Whether the Butterfly Bridal (ornament) with Watch is not classifiable as Jewellery?

PJ/Case Law/2018-2019/3529

Whether the Butterfly Bridal (ornament) with Watch not classifiable as Jewellery?

Case- M/s House of Marigold.

Citation- ADVANCE RULING NO. GUJ/GAAR/R/2018/20 dated 10 August 2018

Issue- The issue involved in this case is regarding classification of the ornaments of precious metals and gems having a watch as its part in it ?

Facts of the Case:The applicant, M/s. House of Marigold purchases gold, diamond, precious stones pearls and watch. Thereafter, these are handed over to job worker who is a specialized job worker for making jewellery and carrying out such work. The buyers who intend to purchase jewellery is shown various types of jewellery and propose order of it and according to customers desire, work is entrusted to job worker. The cost of the jewellery includes cost of Gold, Silver, Diamond, etc. of very high value but a wrist watch is fitted in the jewellery selected by customer.

In light of the above facts the applicant seeks the advance ruling that whether the jewellery which has a watch attached to it will be considered as a jewellery as covered under Chapter Heading 7113 or will be considered as a watch under Heading 9101.

Applicant’s Arguments:The applicant referred to Note 1(b) and Note 2 of Chapter 91 and submitted that heading 9101 covers only watches with case wholly of precious metals or of metal clad with precious metal. It is submitted that the articles sold by the applicant does not consist of only the watches with case wholly of precious metals or metal clad with precious metal, the entire article is of precious metal with watch fitted in it. It is submitted that the watch movement does not contain any jewel or precious metal and it is a very simple machine. Therefore, it is submitted that the articles sold by the applicant are jewellery articles and not watches with case of precious metal, also the applicant contended that the value of watch mechanism fitted in is hardly even 5% of the total value of the jewellery. The Applicant presented the judgments in the case of Hon’ble High Court of Gujarat in the case of State of Gujarat V/s. Titan Industries Ltd. [103 VST 270 (Guj.)] and The applicant also referred to determination order in its own case passed under the VAT Act, reported as Marigold Watches [2011 GSTD 3] on basis of which the applicant was considering the product as jewellery in the old Tax regime of VAT.

Judgment and Ruling of the AAR: The bench reiterated the tariff entry CSH 9101.00 which is reproduced below :

91.01 : Wrist watches, pocket-watches and other watches, including stop-watches, with case of precious metal or of metal clad with precious metal.

Note 2 to Chapter 91 reads as follows :

“Heading No. 91.01 covers only watches with case wholly of precious metal or of metal clad with precious metal, or of the same materials combined with natural or cultured pearls, or precious or semi precious stones (natural, synthetic or reconstructed) of Chapter 71. Watches with case of base metal inlaid with precious metal fall in heading 91.02”

On a reading of the tariff entry and the above Chapter Note it is obvious that watches with case of precious metal or of metal clad with precious metal are covered by the said heading. It is not the assessee’s case that the impugned item is not a watch with case of precious metal.

The judgement dated 03.02.2017 of the Hon’ble High Court of Gujarat in Tax Appeal No. 46 of 2017 in case of State of Gujarat Vs. M/s. Titan Industries Limited pertains to classification of goods under Schedule-II to the Gujarat Value Added Tax Act, 2003. It is pertinent to note that the scheme of classification of goods under Gujarat Value Added Tax Act, 2003 was different than the scheme of classification of goods for the purpose of Notifications issued under the CGST Act, 2017 and GGST Act, 2017, which is based on the First Schedule to the Customs Tariff Act, 1975.

Comment- The AAR concluded the decision by ordering that the jewellery sold by the applicant will be covered under the head 9101 and not 7113 and the functionality or importance or the proportion of value of the watch in the jewellery in which such watch is studded is of no importance also this decision of the bench signifies that the circumstance under the current tax regimes are changes and they are not always admissible as defence .

Prepared by: Subhanshu Jain

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PJ/Case Law/2018-2019/3529

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