Synthetic diamond classification under Chapter 71 prevails over abrasive headings, bringing customs exemption into play.

Imported synthetic diamond pieces were treated as goods of Chapter 71 rather than Chapter 68 because they were diamond pieces, not dust or powder, and were not shown to be agglomerated abrasive goods. Note 1(a) to Chapter 71 covered articles wholly or partly of synthetic precious or semi-precious stones, while the abrasive exclusion in Note 2(k) did not apply. Heading 71.03 was the more specific classification for synthetic or reconstructed precious or semi-precious stones, and the record did not show any post-formation cutting or working that would displace that entry. The exemption notification for such Chapter 71 goods therefore applied, with consequential customs relief.

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Issues: (i) Whether the imported synthetic diamond pieces were classifiable under Chapter 68 or Chapter 71 of the Customs Tariff Schedule. (ii) Whether the goods fell under Heading 71.02(3) or Heading 71.03, and whether exemption Notification No. 131-Cus. dated 1.7.1977 applied.

Issue (i): Whether the imported synthetic diamond pieces were classifiable under Chapter 68 or Chapter 71 of the Customs Tariff Schedule.

Analysis: The goods were found to be diamond pieces, not dust or powder, and were not shown to be agglomerated diamond abrasives. Statutory Note 2(k) to Chapter 71, relied on by the lower authorities, excluded only abrasive goods of the specified kind, which did not cover the present goods. Note 1(a) to Chapter 71 required articles consisting wholly or partly of precious or semi-precious stones, including synthetic stones, to be classified in Chapter 71 unless a specific exception applied. Chapter 68 was therefore inapplicable.

Conclusion: The goods were not classifiable under Chapter 68 and were classifiable under Chapter 71.

Issue (ii): Whether the goods fell under Heading 71.02(3) or Heading 71.03, and whether exemption Notification No. 131-Cus. dated 1.7.1977 applied.

Analysis: The record did not establish that the goods had been cut or otherwise worked after formation. More importantly, Heading 71.03 specifically covered synthetic or reconstructed precious or semi-precious stones and was the more specific entry for the goods. Since the goods fell within Chapter 71 as synthetic industrial diamonds, the exemption notification applicable to such goods within Chapter 71 was attracted.

Conclusion: The goods were correctly classifiable under Heading 71.03, and Notification No. 131-Cus. dated 1.7.1977 applied.

Final Conclusion: The appeal succeeded, the classification adopted by the lower authorities was set aside, and the appellants received the benefit of customs exemption with consequential relief.

Ratio Decidendi: Where imported goods are synthetic diamond pieces consisting wholly of synthetic precious or semi-precious stone, Chapter 71 applies by virtue of the chapter note, and the more specific heading for synthetic stones prevails over a general or inapplicable abrasive classification.

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