Case Law Details
In re Harmony Plastics Pvt Ltd (CAAR Delhi)
In headings 39.20 and 39.21, the expression “plates, sheets, film, foil and strip” applies only to plates, sheets, film, foil and strip (other than those of Chapter 54) and to blocks of regular geometric shape, whether or not printed or otherwise surface-worked, uncut or cut into rectangles (including squares) but not further worked (even if when so cut they become articles ready for use). HDPE woven fabric is not classifiable under headings 39.20 and 39.21.
Heading 3923 covers Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics. It includes sacks and bags (including cones) under heading 3923 10; Stoppers, lids, caps and other closures under heading 3923.50; and residual entry others under 3923.90. The explanatory notes to this heading further explain that this heading covers all articles of plastics commonly used for the packing or conveyance of all kinds of products. The articles covered include: (a) Containers such as boxes, cases, crates, sacks and bags (including cones and refuse sacks), casks, cans, carboys, bottles and flasks. The heading also covers: (i) Cups without handles having the character of containers used for the packing or conveyance of certain foodstuffs, whether or not they have a secondary use as tableware or toilet articles; (ii) Bottle preforms of plastics being intermediate products having tubular shape, with one closed end and one open end threaded to secure a screw type closure, the portion below the threaded end being intended to be expanded to a desired size and shape. (b) Spools, cops, bobbins and similar supports, including video or audio cassettes without magnetic tape. (c) Stoppers, lids, caps and other closures. A careful reading to this heading suggests that HDPE woven fabric is not covered under this heading, in particular under the expression under closures. Further, since the fabric is in roll form, even though it can be used to make bags or sacks, following the settled principle of law, the classification of the article should be based on the form it is presented in, and therefore, cannot be classified under heading 3923 10.
Heading 3925 covers Builders’ ware of plastics, not elsewhere specified or included. Even though the applicant has contended that the fabrics are those which are used to cover buildings under construction, they cannot be considered as builder’s ware of plastics, taking into account the Explanatory Notes of HSN and description of the articles mentioned in the heading/ sub-heading.
I now come to the residual heading 3926, covering Other articles of plastics and articles of other materials of headings 39.01 to 39.14. This heading covers articles, not elsewhere specified or included, of plastics (as defined in Note 1 to the Chapter) or of other materials of headings 39.01 to 39.14, noting that HDPE in its primary form is covered under heading 3901. Therefore, other articles of HDPE, not elsewhere specified would merit classification under this residuary heading. HSN Explanatory Notes to the CTH 3926 provide guidance regarding the kind of articles that may merit classification under this heading. In this regard, I find that Explanatory note specifically provide that they include: (4) Dust-sheets, protective bags, awnings, file-covers, document-jackets, book covers and reading jackets, and similar protective goods made by sewing or glueing together sheets of plastics.
I understand that Dust sheets are fabrics which are used to cover furniture, floors, buildings and the likes during construction or carrying out any repair/decoration. Since, the article HDPE woven fabrics (uncoated/one-side coated/double-side coated) are used to cover buildings under construction, as claimed by the applicant, it is most appropriately considered to be used as a dust-sheet for the purpose of covering of a building under construction.
Therefore, taking into account the detailed submissions of the applicant, including the likely usage of the article under consideration, absence of specific heading/ sub-heading for HDPE woven fabric in Chapter 39, positive mention of the dust sheet in Explanatory Note to Heading 3926, I find that HDPE woven fabrics (uncoated/one-side coated/double-side coated) are most appropriately covered under residual heading 3926 and further the residual sub-heading 3926 9099 of the Customs Tariff Act ,1975.
FULL TEXT OF ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, DELHI
M/s. Harmony Plastics Pvt. Ltd., Udaipur, Rajasthan, a company having IEC No. 4105000039 and PAN no. AABCH5399D, (applicant, in short), has filed an application dated 20.02.2021 received on 09.04.2021 by post, seeking advance ruling under section 28-H of the Customs Act, 1962 before the Customs Authority for Advance Rulings, New Delhi (CAAR, in short).
2. On scrutiny of the application, Secretariat of (AAR, New Delhi issued Deficiency Memo and requested the applicant to rectify the said deficiencies. The applicant submitted rectified application vide letter dated 19.05.2021, which was received in the Secretariat of CAAR, New Delhi on 16.06.2021. The application was accordingly registered under serial No. 11/2021-Delhi dated 16.06.2021.
