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2025 (4) TMI 1048 - AAR - GSTClassification of goods - HSN code - GST rate - Geo Membrance laminated HDPE woven polymer lining - whether the product manufactured by the applicant i.e. Geomembrane for Water Proof Lining-Type-II as per IS 153151 2015 is classifiable under Chapter 39 or Chapter 59 of the GST Tariff? - HELD THAT - From the process of manufacture as described by the applicant it is apparent that after the process of extrusion and slitting HDPE Tapes/ Strips of width less than 5mm are taken to circular looms and are woven into HDPE Woven Fabrics. The said High Density UV Stabilized Woven Fabrics are manufactured with specific weaving pattern through circular ring on horizontal and vertical direction to impact the essential property of Geomembrane fabrics i.e. impermeable to water for the specific end use of water retention. The said HDPE Tapes/Strips of width less than 5mm in width are appropriately classifiable under Heading 5404. Further Section Note 1(g) of Section XI excludes only strips of plastic where the width is exceeding 5mm. The strips of plastic of less than 5 mm width would be appropriately classifiable under Tariff Heading 5404 and the fabric woven out of the said strips would be appropriately classifiable under Tariff Heading 5407 20. Such fabrics would also be considered as a textile fabric. In this regard we find that the Apex Court in the case of M/s. Porritts and Spencer (Asia) Limited 1978 (9) TMI 72 - SUPREME COURT has held that when yarn whether cotton silk woollen rayon nylon or of any other description or made out of any other material is woven into fabric what comes out is a textile. It has been further held in the said case that whatever be the mode of weaving employed the woven fabric would be textile . It is further held that the use to which it may be put is also immaterial and does not bear on its character as a textile. In terms of Section Note 1 (h) of Section XI even woven fabrics which are laminated with plastics or articles thereof of Chapter 39 are excluded from the said Section. Section XI covers Chapters 50 to Chapter 63 of the Customs Tariff. Therefore even if during the course of manufacture of the said product any woven fabric emerges and even if the said woven fabric is classified under Chapter 57 as a textile fabric if the said goods are laminated with plastic and can be classified under chapter 39 the same will go out of the purview of Section XI and consequently out of the purview of Chapter 50 to Chapter 63. The product manufactured by the applicant i.e. Geo Membrane for Water Proof Lining - Type-II as per IS 153151 2015 is an article of textile laminated with plastic of a kind used for technical purposes. This product is and can be classified under Tariff Item 59111000. When a classification based on the specification and use of any product is possible it would not be proper to classify it in the general and residuary entry of Other articles of plastic and articles of other materials of Heading 3901 to 3914 . It is also for this very reason that the provisions of Section Note 1(h) of Section XI would also not be applicable to the goods in the instant case as the goods in the instant case i.e. geo membrane does not find mention under any of the tariff items under Chapter 39 and when they can be correctly classified under Tariff Item 59111000 it would not be proper to consign it to the orphanage of a residuary entry as other articles of plastic under Chapter 3926. Conclusion - i) Geo Membrance for Water Proof Lining is classifiable under Tariff item 591110. ii) Geo Membrance laminated HDPE woven polymer lining attract @ 12% GST.
The core legal questions considered by the Authority for Advance Ruling (AAR) were:
1. What is the correct Harmonized System of Nomenclature (HSN) code applicable to the product described as "GEO MEMBRANE laminated HDPE woven polymer lining"? 2. What is the applicable Goods and Services Tax (GST) rate on this product? These issues arose in the context of classification under the GST Tariff, specifically whether the product falls under Chapter 39 (plastics and articles thereof) or Chapter 59 (textile products and articles for technical uses) of the Customs Tariff Act, 1975. Issue-wise Detailed Analysis Issue 1: Classification of Geo Membrane laminated HDPE woven polymer lining under the correct HSN code Relevant Legal Framework and Precedents: The classification issue required interpretation of the Customs Tariff Act, 1975, particularly Chapters 39 and 59, and their respective Section and Chapter Notes. The General Rules of Interpretation (GRI) of the Tariff were also relevant, especially Rule 3(a) which mandates preference to the most specific description. Chapter 39 covers plastics and articles thereof, including High-Density Polyethylene (HDPE) materials, while Chapter 59 covers textile products and articles for technical uses, including textile fabrics coated or laminated with plastics. Section Note 1(g) to Section XI (Textiles) excludes plastic strips wider than 5mm from textiles, while Note 1(h) excludes woven, knitted or crocheted fabrics laminated with plastics or articles of Chapter 39. Precedents cited included the Supreme Court decision in M/s. Porritts and Spencer (Asia) Ltd. (1983), which held that woven fabrics, regardless of the material or weaving method, are textiles. The Gujarat High Court's recent ruling setting aside an AAR decision and holding Geo Membrane under Chapter 59 was also pivotal. Court's Interpretation and Reasoning: The AAR carefully examined the manufacturing process submitted by the applicant. The process involves extrusion of HDPE granules into sheets, slitting into tapes less than 5mm wide, weaving these tapes into fabrics, and subsequently laminating these fabrics with LDPE films to produce the final Geo Membrane product. The AAR noted that:
