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2019 (2) TMI 833 - AAAR - GSTClassification of goods - PP Leno Bags - whether classified under Chapter 63 or under Chapter 39 of Tariff Act? - challenge to advance ruling decision. Held that - It is pertinent to mention that the Note 2(p) of the Chapter 39 of GST Tariff (plastics and Articles thereof) does not cover the goods of Section XI (Textiles Textile Products). In the instant case, the impugned product, by no way of stretch of imagination, could be termed as Textiles or Textile Products. Therefore, unless the impugned goods have been manufactured from the material which qualifies as Textiles of the Chapter 63, it would not be proper to consider the same to be classifiable under Chapter 63053300 - the goods i.e., woven, knitted or crocheted fabrics, felt or nonwovens, impregnated, coated, covered or laminated, made from the plastics or articles thereof are excluded from the Section XI of Tariff Act. If the impugned goods were made of textile material of polypropylene, then only the same would be classifiable under Chapter 63 and the aforesaid fact is absent in the instant case. Therefore, the impugned goods cannot be classified under Chapter 63 and shall be classifiable under Chapter 39. Also, the Respondent cannot be allowed to change the classification which they had pursued for last 9 years in view of the fact that they are now intended to avail lower tariff rate of GST, which is devoid of merit. CBIC, vide para 7 of the Circular 80/54/2018-GST dated 31-08-2018 has clarified that Polypropylene Leno Bags whether laminated with BOPP or not would be classified as plastic bags under HS code 3923 and would attract 18% GST. Thus, Polypropylene Leno Bags shall be classifiable under Heading No. 392390 of the Tariff Act.
Issues Involved:
1. Classification of Polypropylene Leno Bags under the GST Tariff. 2. Interpretation of Section and Chapter Notes of the Tariff Act. 3. Consideration of previous judgments and practices related to classification. 4. Applicability of Bureau of Indian Standards and Technical Textile Unit classifications. 5. Doctrine of estoppel and the taxpayer's intent in seeking reclassification. Detailed Analysis: 1. Classification of Polypropylene Leno Bags under the GST Tariff: The primary issue revolves around the classification of Polypropylene Leno Bags (PP Leno Bags). The Advance Ruling Authority initially classified these bags under Tariff Sub-Heading 6305 33 00, which pertains to sacks and bags of man-made textile materials. However, the Appellant contested this classification, arguing that the bags should fall under Chapter 39, specifically Sub-Heading 3923 29 90, which covers articles of plastics. 2. Interpretation of Section and Chapter Notes of the Tariff Act: The Appellant argued that the Advance Ruling Authority misinterpreted Section Notes 1 (g) and 1 (h) of Section XI of the Tariff Act. According to the Appellant, the true essence of these notes was not correctly understood, leading to an erroneous classification. The Appellant emphasized that the term 'woven' should have been considered an exclusion word, thus making the ruling legally untenable. The Respondent, however, pointed out that Note 2(p) of Chapter 39 clearly excludes goods of Section XI, thus supporting their classification under Chapter 63. 3. Consideration of Previous Judgments and Practices Related to Classification: The Appellant referenced the judgment of the Hon’ble Madhya Pradesh High Court in the case of M/s. Raj Pack Well Ltd Vs Union of India, which classified HDPE strips or tapes under Heading 39.20 and HDPE sacks under Heading 39.23. The Appellant argued that this precedent should guide the classification of PP Leno Bags. Additionally, the Appellant noted that the taxpayer had been classifying their products under Chapter 39 for the last nine years, suggesting that the sudden change in classification was self-serving. 4. Applicability of Bureau of Indian Standards and Technical Textile Unit Classifications: The Respondent argued that the Bureau of Indian Standards classifies such sacks under the category of Textiles, and their unit was registered as a Technical Textile Unit. However, the judgment clarified that classifications should be determined according to the relevant Section and Chapter Notes of the GST Tariff Act, not external standards. The Respondent failed to demonstrate how these standards were relevant to the GST Tariff Act's Section and Chapter Notes. 5. Doctrine of Estoppel and the Taxpayer's Intent in Seeking Reclassification: The Appellant suggested that the taxpayer's intent to reclassify the bags was to take undue advantage of a lower tax rate, invoking the doctrine of estoppel. The judgment referenced the Supreme Court's observation that a person cannot approbate and reprobate, indicating that the taxpayer's long-standing classification practice should not be changed merely to benefit from a lower tax rate. Conclusion: The judgment concluded that Polypropylene Leno Bags should be classified under Heading No. 3923 90 of the Tariff Act, aligning with the classification for articles of plastics. The Advance Ruling No. 19/WBAAR/2018-19 dated 28.09.2018 was modified accordingly, and the appeal was disposed of. The decision emphasized the importance of adhering to the Section and Chapter Notes of the GST Tariff Act over external standards or previous practices when determining the classification of goods.
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