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2021 (1) TMI 541 - AAR - GSTClassification of goods - HSN Code - product Non-Woven Bags manufactured through the intermediate product, Non-Woven Fabrics - classifiable under Heading No. 6305 or under Heading 3923 or otherwise? - exemption under Notification No.1/2017-C.T. (Rate) and 01/2017-I.T. (Rate) dated 28.06.2017, as amended - HELD THAT - The applicant is engaged in manufacturing of Polypropylene Non-Woven Bags through the intermediate product, i.e. Non-Woven Fabrics manufactured from Fiber grade poly propylene granules by adopting the Spun Bond technology. In this technology, poly propylene granules are fed to the hopper and passed through extruder at certain temperature. The melted material after filtering passed through the spinning unit to obtain a continuous single filament. The said filaments are then subject to lying on the continuous web and under control pressure thermal bonding. The resultant product is Non-Woven fabric, which is called Polypropylene Non-Woven fabrics. The issue of classification of PP/HDPE Bags or sacks, made of HDPE tapes and fabrics, has been dealt with at length by the Hon ble High Court of Madhya Pradesh in case of RAJ PACK WELL LTD. VERSUS UNION OF INDIA 1989 (9) TMI 120 - MADHYA PRADESH HIGH COURT where Hon ble High Court of Madhya Pradesh has discuss what is textile according to the Section 2(g) of Textiles Committee Act, 1963 (Act 41 of 63) and according to the above definition, any fabric or cloth or yarn or garment if made wholly or in part of cotton, wool, silk, artificial silk or other fibre shall be called textiles, 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 . Therefore, it can be concluded that intermediate Fabrics manufactured from Fibre grade poly propylene granules cannot be considered as textile material. Under CTH No. 63 of Custom Tariff Act, 1975 only covers textile sacks and bags of a kind normally used for the packing of goods whereas applicant goods, Non-Woven Bags is not manufactured from textile material as discussed above. Hence, applicant s claim that their product covers under Chapter Heading No. 6305 of the Custom Tariff Act, 1975 is not correct. The applicant product, Non-Woven Bags is manufactured from Fibre grade poly propylene granules, which falls under the definition of plastic material, therefore, goods, Non-Woven Bags is classifiable under CTH No. 3923 of the Custom Tariff Act, 1975. Thus, Non-Woven Bags manufactured through the intermediate product, i.e. Non-Woven fabric manufactured from Fiber grade poly propylene granules by adopting the Spun Bond technology, merits classification under HS code 3923, as also clarified by the CBIC in the Board Circular No.80/54/2018-GST issued from F. No. 354/432/2018-TRU dated 31st December, 2018. Applicable rate of GST - HELD THAT - The rates of GST leviable on product in hand is changed from time to time, as discussed below (a). Period 01.07.2017 to 30.09.2019 rate of CGST and SGST @ 9% each, totalling 18%. (b). Period 01.10.2017 to 30.12.2019 rate of CGST and SGST @ 6% each, totalling 12%. (c). Period 01.01.2020 to till date rate of CGST and SGST @ 9% each, totalling 18%. The product Non-Woven Bags would not be eligible for exemption under Notification No.1/2017-C.T. (Rate) and 01/2017-I.T. (Rate) dated 28.06.2017, as amended.
Issues Involved:
1. Classification of Non-Woven Bags under GST. 2. Eligibility for exemption under Notification No.1/2017-C.T. (Rate) and 01/2017-I.T. (Rate). Detailed Analysis: 1. Classification of Non-Woven Bags under GST: The primary issue is whether Non-Woven Bags manufactured through Non-Woven Fabrics are classifiable under Heading No. 6305 or 3923. - Applicant's Argument: The applicant argued that Non-Woven Bags should be classified under Heading No. 6305, as they are manufactured from Non-Woven fabrics (classified under Heading No. 5603), which are textile materials. They relied on various rulings and clarifications, including the decision by the Appellate Authority for Advance Ruling (AAAR) in West Bengal and the Supreme Court's judgment in Porritts and Spencer (Asia) Ltd. v. State of Haryana. - Authority's Analysis: The Authority examined the relevant chapter notes, headings, and HSN Explanatory Notes. The Authority noted that Chapter 39 covers plastics and articles thereof, and Chapter 63 covers textile articles. The Authority referred to the Madhya Pradesh High Court's decision in M/s. Raj Packwell Ltd. v. UOI, which held that HDPE bags are articles of plastic and not textile materials. - Conclusion: The Authority concluded that Non-Woven Bags made from Fiber grade poly propylene granules are plastic materials and should be classified under HS code 3923. The Authority also referred to CBIC Circular No. 80/54/2018-GST, which clarified that Polypropylene Woven and Non-Woven Bags are classifiable under HS code 3923 and attract 18% GST. 2. Eligibility for Exemption under Notification No.1/2017-C.T. (Rate) and 01/2017-I.T. (Rate): The second issue is whether Non-Woven Bags are eligible for exemption under the specified notifications. - Applicant's Argument: The applicant contended that if classified under Heading No. 6305, Non-Woven Bags would be eligible for exemption under the said notifications. - Authority's Analysis: The Authority analyzed the applicable GST rates and amendments to the notifications. The Authority noted that from 01.07.2017 to 30.09.2019, the applicable GST rate for goods under Chapter 3923 was 18%. From 01.10.2019 to 30.12.2019, the rate was 12%, and from 01.01.2020 onwards, it reverted to 18%. - Conclusion: The Authority concluded that Non-Woven Bags are not eligible for exemption under Notification No.1/2017-C.T. (Rate) and 01/2017-I.T. (Rate). Ruling: 1. Classification: Non-Woven Bags manufactured through Non-Woven Fabrics are classifiable under HS code 3923. 2. GST Rates: - From 01.07.2017 to 30.09.2019: 18% (9% CGST + 9% SGST). - From 01.10.2019 to 30.12.2019: 12% (6% CGST + 6% SGST). - From 01.01.2020 onwards: 18% (9% CGST + 9% SGST). 3. Exemption: Non-Woven Bags are not eligible for exemption under Notification No.1/2017-C.T. (Rate) and 01/2017-I.T. (Rate).
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