PVC floor Mat would fall in Customs Tariff heading 3918: AAAR

In re M/s. National Plastics Industries Ltd. (GST AAAR Maharashtra)

AAAR do not find any reason to interfere with the order of Authority for Advance Ruling holding that the PVC floor Mat would fall in the Customs Tariff heading 3918 and applicable rate of GST would be 18%(9% each of CGST and SGST). However, this order is restricted to the types of PVC floor coverings/Mats being manufactured by the Appellant as per the manufacturing process submitted and whose sample was produced before us.

FULL TEXT OF ORDER OF APPELLATE AUTHORITY FOR ADVANCE RULING, MAHARASHTRA

(under Section 101 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)

At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST 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 MGST Act.

The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as T Act and MGST Act”] by M/s. National Plastics Industries Limited (herein after referred as the “Appellant”) against the Advance Ruling No. GST-ARA-17/2017/B-23 dtd. 02.04.2018

Brief Fact of the Case

A) M/s National Plastics is a company engaged in the manufacture of floor mats / (floor coverings) made of (PVC textiles) PVC, known as PVC Carpet Mats or Floor coverings or Textile floor covering made up of PVC.

B) Manufacturing of the same is undertaken in two stages. Stage 1 being PVC Monofilament production and carpet piling process and stage 2 being Web-lamination and backing The prime raw material being used for the aforesaid product is PVC (Poly Vinyl Chloride). The stages of manufacture are as follows:

a) Under Stage 1, PVC monofilament yarn with decitex ranging from 1200 to 2800 and filament diameter range 0.38 to 0. 75 mm is extruded through a perforated die plate using T-die extrusion. Extrusion is done through 3 to 4 parallel rows along the entire width of T-die and the vertically extruded yarn immediately falls on a water bed to form a non-woven carpet pile. Also, referred to as PVC web, non-woven carpet pile is taken up in a horizontal direction on a roller and wound up in rolls. Pile height of the carpet can be varied by changing the process parameters, usually in the range of 8 mm to 16 mm.

b) Under Stage 2, the web formed in Stage 1 is impregnated with a lamination of clear coat of liquid PVC and is further made to fall over the liquid PVC layer on a conveyer belt. Then it passes through the heated conveyor oven to solidity the liquid PVC backing to the web.

c) The resultant product is a product of running length. It is then cut into size as given specified by the customer. A sample of the product to be classified is attached as annexure 10 for ready reference.

C) On 03.01.2018, The appellant filed the Advance ruling application under section 97 of the CGST Act, 2017 before the advance ruling authority (hereafter referred as the ‘Authority’) seeking the ruling on the correct classification and the rate of GST applicable for the above- mentioned product. The appellant had proposed the classification of the product under chapter 5705 and being covered under entry no 146 of schedule II of the notification no (rate) and 1/2017-ST (rate) and attracting tax at the rate of 12% in total.

D) the Authority passed the advance ruling order No. GST-ARA-17/2017/13-23 018 which was received by the appellant on 26.04.2018 wherein AARclassified the product under chapter heading 3918 and rejected the classification of the appellant under chapter 5705.

E) Being aggrieved by the said order, the appellant has filed the present appeal.

Grounds of Appeal

1) The section 9(1) of the Central Goods & Services Tax Act, 2017 (hereinafter referred to as “the CGST Act”) and the section 9(1) of the Maharashtra Goods and Service Tax Act 2017 (hereinafter referred to as “the SGST Act”) 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 recommendations of the Council.

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

Further, Notification No. 1/2017 – CGST specifically provide that – “Explanation – For the purposes of this Schedule, –

(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 Ta riff Act, 1975.

(iv) The rules for the interpretation of the First Schedule to the Custom Tariff Act, 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.”

Thus, for the purpose of GST, Classification of goods under any tariff item/ subheading /heading/ chapter shall be done using the general rules of interpretation of the first Schedule of the CTA,1975.

It is submitted that the above explanation is also part of the notification 01/2017- State Tax (Rate) and thus the above ratio will apply to notifications issued under State GST law also.

2) The impugned goods do not merit classification under Chapter 3918 as “Floor covering of plastics whether or not self-adhesive in rolls or in form of tiles•”. Therefore the impugned advance ruling passed by the authority needs to be set aside.

a) The authority has classified the impugned goods under chapter heading 3918 on the grounds that the impugned product is made up of PVC which is plastic and thus covered under chapter heading 3918.

b) The Entry no. 104A of Schedule III of the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 amended by notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 issued under CGST Act, covers the chapter heading 3918, the same being reproduced below:

Note-1 to chapter 39 defines the word “plastics” as follows: –