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2021 (1) TMI 587 - AAR - GSTClassification of goods - product Non Woven Bags manufactured through the intermediate product Non Woven fabric - classifiable under Heading No. 5603 or under 6305 or under Heading No. 3923? - exemption under N/N. 01/2017-CT (Rate) and 01/2017-I.T. (Rate) dated 28.06.2017 as amended - HELD THAT - Applicant has relied upon decision of Hon ble Supreme Court of India in PORRITTS SPENCER (ASIA) LTD. VERSUS STATE OF HARYANA 1978 (9) TMI 72 - SUPREME COURT has stated that textile is woven fabric, which is emerged by weaving of yarn of cotton, silk, rayon or nylon and similar type of material. The said textile may be used for making apparel, bed sheet or tapestry or upholstery or as towel. Therefore, fabric made of other than the yarn of cotton, silk, rayon or nylon and similar type of material is not a textile. The word used in the sentence is similar type of material and the meaning of said word can only be drawn in reference of the words used before the above word. The fabric made of Fiber grade Poly Propylene granules is not a similar type of material of cotton, silk, rayon or nylon. Hence fabric made of Fiber grade Poly Propylene granules cannot be considered as textile. Hence, ratio of above case law is not squarely applicable to the present case. 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 on product - Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 - HELD THAT - The rates of GST leviable on above product were changed from time to time, as below (a) Period 01.07.2017 to 30.09.2019 - rate of CGST and SGST @ 9% each, totalling to 18%. (b) Period 01.10.2017 to 31.12.2019 - rate of CGST and SGST @ 6% each, totalling to 12%. (c) Period 01.01.2020 to till date - rate of CGST and SGST @ 9% each, totalling to 18%.
Issues Involved:
1. Classification of Non-Woven Bags under the appropriate Heading. 2. Eligibility for exemption under Notification No. 01/2017-CT (Rate). Issue 1: Classification of Non-Woven Bags The main issue is whether Non-Woven Bags manufactured through the intermediate product Non-Woven fabric, classifiable under Heading No. 5603, should be classified under Heading No. 6305 or Heading No. 3923. The applicant argued that their product should be classified under Heading No. 6305, citing previous classifications and rulings, including the decision by the Appellate Authority for Advance Ruling and clarification from the DKTE Center of Excellence in Non-Wovens. They also referenced the Supreme Court decision in the case of Porritts and Spencers (Asia) Limited v/s State of Haryana, which defined "textile" broadly. Upon review, the Authority noted that the manufacturing process involves polypropylene granules, which are melted and spun into filaments to create Non-Woven fabrics. These fabrics are then used to make Non-Woven bags. The Authority examined the relevant headings and HSN Explanatory Notes for both Heading No. 6305 and Heading No. 3923. Heading No. 6305 covers "Sacks and Bags, of a kind used for the packing of goods," primarily focusing on textile materials. However, the Authority concluded that the applicant's product, made from polypropylene granules, falls under the definition of plastic materials. The Authority cited the Madhya Pradesh High Court's decision in the case of M/s. Raj Packwell Ltd. v. UOI, which held that HDPE woven bags are classified as articles of plastic. The Authority further referenced CBIC (TRU) 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. Consequently, the Authority ruled that Non-Woven Bags manufactured from polypropylene granules are classifiable under Heading No. 3923. Issue 2: Eligibility for Exemption The second issue was whether Non-Woven Bags are eligible for exemption under Notification No. 01/2017-CT (Rate). The Authority examined the applicable GST rates and amendments to the notification over time. Initially, goods under Heading No. 3923 were subject to an 18% GST rate. From 01.10.2019 to 31.12.2019, the rate was reduced to 12%. However, effective from 01.01.2020, the rate reverted to 18%. Based on the classification under Heading No. 3923 and the applicable GST rates, the Authority concluded that Non-Woven Bags are not eligible for exemption under Notification No. 01/2017-CT (Rate). Ruling: 1. The product Non-Woven Bags manufactured through the intermediate product Non-Woven fabric classifiable under Heading No. 5603 is properly classifiable under Heading No. 3923. The applicable GST rates during different periods are: - 01.07.2017 to 30.09.2019: 18% (9% CGST + 9% SGST) - 01.10.2019 to 31.12.2019: 12% (6% CGST + 6% SGST) - 01.01.2020 to till date: 18% (9% CGST + 9% SGST) 2. The product Non-Woven Bags is not eligible for exemption under Notification No. 01/2017-CT (Rate) as amended.
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