Harsh Polyfabric Private Limited Vs Union of India & Ors. (Calcutta High Court)
The case involves Harsh Polyfabric Private Limited (“the petitioner”) challenging an appellate authority’s decision which classified Spunbonded Polypropylene Bed Sheets (PPSB Bed Sheets) under the heading 5603 instead of 6304 of the Customs Tariff Act, 1975. This classification led to the partial denial of a refund of accumulated Input Tax Credit (ITC) due to an inverted duty structure, amounting to Rs. 39,61,030.
Petitioner’s Background and Classification
Harsh Polyfabric Private Limited, incorporated under the Companies Act, 1956, manufactures and supplies non-woven fabrics and PPSB Bed Sheets. They classified non-woven fabrics and PPSB Bed Sheets under chapters 5603 and 6304, respectively. The manufacturing process involves using Polypropylene Granules (PP Granules) in a Spun Bond technology process to produce non-woven fabric, which is then used to make PPSB Bed Sheets.
GST and VAT Regime
Under GST, the petitioner classified PPSB Bed Sheets under heading 6304, paying a 5% GST rate. Under the West Bengal VAT Act, 2003, PPSB Bed Sheets were tax-exempt, and the same exemption applied under the Excise Duty as per Notification No. 30/2004-CE dated 09.07.2004.
Refund Claims and Dispute
The petitioner applied for a refund of the accumulated ITC due to the inverted duty structure, where the input tax rate (18% on PP Granules) was higher than the output tax rates (12% on non-woven fabrics and 5% on PPSB Bed Sheets). The refund application was filed using Form GST RFD-01A.
