In re The Roll Company (Prop. Shri Bhavin Ramesh Shah) (GST AAAR Gujarat)
(i) Zip Rolls is classifiable under Tariff Item 9607 20 00; and (ii) Zip Rolls was liable to Goods and Services Tax @ 18% (CGST 9% + SGST 9%) during 01.07.2017 to 30.09.2019 under Sr. No. 446 of Schedule III of Notification No. 1/2017-Central Tax (Rate) and Notification No. 1/2017-State Tax (Rate), and @ 12% (CGST 6% + SGST 6%) from 01.10.2019 onwards under Sr. No. 231B of Schedule II of Notification No. 1/2017-Central Tax (Rate) and Notification No. 1/2017-Central Tax (Rate). The appeal filed by The Roll Company (Prop. Shri Bhavin Ramesh Shah) is rejected
FULL TEXT OF THE ORDER OF AUTHORITY OF APPELLATE ADVANCE RULING, GUJARAT
The Appellant ‘The Roll Company’ (Proprietor Shri Bhavin Ramesh Shah) is engaged in the manufacture and supply of Slide Fasteners and its Parts, falling under Chapter Heading 9607 of the First Schedule to the Customs Tariff Act, 1975 (herein after referred to as the ‘CTA, 1975’).
2.1 As per Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 and corresponding Notification No. 1/2017-State Tax (Rate) dated 30.06.2017 [herein after referred to as the said ‘Notifications’ and any reference to Central Tax (Rate) Notification includes reference to corresponding State Tax (Rate) Notification) issued respectively under the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017 (herein after referred to as the ‘CGST Act, 2017 and the ‘GGST Act, 2017’ respectively), ‘Slide Fasteners and parts thereof’ falling under Chapter Heading 9607 of the CTA, 1975 were covered under Sl. No. 446 of Schedule – III of the said Notifications and were attracting GST of 18% (9% CGST + 9% SGST). However, in terms of Notification No. 18/2018- Central Tax (Rate) dated 26.07.2018, Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 was amended whereby ‘Slide Fasteners’ falling under Chapter Heading 9607 of the CTA, 1975 were covered under Sl. No. 231B of Schedule – II of the said Notifications attracting the GST of 12% (6% CGST + 6% SGST) whereas Sl. No. 446 of Schedule – III of the said Notifications covered ‘Parts of slide fasteners’ falling under Tariff Item 9607 20 00 attracting GST of 18% (9% CGST + 9% SGST).
2.2 The appellant filed an application for Advance Ruling before the Gujarat Authority for Advance Ruling (herein after referred to as the ‘GAAR’), wherein details of products manufactured and supplied by the appellant, classification of those products as well as rate of GST applicable on those product, in the understanding of the appellant, were described as follows :-
(i) Zip Rolls
This product is supplied in continuous length as per customer order or of normal length as per industrial specification. In terms of the definition in HSN, the said products shall be classified as “Slide Fastener” under heading 9607 and rate of tax applicable is 12% in terms of Sl. No. 231B of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 18/2018- Central Tax (Rate) dated 26.07.2018
(ii) Finished Zipper
This product is supplied in cut length with sliders attached. In terms of definition in HSN, the said products shall be classified as “Slide Fastener” under Tariff Heading 9607 and rate of tax applicable is 12% in terms of Sl. No. 231B of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 18/2018- Central Tax (Rate) dated 26.07.2018
(iii) Sliders
The said product shall be classified as “Parts of Slide Fastener” under Tariff Item 9607 20 00 and rate of tax applicable is 18% in terms of Sl. No. 446 of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 18/2018- Central Tax (Rate) dated 26.07.2018
2.3 The appellant has raised the following question for advance ruling before the GAAR –
Question : What is the classification as per HSN and rate of tax in terms of the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended by the Notification No. 18/2018- Central Tax (Rate) dated 26.07.2018 in respect of their products, (i) The Zip Roll (i.e. Slide Fasteners); (ii) Finished Zippers; and (iii) Sliders ?
2.4 The GAAR vide Advance Ruling No. GUJ/GAAR/R/39/2020 dated 03.07.2020, has ruled as follows –
Answer : The product ‘Finished Zipper’ shall be classified as “Slide Fasteners” under Chapter heading 9607.11 and other products viz. ‘Zip Roll’ and ‘Slider’ merit classification as ‘Parts of slide fasteners’ under Chapter Heading No. 9607.20. Accordingly, the product ‘Finished Zipper’ is liable to GST @ 18% till 26.07.2018, @ 12% from 27.07.2018 to 30.09.2018 (sic 30.09.2019) and @ 12% from 01.10.2019 onwards. Whereas, the other products, viz. ‘Zip Roll’ and ‘Slider’ are liable to GST @ 18% till 30.09.2018 (sic 30.09.2019) and @ 12% from 01.10.2019 onwards.
