2023 (2) TMI 397 - HC - GST

Classification of goods - Polypropylene Leno Bags by weaving polypropylene strips (tapes) - to be classified under Chapter Heading 63053300 or not. - Constitutional Validity of impugned circular no. 80/54/2018-GST dated 31st December, 2018, issued by the Government of India, Ministry of Finance - change of classification of Tariff head of its same product under the Central Excise Tariff Act after introduction of the GST Act, 2017 The moot point is that the Bags/sacks are not manufactured out of textile material as defined under Chapter sub-heading 6305 of the Tariff Act and is rather made of woven strips manufactured out of Polypropylene (i.e., made of plastics) as defined under Chapter sub-heading 3923. Hence, the impugned goods are clearly classified under Chapter heading 3923. HELD THAT - All the Learned Appellate Authority of Advance Ruling of the different States have relied upon and followed the decision of the West Bengal Appellate Authority of Advance Ruling in the case of IN RE MEGA FLEX PLASTICS LTD. 2018 (7) TMI 391 - AUTHORITY FOR ADVANCE RULINGS, WEST BENGAL and decided the issue in favour of the revenue against the assessees by holding that the goods are classifiable under Chapter 39 of the Tariff Act being the plastic articles and the reasoning given by the aforesaid Appellate authorities though being subordinate authorities and not binding upon this Court but the same is found convincing - Petitioner has also failed to produce any judgment or order by any High Court or Supreme Court reversing the order of such Appellate authorities by taking a different view. Merely because no further appeal is provided for or against the impugned order of the Appellate Authority for Advance Ruling the scope of interference under the jurisdiction under Article 226 of the Constitution of India cannot be enlarged and the findings of the Appellate Authority cannot be substituted unless the same is without jurisdiction or there is violation of principle of natural justice or the order is patently contrary to any specific provision of law which factors for invoking constitutional writ jurisdiction of this Court are absent in the instant case - This Court in exercise of its jurisdiction under Article 226 of the Constitution of India is not inclined to allow the petitioner to change the classification of Tariff Heading to avail lower rate of Tariff under GST regime when admittedly the product of the petitioner is Polypropylene Leno Bags manufactured by weaving Polypropylene strips and the major raw material of which is plastic granules and admittedly before the introduction of GST regime, petitioner had been declaring the said product under the Chapter 3923 29 90 of the Central Excise Tariff Act, 1985, and enjoyed the Duty Drawback and never contended before the authority till the introduction of GST law that its classification was wrong. The view that the product in question manufactured by the petitioner is made from plastic granules and cannot be treated as textile articles has found favor by the various authorities - petition dismissed.

Summary

Issues Involved:
1. Legality of the impugned order dated 25th October 2018 passed by the West Bengal Appellate Authority for Advance Ruling.
2. Constitutionality of Circular No. 80/54/2018-GST dated 31st December 2018 issued by the Government of India, Ministry of Finance.
3. Classification disputes of the product (Polypropylene Leno Bags) under the Central Excise Tariff Act and GST Act, 2017.
4. Petitioner's request to change the classification of the product from Tariff Heading 3923 29 90 to 6305 33 00.

Issue-wise Detailed Analysis:

1. Legality of the Impugned Order Dated 25th October 2018:
The petitioner challenged the order of the West Bengal Appellate Authority for Advance Ruling, which reversed the decision of the Authority for Advance Ruling (AAR) that classified Polypropylene Leno Bags under Chapter Heading 6305 33 00. The Appellate Authority set aside this classification, holding that the bags should be classified under Tariff Heading 3923 29 90. The court found that the petitioner had failed to provide a cogent reason for changing the classification and upheld the Appellate Authority's decision, noting that the product's composition and manufacturing process remained unchanged post-GST introduction.

2. Constitutionality of Circular No. 80/54/2018-GST:
The petitioner initially sought to challenge the circular's constitutionality, which clarified that Polypropylene Woven and Non-woven Bags should be classified under HS Code 3923 and attract 18% GST. However, during the hearing, the petitioner did not press this issue. The court noted this waiver and did not address the circular's constitutionality, focusing instead on the classification issue.

3. Classification Disputes of the Product:
The main issue revolved around whether Polypropylene Leno Bags should be classified under Tariff Heading 3923 29 90 (plastics) or 6305 33 00 (textiles). The petitioner argued that the bags should be classified as textiles due to their manufacturing process involving strips less than 5mm in width. The court, however, relied on the consistent classification of similar products as plastics by various authorities and previous judicial precedents, including the Madhya Pradesh High Court's decision in Raj Pack Well Ltd. v. Union of India, which classified HDPE bags as plastic goods.

4. Petitioner's Request to Change Classification:
The petitioner had previously classified the bags under Tariff Heading 3923 29 90 and enjoyed duty drawbacks. Post-GST, the petitioner sought to change the classification to 6305 33 00 to benefit from a lower tax rate. The court found this request unjustified, noting that the product's classification should not change merely to avail a lower tariff rate. The court emphasized that the product's composition and manufacturing process had not changed, and the classification under Chapter 39 was appropriate.

Conclusion:
The court dismissed the writ petition, upholding the Appellate Authority's decision to classify Polypropylene Leno Bags under Tariff Heading 3923 29 90. The court found no merit in the petitioner's arguments for reclassification and noted that the petitioner had waived its challenge to the circular's constitutionality. The court also highlighted the uniform adoption of this classification by various authorities and judicial precedents, reinforcing the decision's legality and consistency with the fiscal statute.