Case Law Details

Case Name : In re Mean Light Co. (CAAR Mumbai)
Appeal Number : Ruling No. CAAR/MUM/ARC/05/2024: 16/01/2024
Date of Judgement/Order :
Related Assessment Year :

In re Mean Light Co. (CAAR Mumbai)

Introduction: In a recent ruling by the Customs Authority for Advance Rulings (CAAR) in Mumbai, the classification of rolls made of Polyester, Nylon Taffeta, Satin, etc., was deliberated. The applicant, Mean Light Co., sought an advance ruling on the classification of these rolls, their nature, and the applicable Integrated Goods and Services Tax (IGST) rate for imports through the port of Chennai.

Background: Mean Light Co., having IEC No. 0707028647, filed an application (CAAR-1) before the CAAR, Mumbai, on 10.04.2023. The Chennai Customs House responded on 19.12.2023, presenting arguments on the classification of the rolls, emphasizing the importance of the nature of the goods. The dispute revolved around whether the rolls should be classified under Chapter Heading 5807 or other relevant headings.

Chennai Customs House’s Position: Chennai Customs House argued that the imported rolls, intended for use as labels, should not be classified under Heading 5807. Instead, they suggested various classifications based on the nature, width, and coating of the rolls. The Chennai Customs House referred to the Explanatory Notes and conditions under Heading 5807, asserting that the goods did not meet the criteria for labels.

Applicant’s Arguments: In response, Mean Light Co. clarified that the goods were woven and contested Chennai Customs House’s interpretation of the Explanatory Notes. They argued that the rolls, even without printing, should be classified under Heading 5807. The applicant highlighted case laws supporting their position and emphasized the functional character of the goods for identification.

Personal Hearing: A personal hearing took place on 21.12.2023, where the authorized representatives of Mean Light Co. reiterated their submissions. Notably, no representation was made by Chennai Customs House during the hearing. The applicant submitted rebuttals, addressing Chennai Customs House’s observations and presenting additional facts and clarifications.

CAAR Mumbai’s Decision: After considering all submissions, the CAAR Mumbai delivered its ruling on the classification of the rolls. They referred to a similar case (M/s. Mahaveer Impex) ruling in favor of the applicant and concurred with the arguments presented by Mean Light Co.’s authorized representatives.

Ruling and Classification: The CAAR Mumbai ruled that the rolls made of Polyester, Nylon Taffeta, Satin, etc., with printable features, should be classified under Heading 5807. Specifically, sub-heading 5807 1020 was identified, and the products were deemed to be covered by entry no. 153 of Schedule II of Notification 1/2017 — IGST (Rate) dated 28 June 2017.

FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI

M/s. Mean Light Co. (having IEC No. 0707028647 and hereinafter referred to as ‘the applicant’, in short) filed an application (CAAR-1) for advance ruling before the Customs Authority for Advance Rulings, Mumbai (CAAR in short). The said application was received in the secretariat of the CAAR, Mumbai on 10.04.2023 along with its enclosures in terms of Section 2811 (1) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’ also). The applicant is seeking advance ruling on the classification of Rolls made of Polyester, Nylon Taffeta, Satin etc. which are available with width ranges from 10 millimeter to 810 millimeter with giftable feature more specifically described as under in Table ‘A’ collectively referred to as Products’ and the applicable IGST rate under sub-section (7) of Section 3 of the Customs Tariff Act read with Notifications issued on import of said ‘products’ for imports through the port f Chennai.

2. Applicant has stated as follows in their statement of relevant facts having a bearing on the question(s) raised enclosed with the CAAR-1 application:

2.1. The applicant, inter-alia, is engaged in the business of purchase and sale of said `products’ in India. The applicant has proposed to import said ‘products’ more specifically described in Table-A as under:-

Table ‘A’

No. Item Description Width in MM
1 Nylon Taffeta Roll 45.00
2 Nylon Taffeta Roll 30.00
3 Nylon Taffeta Roll 127.00
4

5

Nylon Taffeta Roll 25.00
Nylon Taffeta Roll 25.00
6 Nylon Taffeta Roll 32.00
7 Nylon Taffeta Roll 64.00
8 Nylon Taffeta Roll 38.00
9 Nylon Taffeta Roll 40.00
10 Nylon Taffeta Roll 38.00
11 Nylon Taffeta Roll 32.00
12 Nylon Taffeta Roll 32.00
13 Nylon Taffeta Roll 25.00
14 Nylon Taffeta Roll 10.00
15 Nylon Taffeta Roll 204.00
16 Nylon Taffeta Roll 153.00
17 Nylon Taffeta Roll 102.00
18 Single Side Oven Edge Polyester-Satin Roll 28.00
19 Single Side Oven Edge Polyester-Satin Roll 25.00
20 Tearaway Taffeta Roll 35.00
21 Single Side Oven Edge Polyester-Satin Roll 32.00
22 Single Side Slit polyester Satin Roll 12.00
23 Single Side Oven Edge Polyester-Satin Roll 45.00
24 Single Side Oven Edge Polyester-Satin Roll 15.00
25 Iron On Taffeta Roll 30.00
26 Iron On Taffeta Roll 22.00
27 Iron On Taffeta Roll 20.00
28 Recycled Single Side slit Black polyester -satin Roll 40.00
29 Iron On Taffeta Roll 305.00
30 Tearaway Taffeta Roll 30.00
31 Single Side Slit Satin Roll 32.00
32 Single Side Slit Satin Roll 25.00
33 Single Side Slit Satin Roll 32.00
34 Single Side Slit Satin Roll 30.00
35 Double Side Slit Satin Roll 38.00
36 Double Side Slit Satin Roll 30.00
37 Double Side Slit Satin Roll 20.00
38 Double Side Slit Satin Roll 30.00
39 Double Side Slit Satin Roll 15.00
40 Single Side Oven Edge Polyester-Satin Roll 20.00
41 Single Side Oven Edge Polyester-Satin Roll- Black 20.00
42 Single Side Satin Black Roll 25.00
43 Double Side Slit Satin Roll- Black 32.00
44 Double Side Slit Satin Roll- Black 35.00
45 Double Side Slit Satin Roll 32.00
46 Double Side Oven Edge Polyester-Satin Roll 32.0

The applicant has submitted that their supplier has classified the products under HSN 580710. As per First Schedule of Customs Tariff Act, 1962, the basic customs duty for s falling under HSN 580710 is 10%. Similarly, as per entry no. 153 of Schedule II of fication 1/2017 — IGST (Rate) 28 June 2017, the IGST rate for goods falling under HSN is 12%. The ultimate customer of the products are the companies engaged in manufactures adymade garments. The products will be ultimately used for the purpose to capture mark, wash care instructions and other details like country of manufacturing, size, make n the products for the reference of the customers. Separately, the website links of the foreign suppliers elaborating on the use of products is provided as follows: < ://www.hengxin-label.com) >, < https://king-grp.com>.

