In re Max Non Woven Pvt Ltd (GST AAAR Gujarat)
AAAR held that product in question viz. Polypropylene Non-woven bags merits classification under Chapter Heading 3923 of the HSN/Customs Tariff Act, 1975.
1. Whether the product Non-woven Bags manufactured through the intermediate product, Non-Woven Fabrics classifiable under Heading No. 5603 are properly classifiable under Heading No.6305 or under Heading 3923? 2. Whether the product Non-woven Bags would be eligible for exemption under Notification No.01/2017-CT(Rate) and 01/2017-CT(Rate) dated 28.06.2017, as amended ?
The main issue here is to decide the classification of the product viz. Poly Propylene Non-Woven Bags manufactured from intermediate product i.e. Poly Propylene Non-Woven fabrics which in turn is manufactured from Fiber grade poly propylene granules by adopting the Spun Bond technology.
We find that issue of classification of product viz. Poly Propylene Non-Woven bag is already covered in TRU Circular No. 80/54/2018-GST dated 31.12.2018. For reference, relevant portion of above said circular is reproduced below:
“7. Applicability of GST on supply of Polypropylene Woven and Non-Woven Bags and PP Woven and Non-Woven Bags laminated with BOPP:
7.1 Representations have been received seeking the classification and GST rates on Polypropylene Woven and Non-Woven Bags and Polypropylene Woven and Non-Woven Bags laminated with BOPP.
7.2 As per the explanatory notes to the HSN to HS code 39.23, the heading covers all articles of plastics commonly used for the packing or conveyance of all kinds of products and includes boxes, crates, cases, sacks and bags.
7.3 Further as per the Chapter note to Chapter 39, the expression “plastics” means those materials of headings 39.01 to 39.14 which are or have been capable, either at the moment of polymerization or at some subsequent stage, of being formed under external influence (usually heat and pressure, if necessary with a solvent or plasticizer) by moulding, casting, extruding, rolling or other process into shapes which are retained on the removal of the external influence.
7.4 Thus it is clarified that Polypropylene Woven and Non-Woven Bags and PP Woven and Non-Woven Bags laminated with BOPP would be classified as plastic bags under HS code 3923 and would attract 18% GST.
7.5 Non-laminated woven bags would be classified as per their constituting materials” (emphasis supplied)
The GAAR also relied upon above circular in its ruling dated 17.09.2020. The appellant submitted that said clarification/circular pertains to Non-woven bags-laminated with BOPP and in Para 7.5 of said circular, it is specifically stated that non-laminated bags would merit classification as per their constituent materials. From the bare perusal of the above TRU Circular, it is forthcoming from Para 7.4 that there has been mention of two product viz. ‘Polypropylene Woven and Non-Woven Bags’ and ‘PP (Polypropylene) Woven and Non-Woven Bags laminated with BOPP’ (both made from polypropylene and separated by using word ‘and’) and both the products merit classification under HS code 3923 as mentioned in circular. In the above said circular, it is further stated at Para 7.5 that Non-laminated woven bags (made from materials other than polypropylene) would be classified as per their constituting materials. What is manufactured by the appellant is non-woven bags and hence Para 7.4 is relevant.
In view of above we find that TRU Circular dated 31.12.2018 is squarely applicable on the product of appellant viz. Poly Propylene Non-Woven bag and the same is classifiable under HSN Code 3923.
FULL TEXT OF THE ORDER OF AUTHORITY FOR APPELLATE ADVANCE RULING, GUJARAT
At the outset we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 and Gujarat Goods and Services Tax Act, 2017 (hereinafter referred to as the ‘COST Act, 2017′ and the `GGST Act, 2017’) are in pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act, 2017 would also mean reference to the corresponding similar provisions in the GGST Act, 2017.
2. The present appeal has been filed under Section 100 of the CGST Act, 2017 and the GGST Act, 2017 by M/s. Max Non Woven Pvt Ltd (hereinafter referred to as Appellant) against the Advance Ruling No. GUJ/GAAR/R/62/2020 dated 17.09.2020.
3. The appellant has raised the following questions for advance ruling in the application for Advance Ruling filed by it.
“1. Whether the product Non-woven Bags manufactured through the intermediate product, Non-Woven Fabrics classifiable under Heading No. 5603 are properly classifiable under Heading No.6305 or under Heading 3923?
2. Whether the product Non-woven Bags would be eligible for exemption under Notification No. 01/2017-CT (Rate) and 01/2017-IT(Rate) dated 28.06.2017, as amended?”
4. The appellant has submitted that they are engaged in the manufacturing of Non-Woven Bags through the intermediate product i.e. Non-Woven fabrics manufactured from Fiber Grade poly propylene granules by adopting Spun Bond technology, in which poly propylene granules are fed to the hopper and passed through extruder at certain temperature and the melted material after filtering passed through the spinning unit to obtain a continuous single filament which are subjected to lying on the continuous web and under control pressure thermal bonding resulting in product namely Non-Woven fabric which is called Polypropylene Nonwoven fabric.
5. The appellant has submitted that in view of general rules of interpretation, their product is classifiable under Heading No. 6305.3300 and that Director of DKTE Center of Excellence in Non Wovens clarified that polypropylene non-woven fabrics are basically textiles and not plastic and therefore are classifiable under Heading No. 5603. The appellant also submitted that Commissioner, CGST, Madurai vide letter dated 01.01.2018 had clarified to Madurai District Non-Woven Bag and Cotton Bag Manufacturer Association that non-woven bags are classifiable under Heading 63059000 and eligible for exemption under Notification No. 01/2017-CT(Rate). The appellant also submitted that West Bengal Appellate Authority for Advance Ruling vide ruling 02/WBAAAR/Appeal/2019 dated 13.05.2019 have settled the law that polypropylene non-woven bags are classifiable under Heading 6305.3300 and therefore would prevail over the clarification issued by TRU vide Circular No. 80/54/2018-GST wherein polypropylene non-woven bags are classified under Heading 3923 and attract 18% GST. The appellant also relied upon judgment of Supreme Court in case of Porritts and Spencers (Asia) Ltd V/s State of Haryana [1983 (13) ELT 1607 (S.C.)] wherein it was held that the word ‘textile’ would also cover the fabric manufactured through any material.
6. The Gujarat Authority for Advance Ruling (herein after referred to as ‘the GAAR’), vide Advance Ruling No. GUJ/GAAR/R/62/2020 dated 17.09.2020, inter-alia observed that in view of Madhya Pradesh High Court Judgment in case of M/s Raj Packwell Ltd, fiber manufactured from polypropylene granules cannot be considered as textile in view of Textiles Committee Act, 1963 and hence classification of polypropylene non-woven bags under Heading 6305 is not correct. Further, the ruling of WBAAR relied upon by appellant is not applicable in provisions of Section 103 of CGST Act. GAAR also observed that in view of CBIC (TRU) Circular No. 80/54/2018-GST dated 31.12.2018, polypropylene woven and non woven bags as classifiable under Chapter Heading 3923.
6.1 In view of the foregoing, the GAAR ruled as follows:-
“Ques. I .Whether the product Non-woven Bags manufactured through the intermediate product, Non-Woven Fabrics classifiable under Heading No. 5603 are properly classifiable under Heading No. 6305 or under Heading 3923?
Ans: The Non-Woven Bags manufactured through the intermediate product i.e. Non-Woven fabric manufactured from fiber grade polypropylene granules by adopting the Spun Bond technology, merits classification under HS code 392
The rate of GST applicable on said products during different periods are as below:
