2021 (9) TMI 1288 - AAAR - GST

Classification of goods - HSN Code - rate of tax - Zip Roll (i.e. Slide Fasteners) - applicability of N/N. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended by the N/N. 18/2018-Central Tax (Rate) dated 26.07.2018 - HELD THAT - As per the manufacturing process of Zip Rolls described by the appellant, the polyester tape and polyester cord with teeth are stitched together on the stitching machine with one inner edge of each being fitted with scoops of plastics; that the two narrow strips of textile materials with one inner edge fitted with scoops of plastics are interlocked on the machine to form the Zipper Rolls - It is evident from the manufacturing process and the description of the product Zip Rolls given by the appellant that Zip Rolls being supplied by the appellant conforms to the description narrow strips of any length mounted with chain scoops . Therefore, in our considered view, the said product Zip Rolls merit classification under Tariff Item 9607 20 00 of the CTA, 1975 as Parts of Slide Fasteners. The product Zip Roll is classifiable under Tariff Item 9607 20 00 of the CTA, 1975 as Parts of Slide Fasteners in terms of the heading / sub - headings. As per Rule 1 of the General Rules of Interpretation of the CTA, 1975, classification is required to be determined according to the terms of the headings and any relative Section or Chapter Notes - Rule 2(a) of the General Rules of Interpretation is not applicable for classification of Zip Rolls in the present case. Thus, Zip Rolls being supplied by the appellant are appropriately classifiable under Tariff Item 9607 20 00 as Parts of Slide Fasteners. Rate of GST on Zip Rolls - HELD THAT - Zip Rolls being supplied by the appellant were covered under entry 446 of Schedule - III of the Notifications from 01.07.2017 to 30.09.2019, attracting Goods and Services Tax of 18%. However, with effect from 01.10.2019, the said product Zip Rolls being supplied by the appellant is covered under entry 231B of Schedule - II of the Notifications and is attracting Goods and Services Tax of 12% - The description of goods at S. No. 231B of Schedule - II of Notifications during 26.07.2018 to 30.09.2019 was slide fasteners , unlike the description of goods Fasteners and poly wadding materials in the Notification issued under the Customs Act, 1962. Thus, Zip Rolls is classifiable under Tariff Item 9607 20 00 - Zip Rolls was liable to Goods and Services Tax @ 18% during 01.07.2017 to 30.09.2019 under Sr. No. 446 of Schedule - III of Notification No. 1/2017-Central Tax (Rate) and Notification No. 1/2017-State Tax (Rate), and @ 12% from 01.10.2019 onwards under Sr. No. 231B of Schedule - II of N/N. 1/2017-Central Tax (Rate) and Notification No. 1/2017-State Tax (Rate).

Summary

Issues Involved:
1. Classification of 'Zip Rolls' under the appropriate tariff heading.
2. Applicable rate of Goods and Services Tax (GST) on 'Zip Rolls'.

Issue-wise Detailed Analysis:

1. Classification of 'Zip Rolls':

Manufacturing Process and Description:
The manufacturing process of 'Zip Rolls' involves several steps, including the creation of polyester tape and cord with teeth, stitching these components together, interlocking the strips to form zipper rolls, and subjecting the rolls to calendaring and dyeing processes. The 'Zip Rolls' are supplied in continuous lengths and can be cut to required sizes by buyers.

Appellant’s Argument:
The appellant argued that 'Zip Rolls' should be classified as "Slide Fasteners" under Chapter Heading 9607, relying on the Harmonized System of Nomenclature (HSN) and previous classifications under Central Excise Tariff. The appellant contended that 'Zip Rolls' meet the definition of "Slide Fasteners" as they consist of two narrow strips of textile material fitted with scoops, which can interlock by means of a slider.

GAAR’s Ruling:
The Gujarat Authority for Advance Ruling (GAAR) classified 'Finished Zippers' as "Slide Fasteners" under Chapter Heading 9607.11 but classified 'Zip Rolls' and 'Sliders' as "Parts of Slide Fasteners" under Chapter Heading 9607.20. This classification resulted in different GST rates for these products.

Appellate Authority’s Findings:
The Appellate Authority examined the relevant Chapter Heading 9607 and the Explanatory Notes of HSN. It noted that "Slide Fasteners" are described as consisting of two narrow strips of textile material fitted with scoops that interlock by means of a slider. Since 'Zip Rolls' are supplied without sliders, they do not meet the complete definition of "Slide Fasteners" and instead fit the description of "Parts of Slide Fasteners" as "narrow strips of any length mounted with chain scoops."

Conclusion:
The Appellate Authority upheld the classification of 'Zip Rolls' under Tariff Item 9607 20 00 as "Parts of Slide Fasteners."

2. Applicable Rate of Goods and Services Tax (GST) on 'Zip Rolls':

GST Notifications:
The relevant GST notifications were examined to determine the applicable rates:
- Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 initially classified "Slide Fasteners and parts thereof" under Sl. No. 446 of Schedule-III, attracting 18% GST.
- Notification No. 18/2018-Central Tax (Rate) dated 26.07.2018 amended the classification, placing "Slide Fasteners" under Sl. No. 231B of Schedule-II with 12% GST, while "Parts of Slide Fasteners" remained under Sl. No. 446 of Schedule-III with 18% GST.
- Notification No. 14/2019-Central Tax (Rate) dated 30.09.2019 further amended the classification, including "Slide Fasteners and parts thereof" under Sl. No. 231B of Schedule-II, attracting 12% GST from 01.10.2019.

Appellant’s Argument:
The appellant argued that 'Zip Rolls' should be classified under the entry for "Slide Fasteners" and be subject to 12% GST for the period from 27.07.2018 to 30.09.2019.

Appellate Authority’s Findings:
The Appellate Authority confirmed that 'Zip Rolls' being "Parts of Slide Fasteners" were correctly classified under Sl. No. 446 of Schedule-III, attracting 18% GST from 01.07.2017 to 30.09.2019. From 01.10.2019 onwards, 'Zip Rolls' were covered under Sl. No. 231B of Schedule-II, attracting 12% GST.

Conclusion:
The Appellate Authority upheld the GAAR's ruling on the applicable GST rates for 'Zip Rolls,' confirming the rates as 18% from 01.07.2017 to 30.09.2019 and 12% from 01.10.2019 onwards.

Final Decision:
The appeal filed by The Roll Company was rejected, and the Advance Ruling No. GUJ/GAAR/R/39/2020 dated 03.07.2020 was confirmed to the extent appealed.