2.2 The products have following characteristics:

  • The products are made of manmade fibers textile fabrics
  • The products are not embroidered
  • The products are known as labels in common parlance and trade. The Indian suppliers are selling the rolls with IISN 580710. The copy of the invoice/ proforma invoice/ email issued by them for sale of rolls to Mean Light is attached with said application as Exhibit.
  • There is no alternate use of the products except as labels
  • The labels are stitched to products to provide information about washcare or supplier etc. The printing of such information is not legible & durable on the plain fabric and hence, a layer of coating has to be put to enable printing on the same.
  • The Rolls made-up of Taffeta has a polyamide coating of different thickness depending on the requirements of the customers. The polyamide coating on the product facilitates printing of the product/ washing information on the labels which is later stitched to the products. It is submitted that the coated/calendared side of the rolls shines compared to the side without coating/calendaring.
  • Further, it is submitted that typically the rolls shall be of the width 10mm to 50mm but at times the supplier has a standard size of the rolls say 300mm or 500mm, which will subsequently be cut to the size for use as labels by the customers.

2.3 The applicant has asked specific question(s) on which Advance Ruling is required:

a) Whether the products proposed to be imported can be classified under CTH 580710 of the First Schedule to the Customs Tariff Act, 1975 and leviable to customs duty of 10%?

b) If answer to (a) above is negative, what is the classification of the products proposed to be imported?

c) Whether the products are covered by entry no. 153 of Schedule II of Notification 1/2017 — IGST (Rate) 28 June 2017?

d) If answer to (c) above is negative, what is IGST rate under sub-section (7) of Section 3 of the said Customs Tariff Act read with Notifications issued on import of the products?

3. Applicant’s Interpretation:-

3.1. Products classifiable under INN 580710:-

Chapter no. 58 covers ‘Special woven fabrics; tufted textile fabrics; lace; tapestries; trimmings; embroidery’. Further, Chapter heading 580710 applies to ‘labels, badges and similar articles of textile materials, in the piece, in strips or cut to shape or size, not embroidered’. The extract of chapter heading 580710 is reproduced below:

Tariff Item Description of goods
5807 LABELS, BADGES AND SIMILAR ARTICLES OF TEXTILE MATERIALS, IN THE PIECE, IN STRIPS OR CUT TO SHAPE OR SIZE, NOT EMBROIDERED
5807 10 – Woven :
5807 10 10 — Of cotton
5807 10 20 — Of man-made fibre
5807 10 90 — Other
5807 90 – Other :
5807 90 10 — Felt or non-woven
5807 90 90 — Other

As per the World Customs — HSN code, the chapter heading 5807 covers labels of any textile material subject to conditions. The relevant extract is reproduced below:

58.07 — Labels, badges and similar articles of textile materials, in the piece, in strips or cut to shape or size, not embroidered.

5807.10 — Woven

5807.90 — Other

Subject to the conditions specified below this heading covers:

(A) Labels of any textile material (including knitted). These include labels of a kind used for marking wearing apparel, household linen, mattresses, tents, soft toys or other goods. They are utilitarian labels bearing individual inscriptions or motifs. Such labels include, interalia, commercial labels bearing the trade name or trade mark of the manufacturer or the nature of the constituent textile (“silk”, “viscose rayon”, etc.) and labels used by private individuals (boarding school pupils, soldiers; etc) to identify their their personal property; the latter variety sometimes bear initials or figures or comprise sometimes a framed space to take a hand-written inscription.

(B) Badges and similar articles of any textile material (including knitted). This category includes badges, emblems, “flashes”, etc., of a kind normally sewn to the outer part of wearing apparel (sporting, military, local or national badges, etc., badges bearing the names of youth associations, sailors’ cap badges with the name of a ship, etc.).

The above articles are classified in the heading only if the Mill the following conditions:

(1) They must not be embroidery. The inscriptions or motifs on the articles classified here are generally produced by weaving (usually broch work) or by printing.

(2) They must be in the piece, in strips (as is usually the case) or in separate units obtained by cutting to size or shape but must not be otherwise made up.

This heading does not include labels, badges and similar products, which have been embroidered (heading 58.10) or made up otherwise than by cutting to shape or size (heading 61.17, 62.17, or 63.07).

The products proposed to be imported by the applicant are meant to be used to capture tradenark, wash care instructions and other details like country of manufacturing, size, make etc. on the products for the reference of the customers. The photos depicting the end use of the product is attached with application. The applicant relies on the Ruling of The Customs Authority for Advance Ruling — Mumbai in the case of M/s Mahaveer Impex CAAR/Mum/ARC/01/2023 dated 17 January 2023 and the decision of the Calcutta High Court in the case of M/s Bijay Kurnar Poddar vs Union of India 2000 (126) ELT 393 (Calcutta). The relevant extract of Ruling in the case of M/s Mahaveer Impex CAAR/Mum/ARC/01/2023 dated 17 January 2023. Para 6.5 of the Ruling on Page -13

I also find that various courts in a plethora of cases have held that USN explanatory notes have a persuasive effect in deciding the matters of classification. Keeping in view the observation of Apex Court in various decisions referred in forgoing paras as well as the decision of High Court decision in case of M/s Bijay Kumar Poddar vs Union of India, I find that the said products have to be considered as articles similar to labels of textile materials in strips and accordingly are classifiable under heading CTH 58.07. I do not find any grounds to disagree with the High Court decision in case of M/s Bijay Kumar Poddar vs Union of India 2000 (126) ELT 393 (Calcutta) on the issue of classification in the instant case.”