However, the AAR emphasized the principle of tariff interpretation that the most specific heading should be preferred. Heading 5911 specifically covers textile fabrics coated or laminated with plastics used for technical purposes, which aligns with the applicant's product. The product is manufactured as per IS:15351:2015, recognized as an agro-textile and technical textile by the Directorate General of Foreign Trade and Ministry of Textiles notifications. It is used primarily for water retention in agriculture and aquaculture, confirming its technical use. The AAR distinguished the case from those involving plastic strips or sacks, emphasizing that woven fabric made from HDPE tapes is a textile product. The Supreme Court ruling in Porritts and Spencer supported this conclusion, underscoring that the weaving process creates a textile regardless of material or use. While Section Note 1(h) excludes woven fabrics laminated with plastics if classifiable under Chapter 39, the AAR found that since the product is not classifiable under any specific Chapter 39 tariff item, and can be specifically classified under Chapter 59 heading 5911, the exclusion does not apply. Key Evidence and Findings:
Application of Law to Facts: The AAR applied the tariff classification rules, Section and Chapter Notes, and judicial precedents to conclude that the product is a textile fabric laminated with plastics used for technical purposes. The weaving of HDPE tapes less than 5mm wide produces a textile fabric, which is then laminated but not excluded from textiles because it is not classifiable under Chapter 39. The product's technical use and compliance with textile standards further supported classification under Chapter 59. Treatment of Competing Arguments: The jurisdictional officer argued that the product is essentially a plastic article under Chapter 39, citing the raw materials (HDPE granules) and Section Note 1(h) excluding laminated woven fabrics from textiles. The officer also noted the absence of detailed manufacturing process submission by the applicant during the inquiry. The AAR rejected this view, emphasizing the detailed manufacturing process, the width of tapes, the weaving into fabric, and the technical textile recognition. The AAR also relied on the principle that the most specific heading prevails and that the product is not classifiable under any Chapter 39 tariff item. Issue 2: Applicable GST rate on the product Relevant Legal Framework: The GST rates are specified in Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017, which applies the rates based on HSN classification. Chapter 39 items generally attract 18% GST, whereas Chapter 59 items attract 12% GST. Court's Interpretation and Reasoning: Since the product was held to be classifiable under Heading 59111000 (textile fabrics for technical uses laminated with plastics), the applicable GST rate is 12% (6% CGST + 6% SGST) as per the notification. Key Evidence and Findings: The product's classification under Chapter 59 triggered the lower GST rate of 12%. The applicant was previously paying 18% under Chapter 39 heading 39269099. Application of Law to Facts: Correct classification under Chapter 59 directly led to the determination of the GST rate at 12%, consistent with the GST schedule. Treatment of Competing Arguments: The jurisdictional officer's contention for 18% GST was based on classification under Chapter 39. With the product reclassified under Chapter 59, the officer's argument on rate became inapplicable. Significant Holdings "The word 'textiles' is derived from the Latin 'texere' which means 'to weave' and it means any woven fabric. When yarn, whether cotton, silk, woollen, rayon, nylon or of any other description or made out of any other material is woven into a fabric, what comes into being is a 'textile' and it is known as such... Whatever be the mode of weaving employed, woven fabric would be 'textiles'... The use to which it may be put is also immaterial and does not bear on its character as a textile." "It is a well-established tenet of interpretation of the tariff that a heading which provides the most specific description shall be preferred to a heading providing a more general description." "The product manufactured by the applicant i.e. Geo Membrane for Water Proof Lining - Type-II as per IS 153151:2015 is an article of textile, laminated with plastic, of a kind used for technical purposes. This product is and can be classified under Tariff Item 59111000." "Since the product is classifiable under Chapter 59 and not under Chapter 39, the GST rate applicable is 12%." Final Determinations: 1. The HSN code for Geo Membrane laminated HDPE woven polymer lining is 59111000, classifying it as a textile fabric for technical use laminated with plastics. 2. The GST rate applicable to the product is 12%.
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