3. As per the original application, the Commissioner of Customs, Jaipur (Rajasthan) has been declared as the jurisdictional Commissioner of Customs from where import/export is proposed to be undertaken. However, the applicant, vide its letter dated nil forwarded vide email dated 15.07.2021 requested for change of concerned Commissioner of Customs, from where import/export of goods is proposed to be undertaken. On acceptance of request of the applicant, for change of the concerned Commissioner of Customs by the Authority, Secretariat of CAAR, New Delhi requested the concerned Principal Commissioner of Customs, Mundra Port, Gujarat to furnish comments in the matter.
4. The applicant has declared that they are manufacturing and exporting products, namely PP woven fabric unlaminated/laminated, Non-woven fabric unlaminated/laminated, Articles of Nonwoven fabric unlaminated/laminated and High Density Polyethylene (HDPE) woven fabric unlaminated/laminated. Further, as regards manufacturing process of High Density Polyethylene (HDPE) Woven Fabric laminated / unlaminated, it is declared that the manufacturing of the said goods involve extrusion of raw material namely HDPE granules, films which are obtained slit into strips; weaving of fabric is done on looms. It is also stated in the application that the raw materials used for manufacturing High Density Polyethylene (HDPE) Woven Fabric is E52009 HDPE [MFI — 0.90 g/10min, Density – 0.952g/cc] and raw material used for lamination of Fabric is Low Density Polyethylene LA1070 [MFI — 8.5g/1 Omin, Density – 0.917g/cc]. Further, it is also mentioned that HDPE woven fabric is widely used for packing and wrapping of various products. The HDPE fabric is used for manufacturing of tarpaulin, HDPE Bags for packing, wrapping of various products etc.
5. The applicant has also stated that Custom Tariff does not have specific description / classification for HDPE woven fabric; Tariff heading 3923 does not deal with fabric, it only deals with “articles for the conveyance or packing of goods including sacks and bags” and Tariff heading 3926 deals with “other articles of plastics”; in our understanding it includes HDPE woven fabric; therefore, they are classifying HDPE woven fabric under Customs Tariff “39269099 others” for their export shipments. In light of the forgoing, they have sought confirmation by advance ruling that the above classification is correct; and if not, then suggestion regarding the correct classification is required. It is also stated that the fabric made of HDPE is not specified in the First Schedule & Second Schedule of the Customs Tariff. Accordingly, the applicant requests for Advance Ruling that the appropriate classification of the said goods be ruled under section 28H of the Customs Act, 1962.
6. The concerned Commissioner of Customs has stated inter-alia that the applicant has claimed that tariff heading 3023 does not deal with fabric and it only deals with ‘articles for the conveyance or packing of goods including sacks and bags and tariff heading 3926 deals with ‘other articles of plastics and articles of other materials of ‘tending 3001 to 3914’; as per their understanding CTH 3926 includes HDPE: woven fabric. However, the concerned Commissioner has commented that this plea of the applicant is self-fallacious. The concerned Commissioner has opined that the contention of the applicant that ‘Fabric mode of high density polyethylene’ is not specified in First Schedule Second Schedule of the Customs Tariff’ is wrong; and it should be classified under .Tariff item 3023.
7. Personal hearing in the mutter was held on 11.10.2021 and the same was attended by Shri Vardhmun Doogar, C.A., who began by explaining contents of the application. He briefly explained that they intend to export HDPE fabric, laminated/unlaminated. He also mentioned that they wish to have ruling on classification for the purposes of export as well as imports. Shri Doogar referred to classification decision of Gujarat GST Advance Ruling Authority, also a M.P. High Court judgment in support of his contention that the product in question merits classification under residuary tariff heading 3926.
7.1 In order to obtain clarity regarding the question being posed for advance ruling and eligibility of the applicant to seek the same, the Authority posed a few questions:
(a) On the question regarding present and proposed line of activities of the applicant, Shri Doogar stated that right now they are in the business of exports and domestic sale only but intend to explore the possibility of imports; and therefore, seek a ruling regarding the classification for both export and import purposes. He was advised to make additional submission clarifying the intent to import the said goods;
(b) On a question regarding the sample of the goods, he stated that they have not brought any sample with them; but explained the goods are those which are used to cover buildings under construction. It was explained to him that the Authority would find it useful if sample of goods was presented for better appreciation of the same;
(c) On a question regarding the goods being exported, he clarified that they have earlier exported the specific goods, covered under the application; they do not intend to export the goods under Duty Drawback scheme, rather they plan to export under Advance Authorization Scheme.
(d) He also stated that for domestic sale, they are classifying their goods under heading 3926 for the purposes of levy of GST.