In addition, the applicant also relies on the Ruling of the Karnataka Authority for Advance Ruling (`KAAR’) under the Goods and Services Tax Act, 2017 in case of M/s. Mean Light Co TS-623-AAR(KAR)-2022-GST. In this case, the KAAR has held that the satin and Tafetta Rolls, used for printing wash care instructions & fabric contents are classifiable as label under Chapter Tariff heading 580710. The relevant extract is reproduced below: Para 18

” … The impugned products are narrow woven fabrics, made up of man made fibres i.e. Polyester Yarn and thus are squarely covered under tariff heading 5807 10 20. Therefore the impugned products merit classification under tariff heading 5807 1020.”

3.2 Goods to be classified as understood in trade and common parlance:-

The term ‘labels’ is not defined in the Customs Tariff. The applicant has submitted that the Hon. Bombay High Court in the case of M/s. Pharm Aromatic Chemicals reported in 1997(95) E.L.T.203 (Born.) in para 14 has observed as follows: 14. The principles that emerge from the above interpretation can be summed up thus: Where no definition is provided in the statute for ascertaining the correct meaning of a fiscal entry, the same should be construed as understood in common parlance or trade or commercial parlance. Such words must be understood in their popular sense. The strict or technical meaning or the dictionary meaning of the entry is not be resorted to. The nomenclature given by the parties to the word or expression is not determinative or conclusive of the nature of the goods. The same will have to be determined by application of the well-settled rules or principles of interpretation which have been referred to as “common parlance” rule, “trade or commercial parlance” rule, “common sense rule of interpretation” and “user test”. The application of the principles will again depend on the facts and circumstances of each case. No test or tests can be said to be of universal application. Each case will have to be decided by applying one or more rules of interpretation depending upon the facts of that particular case.

Further, the Supreme Court in the case of DUNLOP INDIA LTD. & MADRAS RUBBER FACTORY LTD reported in 1983 (13) E.L.T. 1566 (S.C.) in para 31 & 36 has observed as follows: 31. It is well established that in interpreting the meaning of words in a taxing statute, the acceptation of a particular word by the Trade and its popular meaning should commend itself to the authority. 36. We are, however, unable to accept the submission. It is clear that meanings given to articles in a fiscal statute must be as people in trade and commerce, conversant with the subject, generally treat and understand them in the usual course. But once an article is classified and put under a distinct entry, the basis of the classification is not open to question. Technical and scientific tests offer guidance only within limits. Once the articles are in circulation and come to be described and known in common parlance, we then see no difficulty for statutory classification under a particular entry.

Further, the Bombay High Court in the case of M/s. Kantilal Nandchand and Co. reported in 2000-(123)E.L.T.311 (Born.) in para 12 has observed as follows: 12.It is now well-settled by judicial decisions that when an expression is not defined in a Statute, the meaning to be given to it is the one which it has in popular or trade parlance.

Further, the Karnataka High Court in the case of M/s. Bella Premier Happy Hygiene Care Pvt. Ltd. reported in 2018 (17)G.S.T.L 603 (Kar.) in para 15 has observed as follows: 15. It is well-settled that i f a commodity can by some rational understanding or analysis be brought or related to specific entry in the tax laws, the same cannot be taxed under the residuary entry and what is important is to apply the Trade Parlance Test or Common Parlance Test and not to apply the hair-splitting exercise to apply the technical terms.

In view of the above judgements, the applicant submitted that in the present case as well, labels are not specifically defined in the notification. The correct meaning of the same should be construed as understood in common parlance or trade or commercial parlance and that hair-splitting exercise to apply the technical terms or the dictionary meaning of the entry is not to be resorted to.

3.3 Products are known as ‘labels’ in trade parlance:-

In the present case, the applicant submits that the products proposed to be imported are treated as labels in the trade. It can be observed from the name / trade name of the supplier i.e. hengxin-label. Further, the applicant has made a local procurement of the Rolls within India and the same is supplied by the domestic supplier under the HSN 580710. In view of the above, it is submitted that it is well established by the applicant that the products proposed to be imparted are understood as ‘labels’ by the persons in the trade dealing with the subject goods. Therefore, applying to the ratio of the said judgments cited above, the applicant submitted that the subject products proposed to be imported shall mean ‘labels’ and are classifiable under the chap er heading 580710.

3.4 Functional Test:-

The Hon. Supreme Court in the case of ATUL GLASS INDUSTRIES LTD.1986 (25) E.L.T 473 (S. C.) has held that classification of the product can also be based on functional test i.e. the function the product performs. In this case the dispute was classification of Screens fitted in motor vehicles as wind screens, rear screens and door screens. The court observed as follows while approving the classification as part of car.

8 The test commonly applied to such cases is : How is the product identified by the class or section of people dealing with or using the product? That is a test which is attracted whenever the statute does not contain any definition. Porritts and Spencer (Asia) Ltd. v. State of Haryana (1978) 42 S.T.C. 433 = 1983 (13) E.L.T 1607 (S. C.). It is generally by its functional character that a product is so identified In Commissioner of Sales Tax, U.P. v. Macneill & Barry Ltd, Kanpur (1985) 2 SCALE 1093 = 1986 (23) E.L.T. 5 (S.C.), this Court expressed the view that ammonia paper and ferro paper, used for obtaining prints and sketches of site plans could not be described as paper as that word was used in common parlance. On the same basis the Orissa High Court held in State of Orissa v. Gestate Duplicators (P) Ltd. (1974) 33 S.T.C. 333 that stencil paper could not be classified as paper for the purposes of the Orissa Sales Tax Act. It is a matter of common experience that. the identity of an article is associated with its primary function. It is only logical that it should be so. When a consumer buys an article, he buys it because it performs a specific function for him. There is a mental association in the mind of the consumer between the article and the need it supplies in his life. It is the functional character of the article which identifies it in his mind. In the case of a glass mirror, the consumer recalls primarily the reflective function of the article more than anything else. It is a mirror, an article which reflects images. It is referred to as a glass mirror only because the word glass is descriptive of the mirror in that glass has been used as a medium for manufacturing the mirror. The basic or fundamental character of the article lies in its being a mirror. It was observed by this Court in Delhi Cloth and General Mills Co. Ltd. v. State of Rajasthan & Ors. (1980) 3 SCR 1109 =1980 (6) E.L.T. 383 (S. C.) which was a case under the Sales Tax law :”In determining the meaning or connotation of words and expression describing an article or commodity the turnover of which is taxed in a sales tax enactment, if there is one principal fairly well settled it is that the words or expressions must be construed in the sense in which they are understood in the trade, by the dealer and the consumer. It is they who are concerned with it, and it is the sense in which they understand it that constitutes the definitive index of the legislative intention when the statute was enacted.”

