Gold Chains In Running Lengths Are Jewellery, Not Semi-Manufactured Gold: CESTAT Bengaluru

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) at Bengaluru has recently held that gold chains imported in running lengths are to be treated as articles of jewellery and not as semi-manufactured gold, ruling that minor processes like cutting and attaching hooks do not alter their essential character.

A coram of Technical Member Pullela Nageswara Rao said the goods had already taken the form of finished jewellery:

“I find that the goods as imported, 'gold neck chains' though are in running length have almost attained the form of a finished article which requires mere cutting to length and adding of the hooks as per the desired length of the customers to become a complete article and therefore as per the Chapter Note 9(a) to Chapter 71 such articles are also classifiable under Customs Tariff Heading (CTH) 7113. Further, Rule 2(a) of the General Rules of Interpretation (GRI) to Harmonised System of Nomenclature (HSN) provides that articles which are incomplete or unfinished, if have attained the essential character of the complete or finished article, shall be classified under the heading of finished article only.”

The ruling came in an appeal filed by taxpayer Ram Aabhoshan against an order passed by the Commissioner of Customs (Appeals), Bengaluru, which had upheld the reclassification of imported 22K jewellery, specifically gold chains in running lengths, as semi-manufactured gold and ordered confiscation along with redemption fine and penalty.

The taxpayer had declared the goods as jewellery at the time of import and claimed duty benefits under a free trade agreement along with concessional IGST. The goods were, however, not cleared and a show cause notice was issued proposing reclassification, confiscation and penalty.

The adjudicating authority confirmed the proposals and permitted re-export on payment of Rs. 15 lakh each as redemption fine and penalty. The taxpayer paid the amounts and re-exported the goods.

Before the tribunal, the taxpayer argued that the imported goods were complete gold chains which only required cutting to the desired length and attachment of hooks for use as neck chains. It was contended that such minimal activity does not change the identity or use of the product as jewellery and that the dispute was purely one of classification without any misdeclaration.

The revenue maintained that the goods were not ready-to-use jewellery and required further processing, and therefore ought to be treated as semi-manufactured gold.

Rejecting the department's stand, the tribunal held that the imported chains had already acquired the essential character of finished jewellery. It observed that processes such as cutting to size and attaching hooks do not result in a new or distinct product.

The bench also found the reclassification by customs authorities to be unsustainable, observing,

“..to classification confirmed by the customs authorities of 'Gold neck chains in running length', the impugned goods under Customs Tariff Heading (CTH) 7108 as 'Gold (including gold plated with platinum) unwrought or in semi-manufactured forms or in powder form', more specifically under Customs Tariff Item (CTI) 7108 1300 as 'Other semi-manufactured forms' is incorrect.”

On confiscation and penalty, the tribunal held that since the case involved a bona fide classification dispute and there was no misdeclaration, the goods were not liable for confiscation and the penal action could not be sustained.

The tribunal accordingly set aside the redemption fine and penalty imposed on the taxpayer and granted consequential relief.

For Appellant: Purvi Asati and Ashutosh Sharma

For Respondent: Maneesh Akhoury, Assistant Commissioner