Narrow woven fabrics classifiable under Tariff Heading No. 5407.10.19

In re Rajivkumar Giriraj Bansal (Proprietor of M/s Gujarat Plast Industries) (GST AAR Gujarat)

Whether narrow woven fabrics manufactured are classifiable under Tariff Heading No. 58063990?

Question: Whether narrow woven fabrics manufactured are classifiable under Tariff Heading No. 58063990?

Answer:  No. The product, Narrow Woven Fabrics of Polyester Yarn of a width not exceeding 30 cm but not provided with selvedges (flat or tubular) on both edges manufactured by the applicant is classifiable under Chapter Sub-heading No. 5407.10.19 of the Customs Tariff Act, 1975, attracting rate of GST @ 5% (2.5% CGST + 2.5% SGST) or IGST @ 5%.

FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, GUJARAT

BRIEF FACTS

M/s Rajivkumar Giriraj Bansal (Proprietor of M/s Gujarat Plast Industries), 111/B, PTM Mill Compound, Behind Narol Court, Narol, Ahmedabad-382405, Gujarat (herein after referred to as the “applicant” or the “company” for the sake of brevity) is engaged in manufacturing of narrow woven fabrics by process of weaving from polyester yarn and its width is not exceeding 30 cm.

2. Narrow woven fabrics are woven on special narrow fabric looms called Needle loom where the number of tapes/yarn warping according to size and width of tape and cord, the weft yarn is carried through long needle. These machines are used for larger runs because of their high speed capabilities. Several sets of warp yarn may be beamed together to make several narrow fabrics side by side, on the same loom. The width of the narrow fabrics manufactured is below 12 inches.

3. The applicant sought for the Advance Ruling in respect of following question:

Question- Whether the Narrow woven fabrics manufactured are classifiable under Tariff Heading No. 58063990?

Statement containing the applicant’s view point and submissions on issues on which the advance ruling is sought:

4. The Section 9(1) of the CGST Act, 2017 and the SGST Act, 2017 are the charging sections which levy CGST and SGST respectively on all intra-state supplies of goods or services or both, at such rates as may be notified by the Government on the recommendation of the Council.

4.1 In exercise of the power conferred under Section 9(1) of the CGST Act, 2017 as well as SGST Act, 2017, Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 and the Notification No.01/2017-State Tax (Rate) dated 28.06.2017 respectively which specifies the rate of CGST and SGST respectively to be levied on different products along with their corresponding Chapter/Headings/ Sub-headings/ Tariff item. Thus, the rate of GST will depend on the schedule of the Notification under which the goods are being classified.

4.2     Further, Notification No.01/2017-Central Tax (Rate) specifically provides that:

“Explanation.- For the purposes of this Schedule,-

(i) “Tariff item”, “sub-heading” “heading” and “Chapter” shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975).

(ii) 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.”

4.3 Thus, for the purpose of GST, Classification of goods under any tariff item/sub-heading/heading/chapter shall be done using the general rules of interpretation of the First Schedule of the Customs Tariff Act, 1975 including the Section and Chapter Notes and the General Explanatory Notes to the HSN of the fist Schedule of the Customs Tariff Act, 1975.

5. The applicant further submitted that the above explanation is also part of the Notification No.01/2017-State Tax (Rate) and, thus, the above ratio will apply to notifications issued under State GST Law also.

6. As per the general rules of interpretation, a product shall be classified under the heading which provides the most specific description. In case this is not possible and the goods equally merit classification under 2 different chapter headings, then the product will be classified under the heading which occurs last in numerical order among those headings.

7. Narrow woven fabrics are classified under Tariff heading 58.06 of Customs Tariff Act, 1975. As per Chapter note 5 of Chapter 58 of Customs Tariff Act, “narrow woven fabrics” means:

(a) Woven fabrics of a width not exceeding 30 cm, whether woven as such or cut from wider pieces, provided with selvedges (woven, gummed or otherwise made) on both edges;

(b) Tubular woven fabrics of a flattened width not exceeding 30 cm; and

(c) Bias binding with folded edges, of a width when unfolded not exceeding 30 cm.

8. The applicant is manufacturing woven fabrics by process of weaving from polyester yarn and its width is not exceeding 30 cm. The classification of goods under heading 5806 are as under:

“5806 NARROW WOVEN FABRICS OTHER THAN GOODS OF HEADING 5807; NARROW FABRICS CONSISTING OF WARP WITHOUT WEFT ASSEMBLED BY MEANS OF AN ADHESIVE (BOLDUCS)

5806 10 00 – Woven pile fabrics (including terry towelling and similar terry fabrics) and chenille fabrics

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

5806 31     — Of cotton:

5806 31 10 — Typewriter ribbon cloth

5806 31 20 — Ne war cotton

5806 31 90 — Other

5806 32 00 — Of man-made fibres

5806 39 — Of other textile materials:

5806 39 10 — Goat hair puttis tape

5806 39 20 — Jute webbing

5806 39 30 — Other narrow fabrics of jute

5806 39 90 — Other

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

9. From the description of goods given under the above Tariff Headings, it is evident that the product manufactured from polyester yarn by the applicant is appropriately classifiable under Tariff sub-heading 58063990.

