In re Supercoat India (Trade Name) Ayush Baid (Legal Name) (GST AAR Gujarat)
i. The applicant supplies partially coated Polyester fabric ( knitted/woven) or partially coated fabric.
ii. Said fabric is scattered with micro-dot printing.
iii. The subject goods are used as interlining fabric.
iv. The resultant fabric is partially coated on one side with scattered dots and the dots are elevated in a manner that the fabric can be attached to another fabric which is used for interlining.
The issue before us is the Classification of subject goods. We refer to HSN 5903, to examine its applicability in subject matter.
AAR find that the subject goods have passed all the conditionality’s placed in the HSN 5903 Chapter Heading description and the Chapter Notes. AAR find that the subject goods have satisfied the guidelines specified in the Explanatory Notes to HSN 5903.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, GUJARAT
1. M/s. Supercoat India submits that it supplies partially coated Polyester fabric (knitted or woven) or any other kind of partially coated (with scattered micro-dot print) Fabric covered under chapter heading 50 to 55, 58 or 60. The goods supplied are further be used as interlining fabric in products like shirt, suits, coats, Gowns etc.
2. Process performed by applicant on the Fabrics:
Microdot Coating Machine is used by the applicant for undertaking the process of coating. The applicant describes the process as follows-
Raw materials
a. Polyester fabric (knitted and woven) or any other fabric covered under chapter heading 50 to 55, 58 or 60 (herein referred to as Fabric)
b. Chemicals- Bemifuse ST, Bemifuse XC and Thickener
c. Powder- Copolyster Hotmelt Adhesive
d. Powder -XINXIN Adhesive Copes
e. water
Parts of Machine – Screen Printing, Conveyor Belt, 3 chambers has burner Blower, Heater Blower, Cooling Drum and Platter.
3. Functions of various parts of the micro dot coating machine:-
a. Screen Printing – A roller like structure along with pump installed on the sides.
There is a dotted design on the roller which prints the scattered microdots on the fabric. The function of pump is to throw in the adhesive powder and the roller does the printing.
b. Conveyor Belt – The fabric travels through whole machine with the help of this belt.
c. The machine has 4 chambers out of which, 3 chambers has burner and Blower and 4th Chamber has Heater and Blower. The conveyer Belt takes the cloth through all the chambers of the machine. The Burner and Blower helps in drying and fixing the print on the fabric.
d. Cooling Drum – This is the last part where the cloth is put under very low temperature.
e. Platter – The final fabric is collected in platter.
4. Process
The steps involved are as follows-
Unwind> Screen Coater > Scatter> Suction> Dryer>
Cooling> Platter > Finished Goods
The applicant describes the process as follows-
a. The applicant purchases Fabric from the market.
b. The Fabric is sent for dyeing on Job work basis. The dyed fabric is then put in the micro dot coating machine.
c. First, the dyed fabric passes through screen printing and then conveyor belt takes the fabrics to other chambers of the machine.
d. The print done by screen printing is Dried and fixed on the fabric with the help of Burner and Blower.
e. Further, the cloth undergoes last stage of process which is cooling. This function is undertaken by cooling drum.
5. Characteristics of the Finished Product-
a. The product is partially coated on one side with scattered dots.
b. The dots are elevated in a manner that the fabric can be attached to another fabric and used for interlining.
6. The applicant vide letter dated 30-7-21 has submitted as follows:
(i) The product is used as an interlining fabric for a garment to give a suitable stability or appearance. The finished product is affixed with garments by applying heat and pressure for a certain time. The lining which is fixed with garments in above mentioned fashion is classified as fusible interlining fabric.
(ii) The main raw material used for manufacturing the product is a polyester Fabric. The woven or knitted polyester fabric is passed over through heated rolls having high temperature. Then the cloth is pressed against printing rolls having dots engraved on it. High density polyethene powder is taken in the hopper seated on the printing roll, filling the dots. The extra powder is scrapped and the cloth is finally passed through the heated chamber where the plastic melts and the entire surface is coated with plastic. PES powder i.e. Copolyester powder is used to do the plastic coating, a specific design at equal distance is visible.
(iii) The applicant is classifying the goods at Tariff 5903. However, it opines that said goods will not be covered under the HSN 59 of Customs Tariff. The applicant submits as follows :-
(a) Ch. 59 of the Custom Tariff deals with Impregnated, coated, covered or laminated textile fabrics; textile articles of a kind suitable for industrial use.
