In re Shradha Polymats (GST AAR Maharastra)
Whether 4601 as the HSN Classification of Polypropylene Mats is correct?
Heading appropriate for Polypropylene Mats made from plaiting materials is 4601 and the relevant sub-heading is 4601 99. However as it is not necessary to go beyond four digit level for the purpose of this Advance Ruling, we hold that the product of manufactured by the applicant falls in heading 4601 of First Schedule of the Indian Customs Tariff Act,1975.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, MAHARASTRA
The present application has been filed under section 97 of the Central Goods and services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by M/s SHRADHA POLYMATS, the applicant, seeking an advance ruling in respect of the following questions.
1. Whether 4601 as the HSN Classification of Polypropylene Mats is correct?
2. If the answer to above question is in the affirmative, whether entry No 198A (inserted vide Notification No 27/2017) is to be applied or Entry No. 103 should be considered. In other words, whether CGST / SGST Tax Rate is to be considered as 2.5% or 6% ?
At the outset, it is made clear that unless specified otherwise, a reference to a Section or Provision of the CGST Act shall also mean a reference to the same Section or Provision under the MGST Act. Further, a reference to GST Act shall mean a reference to CGST Act and MGST Act.
02. FACTS AND CONTENTION – AS PER THE APPLICANT
The submissions, as reproduced verbatim, could be seen thus-
1. “Shradha Polymats” is a Manufacturer of Floor Mats. The mats are made up by interweaving the straws manufactured from extrusion of PP Granules. These mats are popularly known as Polypropylene Mats (PP Mats) herein after referred to as ‘the mats’. An alternate term used for the concerned product is ‘Plastic Satranj’.
2 .Manufacturing Process can be briefly explained as under:
1) Primary forms (PP Granules) is the basic raw Material used which may be either Virgin or made up from the Waste Plastic (Flakes).
2) These forms are put up in mixers for giving them desired Colour.
3) The Coloured Granules are then passed through extruders to take form of straws.
4) The straws are then interwoven using a thread to form Floor mats.
3. The Classification of above product Polypropylene Mats, is interpreted to be classified under HSN 460101 considering the present duty drawback schedule (updated w.e.f 1st October 2017) containing the aforementioned product under Chapter-46.
4. Notification No.1/2017-Central Tax (Rate) clearly defines as under:
“Tariff item”, “sub-heading” “heading” and “Chapter” shall mean respectively a tariff item, subheading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975).
Due to unknown reason the First Schedule to the Customs Tariff Act, 1975 does not incorporate the entry 4601 01 in itself which makes us draft the advance ruling and intimate ourselves to get assured about the classification.
5. The Circular No 4/2018 dated 24.01.2018, Amending All Industry Rates of Duty Drawback’ effective from 25.01.2018 (Customs) Having File No. 609/12/2018-DBK reconfirms the classification of Polypropylene Mats under tariff Item 460101 in Part 2 (c) of the same and deletes the entry from the drawback schedule of 391802 as Polypropylene Mats.
6. Simultaneously Notification No.131/2016-Cus (NT), dt. 31-10-2016 also suggests in the first part of Notes and Conditions that the tariff items and descriptions of goods in the drawback Schedule are aligned with the tariff items and descriptions of goods in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) at the four-digit level only. The descriptions of goods given at the six digit or eight digit or modified six or eight digits in the said Schedule are in several cases not aligned with the descriptions of goods given in the First Schedule to the Customs Tariff Act, 1975.
7. If due consideration is to be given to the above alignment of the duty drawback schedule and First schedule to the Customs Tariff Act 1975; it appears very clear that Polypropylene mats can be classified under the first four digits of HSN Being 4601.
8. If we come back to the chapter 46 of first Schedule, Customs Tariff Act 1975, and consider the definition: “heading”, in respect of goods, means a description in list of tariff provisions accompanied by a four-digit number and includes all sub-headings of tariff items, the first four-digits of which are 4601;
9. About the Chapter 46:
(1) Which states that for the purposes of heading 4601, the expression “plaiting materials, plaits and similar products of plaiting materials, bound together in parallel strands” means plaiting materials plaits and similar products of plaiting materials, placed side by side and bound together, in the form of sheets, whether or not the binding materials are of spun textile materials” which perfectly creates the picture of Plaiting Material being straws made from the above mentioned process of extrusion and then bound together in parallel/perpendicular strands to form the Mats.