7.2 The Authority advised him to make additional submissions on the lines discussed during the PH and to submit sample of the goods in question, if feasible. Shri Doogar requested to grant time for the purpose, which was granted by the Authority.
8.1 M/s Harmony submitted additional submissions vide their letter dated 25.10.2021 along with a sample of an item said to be HDPE Woven Fabric, wherein the applicant stated inter-alia that:-
(i) the company wishes to export HDPE woven fabric in near future. Further, they may also explore possibilities of importing the same product to meet the additional demand. Therefore, the applicant seeks ruling for classification under First as well as Second Schedule to the Customs Tariff Act, 1975.
(ii) the applicant purchases raw material under Advance Authorisation Scheme; hence they do not claim Duty Drawback on inputs purchased by them; therefore, classification for Duty Drawback is not requested.
(iii) as per their interpretation, HDPE woven fabric would fall under heading 3926 of the Customs Tariff Act, 1975; as articles of Plastic fall under Chapter 39, and HDPE woven fabric is not covered under the heading 3901 to 3925 as there is no specific mention of the product under these headings; since heading 3926 reads as ‘Other articles of plastics and articles of other materials of heading 3901 to 3914’, it implies that articles of plastics or articles of other materials not covered in any of the heading from 3901 to 3925 would be covered under heading 3926, which is a residuary entry; therefore, HDPE woven fabric merit classification under 39269099 and the applicant has made domestic sale of the HDPE woven fabric, classifying the same under HS code 39269099.
8. For their interpretation on classification, they have relied on a few judgements, viz. Advance Ruling No. GUJ/GAAR/R/87/2020 issued by the Gujarat Authority for Advance Ruling, in the matter of M/s Gujarat Raffia Industries Limited and Judgement of Hon’ble High Court of Madhya Pradesh in the case of M/s Raj Packwell Ltd. V. UOI [1990 (50) E.L.T.201 (M.P.)].
8.1 The image of sample (white colour) furnished along with applicant letter dated 25.10.2021 is as below:
8.2 Further, the applicant was requested to mention technical specification of the item which they intend to export or import, viz. length, breadth, shape, whether in rolls or cut-pieces etc., constituent raw material, whether coated, impregnated, laminated or otherwise. The applicant was also asked in case, the fabric is coated, impregnated or laminated, whether such coating/impregnation/lamination has been done after weaving and to declare the material used for such coating/impregnation/lamination. On perusal of the sample supplied along with the applicant’s letter dated 25.10.2021, it is observed that item is made by weaving of strips; therefore, the applicant was also requested to mention thickness and width (in mm) of such strips which are woven to make the item intended for import/export. The applicant vide their email dated 09.11.2021 submitted that following would be the technical specification of the HDPE fabric which they intend to export of import: length-5000 meter to 10,000 meter, breath-72″-125″ Flat fabric, shape-fabric in rolls, raw material-HDPE granules and additives; sample is of un-coated fabric but ruling has been sought for un-coated as well as coated, impregnated, laminated or otherwise and coating/impregnation/lamination has been done after weaving and for coating/impregnation/lamination, materials used is LDPE granule and additive; details of strips/tapes which are woven, thickness-34 micron and width-2.4 mm.
8.3 Thereafter, vide email dated 10.11.2021, the applicant was asked to furnish a representative sample of HDPE woven fabric, coated, impregnated, laminated or otherwise. The applicant, vide their letter dated 15.11.2021 forwarded representative sample of coated fabric and vide email dated 16.11.2021 replied that they have submitted two samples of HDPE coated fabric (single side coated and double side coated) out of which blue tint HDPE Fabric is double side coated & white HDPE fabric is single side coated. The images of both the samples (blue tint and white colour) furnished along with applicant letter dated 15.11.2021 are as below:
(IMAGE OF ONE SIDE COATED FABRIC)
9. In view of the above, having completed the procedure prescribed in the law, I admit the application dated 19.05.2021 filed by M/s Harmony Plastics Pvt. Ltd. and proceed to examine the matter for pronouncing my ruling on the questions of classification posed therein.
9.1 I note that the applicant has requested for ruling on classification of HDPE woven fabric, for the purposes of export and import. Specifically, the applicant has sought ruling on classification of HDPE woven fabric (uncoated), HDPE woven fabric (coated on one side) and HDPE woven fabric (both-side coated). Manufacturing of HDPE woven fabric (un-coated) involves extrusion of raw material namely HDPE granules, films, which are obtained slit into strips; weaving of fabric is done on looms; on perusal of the sample supplied by the applicant, it is observed that item is made by weaving of strips resulting in flat fabric in rolls where width of the strip is 2.44 mm. As per submissions of the applicant the products would be covered under heading 3926, more specifically under “39269990-others” for the purposes of export and import.