That was also the view expressed in Geep Flashlight Industries Ltd. v. Union of India and Others – 1985 (22) E.L.T. 3. Where the goods are not marketable that principle of construction is not attracted. Indian Aluminium Cables Ltd. v. Union of India and Others – (1985) 3 S.C.C. 284 = 1985 (21) E.L.T. 3 (S.C.). The question whether thermometers, lactometers, syringes, eye-wash glasses and measuring glasses could be described as ‘glassware’ for the purpose of the Orissa Sales Tax Act, 1947 was answered by the Orissa High Court in State of Orissa v. Janta Medical Stores (1976) 37 STC 33 in the negative. To the same effect is the decision of this Court in Indo International Industries v. Commissioner of Sales Tax, Uttar Pradesh, (1981) 3 S.C.R. 294 = 1981 (6) E.L.T. 325 (S.C.), where hypodermic clinical syringes were regarded as falling more accurately under the entry relating to “hospital equipment and apparatus” rather than under the entry which related to “glasswares” in the U.P. Sales Tax Act.

Thus, the applicant submitted that the classification of any product is based on ultimate function which it performs.

3.5 No alternate use available of the products:-

One side or both sides of Rolls proposed to be imported by the applicant shall be coated/ processed specially to enable printing. It is a common practice of the retailers to stitch labels to the products to provide wash care information or details about the supplier/ make etc. The printing of such information is not legible & durable on the plain fabric as in the normal fabric printing is not clear and printing gets smudged. Further, it is important that the information printed should stay for longer period and even after washing.

Accordingly, the fabric undergoes a process like fabric washing by aqua hydrogen dioxide liquid caustic, Dyeing, fluorescent bleacher, high pressure calendaring or by coating which enable printing on the same. The said processes/ coating on the fabric facilitates printing on the fabric, which is later stitched to the products. It is submitted that the coated/ processed side of the Rolls shines compared to the other side. It is apparent from the sample that the side coated/ processed shines compared to the other side. In view of above, the Rolls proposed to be imported by the applicant shall be classified as ‘labels’ or ‘similar articles’ as the Chapter Tariff Heading 580710 specifically covers all the products used as labels or similar articles.

The Hon’ble Calcutta High Court in the case of M/s Bijay Kumar Poddar vs Union of India 2000 (126) ELT 393 (Calcutta) has held that sub-heading 5807 provides and covers labels and similar articles. In this case the dispute was of classification of ‘reels of 250 yards each of textile fabrics’. 25. The facts are not in dispute that the petitioner has imported plain label strips described as cloth for printing. The sample of that material also produced in the Court and learned Counsel submits that there cannot be any other use of this material, except for printing the labels and in the trade market under the catalogues, these plain strips are called labels. Learned Counsel for the respondent could not pointed out any use of the material produced in the court other than the use of the plain strips for purpose of printing labels. The material is known in the trade market as labels. We do not find any justification to put that material under the sub-heading 59.07. Sub-heading provides for woven fabrics of chapter 54 of plain weave woven strips of width 1.5 cm to 3.5 cm. Its correct heading should be and not 58.07 as that entry dose not cover only the labels but also the similar materials.

3.6 Textiles labels printed or otherwise are classifiable under HSN 580710:-

CTH 580710 does not require a label to be printed for classification under the heading. Further there is no such requirement in the chapter and section notes. The applicant relies on the below paras of the decision in the case of Bijay Kumar Poddar (supra). The High Court observed that if the unprinted label is not label in strict sense then in that case the material imported can be said similar to label. The relevant extract is reproduced below: 20. Sub- heading 58.07 provides and covers labels and similar articles. If it is not label in strict sense. In that case the material imported can be said similar to label…. 23. Unprinted labels if not accepted giving narrow meaning to it. It should be accepted as similar articles as that of label. when in the trade world it is known as label. Specially when in the trade word it is known as label.

3.7 The Roll would be imported in standard sizes and can be cut as per the requirement of the customer:-

The Rolls comes in a specified size as maintained by the suppliers and commonly accepted in the trade practices. The applicant shall import the Rolls as per the standard size maintained by the supplier and subsequently sell the same to the Indian customers who will cut to size as per their requirements. Further, the Rolls have multiple Industry applications like garments, toys, automobile and the same are required to be cut in the size as per the product’s requirement and hence, it does not come with marking. In case the Rolls are given a specific making or cutting then the same will have a limited application and can be used only by a particular customer/ industry. However, the applicant will import the Rolls and then identify the customer, and hence, the Rolls cannot come with a specific cut marking.

4. Chennai Customs House which is the concerned jurisdictional Customs Commissionerate has responded to the subject application vide letter dated 19.12.2023 and the is reproduced as under:

The product under consideration arc the textile fabrics in roll form having different widths. Some of the products are coated on one side or both the sides. The end use of the product is to be used as labels upon printing and cutting as per the requirement of the end users. In this regard, the following points are pertinent to remember before deciding the classification: is presented to the Customs classification of the goods is to be decided based on the nature of the goods as to the Customs; -End use of the goods is not the sole criteria for deciding classification of the of the goods. The importer proposed to import goods in roll form for final use as labels by the garment manufactures. However, the ‘importer has not stated whether the goods are woven/knitted/non-woven to decide the classification. The importer has stated that the word “Label” is not defined in the tariff. It is true that the word “Label” is not defined in the Tariff. However, in the Explanatory notes it is clearly stated that what constitutes a label. The same is reproduced below for ready reference:

“Labels of any textile material (including knitted), These include labels of a kind used for marking wearing apparel, household linen, mattresses, tents, soft toys, or other goods. They are utilitarian labels bearing individual inscriptions or motifs. Such labels include, inter alia, commercial labels bearing the trade name or trademark of the manufacturer or the nature of the constituent textile (” ‘silk”, “viscose rayon”, etc.) and labels used by private individuals (boarding school pupils, soldiers, etc.) to identify their personal property; the latter variety sometimes bear initials or figures or comprise sometimes framed space to take a hand-written Inscription.”

