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GST - 'SIKA Block Joining Mortar' is non-refractory and is not used for preparation of surfaces - correctly classifiable under CTH 3824 - AAR order modified - West Bengal AAAR

Published: Aug 06, 2018

By TIOL News Service

KOLKATA, AUG 06, 2018: THE appellant is manufacturer or 'SIKA Block Joining Mortar' alleged to be used for joining masonry units like AAC blocks, Concrete blocks, fly ash bricks etc. They had approached the Advance Ruling Authority for determining the proper classification of the impugned product.

The AAR had held that the product is classifiable under TI 3214 90 90 of the CTA, 1975 and taxable under Serial no. 24 of Schedule IV of notification 01/2017-CT(R) @14%. Kindly see 2018-TIOL-27-AAR-GS.

The appellant is before the Appellate Authority and submits that -

+ Applicant had approached the AAR for classification of the impugned goods under Tariff Heading 3824 50 90 instead of heading 3214 90 10 whereas the AAR had travelled beyond its jurisdiction by classifying under 3214 90 90;

+ The ruling does not specify the basis for classifying the product under the said heading;

+ Their competitors are marketing similar products under Tariff Heading 3824 50 90 and same product cannot be held chargeable under two different rates of tax.

They also rely on a plethora of cases in support.

Incidentally, the appellant had been voluntarily classifying the goods under the earlier taxation regime under 3214 9010 and now insist that the heading 3824 50 90 is the correct classification.

The appellant submits that under the earlier tax regime, classification under either of the headings 3214 90 10 or 3824 50 90 made no difference as the duty/tax payable under both heads was the same. However, under the GST regime, there is a difference of 10% which is pushing them out of the market as competitors are supplying similar products by charging lower tax. That is, Tariff Heading 3824 50 90 attracts GST @18% whereas TH 3214 90 10 attracts GST @28%. It is further submitted that 'SIKA Block Joining Material' has no refractory property and it is not used to withstand extreme heat or high temperatures; that it is not used for surfacing preparations for facades, indoor walls, floors, ceilings, etc. and is used only for joining masonry units like AAC blocks, Concrete blocks, fly ash bricks etc. and hence rightly classifiable under CTH 3824 50 90.

The Appellate authority considered the submissions and observed -

+ …it is clear that the 'SIKA Block Joining Mortar' is non-refractory and that it is not used for preparation of surfaces. Considering the nature, use and commercial identity of the item in question and notwithstanding the Appellant's earlier voluntary declaration about the classification of the item, we are not inclined to accept its classification under Tariff Item 3214. Instead, it is to be classified under TI 3824.

Accordingly, the ruling of the Authority was modified - 'SIKA Block Joining Mortar' is classifiable under Tariff Item 3824 as notified taxable under Sr. no. 97 of Schedule III vide notfn. 01/2017-CT(R) @9% and corresponding equivalent SGST.

In parting:

Interestingly, by notification 18/2018-CT(R) dated 26.07.2018 [w.e.f 27.07.2018], the Sr.no. 24 appearing under Schedule IV [covering goods viz. 3214 Glaziers' putty, grafting putty, resin cements, caulking compounds and other mastics; painters' fillings; non-refractory surfacing preparations for facades, indoor walls, floors, ceilings or the like] have been omitted and the said goods now make an appearance under Schedule III against Sr. no. 54B. Simply put, the goods classifiable under 3214 also now attract CGST @9%.

The present order is dated 26 July 2018 .

(See 2018-TIOL-03-AAAR-GST)