Girish Pavinbhai Rathod (Jay Ambey ) Vs Union of India & Ors (Gujarat High Court)
Gujarat High Court has set aside an advance ruling and its confirmation by the appellate authority regarding the classification of “fusible interlining fabric of cotton.” The court ruled that the product should be classified under Chapters 50 to 55, 58, or 60 of the First Schedule to the Custom Tariff Act, 1975, rather than Heading 5903 of Chapter 59.
The petitioner, Girish Pavinbhai Rathod (Jay Ambey), challenged the classification, arguing that the authorities had misapplied Chapter Note 2(a) of Chapter 59 and misinterpreted test reports. The original ruling classified the fabric under Heading 5903, which covers “TEXTILE FABRICS, IMPREGNATED, COATED, COVERED OR LAMINATED WITH PLASTICS OTHER THAN THOSE OF HEADING 5902.”
The core of the dispute revolved around the interpretation of Chapter Note 2(a) of Chapter 59, which outlines exclusions from Heading 5903. This note specifies that fabrics where the impregnation, coating, or covering cannot be seen with the naked eye usually fall under Chapters 50 to 55, 58, or 60.
The appellate authority’s decision relied on its interpretation of five criteria against an ATIRA (Ahmedabad Textile Industry’s Research Association) test report. However, the High Court found fault with this comparison. For instance, the appellate authority concluded that “film coating is visible with the naked eye,” yet simultaneously asserted the product fulfilled the criteria for Heading 5903, which requires the coating not to be visible to the naked eye.
Crucially, the ATIRA test report explicitly stated that the fabric showed “Air and Water permeability after coating indicates that coating is done but it is partial in nature. The fabric can be considered as partially coated or partially covered plastics and bearing designs resulting from these treatments (Dot matrix printing process).” The High Court emphasized that if a fabric is partially coated, it would fall outside Chapter 59, specifically under Chapters 50 to 55, 58, or 60, as per the exclusion clauses in Chapter Note 2(a) of Chapter 59.
Judicial Precedents Cited
The High Court also noted that the appellate authority failed to consider a classification issued by ATIRA dated July 23, 2021, which reiterated the partial coating of the fabric.
Furthermore, the court highlighted the binding nature of a Madras High Court decision that had set aside Circular No. 4233 dated November 27, 1998. This previous ruling, which the respondent-authority had attempted to distinguish, was considered relevant by the Gujarat High Court.
Another significant precedent considered was the case of M/s. Goods Wear Fashion Ltd. In that instance, the Advance Ruling Authority of Uttarakhand determined that “Polyester Viscose Fusing Interlining Woven Fabric partially covered with plastic leads to plastic coated pattern that is visible on its one side” does not fall under HSN Code 5903. Instead, it was classified under Chapters 50, 55, 58, or 60, citing Chapter Note 2(a)(4) of Chapter 59 of the GST Tariff. The Gujarat High Court found similar facts in the present case, supporting the reclassification of the petitioner’s fabric.
In light of these findings, the Gujarat High Court concluded that the orders passed by the advance ruling authority and subsequently confirmed by the appellate authority were unsustainable. The court quashed the impugned order dated April 8, 2021, and ruled that the petitioner’s product, being partially covered with a visible plastic coated pattern on one side, falls under Chapters 50 to 55, 58, or 60 of the GST Tariff, and not under Chapter 59. The rule was made absolute to this extent.
Read SC Judgment: SC upholds Gujarat HC Ruling on GST Classification of ‘Fusible Interlining Cloth’
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