9.2 As per comments received from the concerned Commissionerate, the item is classifiable under CTH 39231090. It has been contended that tariff entry at CTH 3923 is an inclusive entry; once it includes under CTH 39232100 — sacks/bags, the preceding heading under CTH 39231090 — Other, includes fabrics of all types of plastics. In this regard, it has also been submitted that in “Customs Tariff with IGST and Foreign Trade Policy (2021-2022) (Vol.I); as per the Duty Drawback Rates (inserted vide Notfn. 07/2020-Cus (N.T.) dated 28.01.2020, the goods having description “HDPE woven fabrics/bags/sacks, whether or not laminated, with or without U.V. stabilization, with or without liners/fasters” are specifically classified under Tariff Item 3923.
9.3 Before proceeding further I wish to clarify that the applicant has .sought ruling on classification of the said goods for both import and export purpose, implying its appropriate classification under First and Second Schedule to the Customs Tariff Act. However, given the structure of the Second Schedule, it is not possible for me to pronounce a ruling under the said Second Schedule. Further, since the applicant has expressly clarified during the PH that they are not interested in seeking a ruling in respect of the drawback rates, the same is not being considered; and for this reason as well reliance on the Drawback Schedule for determining classification as proposed by the concerned Commissionerate may not be appropriate.
9.4 I find that the item under consideration is HDPE woven fabric, whether single side coated, double side coated or uncoated. In the GST Tax Invoice dated 09.10.2021 submitted by the applicant the commodity has been described as “HDPE flat white fabric, coated”. At this juncture, I wish to highlight the fact that the applicant has sought ruling on article in the form of fabric and not sack or bag made from the said fabric. Therefore, following the settled principle of law, I proceed to determine the classification of HDPE woven fabric, whether uncoated or coated on one side or both sides.
9.5 The general dictionary meaning of fabric is “cloth or other material produced by weaving or knitting fibres”. I note that the trade name of the article includes “fabric” in the description, and HDPE woven fabrics are manufactured from HDPE fibre. The applicant has mentioned in their letter dated 15.11.2021 that the HDPE woven fabric is made by interweaving strips/tapes of thickness 34 micron with width of 2.44 MM. It is understood that these tapes are through use of warp and weft (Tana-Bana) method is converted into HDPE/PP fabric and fabric rolls of length 5,000 Meter to 10,000 Meter and breadth 72″-125″ (technical specification provided in the same letter). It appears that the product gets the name of fabricon account of this method of weaving involved in its manufacture. Therefore, it was felt that it would be appropriate to ascertain whether the article may merit classification as textile or textile article under Section XI of the Schedule to the Customs Tariff Act.
9.6. The scope of Section- XI is best understood by the General Notes of Section-XI of Explanatory Notes to HSN, which provides that “In general, Section XI covers raw materials of the textile industry (silk, wool, cotton, man-made fibres, etc.), semi-manufactured products (such as yarns and woven fabrics) and the made-up articles made from those products. However, it excludes a certain number of materials and products such as those mentioned in Note 1 to Section XI, the Notes to certain Chapters or in the following Explanatory Notes on headings in the Section…”.
9.7 It is seen that Note 1 to Section XI provides for exclusion of specific items from the Section; and Note 1(h) covers “Woven, knitted or crocheted fabrics, felt or non-wovens, impregnated, coated, covered or laminated with plastics, or articles thereof, of Chapter 39”. Therefore, the said General Note read with Note 1 (h) to Section XI makes it clear that woven fabrics coated with plastic or articles thereof of Chapter-39 are expressly excluded from the scope of Section-XI.
9.8 In view of above, it is seen that High Density Poly Ethylene (HDPE) woven fabrics, including coated with plastic materials are expressly excluded from the scope of articles covered under Section-XI of the Customs Tariff Act 1975 covering textile and textile articles. Therefore, the said goods are classifiable under Chapter 39 covering Plastics and Articles thereof; Rubber and Articles thereof.
10. I note that the applicant has contended that the goods are classifiable under sub-heading 39269099, whereas the concerned Commissioner has suggested sub-heading 39231090. I find that both the entries at the eight digit level are residuary ” – – – Other”. Heading 3923 covers Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics, of which includes – Sacks and bags (including cones). Heading 3926 is a residuary heading at the four digit level itself, covering 39.26 – Other articles of plastics and articles of other materials of headings 39.01 to 39.14, of which sub-heading 3926 90 is a residuary entry at six digit level and 3926 9099 is a residuary entry at the eight digit level.