10. The applicant has further submitted that the scheme of the Tariff is determined the coverage of the respective headings in the light of the Section Notes and Chapter Notes. Hon’ble Supreme Court in CCE v. Wood polymers Ltd.-1998 (97) E.L.T. 193 (S.C.) held that classification should be done as per the rules of interpretation contained in the Tariff and not as per the trade parlance and commercial understanding.

11. Since no other classification of goods with description ‘narrow woven fabrics’ is available in Customs Tariff, the applicant is classifying the product under Chapter sub-heading No.58063990, attracting 5% IGST.

12. At the time of personal hearing held through Video Conferencing on 24.09.2020, the Authorised Representative of the applicant, Shri Hasit Dave Advocate reiterated the facts as stated herein above and also submitted the additional submission as below:

(i) During the course of personal hearing, it was explained that they  are manufacturing Narrow woven fabrics not exceeding 30 cm. and in light of Chapter note 5 of Chapter 58 of Customs Tariff Act, 1976, it has been defined that woven fabrics of a width not exceeding 30cm, whether woven as such or cut from wider pieces, provided with selvedges (woven, gummed or otherwise made) on both edges. Since they are manufacturing woven fabrics by process of weaving from Polyester/Synthetic/Polypropylene Yarn and its width not exceeding 30cm. Thus, the product which manufactured has been specifically covered under Chapter 58063990 and it is correctly classifiable under the said heading which attracts 5% IGST. Even Rule 3(a) of Rules for interpretation of Central Excise Tariff Act, 1944 says that the heading which provide the most specific description shall be preferred to headings providing a more general description. Thus, their product is correctly classifiable under sub-heading No.58063990 and attracts 5% IGST.

(ii) Even Hon’ble Supreme Court of India in the case of CCE Vs. Wood Polymers Ltd.-1998 (97) E.L.T. 193 (S.C.) held that the classification should be done as per the rules of interpretation contained in the Tariff and not as per the trade parlance and commercial understanding.

(iii) In light of above, it was requested to classify their product as explained above as it has got specific entry under the said heading and this product has got no any other entry in the Tariff except the said entry.

(iv) They have also submitted copies of ER-1 Returns from April-2017 to June-2017 and stated that formerly they were not manufacturing Narrow woven fabrics, hence, the question of its classification for the earlier period does not arise.

DISCUSSION & FINDINGS:

13. We have carefully gone through the facts of the case, written and oral submissions made by the applicant in their application for advance ruling as well as at the time of personal hearing and the applicable provisions of the GST Laws in this regard.

At the outset, we would like to state that the provisions of both the CGST Act and the GGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the GGST Act.

14. In this case, a moot point is to be decided regarding classification of “Narrow woven fabrics”.

15. Few facts relevant for the present purpose, those are as follows:

(i) The applicant is engaged in manufacturing of narrow woven fabrics by process of weaving from polyester yarn and its width is not exceeding 30 cm.

(ii) From the description of goods given under the Tariff Heading 5806, it is evident that the product manufactured from polyester yarn by the applicant is appropriately classifiable under Tariff sub-heading 58063990.

(iii) Since no other classification of goods with description ‘narrow woven fabrics’ is available in Customs Tariff, the applicant is classifying the product under Chapter sub-heading No.58063990, attracting 5% IGST.

16. In order to determine the classification and the tax liability under GST in respect of supply of the goods viz. ‘narrow woven fabrics’ manufactured by the applicant, we are required to refer to the Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 containing the sub-headings as well as the rates of Central GST applicable to various goods, which are covered under 6 Schedules, as below:

(i) 5 per cent. in respect of goods specified in Schedule I,

(ii) 6 per cent. in respect of goods specified in Schedule II,

(iii) 9 per cent. in respect of goods specified in Schedule III,

(iv) 14 per cent. in respect of goods specified in Schedule IV,

(v) 5 per cent. in respect of goods specified in Schedule V, and

(vi) 125 per cent. in respect of goods specified in Schedule VI.

Further, Explanations (iii) and (iv) of the said Notification read as under:

(iii) “Tariff item”, “sub-heading” “heading” and “Chapter” shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975).

(iv) 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.

17. As claimed by the applicant that “narrow woven fabrics” should fall under sub-heading No.58063990. For the ease of understanding, Chapter Note 5 of Chapter 58 along with Chapter sub-heading 5806 as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) are reproduced herein below:

A. CHAPTER NOTE 5 OF CHAPTER 58:

Note 5 to Chapter 58, HTSUS, sets forth the meaning of “narrow woven fabrics” for the purposes of heading 5806. It states:

“5. For the purposes of heading 5806, the expression “narrow woven fabrics” means:

(a) Woven fabrics of a width not exceeding 30 cm, whether woven as such or cut from wider pieces, provided with selvedges (woven, gummed or otherwise made) on both edges;

(b) Tubular woven fabrics of a flattened width not exceeding 30 cm; and

(c) Bias binding with folded edges, of a width when unfolded not exceeding 30 cm.”