On plain reading of the above, it is evident that a label shall bear individual inscriptions or motifs viz. Trademark/ constituent textile etc. The explanatory notes clearly states the conditions for classifying the goods under the heading 5807. The same is reproduced below for ready reference:

“(1) They must not be embroidery. The inscriptions or motifs on the articles classified here are generally produced by weaving (usually broche work) or by printing.

(2) They must be in the piece, in strips (as is usually the case) or in separate units obtained by cutting to size or shape but must not be otherwise made up.”

On plain reading of condition number 1, it is evident that the goods following under the heading 5807 shall have inscriptions or motifs on them produced by wearing or by printing and it shall not be produced by way of embroidery.

The importer had made a reference to the point that, if the goods are not covered under labels the same may be considered as qualifying under similar articles of labels and thereby falls under the heading 5807. Without prejudice to going into the merits of whether the goods can be treated as similar articles of labels, it is important to consider whether similar articles of labels are covered under the heading 5807. The heading 5807 covers “Labels, badges and similar articles of textile materials, in the piece, in strips or cut to shape or size, not embroidered”. It appears the correct interpretation of the goods covered under 5807 is “Labels”, “Badges and similar articles of textile materials”. The explanatory notes also clearly made this distinction in the notes and specified “Labels of any textile material” and “Badges and similar articles of any textile material” separately. Therefore, the contention of the importer that if the imported goods are not considered as Labels the same may be treated as similar articles of labels and to classify under 5807 appears to be contentious, as the word similar articles qualifies only badges and not labels, as is clearly mentioned in Explanatory notes.

The heading 5806 covers “narrow woven fabrics, other than the goods of heading 5807”. Narrow woven fabrics are those woven fabrics with a width not exceeding 30cm. The explanatory notes state the goods which are excluded under the heading. The relevant portion of the same is reproduced below for ready reference.

“This heading excludes:

(a)….

(b)….

(c) Narrow woven fabrics more specifically covered by other headings, e.g., those having the character of:

(1) Woven labels, badges and similar articles, in strips (heading 58.07 or 58,10)………. From the plain reading of the same, it is evident that only narrow woven fabrics (<30cm width) having the characteristics of woven labels, badges and similar articles, in strips are excluded from the scope of 5806 and covered under 5807. The imported goods are in roll form of various widths and not having any inscriptions or motifs to qualify as label and therefore the goods as is imported do not have the characteristics of a label.

The Book “Customs Classification of Textiles and Textile Articles under HSN-Explanatory Notes” Authored by Shri. Ajay Kumar Gupta (IRS), who was a member of formulation of 8 digit 1-ISN code for the textile commodities falling under Chapter 50-63, is one of the most referred books by various forums including DRI, CESTAT etc.

It is interesting to find out the insights provided in this book in the subject matter regarding the labels. The same is reproduced below (as it is) for ready reference:

“Label of this heading is a small piece of cloth attached to an article to designate its origin, owner, contents, use, or destination. It is also a distinctive name or trademark identifying a product or manufacturer. It may be woven, knitted or crocheted. It may be printed or coloured woven; plain or embossed; big or small. Since there are no standard specifications with respect to dimensions, it needs to be distinguished from made ups of a kind classified under Chapters 61-63. The design, content of text, etc., are the crucial determining factors.

In terms of Interpretative Rule 1 and Rule 2(a), labels, whether they are made ups or not, should be classified under this heading, provided they should have an essential character of a label. However, Section Note 7(a) to Section XI is equally important. As per this Note, any fabric cut into a square and a rectangle will not be considered a made up. So, labels cut from a roll of ribbon without closed or hemmed edges do not qualify as as made ups in terms of Section Note 7. Instead, they ought to be treated as ribbon in running length (under heading 5806). But, if such ribbons have regular cut markings and they bear typical designs of a label, they shall be treated as labels in strips of this heading.

This should not mean that ribbons cut at significant large regular intervals would automatically qualify as label. Sometimes, a ribbon or tape has a continuous pattern without any breaks. Such a tape should not be treated as label tape. Instead, it should be treated as a narrow-woven fabric of heading 5806.”

From the foregoing, it is observed that for qualifying a textile article as a label, the goods shall have the following characteristics:

  • The lable can be woven, knitted or crocheted.
  • It can be any size.
  • The design content of text etc. are crucial determining factors of a label to differentiate the same from that of a made up classifiable under chapter 61-63
  • A piece cut from a roll of ribbon (with text on it) without hemmed edges neither qualifies as a label nor a made up, but the same shall be classifiable as ribbon in running length under 5806.
  • If a roll of label has regular cut markings and they bear typical designs of label, they shall be treated as labels in strip under the heading 5807.

In view of the above points, Jurisdiction Commissionerate submitted that the product under consideration i.e. “Rolls made of Polyester, Nylon Taffeta, Satin etc which are available with width ranges from 10 millimeter to 810 millimeter” appears to be rightly classifiable under various CTI-I as follows:

1. If the rolls are woven and the width is less than 30 cm and not coated or coating is not visible to the naked eye, the goods are rightly classifiable under 58063200 as narrow woven fabrics made of manmade fibre.

2. If the rolls are woven and the width is more than 30 cm and not coated or coating is not visible to the naked eye, then the classification depends on the nature of the yarn used as follows:

a. If the yarn is filament yarn, the goods are rightly classifiable under the CTII 5407 and at 8-digit level the classification depends on whether the goods are unbleached/bleached/dyed/printed.

b. If the yarn is spun yarn, the goods are rightly classifiable under the CTH 5512 and at 8-digit level the classification depends on whether the goods are unbleached/bleached/dyed/printed.