3. Aggrieved by the aforesaid ruling, the appellant has filed the present appeal.
4.1 The appellant has submitted that the manufacturing process of ‘Zip Roll’ (Zipper Roll) is as follows –
(i) Polyester tape is manufactured on power looms from polyester yarn.
(ii) A strip of polyester cord along with teeth (scoop) is manufactured on
the cording machine from polyester monofilament yarn.
(iii) The polyester tape and polyester cord with teeth are stitched together on the stitching machine with one inner edge of each being fitted with scoops of plastics.
(iv) The two narrow strips of textile materials with one inner edge fitted with scoops of plastics are interlocked on the machine to form the ‘zipper rolls’. Such ‘zipper rolls’ can be made to interlocked or opened by means of a slider.
(v) The ‘zipper rolls’ are subjected to a process of calendaring and dyeing.
(vi) The ‘zipper rolls’ are cleared in continuous length.
4.2 The appellant has submitted that in the garment industry, since the size of the zipper is fixed, the zippers are generally purchased by buyers in cut length along with slider. However, in case of bag manufacturers, since the size of the zipper is not fixed, they purchase ‘Zipper Rolls’ which are cut by them in required lengths and then slider is affixed by them. Both the ends of the ‘Zipper Rolls’ are fixed in the baggage, the slider is inserted in the ‘Zipper Roll’ of the baggage, which functions to interlock or open and the ‘Zipper Rolls’ works as a slide fastener. The appellant has submitted that the definition of Slide Fastener in HSN clarifies that the two narrow composite strips can be made to interlock by a slider or runner; that it does not specify that the ‘Zipper Rolls’ should be cleared with the slider or runner, but it should work as slide fastener. The appellant has further submitted that the only difference between ‘Zippers’ and ‘Zipper Rolls’ is that while the ‘Zipper’ is supplied in cut length along with Slider, ‘Zipper Rolls’ are supplied in continuous length which can be cut in varying lengths by the buyer and it can be operated by a slider.
4.3 It has been submitted by the appellant that the GAAR has held ‘Zippers’ to be classifiable under Entry 23 1B as “Slide Fasteners”, whereas ‘Zipper Rolls’ and ‘Sliders’ are held to be “Parts of Slide Fastener” under Entry 446 of the Schedules of the rate notification, thereby attracting 18% tax for the period from 27.07.2018 to 30.09.2019. The appellant has submitted that the only reason given by the GAAR for rejecting classification of ‘Zipper Rolls’ under the entry for Slide Fasteners is that they are sold in continuous length and without slider.
4.4 The appellant has submitted that the GST rate notifications are based on Harmonized System of Nomenclature (HSN) and relied upon the judgement of the Hon’ble Supreme Court in the case of Collector of Central Excise Vs. Wood Craft Products Ltd. [1995 (77) ELT 23 (SC) in support of the argument that where a tariff or Schedule is based on HSN, then the classification has to be made in accordance with the HSN and explanatory notes thereto.
4.5 The appellant has further submitted that the GAAR has also not taken into consideration the classification of ‘Zipper Rolls’ as ‘Slide Fasteners’ under Chapter Heading 9607.1190 in the Central Excise Invoices and Monthly Returns for the period prior to 01.07.2017. The appellant has narrated the relevant entries under Central Excise Tariff and has submitted that clearances of ‘Zipper Rolls’ as ‘Slide Fasteners’ under 9607 1990 in CET (Central Excise Tariff) also support appellant’s classification. It has been submitted that the classification of ‘Zipper Rolls’ in GST regime shall merit under Chapter Heading 9607 and not as parts under 9607 2000. The appellant has relied upon the judgement of the Hon’ble Supreme Court in the case of Reckitt Benckiser (India) Ltd. Vs. Commissioner, Commercial Taxes [(2015) 7 SCC 126].
4.6 The appellant has referred to the Explanatory Notes to HSN Heading 9607 and has submitted that ‘Slide Fastener’ is described to consist of two narrow strips of textile material fitted with chain scoops on each edge and which can be made to interlocked by a slider. It has further been submitted that the slider is required only to operate the slide fastener and it is not as if there is no slide fastener without slider. In so far as the ‘Zipper Rolls’ of the appellant are concerned, they are not only consisting of two strips of textile material with one edge of each strip being fitted with scoops, they are further also interlocked by a machine. The appellant has submitted that the only reason why they are not cut into ‘Zippers’ and fitted with sliders is that they are meant for buyers who do not use ‘Zippers’ of fixed lengths and therefore the ‘Zipper Rolls’ can be cut by them into required lengths and then fitted with sliders.
