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Issues: (i) whether rough diamonds bearing Galaxy and DiaExpert surface markings are classifiable as unworked rough diamonds or as worked and engraved diamonds under the Customs Tariff Act, 1975; and (ii) whether such goods are entitled to exemption under Sr. No. 345 of Notification No. 50/2017-Cus dated 30.06.2017.
Issue (i): whether rough diamonds bearing Galaxy and DiaExpert surface markings are classifiable as unworked rough diamonds or as worked and engraved diamonds under the Customs Tariff Act, 1975.
Analysis: The tariff entry for diamonds whether or not worked was read with the HSN explanatory notes, which distinguish diamonds in their natural state from diamonds that have been sawn, cleaved, bruted, polished, drilled or engraved. The Authority found that the proposed scanning, planning and laser marking process does more than merely identify the stone: it places lines, dots and numbers on the surface for manufacturing use, alters the stone's commercial character, and amounts to working/engraving rather than leaving the goods in their natural state.
Conclusion: The goods were held classifiable as worked diamonds under the relevant tariff entry for diamonds other than rough diamonds, and not as diamonds in their natural state.
Issue (ii): whether such goods are entitled to exemption under Sr. No. 345 of Notification No. 50/2017-Cus dated 30.06.2017.
Analysis: The exemption at Sr. No. 345 applies to rough diamonds, while the later notification entries for simply sawn diamonds and semi-processed diamonds show that processed forms are excluded from that entry. Since the subject goods were held to have undergone scanning and laser marking that removed them from the category of rough diamonds, the exemption benefit could not be extended.
Conclusion: The exemption under Sr. No. 345 was held to be unavailable to the subject goods.
Final Conclusion: The ruling determines that Galaxy-marked rough diamonds are not to be treated as exempt rough diamonds and are to be assessed as processed diamonds under the tariff classification found applicable by the Authority.
Ratio Decidendi: Where rough diamonds undergo laser-based planning and surface marking that gives them a distinct commercial identity and amounts to working or engraving, they cease to remain in their natural state for tariff classification and cannot claim an exemption meant only for rough diamonds.
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