(b) As per chapter note 1 : Except where the context otherwise requires, for the purposes of this Chapter, the expression “textile fabrics ” applies only to the woven fabrics of Chapters 50 to 55 and headings 5803 and 5806, the braids and ornamental trimmings in the piece of heading 5808 and the knitted or crocheted fabrics of headings 6002 to 6006.
(c) The applicant submits as follows:-
(i) The impregnated and coating on the finished goods can be seen with naked eyes.
(ii) The manufactured cloth can be bent manually.
(iii) The manufactured product is embedded with plastic. However, it is not entirely coated or covered on both sides or completely embedded. The dotted coating has not made the textile fabrics impervious.
(iv) The applicant states that the coating on the fabric is plastic in nature and bears dotted after the entire process.
(v) The fabric is not the mere material for enforcing purpose instead it is the main raw material.
(vi) The product does not fall under heading 5811.
In view of the above evaluation impugned product satisfies the specifications mentioned in point 4 of the Chapter Note 2 which reads that CTH 5903 applies to Textile fabrics other than fabric partially coated or partially covered with plastics and bearing designs resulting from these treatments (usually chapters 50 to 55, 58 or 60). Therefore, the applicant is of the belief that the product i.e. interlining cloth of woven knitted polyester fabric will not be classified under heading 5903.
(d) The powder used for plastic coating of the fusible interlining cloth manufactured by the applicant is PES powder i.e. Copolyster powder. The powder gives a continuous and adherent film or layer on the fabric and the fabric has an impervious surface. The use of the said powder results in plastic coating. As the cloth is coated with plastics, it will not be classified under Chapter headings 5903.
(e) The applicant submits that from the above it is apparently clear that product will not be classified under heading 5903 as it is covered under point no. 4 of Chapter Note 2. Accordingly, it can be said that if the product is not classified under heading 5903, then the applicant should classify the product under chapter 50 to 55 or 58 or 60.
(f) The applicants refer to the Chapter 50 to55, 58 and 60. It submitted that its product will not fall under Chapter 50, 51, 52 & 53 as the main raw material is polyester. They use the filament fibre i.e. polyester which is a synthetic fibre. Therefore, the polyester fusible lining can be classified under Chapter 54.
(g) The applicant submitted the various amendments and circulars which were relevant for classification of interlining fabric. For ready reference the details of the same are given as follows-
(i) Chapter note 2(c) to chapter 59 which dealt with “Textile fabrics, partially or discretely coated with plastic by dot printing process” was omitted w.e.f. 16.03.1995. Circular no. 433/66/98-CX dated 27-11-1998 was issued by CBEC wherein the clarification was given regarding the fusible interlining which was intended to be considered in exception to chapter note 2(a)(4) to chapter 59. With respect to the above mentioned, the applicant submits the following:
(ii) Omission of chapter note 2(c) is a clear indication that the items mentioned therein will not be covered by chapter heading 5903. The circular clarifies and prescribes that intention of omission of the chapter note did not mean that the classification of interlining will change. The said circular was struck down as ultra vires by Madras High Court in case of Madura Coats. From the above mentioned, the applicant submits that the omitted chapter note and the Circular cannot dictate the classification of fabric in question. Therefore, the treatment as mentioned in circular is incorrect and should not be followed. The applicant relied upon the case of Single Bench of Madras HC in case of Madura Coats Ltd. Vs CBEC wherein the Hon’ble High Court has quashed the Board Circular No. 433/66/98-CX dated 27-11-1998. Further the applicant submits that CESTAT was approached vide Appeal No. E/31/2012 in case of Madura Coats Private Limited V Commissioner of Central Excise, Tirunelveli. The matter before the Hon’ble Tribunal was that applicant was engaged in manufacture of coated fusible interlining fabrics of cotton and the department was of the view that the said product will be classified under chapter heading 5903 even in absence of chapter note 2(c). The Hon’ble CESTAT had passed an order stating that the remnant samples of the product should be checked and the officers should pass a fresh order of classification. The characteristics that these samples need to have to merit classification under chapter note 5903 is that the fabric should have a continuous and adherent film or layer or plastic on one side of the surface, the fabric should be impervious, the conditions of note 2 of Chapter 59 should be satisfied.
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