The case of State of Gujarat v. Titan Industries Ltd [2017 (2) TMI 521 - GUJARAT HIGH COURT] was regarding the classification of the “Nebula” watch – a watch made of 18 karat gold along with silver or other precious metals in which the value of the precious metals remains 90 to 95%. The watches were sold by and large at jewellery shops and were not sold in normal ordinary watch shops. Thus, the jewellery watches were normally marketed by the jeweller in their showrooms. It was put on record that these watches were manually polished and individually inspected, cleaned and then assembled. That the value of watch used was not more than 2 to 5%.
It was held that mainly because the Nebula watch which carried the mechanism of a watch, it would still not lose the characteristic of jewellery.
It was held that the words “article or jewellery” used in Entry No. 13(ii) of Second Schedule of the VAT Act were required to be given the widest possible meaning and not required to be read in a narrow or restricted sense. Thus, it was held, that this product would fall under Entry 13(ii) of the 2nd schedule, and not the residuary entry 87 of the 2nd schedule of the Gujarat VAT Act.
It would be interesting to note that the dictionary meaning of term “jewel / jewellery” was taken from the Law Lexicon dictionary, which stressed upon the feature of “personal adornment”.
Distinguishing factors for the non-applicability of the judgment –
That there was no relevant, specific entry for watches and clocks in Schedule 2 of the Gujarat VAT Act, as are there in the GST Tariff.
That even in the dictionary meaning of the term “jewel / jewellery” – the feature of personal adornment was stressed upon. That since wall clocks are not for wearing on the person but for hanging on the wall – this judgment cannot be made applicable.
In Titan Industries Ltd. (Jewellery Division) v. Commissioner of Central Excise, Chennai – III 2017 (8) TMI 1211 - CESTAT CHENNAI) it was held that a miniature toy car made out of FRP (Fibreglass Reinforced Plastics) mould coated with gold constituent of 200g and FRP mould weighing 300g was an article of gold classifiable under Chapter 71 of Central Excise Tariff Act. On the behalf of the assesse, it was submitted that the subject item, namely miniature cars would be rightly classifiable as “articles of gold” under Chapter 71 of CETA 1985 and these were exempted from payment of duty as per Sl. No. 171 of the Table to the Notification No. 6/2002 dt. 1.3.2002 by virtue of definition of “article of gold” as appearing in the Explanation under Sl. No. 171 of the said Notification.
The respondent intended to classify the same in Chapter Heading 95.03 which dealt with “other toys: reduced size (scale) models and similar recreational models, working or not; puzzles of all kinds”. Moreover, it was contended by the respondent that gold only constituted a minor element by mass.
But it was held that since the majority cost was of because of the gold being used in the miniature car, and since the item was “…anything (other than ornaments), in a finished form, made of, or manufactured from or containing, gold…”; the same was classifiable under Heading No. 71.01.
Distinguishing the decision: This decision, rendered just before the start of the GST Regime, although prima-facie appears to be in favour of the principle that taxability is to be determined on basis of component which forms the majority cost, loses sight of the fact that there was no exclusionary clause in Chapter 71 relating to toys and other such articles. That in the incumbent GST Regime, Chapter 71 expressly excludes watches and clocks vide Note 3(l) of the Chapter.
Although these cases are inapplicable because of the exclusionary clause of Chapter 71 which removes watches and clocks from the purview of the chapter, it cannot be said for other products or silver articles WHICH DO NOT HAVE A SEPARATE EXCLUSIONARY clause.
Thus the question is - are there any other JUDICIAL PRECEDENTS such as these which basically state that silver articles, in which the major part of value is of silver and are also sold at jewelry shops can avail the beneficial rate of 3% ?