(2). It specifically excludes
(a) wall coverings of heading 4814;
(b) twine, cordage, ropes or cables, plaited or not (heading 5607);
(c) footwear or headgear or parts thereof of Chapter 64 or 65;
(d) vehicles or bodies for vehicles of basketware (Chapter 87); or
(e) articles of Chapter 94 (for example, furniture, lamps and lighting fittings).
3. Thus the Mats appropriately complies with the Chapter Heading 4601 expression and the above five exclusions nowhere considers the Mats. The tariff Item 4601 99 00 ‘Other’ excludes from itself the kinds of vegetable material as there are separate tariff Items 4601 29 00 ‘Other’ and 4601 94 00 ‘Of Other vegetable material’.
10. From all the above it is being interpreted that the Polypropylene Mats falls under the HSN classification of which the first four digits are 4601.
11. Honorable CESTAT (Customs, Excise and Gold Tribunal – Delhi) in Supreme Industries Ltd. VS Commissioner of Central Excise-2004-(170) ELT 432 upheld the Classification of the Mats under the Chapter Heading 4601.
12. Now as on Present date the Updated Schedule of CGST Rates on Goods incorporates 2 entries of 4601 namely:
i) Entry No 198A inserted vide Notification No 27/2017 Central Tax (rate) under the Schedule – 1 of 2.5% for Chapter / Heading / Tariff Item 4601,4602 having product Descriptions as Grass, leaf or reed or fiber products, including mats, pouches, wallets.
ii) Entry No 103 under the Schedule – II of 6% for Chapter / Heading / Tariff Item 4601 having product description as ‘Plaits and similar products of plaiting materials, whether or not assembled into strips; plaiting materials, plaits and similar products of plaiting materials, bound together in parallel strands or woven, in sheet form, whether or not being finished articles (for example, mats matting, screens) of vegetables materials such as of Bamboo, of rattan, of Other Vegetable materials.
13. The Further Interpretation implies entry 103 is specifically for the Plaits and Similar products of Plaiting materials of Vegetable material such as of Bamboo, of rattan, of Other Vegetable materials. Thus only vegetable material and its likes can be covered under it and hence Polypropylene Mats are nowhere near to being vegetable material and thereby can only be related to the entry 198A.
The Questions hereby raised are;
1. Whether 4601 as the HSN Classification of Polypropylene Mats is correct?
2. If the answer to above question is affirmative, whether entry No 198A (inserted vide Notification No 27/2017) is to be applied or Entry no 103 should be considered. In other words whether CGST / SGST Tax Rate is to be considered as 2.5% or 6% ?
Additional submissions made by applicant on 18.12.2018 is as under.
In support of our stand that the Polypropelene Mats (PP Mats) Fall under the Classification of HSN 4601 we would hereby like to submit as under.
1. As per the Chapter 46 of first schedule of Customs tariff Act 1975, the definition: “heading”, in respect of goods, means a description in list of tariff provisions accompanied by a four-digit number and includes all sub-headings of tariff items, the first four-digits of which are 4601.
For the Chapter 46 the expression “plaiting materials” means materials in a state or form suitable for plaiting, interlacing or similar processes; it includes straw, osier or willow, bamboos, rattan, rushes, reeds, strips of wood, strips of other vegetable material (for example, strips of bark, narrow leaves and raffia or other strips obtained from broad leaves), unspun natural textile fibres, monofilament and strip and the like of plastics and strips of paper.
For the purpose of heading 4601 The expression “plaiting materials, plaits and similar products of plaiting materials, bound together in parallel strands” means plaiting materials, plaits and similar products of plaiting materials, placed side by side and bound together, in the form of sheets, whether or not the binding materials are of spun textile materials” which perfectly creates the picture of Plaiting Material being the hollow tubes and then bound together in parallel / perpendicular strands to form the Mats popularly called as PP Mats. The Sample of Plaiting material and Mat prepared there from is hereby made available for your honour’s kind perusal.
