material i.e. Glass fibre and additives is also used in the manufacturing of GRG Board - the raw materials which is used in gypsum board and GRG board are different. The applicant submitted that the proposed new variant of Gypsum Board is made-up of Gypsum, glass fibre and additives, the main raw material is Gypsum which is procured from the mines, whereas, GRG board is made up of Phosphogypsum, which is a by product of phosphoric acid plant therefore, the proposed new variant of Gypsum board to be manufactured by the applicant cannot be called as 'Glass-fibre Reinforced Gypsum Board (GRG)' and cannot be classified in Serial No. 92 of Schedule II of Notification No. 1/2017- Central Tax (Rate) dated 28 June 2017 which provides specific rates for GRG board. Since, the intended product cannot be treated as GRG Board, the second question raised in respect of 'BIS Standard IS 2095' is not relevant and not required answer. Thus, the new variant of gypsum board intended to be manufactured by the Applicant as per the specifications mentioned in Exhibit-2 could not be classified as Glass-fibre Reinforced Gypsum Board (GRG Board) and charged to GST at the rate of 12%. ISSUES PRESENTED AND CONSIDERED 1. Whether the proposed new variant of gypsum board, composed predominantly of gypsum plaster reinforced with glass fibre as per specified dimensions and composition, falls within the description 'Glass-fibre Reinforced Gypsum Board (GRG)' for the purpose of Entry No. 92, Schedule II of the GST rate Notification and thereby attracts GST at 12%. 2. Whether manufacture and conformity to Bureau of Indian Standards IS-2095 (Part-3) is a prerequisite for a product to be regarded as GRG board under Entry No. 92 of Schedule II of the GST rate Notification. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Classification of the proposed gypsum board as GRG Board (12% rate) versus classification under Chapter 68 (6809) (18% rate) Legal framework: The relevant GST rate Notification sets out (a) general classification for 'Articles of plaster or of compositions based on plaster; Boards, sheets, panels, tiles and similar articles' under Chapter/Heading 6809 attracting 18%, and (b) a separate entry (Entry No. 92, Schedule II) listing specific products including 'Glass-fibre Reinforced Gypsum Board (GRG)' attracting 12%. The Notification incorporates, by explanation, the First Schedule to the Customs Tariff Act, 1975 and the rules of interpretation, Section and Chapter Notes, and General Explanatory Notes insofar as applicable. Precedent treatment: The applicant relied on tribunal decisions holding that conformity to BIS standards cannot be read into a rate notification unless explicitly required by the notification. Those authorities treat interpretation principles (literal meaning/common parlance) favoring a non-technical reading where no express technical precondition is prescribed. Interpretation and reasoning: The Authority examined (a) composition and manufacturing differences between conventional gypsum plaster board and GRG boards, (b) the technical manufacturing process of GRG boards (use of phosphogypsum - a by-product of phosphoric acid plants - embedding of glass roving, specific calcination and drying processes), and (c) the applicant's submitted specifications for the contemplated product (predominantly gypsum from mines with glass fibre reinforcement and specified mass/density/thickness dimensions). The Authority emphasised that classification under tariff headings depends on the actual character and composition of the goods and that the entries distinguish boards reinforced with paper/paperboard (6809 11 00) from 'other' boards (6809 19 00). Entry No. 92 is a separate concessional list for specified particle/fibre boards including GRG. The Authority found material and manufacturing distinctions: GRG as commonly understood and as produced per BMTPC description uses phosphogypsum (not mined gypsum) and a specific casting/roving/drying manufacturing route. The proposed product's main raw material is mined gypsum, not phosphogypsum, and its manufacturing inputs/process differ from the GRG process described in authoritative technical material. On that factual basis the product did not correspond to the GRG product identified in practice and in trade. Ratio versus obiter: The holding that classification turns on the actual composition and manufacturing character of the goods (and that the applicant's specified product is not GRG because it uses mined gypsum rather than phosphogypsum and lacks the GRG manufacturing characteristics) is ratio decidendi. Observations about the applicability of tariff headings, and the role of First Schedule interpretative rules, are supporting ratio. Discussion of common parlance/literal interpretation relied on by applicant and precedent distinctions are treated as contextual analysis rather than central to the factual finding. Conclusion: The Authority concluded that the proposed new variant of gypsum board cannot be classified as 'Glass-fibre Reinforced Gypsum Board (GRG)' under Entry No. 92, Schedule II and therefore does not attract the concessional 12% rate; it is covered by the broader Chapter 68 description and liable at the higher rate (18%) applicable to articles of plaster/gypsum boards. Issue 2 - Whether conformity to BIS IS-2095 (Part-3) is necessary to qualify as GRG Board under Entry No. 92 Legal framework: The GST rate Notification does not expressly reference IS-2095 or require conformance to any BIS standard for inclusion within Entry No. 92. The Notification incorporates interpretative aids from the Customs Tariff First Schedule but imposes no explicit product standard condition. Precedent treatment: The applicant cited CESTAT authorities holding that, in the absence of an express requirement in the notification, conformity to a BIS standard cannot be read into the rate condition. Those precedents endorse literal construction and the principle that statutory or notification conditions should not be expanded by reference to external technical standards unless the instrument itself makes that linkage. Interpretation and reasoning: The Authority observed that the question of mandatory conformity to IS-2095 becomes relevant only if the product otherwise qualifies, by character and composition, as GRG under the Notification. Given the Authority's primary factual and classificatory conclusion that the applicant's proposed product is not GRG (Issue 1), the question whether IS-2095 compliance is a prerequisite for classification under Entry No. 92 is rendered academic in the present case. The Authority therefore declined to decide the necessity of IS-2095 conformity in the abstract for Entry No. 92, noting prior tribunal authority but not pronouncing a binding determination on that separate legal question. Ratio versus obiter: The Authority's decision to not answer the IS-2095 necessity question in view of the negative finding on classification is an operative conclusion limited to the facts of the matter (practical non-answer). Any commentary on precedent regarding IS-2095 is obiter in relation to the principal ruling that the product is not GRG. Conclusion: The Authority did not rule that IS-2095 conformity is required or not required generally; it held the question to be irrelevant to the applicant's case because the product as specified does not qualify as GRG. Consequently, no positive ruling was given on mandatory BIS conformity for Entry No. 92 applicability. Cross-references 1. Issue 2 is expressly dependent on the outcome of Issue 1: because the product was found not to be GRG, the Authority did not adjudicate the IS-2095 conformity question (see Issue 1 conclusion). 2. Interpretation principles invoked by the applicant (literal interpretation and common parlance) were considered but found insufficient to overcome the factual and manufacturing distinctions established for GRG versus the proposed product; those interpretive principles did not alter the factual classification outcome.