In re Nagrani Warehouseing Private Limited (GST AAR Madhya Pradesh)
Determining the classification of P.P. Bags which are made from strips having width of less than 5mm. It is to be decided by the Hon’ble Advance ruling authority as to whether the aforesaid PP bags would classify under chapter heading 63 or chapter 39 of the GST Tariff and what shall be the rate of GST on the same?
The goods in question shall be classifiable under Chapter 39 of the GST tariff as articles of Plastic and would attract appropriate rate prevailing at the date and time of supply.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, MADHYA PRADESH
1. The present application has been filed u/s 97 of the Central Goods & Services Tax Act, 2017 and MP Goods & Services Tax Act, 2017 (hereinafter also referred to CGST Act and MPSGT Act respectively) by M/S NAGRANI WAREHOUSEING PRIVATE LIMITED (hereinafter also referred to as applicant), registered under the Goods & Services Tax.
2. The provisions of the CGST Act and MPGST Act arc identical, except for certain provisions. Therefore, unless a specific mention of the dissimilar provision is made, a reference to the CGST Act would also mean a reference to the same provision under the MPGST Act. Further, henceforth, for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST or MP GST Act would be mentioned as being under the GST Act.
3. QUESTIONS RAISED BEFORE THE AUTHORITY –
In the application the applicant raised following question that
“Determination of classification of sacks and bags made from man made textile materials under GST tariff No. 6305 which falls under Serial No. 224 of Schedule-1 of Notification No. FA3-33-2017-1-V (42) dated 29.06.17 issued vide Madhya Pradesh Gazette”.
However at the time of personal hearing the applicant himself admitted that the question raised was not very clear so amended the question as follow –
“Determining the classification of P.P. Bags which are made from strips having width of less than 5mm. It is to be decided by the Hon’ble Advance ruling authority as to whether the aforesaid PP bags would classify under chapter heading 63 or chapter 39 of the GST Tariff and what shall be the rate of GST on the same”.
4. DEAPRTMENT’S VIEW POINT:
4.1. The Deputy Commissioner (Tech), CGST & Central Excise Headquarters, Indore vide his letter C.No.l(Gen)30-08/18-19/GST/T dtd.14.12.2018 forwarded the opinion of CGST & Central Excise department on the issue at hand. The opinion of teh department is reproduced below:
In this context the ratio of judgment passed by the Hon’ble Tribunal in the case of M/s Gujrat Raffia Industries Ltd., V/s Commissioner of Central Excise on 14.1.2003 [Reported in 2003 .(153). ELT 336 (Tri-Dell] and by the Hon’ble High Court of M. P. in the case of M/s Raj Packwell Ltd., V/s Union of (UOI) on 19.09.1989 [Reported in 1993 (41) ECC 285, 1993 351 MP, 1990 (50) ELT 201 (MP)} are squarely applicable in the instant case, wherein the issue of classification of Sacks and Bags made out of Woven fabrics already been decided.
5. The Hon’ble Tribunal in the case of Gujrat Raffia Industries Ltd., V/s Commissioner of Central Excise has relied upon the decision of Hon’ble Supreme Court in case of Commissioner of Commissioner of Central Excise Sup Shillong V/ s Woodcraft Ltd., 1995 (77) ELT 23 (SC) and has held that:
“any dispute relating to Tariff Classification must, as far as possible, be resolved with reference to nomenclature indicated by the HSN unless there be an expressed difference intentions indicated by the Central Excise Tariff Act, 1985 itself A reference to Explanatory Notes of HSN below Heading 63.06 covers a range of Textile articles usually made from strong industrially woven canvas. It, further mentions that tarpaulin are generally made of coated or uncoated manmade fibre, fabrics, or heavy to fairly heavy canvas (of hemp, jute, fax or corron). It is thus apparent that Heading 63.06 covers tarpaulins which are made of manmade fibre fabric of heavy canvas of hemp, jute, flax or corron as HDPE / Plastic strip yam is not manmade fabric, tarpaulin made of the said material would not fall wider Heading 63.06. Further Heading 39.06 applies to articles of plastics and articles of other materials of Heading No.39.01 to 39.14. No doubt Heading No.39.06 is residuary Heading but it is residuary to Chapter 39 as all articles of plastics, which are not covered by earlier Headings, would fall under 39.26. As far as any article is made of plastic it will fall either in any one of the specific headings in Chapter 39 and failing which under Heading 39.26. As the impugned products are made of plastic and arc not mentioned specifically in any of the Headings of Chapter 39, they are appropriately classifiable under Heading 39.26. This is also evident from the Explanatory Notes of HSN below Heading 39.26 wherein it is mentioned that “this Heading covers articles, not elsewhere specified or included, of plastic (as defined in Note I to the Chapter) or other materials of Heading 39.01 to 39.14.” It is also observed by the hon’ble CESATE that awnings which are specifically mentioned in Heading No. 63.06, if made of plastic, are classifiable under Heading 39.26 as Explanatory Notes of HSN.”
6. Similarly, the Hon’ble High Court of M. P. in the case of M/s Raj Packwell Ltd., V/s Union of India has held that:
“In the Textiles Committee Act, 1963 (Act 41 of 63) the word fibre has been defined in Section 2 (a) as under:-
“fibre” means man made fibre including regenerated cellulose rayon, roan, nylon and the like.” y
“Textiles” has been defined in Section 2 (g) as under: – ‘Textiles” means any fabric or cloth, or yam or gannent or any other articles made wholly or in part of-
(i) Cotton; or
(ii) Wool; or
(iii) Silk; or
(iv) Artificial silk or other fibre, and includes fibre”.