10.1 I find it prudent to examine the possibility of classifying the said article under any of the heading/ sub-heading of Chapter 39, starting with heading 3915 before considering the residuary classification under sub-heading 39269099 suggested by the applicant. For this purpose, I specifically take note of the following features of the article under consideration: (a) HDPE woven fabric is made by interweaving strips/tapes of certain thickness and width; (b) these tapes woven using the warp and weft method; (c) HDPE woven fabric is presented as a roll of long length, say of 5,000 Meter to 10,000 Meter; and (d) the articles are those which are used to cover buildings under construction. The details of the uses of the product available online include converting into packaging, sheltering and covering the products. However, sample of the article produced before me is a piece of roll of fabric cut and presented.
10.2 Having gone through each of the sub-heading, I briefly discuss heading 3920, 3921, 3923, 3925 and 3926.
10.3 In headings 39.20 and 39.21, the expression “plates, sheets, film, foil and strip” applies only to plates, sheets, film, foil and strip (other than those of Chapter 54) and to blocks of regular geometric shape, whether or not printed or otherwise surface-worked, uncut or cut into rectangles (including squares) but not further worked (even if when so cut they become articles ready for use). HDPE woven fabric is not classifiable under headings 39.20 and 39.21.
10.4 Heading 3923 covers Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics. It includes sacks and bags (including cones) under heading 3923 10; Stoppers, lids, caps and other closures under heading 3923.50; and residual entry others under 3923.90. The explanatory notes to this heading further explain that this heading covers all articles of plastics commonly used for the packing or conveyance of all kinds of products. The articles covered include: (a) Containers such as boxes, cases, crates, sacks and bags (including cones and refuse sacks), casks, cans, carboys, bottles and flasks. The heading also covers: (i) Cups without handles having the character of containers used for the packing or conveyance of certain foodstuffs, whether or not they have a secondary use as tableware or toilet articles; (ii) Bottle preforms of plastics being intermediate products having tubular shape, with one closed end and one open end threaded to secure a screw type closure, the portion below the threaded end being intended to be expanded to a desired size and shape. (b) Spools, cops, bobbins and similar supports, including video or audio cassettes without magnetic tape. (c) Stoppers, lids, caps and other closures. A careful reading to this heading suggests that HDPE woven fabric is not covered under this heading, in particular under the expression under closures. Further, since the fabric is in roll form, even though it can be used to make bags or sacks, following the settled principle of law, the classification of the article should be based on the form it is presented in, and therefore, cannot be classified under heading 3923 10.
10.5 Heading 3925 covers Builders’ ware of plastics, not elsewhere specified or included. Even though the applicant has contended that the fabrics are those which are used to cover buildings under construction, they cannot be considered as builder’s ware of plastics, taking into account the Explanatory Notes of HSN and description of the articles mentioned in the heading/ sub-heading.
10.6 I now come to the residual heading 3926, covering Other articles of plastics and articles of other materials of headings 39.01 to 39.14. This heading covers articles, not elsewhere specified or included, of plastics (as defined in Note 1 to the Chapter) or of other materials of headings 39.01 to 39.14, noting that HDPE in its primary form is covered under heading 3901. Therefore, other articles of HDPE, not elsewhere specified would merit classification under this residuary heading. HSN Explanatory Notes to the CTH 3926 provide guidance regarding the kind of articles that may merit classification under this heading. In this regard, I find that Explanatory note specifically provide that they include: (4) Dust-sheets, protective bags, awnings, file-covers, document-jackets, book covers and reading jackets, and similar protective goods made by sewing or glueing together sheets of plastics.
10.7 I understand that Dust sheets are fabrics which are used to cover furniture, floors, buildings and the likes during construction or carrying out any repair/decoration. Since, the article HDPE woven fabrics (uncoated/one-side coated/double-side coated) are used to cover buildings under construction, as claimed by the applicant, it is most appropriately considered to be used as a dust-sheet for the purpose of covering of a building under construction.
10.8 Therefore, taking into account the detailed submissions of the applicant, including the likely usage of the article under consideration, absence of specific heading/ sub-heading for HDPE woven fabric in Chapter 39, positive mention of the dust sheet in Explanatory Note to Heading 3926, I find that HDPE woven fabrics (uncoated/one-side coated/double-side coated) are most appropriately covered under residual heading 3926 and further the residual sub-heading 3926 9099 of the Customs Tariff Act ,1975.
11. I rule accordingly.