4.6 The appellant has submitted that despite the fact that the ‘Zipper Rolls’ are supplied in continuous length without a slider, they completely fit into the description of “Slide Fasteners” as narrated in the Explanatory Note to the HSN and therefore the GAAR has erred in rejecting such classification. They relied upon the judgement of the Hon’ble High Court of Madras in the case of Commissioner of Customs Vs. Hides [2009 (238) E.L.T. 398 (Mad.)].
4.7 As an alternative submission, the appellant has submitted that the ‘Zipper Rolls’ are ready for use as ‘Zippers’ in all respect and they are sold in Roll form only because the buyers, mainly the bag manufacturers, do not have fixed measurement of ‘Zipper’ that would be required. The appellant has further submitted that all that the buyer is required to do is to cut the ‘Zipper Roll’ in required length and the same can be operated by attaching the Slider. Thus, the ‘Zipper Rolls’ have the essential character of the ‘Zipper’ and hence even by applying Rule 2(a) of the General Rules of Interpretation, the ‘Zipper Rolls’ would be classifiable under the entry for ‘Slide Fasteners’. In support of this contention, the appellant has relied upon the decisions in the cases of RMKV Fabrics Pvt. Ltd. [2019 (29) GSTL 120 (App. AAR – GST)], Ankit Asthana Vs. Commissioner of Customs [2015 (327) ELT 162 (Tri. – Mum.)] and Bharat Heavy Electricals Ltd. Vs. Collector of Customs [1987 (28) ELT 545 (Tri.)].
4.8 The appellant has further relied upon the decisions in the cases of Commissioner of Central Excise – 1, New Delhi Vs. S.R. Tissues Pvt. Ltd. and Another [JT 2005 (7) SC 475)], Commissioner of Central Excise Vs. Tarpaulin International [24 VST 97 (SC)], TEGA India Ltd. Vs. Commissioner of Central Excise [135 STC 219 (SC)] and Bharat Forge and Press Industries (Private) Limited Vs. Collector of Central Excise, Baroda [84 STC 414 (SC)], wherein it has been held that simple processes which do not change the identity of the product do not tantamount to manufacture. The appellant has submitted that applying the said principle, ‘Zipper Rolls’ and ‘Zippers’ are as such the same commodity and therefore warrant the same classification under the entry of ‘Slide Fasteners’.
4.9 The appellant has also submitted that if two views are possible in taxing statutes then the view in favour of the assessee should be adopted. The appellant has referred to the judgements in the cases of Mauri Yeast India Pvt. Ltd. Vs. State of Uttar Pradesh and Another [(2008) 5 SCC 680] and Commissioner of Income Tax Vs. Kullu Valley Transport Co. Pvt. Ltd. [AIR 1970 SC 1734].
4.10. The appellant has requested to hold that ‘Zipper Rolls’ are classifiable under Entry 231B pertaining to ‘Slide Fasteners’ for the period from 27.07.2018 to 30.09.2019 and therefore taxable at the rate of 6% CGST + 6% SGST.
5. The appellant has submitted copy of first page of ER-1 Return for June, 2017 wherein Central Excise Tariff Sub-Heading 9607 11 10 has been shown for the product ‘Zipper Roll’.
FINDINGS :-
6. We have considered the submissions made by the appellant in the appeal filed and at the time of personal hearing as well as evidences available on record. We have also gone through the Ruling given by the GAAR.
7. The Advance Ruling was sought for by the appellant for appropriate
classification and applicable rate of Goods and Services Tax for the products (i) ‘Zip Rolls’; (ii) ‘Finished Zipper’; and (iii) ‘Sliders’. The appellant has not challenged the Advance Ruling given in respect of the products ‘Finished Zipper’ and ‘Sliders’.
8. Therefore, the issue involved in this case is limited to the proper classification of the product ‘Zip Roll’ and the applicable rate of Goods and Services Tax on the said product.
Classification of Zip Roll
9.1 As per explanation (iii) and (iv) of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, “Tariff item”, “sub-heading” “heading” and “Chapter” shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the CTA, 1975. Further, it has been provided that the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification. As submitted by the appellant, the Hon’ble Supreme Court has held in the case of Wood Craft Products Ltd. [1995 (77) ELT 23 (SC)] that any dispute relating to tariff classification must, as far as possible, be resolved with reference to the nomenclature indicated by the HSN unless there be an express different intention indicated by the Central Excise Tariff Act, 1985 itself.
9.2 Therefore, in order to examine the classification of the product ‘Zip Roll’, it will be useful to refer to Chapter Heading 9607 of the CTA, 1975 and Explanatory Notes of HSN for Tariff Heading 9607.
9.3 The Chapter Heading 9607 in the CTA, 1975 is reproduced herein below :-