Therefore, according to the above definition, any fabric or cloth or yam or garment if made wholly or in part of cotton, wool, silk, artificial silk or other fibre shall be called textiles. The definition of fibre’ includes the regenerated cellulose, rayon, nylon and the like. Nowhere in the aforesaid definition of fibre’ or ‘textiles’ plastic has been mentioned as a commodity to be included in the definition of ‘fibre’ or ‘textiles’. Now I the Shree Radhe Industries case (supra) and the SHellya Industries case (supra) irrespective of the entries in the tariff as prevailing then, it has been held that the HDPE sacks are articles made of plastic; they are made of high density polyethylene which is a plastic raw material and it has further been held that they are not manmade, filament yam but are articles of plastic. The circular of the Central Board of Direct Taxes dated 20.1.1985 also clearly says that the Board has decided that so long as the finished articles of plastic is made out of plastic material falling under Tariff N0.15A (i), even if at the intermediate stage articles classifiable under Item No.l5A (ii) if any tariff item emerges, the said product would be considered to have been produced out of plastic material falling under Tariff Item No.l5A (i) and, therefore, the HDPE woven sacks should be considered as articles of plastic,”
7. In view of the above the Hon’ble Court has concluded that HDPE strips or tapes fall under the Heading 39.20, sub heading 3920.32 of the Central Excise Tariff Act and not under Heading 54.06, sub heading 5406.90. Similarly the HDPE sacks fall under Heading 39.23, subheading 3923.90.
8. Hence following the above referred judicial pronouncement, the HDPE/LDPE/LLDPE Sacks 86 Bags, which is made out of plastics are classifiable under chapter 3923 and similarly, Sacks & Bags, which is made out of manmade textiles materials are classifiable under chapter sub heading 6305.
5. RECORD OF PERSONAL HEARING:
5.1 The matter was posted for hearing on 27.11.2018 and Alok Barthwal, Counsel for the Applicant appeared on behalf of the Applicant. Reiterating the submissions already made in the application, he submitted that the Applicant has filed the Advance Ruling application for determining the classification of P.P. Bags which are made from strips having width of less than 5mm. It is to be decided by the Hon’ble Advance ruling authority as to whether the aforesaid PP bags would classify under chapter heading 63 or chapter 39 of the GST Tariff and what shall be the rate of GST on the same.
5.2 The Applicant in this context submitted that they have been manufacturing PP Strips of width less than 5mm which is used for manufacture of Woven fabrics on Knitting Machine. The said woven fabric is used for manufacture of PP bags/ Sacks. The goods are also registered as textile articles with the Textile ministry. Further in this context the following section notes, chapter notes and HSN Explanatory Notes are relevant:
As per Notes given at Notification No. F-A3-33-2017-1V (42) dt. 29.06.2017 –
Explanation 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 he, apply to the interpretation of this notification.
In view of above Explanation it is thus absolutely clear that for the purpose of classification the Customs Tariff Act, 1975 has to be resorted too as the none of the tariff under IGST, COST OR SGST has any Chapter Notes or Tariff notes for determining the classification of goods.
5.3 Section XI of Customs Tariff Act, 1975 i.e. Textiles and Textile Articles of the Customs Tariff Act, 1975 under Sr. No. 1 states as under :
This Section does not cover:
(a) ………………………..
(b) ………………………..
(c) ………………………..
(d) ………………………..
(e) ………………………..
(f) ………………………..
(g) monofilament of which any cross-sectional dimension exceeds 1 mm or strip or the like (for example, artificial straw) of an apparent width exceeding 5 mm, of plastics. (Chapter 39). or plaits or fabrics or other basketware or wickerwork of such monofilament or strip (Chapter 46);
5.4 Further chapter Note 2 (p) of Chapter 39 of the Customs Tariff Act states as under :
Sr. No. 2 – This chapter does not cover:
(P) goods of section XI (textiles and textile articles);
In the present case since the strips used for manufacture of Sacks and bags are of width less than 5mm hence the strips arc articles of textile and appropriately classifiable under chapter 54. The aforesaid strips are covered under chapter sub heading 5404 which describes the goods as :
5404 – Synthetic monofilament of 67 decitex or more and of which no cross-sectional dimension exceeds 1 mm; strip and the like (for example, artificial straw) of synthetic textile materials of an apparent width not exceeding 5 mm.
5.5 Further explanation to Note 1 (b) to Chapter 54 under Customs Tariff also states that
– The terms “man-made”, “synthetic” and ” artificial” shall have the same meaning when used in relation to textile materials. “
5.6 The heading 54.04 of HSN also states that the heading covers :-
Strip and the like, of synthetic textile materials. – The Strip of this heading are flat, of a width not exceeding 5 mm. either produced as such by extrusion or cut from wider strips or from sheets.
5.7 The fabric manufactured from the above strips has also been classified under chapter sub heading 5407 as Woven fabrics of synthetic filament yarn, including woven fabrics obtained from materials of heading 5404.
From the above it is thus absolutely clear that the strips of width less than 5mm and the woven fabrics manufactured therefrom are classifiable as textile material under chapter 54.
5.8 Also serial No. 217 of Notification No. F-A3-33-2017-1-V (42) dt. 29.06.2017 issued vide Madhya Pradesh Gazzette covers under chapter 5405 and 5408 as Woven fabrics of manmade textile materials -.
5.9. As regard classification of PP bags, the Chapter 63 of HSN Explanatory Notes provides as under :