3. If the rolls are coated with polyamide or any polymeric material and the coating is visible to the naked eye, the goods are rightly classifiable under 59039090.

4. If the rolls are of knitted fabric, the width is less than 30 cm and not coated or coating is not visible to the naked eye, then the goods are classifiable under 6003 3000.

5. If the rolls are of knitted fabric and the width is more than 30 cm, then the same shall be classifiable as follows:

a. If the rolls are warp knitted, the same shall be classifiable under the heading 6005 8-digit level the classification depends on whether the goods are unbleached/bleached/dyed/printed.

b. If the rolls are weft knitted, the same shall be classifiable under the heading 6006 8-digit level the classification depends on whether the goods are unbleached/bleached/dyed/printed.

5. A personal hearing in the matter was conducted on 21.12.2023 in office of the CAAR, Mumbai. During the personal hearing the authorized representatives of M/s. Mean Light Co., Shri S. S. Gupta, Advocate and Shri Vaibhav Shah, Advocate both reiterated their earlier submissions made in the applications to CAAR, Mumbai. They also cited some case laws to strengthen their argument that the products in question are correctly classifiable under CTH 5807 more particularly under 5807 10. It is pertinent to mention that no one appeared from the concerned Jurisdiction Commissionerate i.e. Chennai Customs House during the said Personal Hearing either online or in person. Although, Chennai Commissionerate has submitted comments/reply reproduced in para 4 (supra). During the Personal Hearing the learned Advocates also rebutted the reply/comments of the Chennai Customs House by reiterating their arguments already submitted in the application. Further, learned advocates present for the applicant have submitted rebuttal dated 08.01.2024 and 11.01.2024 to the comments of Chennai Customs in office of the CAAR, Mumbai wherein they have reiterated their earlier submissions, although, in addition to that some other facts/arguments/clarifications have been brought forth by the learned advocates of the applicant which are reproduced as under:-

In response to observation of Chennai Customs that the applicant has not stated whether the goods are woven/knitted/non-woven to decide the classification, the applicant has clarified that the goods are woven. Further, CTH 580710 does not require label to be printed for classification under it and there is not such requirement in the section/chapter notes.

In terms of the principle of ejusdem generis, when a list of two or more specific descriptors are followed by more general descriptors, the otherwise wide meaning of the general descriptors must be restricted to the same class, if any, of the specific words that precee them. In the present case, applying the principle of ejusdem generis, the term ‘similar’ shall mean same class of as ‘labels’ and ‘badges’ both. Accordingly, the term ‘similar’ shall apply both ‘labels’ and ‘badges’. The rolls proposed to be imported by the applicant do not have an alternate use other than labels. The Commissioner of Customs, Chennai, in his letter, has not highlighted any alternate use of the rolls proposed to be imported by the applicant. The Hon’ble Supreme Court in the case of Collector of Customs Vs. Kumudam Publications reported in 1997 (96) ELT 226 (SC) has held that it is not entirely correct to say that end use or function of the goods is irrelevant to decide the question of classification. A three Judge Bench of the Hon’ble Supreme Court had also relied upon the function and end use in the determining the classification in Indian Tool Manufacturers Vs. Asstt. Collector of Central Excise, Nasik & Others reported in 1994 (74) ELT 12 (SC).

In the present case, the rolls are coated/processed specifically to enable legible and durable printing, which is not possible on normal fabric as it get smudged and disappeared quickly. Accordingly, the basis of the classification i.e. ‘not coated or coating is not visible’ is incorrect and hence, the rolls proposed to be imported by the applicant do not fall under HSN 58063200, 5407 or 5512.

The classification under Chapter 59 shall be applicable to woven fabrics of Chapters 50 to 55 and headings 5803 and 5806 etc. The note 1 of the Chapter 59 is reproduced below:

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.

The applicant submitted that their product does not fall in the above chapters and accordingly, the classification IISN 5903 does not apply to it. The applicant has further submitted that the satin rolls are not coated with polyamide or any polymeric material. In the present case, the rolls proposed to be imported by the applicant are not coated with polyamide or any polymeric material. The fabric undergoes a process like fabric washing by aqua hydrogen dioxide liquid caustic, dyeing, fluorescent bleacher, high pressure calendaring or by coating which enable printing on them. The said processes/coating on the fabric facilitates printing on the fabric, which is later stitched to the products and coated/processed side of the rolls shines compared to the other side. Accordingly, the basis of the classification i.e. ‘coated with polyamide or any polymeric material’ is incorrect and hence, the rolls proposed to be imported by the applicant do not fall under HSN 5903 9090.

Further, the rolls proposed to be imported by the applicant are of woven fabric, Accordingly, the basis of the classification i.e. ‘rolls are of knitted fabric’ is incorrect and hence, the said rolls do not fall under HSN 6003 3000, 6005 or 6006.

6. I have taken into consideration all the materials placed on record in respect of the subject goods including the submissions made by the applicant during the course of personal hearing. I have gone through the response received from the Chennai Customs House and the rebuttal to that filed by the applicant. I therefore proceed to decide the present applications regarding classification of “Rolls made of Polyester, Nylon Taffeta, Satin etc. which are available with width ranges from 10 millimeter to 810 millimeter with printable feature more specifically described in Table ‘A’ (supra) collectively referred to as ‘Products’ on the basis of the information on record as well as the existing legal framework having bearing on the classification of the products in question under the first schedule of the Customs Tariff Act, 1975.