2. The Notification No 6/2018 (Central Tax Rate) substituted the Entry in Schedule I of Notification No 1/2017 (Central tax Rate) having S. No 198A by the description of Goods being “Manufactures of straw, of esparto or of other plaiting materials; basketware and wickerwork”. Having regard to the notes of Chapter 46 which we are ought to follow as per the Notification No 1/2017 (Central Tax rate); we are of the strong contention and belief that our product is nothing but “Manufactures of other plaiting Material.”
3. Also as an evidence to support our claim we would like to draw your honour’s kind attention towards the Central Excise Circular F. No. 93/24/87-CX.3, dated 16-6-1987 clearly stating that the PP Mats Fall under the tariff classification of 4601. and the Plaits of Polypropylene are aptly the plaiting material as per the notes of chapter 46. The circular had put to rest all tire doubts regarding the classification of PP Mats. (Copy Enclosed) “Heading No. 46.01 of the CET covers, ‘manufacture of straw, of esparto or of other plaiting materials; basketware and wicker-work’, Chapter Note 1 of Chapter 46 defines ‘plaiting materials’. As per this definition, ‘plaiting materials’ includes monofilament and strip and the like of plastics. As already stated, plastic mat/matting (Satranji) is manufactured out of plastic tubes ofdiametre 1.5 mm cut according to the size of the mat to be manufactured. As monofilaments are normally of solid cross section, plastic tubes ofdiametre of 1.5 mm used for the manufacture of Satranji could be covered within the term ‘monofilament and strips and the like of plastics’ as used in Chapter Note 1 of Chapter 46. Therefore, plastic mat/matting (Satranji) appears to be covered under Chapter 46 of CET as an article of plaiting materials. This view is further reinforced by the fact that the description of Heading No. 46.01 of the Customs Tariff specifically covers ‘Mat, mating, screens of’ Vegetable Materials.’ Both under Note 1 of Chapter 46 of CET and Note of Chapter 46 of Customs Tariff ‘Plaiting material, includes monofilament and strips and the like of plastic.’ It is also seen from the description of Heading No. 46.01 of the HSN that it covers mat/mating /screens of all plaiting materials and in the HSN Chapter Note 1 of Chapter 46 also, ‘Plaiting materials includes ‘monofilaments and strips and the like of plastics’. In the HSN Notes below Heading No. 46.01, mats and matting (whether rectangular or in other shapes) made by weaving or binding parallel strands of plaiting material, txvine, cord etc. are mentioned as goods falling within the scope of Heading No. 46.01 of the HSN.
4. In view of the above, it is clarified that plastic mat/matting (Satranji) would be appropriately classified under Heading No. 46.01 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986).
3. It was also stated at the last of aforementioned circular that ‘All the pending assessments may be finalized on the basis of above guidelines’. Thus Honourable CESTAT (Customs , Excise and Gold Tribunal – Delhi) in Supreme Industries Ltd. VS Commissioner of Central Excise-2004-(170) ELT 432 upheld the Classification of the Mats under the Chapter Heading 4601 not only from the date of aforementioned circular but also for the period before the date of the circular. Judgment Enclosed)
4. We would again like to submit that, the Circular No 4/2018 dated 24.01.2018, Amending All Industry Rates of Duty Drawback’ effective from 25.01.2018 (Customs) Having File No. 609/12/2018-DBK reconfirms the classification of Polypropylene Mats under tariff Item 460101 in Part 2 (c) of the same and deletes any other entry from the drawback schedule for Polypropylene Mats. (Copy Enclosed)
5. Due consideration should be given to the above Circular No 4/2018 as the Notification No.131/2016-Cus (NT), dt. 31-10-2016 also suggests in the first part of Notes and Conditions that, ‘The tariff items and descriptions of goods in the drawback Schedule are aligned with the tariff items and descriptions of goods in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) at the four-digit level only. The descriptions of goods given at the six digit or eight digit or modified six or eight digits in the said Schedule are in several cases not aligned with the descriptions of goods given in the First Schedule to the Customs Tariff Act, 1975.’ (Relevant Extract Enclosed)
6. We have enclosed the Excise Invoices and Shipping Bills for the Assurance that during the era of existing laws (Excise) the product was duly classified under the HSN 4601 9900. Also the Assessments were completed and classification was duly accepted by the department in this regard. This has been a settled position since 1987.
