TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 1398
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.... considering the provisions of Rule 3(b) of the General Rules for Interpretation. 2. Applicant's Submissions: 2.1 The applicant, Carborundum Universal Limited (CUMI), a company duly incorporated under the Companies Act, 2013, with its registered office located at 43, Parry House, Chennai, submitted that it operates one of its key manufacturing units at Plot No. 18, Cochin Special Economic Zone (CSEZ), Kakkanad, Ernakulam, Kerala. The company is engaged in the manufacture, procurement, and sale of a wide portfolio of products, including abrasives, refractory materials, ceramics, and fused and sintered materials, with operations both in India and abroad. Under its Electro Minerals Division, CUMI manufactures and sells aluminium oxide, silicon carbide, zirconium oxide grains, and high-purity fine powders such as graphite, graphene, and silicon carbide, which find applications across various sectors including abrasives, refractories, metal matrix composites, automotive components, and other advanced materials. 2.2 It was further submitted that CUMI has made a significant long-term strategic investment in establishing a dedicated 12,000 sq. ft. graphene manufacturing facili....
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....eristics without modifying their chemical identity. 2.5 It was further clarified that the graphene-based products are cleared either in pure form or in the form of masterbatches, dispersions, composites, or solutions, depending on customer requirements. The graphene concentration in these composite products typically ranges from 0.02% to 40%, and the final formulations are often diluted by customers by a factor of 20 to 50 during actual usage, resulting in graphene concentrations in the final product as low as 0.02% to 0.5%. Despite this low concentration, the graphene imparts substantial improvement to the end-use properties of the products. 2.6 To illustrate the value and effect of graphene addition, the applicant submitted an example related to rubber manufacturing. In this case, 1 kg of rubber (costing approximately Rs.250/kg) is mixed with 200 grams of graphene (costing around Rs.25,000/kg) to produce a masterbatch priced at Rs.5,250/kg. This masterbatch, when diluted 20 times at the customer's end, results in a graphene-impregnated rubber product with a cost of Rs.462.5/kg (Rs.262.5 for the diluted masterbatch + Rs.200 for the rubber), but with significantly enhance....
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....t approved under the Letter of Approval (LOA) issued by the Development Commissioner, CSEZ, which covers manufacture and supply of graphene powders, dispersions, composites, and mixtures under the appropriate HSN codes. 2.12 In view of the differing interpretations by the jurisdictional customs authorities and the potential classification implications under Rule 3(b) of the GIR, the applicant has sought an advance ruling under Section 28H of the Customs Act, 1962. The specific query is whether graphene, when cleared as a composite material impregnated into a carrier medium such as a masterbatch or solvent is correctly classifiable under HSN 38019000 or otherwise, considering the provisions of Rule 3(b) of the General Rules for Interpretation. 3. Comments by the Jurisdictional Commissionerate 3.1 The jurisdictional Commissionerate, in response to the reference from the Customs Authority for Advance Rulings, conveyed that M/s. Carborundum Universal Limited, a unit in Cochin Special Economic Zone, Kakkanad, Cochin, imports Graphite under CTH 25041090 and exports Graphene in powder form under CTH 38019000. Additionally, the unit undertakes DTA sales of Graphene in various form....
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....f Hearing A hearing was conducted on 23.06.2025 and 07.07.2025 at 11.30 AM. Shri Vinod Kumar CN and Dr. Japen, the authorized representatives from the applicant's side appeared online for Personal hearing. They submitted that they are importing natural graphite and manufacturing Graphene from it. The final product Graphene is used in increasing the strength of the materials, making composite materials, paint, abrasive varnish, battery, rubber, plastic and so on. That graphene is in powdery form and in some cases it is either impregnated into the product in the master batch or dissolved in a solution. When it is dissolved in the solution, content of graphene may vary about 0.02% to 0.5%. That even when a smaller quantity of graphene may cost significantly in comparision of final finished products; to say one rubber sheet of 1 kg contains 200 gms of graphene but price of rubber sheet may cost Rs. 250/- per Kg whereas the graphene value may go about Rs. 25,000/- per kg. It was specifically asked to provide the details of the ingredients in the final products both in the terms of value and weight regarding all the 37 products, they sought one week time, which was granted. Nob....
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....ka) is converted into few-layer graphene. This material exhibits superior thermal, electrical, barrier, antibacterial, and mechanical reinforcement properties. Due to its nano-scale dimensions, low bulk density, and ultra-light weight, graphene in pure form is generally unsuitable for direct use by downstream industries. Accordingly, the applicant disperses it into appropriate carriers to enable safe handling, dosing, and application by its customers. Depending on customer specifications, the graphene content in the final product may vary from 0.02% to 40%. The selection of carrier and the concentration of graphene are tailored to suit the intended industrial application. the carrier material constitutes a greater proportion by volume or weight, its role is limited to serving as a medium for the safe handling and effective application of graphene. Although the incorporation of graphene imparts significant functional attributes-such as enhanced mechanical strength, increased electrical conductivity, and superior barrier properties-its presence does not alter the essential character of the final product. The graphene remains in its original chemical form within the composite and does....
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....ity of the carrier material. The graphene remains chemically intact and does not alter the essential structure or purpose of the matrix into which it is incorporated. 5.5 Rule 3(b) of the General Rules for Interpretation of the First Schedule to the Customs Tariff Act, 1975, which governs the classification of composite goods states that: "Composite goods consisting of different materials or made up of different components ... shall be classified as if they consisted of the material or component which gives them their essential character." The term "essential character," though not statutorily defined, has been elaborated in the Harmonized System Explanatory Notes to Rule 3(b), which guide that determination may depend on the nature of the material or component, its bulk, quantity, weight, value, or the role played in relation to the use of the goods. 5.6 In the present case, the carrier medium not only dominates quantitatively but also confers the functional utility, commercial identity, and end-use applicability of the product. The graphene acts as a property enhancer but not as the defining or governing component of the preparation. 5.7 This interpretation f....
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..... Given the diversity of formulations and carriers involved, classification must be decided on a case-by-case basis at the time of clearance, keeping in mind the physical characteristics, commercial identity, and functional end-use. 5.10 In view of the legal provisions, Harmonized System Explanatory Notes, and consistent judicial pronouncements, it is clear that graphene-based composite products-where graphene is dispersed in a dominant carrier medium without chemically transforming it-must be classified based on the essential character derived from the carrier matrix and not under headings applicable to graphene or graphite in raw or pure form. 5.11 In light of the detailed analysis above, I find that the presence of graphene in a carrier medium does not transform the essential character of the base material but serves solely to enhance its inherent functional properties. Accordingly, the classification of such composite products must be governed by the component that imparts the essential character to the final product, in line with Rule 3(b) of the General Rules for the Interpretation of the Customs Tariff. The graphene content, though functionally significant, does not ov....