6.1 In the recent ruling dated 17.01.2023 in the case of M/s. Mahaveer Impex which was passed on the question of classification of the same products i.e. “Rolls made of Polyester, Nylon Taffeta, Satin etc. available with width ranges from 10 millimeter to 810 millimeter with printable feature more specifically described in Table ‘A’ (supra) and collectively referred to as ‘Products’, Customs Authority for Advance Rulings has concurred with the submissions put forth by the the authorized representatives Shri S. S. Gupta, Advocate and Shri Vaibhav Shah, Advocate present for M/s. Mahaveer Impex. In the instant case the same advocates Shri S. S. Gupta and Shri Vaibhav Shah are present for the applicant M/s. Mean Light Co. and moreover, they have submitted the very same arguments and sought classification of the said ‘products’ under Heading 5807 10 and has advocated that the said ‘products’ are covered by entry no. 153 of Schedule II of Notification 1/2017 — IGST (Rate) dated 28 June 2017. In the case of M/s. Mahaveer Impex, the Customs Authority for Advance Rulings has ruled that the said ‘products’ are specifically classifiable under sub-heading 5807 1020 and said ‘Products’ are covered under the entry no. 153 of Schedule II of Notification 1/2017 — IGST (Rate) 28 June 2017. I have gone through the observations of the Authority in the case of M/s. Mahaveer Impex and I am of the view that the Authority in the case ibid has deliberated upon every aspect to decide the case on merit. Further, the said advocates have rebutted the comments of the jurisdiction Chennai Customs House thoroughly. Case laws cited by the learned advocated have been perused by me and I have understood their relevance in the instant case.

6.2. Chapter heading 58.06 covers Narrow woven fabrics, other than goods of heading 58.07; narrow fabrics consisting of warp without weft assembled by means of an adhesive (bolducs). 5806 10 00 – Woven pile fabrics (including terry toweling and similar terry fabrics) and chenille fabrics

5806 20 00 – Other woven fabrics, containing by weight 5% or more of elastomeric yam or rubber thread – Other woven fabrics:

5806 31 — Of cotton

5806 32 00 — Of man-made fibers

5806 39  — Of other textile materials
5806 39 90 — Other

5806 40 00 – Fabrics consisting of warp without weft assembled by means of an adhesive (bolducs)

In order to understand the scope of this tariff heading it is essential to refer to the HSN

Explanatory notes to CTH 58.06 which provide as under: –

(A) Narrow Woven Fabrics

In accordance with Note 5 to this Chapter, this heading includes as narrow woven fabrics:

(1) Warp and weft fabrics in strips of a width not exceeding 30 cm, provided with selvedges (flat or tubular) on both edges. These articles are produced on special ribbon looms several ribbons often being produced simultaneously; in some cases, the ribbons may be woven with wavy edges on one or both sides.

(2) Strips of a width not exceeding 30 cm, cut (or slit) from wider pieces of warp and weft fabric (whether cut (or slit) longitudinally or on the cross) and provided with false selvedges on both edges, or a normal woven selvedge on one edge and a false selvedge on the other. They may also be created when a fabric is treated before it is cut into strips in a manner that prevents the edges of those strips from unravelling. No demarcation between the narrow fabric and its false selvedges need be evident in that case. Strips cut (or slit) from fabric but not provided with a selvedge, either real or false, on each edge, are excluded from this heading and classified with ordinary woven fabrics.

(3) Seamless tubular warp and weft fabrics, of a width when flattened, not exceeding 30 cm. Fabrics consisting of strips with the edges joined to form a tube (by sewing, gumming or otherwise) are, however, excluded from this heading.

(4) Bias binding consisting of strips, with folded edges, of a width, when unfolded, not exceeding 30 cm, cut on the cross from warp and weft fabrics. These products are cut from wide fabrics and not provided, therefore, with a selvedge, either real or false. These products remain classified here when watered (“moire”), embossed, printed, etc. Bolducs

This heading also covers narrow fabrics (bolducs) of a width usually ranging from a few mm to 1 cm, consisting of warp (parallelized yarns, monofilaments or textile fibers) without weft but assembled by means of an adhesive.

This heading excludes:-

(a) Bandages, medicated or put up in forms or packings for retail sale (heading 30.05).

(b) Narrow woven fabrics with woven fringes, braided galloons and braids (heading 58.08).

(c) Narrow woven fabrics more specifically covered by other headings, e.g., those having the character of:

(1) Woven labels, badges and similar articles, in strips (heading 58.07 or 58.10)

6.3.  Chapter heading 58.07 covers labels, badges and similar articles of textile materials, in the piece, in strips or cut to shape or size, not embroidered.

5807 10 – Woven

5807 10 10 — Of cotton

5807 10 20  — Of man-made fibre

5807 10 90  — Other

5807 90 – Other

As per HSN Explanatory notes to CTH 58.07, subject to the conditions specified below, this heading covers:

(A) Labels of any textile material (including knitted). These include labels of a kind used for marking wearing apparel, household linen, mattresses, tents, soft toys, or other goods. They are utilitarian labels bearing individual inscriptions or motifs. Such labels include, inter alia, commercial labels bearing the trade name or trade mark of the manufacturer or the nature of the constituent textile (“silk”, “viscose rayon”, etc.) and labels used by private individuals (boarding school pupils, soldiers, etc.) to identify their personal property; the latter variety sometimes bear initials or figures or comprise sometimes a framed space to take a hand written inscription.

(B) Badges and similar articles of any textile material (including knitted). This category includes badges, emblems, “flashes”, etc., of a kind normally sewn to the outer part of wearing apparel (Sporting, military, local or national badges, etc., badges bearing the names of youth associations, sailors’ cap badges with the name of a ship, etc.). The above articles are classified in this heading only if they fulfil the following conditions:

(C) They must not be embroidery. The inscriptions or motifs on the articles classified here are generally produced by weaving (usually broche work) or by printing.

(D) They must be in the piece, in strips (as is usually the case) or in separate units obtained by cutting to size or shape but must not be otherwise made up.

This heading does not include labels, badges and similar articles, which have been embroidered (heading 58.10) or made up otherwise than by cutting to shape or size (heading 61.17, 62.17 or 63.07).

6.4. From the descriptions of the products as seen in Table-A above, I find that the same are of various type having sizes ranging from 10 mm to 305 mm, whereas in the CAAR-I application the applicant had mentioned sizes ranging from 10 mm to 810 mm. However, there is only one item in the list of products having width exceeding 300 mm, namely ‘Iron on Taffeta Roll – 305 mm’. I also find a plethora of case laws/judgements cited by the applicant in furtherance of their case.

6.5. The products under reference have sizes ranging from 10mm to 305mm and can be considered as narrow woven fabric but for the exclusion clause whereby it is mandated that this heading excludes:

(c) Narrow woven fabrics more specifically covered by other headings, e.g., those having the character of (1) Woven labels, badges and similar articles, in strips (heading 58.07 or 58.10).