B. CHAPTER SUB-HEADING 5806:

“5806 NARROW WOVEN FABRICS OTHER THAN GOODS OF HEADING 5807; NARROW FABRICS CONSISTING OF WARP WITHOUT WEFT ASSEMBLED BY MEANS OF AN ADHESIVE (BOLDUCS)

5806 10 00 – Woven pile fabrics (including terry towelling and similar terry fabrics) and chenille fabrics

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

5806 31 — Of cotton:

5806 31 10 — Typewriter ribbon cloth

5806 31 20 — Newar cotton

5806 31 90 — Other

5806 32 00 — Of man-made fibres

5806 39 — Of other textile materials:

5806 39 10 — Goat hair puttis tape

5806 39 20 — Jute webbing

5806 39 30 — Other narrow fabrics of jute

5806 39 90 — Other

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

17.1 The Explanatory Notes (EN), which are the official interpretation of the Harmonized Code at the international level, further describe narrow woven fabrics and the selvages required for classification under heading 5806. For better appreciation, the Explanatory Notes to the HSN code 58.06, is reproduced as below:

“(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 fabrics (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. False selvedges are designed to prevent unravelling of a piece of cut (or slit) fabric and may, for example, consist of a row of gauze stiches woven into the wider fabric before cutting (or slitting), of a simple hem, or they may be produced by gumming the edges of strips, or by fusing the edges in the case of certain ribbons of man-made fibres. They may also be created when a fabric is treated before it 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 selvedges either real or false, on each edge, are excluded from this heading and classified with ordinary woven fabrics. (As regard bias binding, see paragraph (4) below.)

(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.

The products referred to above includes both ribbons and webbing as well as certain galloons having the characteristics of woven ribbons.”

From the above, it is seen that to classify the product under HSN code 5806 as “narrow woven fabrics”, same has to satisfy the following conditions:

(i) It should be warp and weft fabrics in strips of a width not exceeding 30 cm.;

(ii) It should have selvages (flat or tubular) on both edges.

18. We find that the product in question is manufactured by process of weaving from polyester yarn and its width is not exceeding 30 cm. However, it is not forthcoming from the submission that the product is having selvedges (flat or tubular) on both edges. Since, the product is not provided with a selvedges (flat or tubular) on both edges, it does not meet the definition of narrow woven fabric of being provided with selvages, as elaborated above. Hence, it would not be considered a narrow woven fabric. The said woven fabrics is, therefore, not fall under heading 5806 and to be classified with ordinary woven fabrics. As per the rate schedule, the woven fabric can be classified under many heading depending upon their composition.

19. We further note from copies of ER-1 Returns for the months of April-17, May-17 & June-17 that the applicant has classified Poly Propylene Woven Fabrics under sub-heading No.3926.90.80 of the Customs Tariff Act, 1975, which reads as under:

“3926 OTHER ARTICLES OF PLASTICS AND ARTICLES OF OTHER MATERIALS OF HEADINGS 3901 TO 3914 3926 10

3926 90      — Other

3926 90 80 —- Polypropylene articles, not elsewhere specified or include or included”

20. We, therefore, hold that the product, narrow woven fabrics made of polyester yarn of a width not exceeding 30 cm but not provided with selvedges (flat or tubular) on both edges, is classifiable under sub-heading No. 10. 19 of the Customs Tariff Act, 1975, which reads as under:

“5407 WOVEN FABRICS OF SYNTHETIC FILAMENT YARN, INCLUDING WOVEN FABRICS OBTAINED FROM MATERIALS OF HEADING 5404

5407 10 – Woven fabrics obtained from high tenacity yarn of nylon or other polyamides or of polyesters:

– Unbleached:

5407 10 19 —- Other polyester fabrics”

20.1 Coming to the applicable rate of tax, it is to mention that the said product attracts rate of tax of 2.5% CGST + 2.5% SGST as applicable under Sr. No. 217 under Schedule I of Notification No.1/2017-Central Tax (Rate) read with the corresponding notification under the Gujarat GST Act in case of Intra-State supply. Likewise, the applicable rate of tax will be 5% IGST under Sr. No. 217 under Schedule I of Notification No.1/2017-Integrated Tax (Rate) dated 28^th June, 2017 in case of Inter-State supply.

21. In light of the above discussions, we rule as under –

RULING

Question: Whether narrow woven fabrics manufactured are classifiable under Tariff Heading No. 58063990?

Answer:  No. The product, Narrow Woven Fabrics of Polyester Yarn of a width not exceeding 30 cm but not provided with selvedges (flat or tubular) on both edges manufactured by the applicant is classifiable under Chapter Sub-heading No.5407.10.19 of the Customs Tariff Act, 1975, attracting rate of GST @ 5% (2.5% CGST + 2.5% SGST) or IGST @ 5%.