The HSN Explanatory notes to CTH 58.07, subject to the conditions specified, cover the labels of any textile material. These include labels of a kind used for marking wearing apparel, household linen, mattresses, tents, soft toys, or other goods. They are utilitarian labels bearing individual inscriptions or motifs. Such labels include, inter alia, commercial labels bearing the trade name or trade mark of the manufacturer or the nature of the constituent textile (“silk’ , “viscose rayon”, etc.) and labels used by private individuals (boarding school pupils, soldiers, etc.) to identify their personal property; the latter variety sometimes bear initials or figures or comprise sometimes a framed space to take a hand written inscription. Condition that these products must not be embroidery. Goods will not have embroidery on them. Due to this explanation in the HSN explanatory notes the proposed imports will get covered under exclusion clause of CTH 5806. In the instant case the goods will be imported without printing of labels on them. Applicant has argued that the textiles labels printed or otherwise are classifiable under HSN 5807 10. It is submitted by applicant that the CTH 5807 10 does not require a label to be printed for classification under the heading. Further, there is no such requirement in the chapter and section notes. In support of this argument the applicant has further submitted that the Hon”ble Calcutta High Court in the case of M/s Bijay Kumar Poddar vs Union of India 2000 (126) ELT 393 (Calcutta) has held the plain label strips as ‘labels’ considering that it is meant for printing and there is no alternate use of the same. The related sub-heading 5807 provides and covers labels and similar articles. Crux of the judgment is narrated in para 25 of the Court order and the same is reproduced supra.

Honorable High Court has further opined that the CTH 5807 10 provides and covers labels and similar articles. Notwithstanding whether the imported goods came with printing on it or not then also, the Court held that, if it is not label in strict sense then also the material imported can be said similar to label. While delivering the judgment on classification honorable High Court discussed few apex court decisions as follows:

The apex court decision in the case of Atul Glass Industries Ltd. and Others v. Collector of Central Excise and Others – 1986 (25) E.L.T. 473 (S.C.) wherein para 8 their Lordships observed as under:

8. The test commonly applied to such cases is: How is the product identified by the class or section of people dealing with or using the product? That is a test which is attracted whenever the statute does not contain any definition. ……….  It is generally by its functional character that a product is so identified… …… When a consumer buys an article, he buys it because it performs a specific function for him. There is a mental association in the mind of the consumer between the article and the need it supplies in his life. It is the functional character of the article which identifies it in his mind. In the case of a glass, mirror, the consumer recalls primarily the reflective function of the article more than anything else. It is a mirror, an article which reflects images. It is referred to as a glass mirror only because the word glass is descriptive of the mirror in that glass has been used as a medium for manufacturing the mirror. The basic or fundamental character of the article lies in its being a mirror.

It has been observed by their Lordship in Commissioner of Customs & C. Ex., Amritsar v. D.L. Steels – 2022 (381) E.L.T. 289 (S.C.) that “………. well-settled principle that words in a taxing statute must be construed in consonance with their commonly accepted meaning in the trade and their popular meaning. When a word is not explicitly defined, or there is ambiguity as to its meaning, it must be interpreted for the purpose of classification in the popular sense, which is the sense attributed to it by those people who are conversant with the subject matter that the statute is dealing with. This principle should commend to the authorities as it is a good fiscal policy not to put people in doubt or quandary about their tax liability. The common parlance test is an extension of the general principle of interpretation of statutes for deciphering the mind of the law-maker.”

Applying the same ratio, the product commonly identified by the section of people dealing in or using the same would be known as Label due to its functional character. Further, due to the exclusion clause the said label or similar articles in strip would not be covered under heading 58.06.

6.6. Further, labels, badges and similar articles of textile materials, in the piece, in strips or cut to shape or size, not embroidered are covered under Heading 58.07. The Apex Court in the case of CCE, Shillong vs. Wood Craft products ltd., 1995 (77) E.L.T. 23 (S.C.) has observed that ‘Words & Phrases – “similar” and “same” – The word “similar” is expansive and not restrictive like “same’. It would be not out of place to mention that in similar context in Nat Steel Equipment Private Ltd. vs. Collector of Central Ex., 1988 (34) E.L.T. 8 (S.C.), while considering the meaning of the word “similar” in a tariff item, it was stated as follows:

……….. The expression “similar” is a significant expression. It does not mean identical but it means corresponding to or resembling to in many respects; somewhat like; or having a general likeness. The statute does not contemplate those goods classed under the words of ‘similar description’ shall be in all respects the same if it did these words would be unnecessary. These were intended to embrace goods but not identical with those goods…. “

I also find that various courts in a plethora of cases have held that HSN explanatory notes have a persuasive effect in deciding the matters of classification. Keeping in view the observation of Apex Court in various decisions referred in forgoing paras as well as the decision of High Court decision in case of Mis Bijay Kumar Poddar vs Union of India, I find that the said products have to be considered as articles similar to labels of textile materials in strips and accordingly are classifiable under heading CTH 58.07. I do not find any grounds to disagree with the High Court decision in case of M/s Bijay Kumar Poddar vs Union of India 2000 (126) ELT 393 (Calcutta) on the issue of classification in the instant case.

7. On the basis of foregoing discussions and findings, my reply is ‘positive’ to both the questions (a) & (c) asked by the applicant in para 2.3 (supra) and I rule that the Rolls made of Polyester, Nylon Taffeta, Satin etc. which are available with width ranges from 10 millimeter to 810 millimeter with printable feature more specifically described in Table ‘A’ (supra) collectively referred to as ‘Products’ proposed to be imported by the applicant merit classification as articles similar to label of textile material in strips under CTH 5807 specifically undo sub-heading 5807 1020 of the First Schedule to the Customs Tariff Act, 1975 and also said products’ are classifiable at 8-digit level under CTI 5807 1010 (Of cotton), 5807 1020 (Of  man-made fiber) & 58071090 (Other) according to their composition and characteristics and said ‘products’ are covered by entry no. 153 of Schedule II of Notification 1/2017 — IGST (Rate) 28 June 2017.

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