GST: CLASSIFICATION OF HDPE WOVEN FABRICS

[Dr. Sanjiv Agarwal]

Tarpaulins made of High Density Polyethylene (HOPE) woven fabrics are laminate of two materials. HDPE tapes woven into fabrics and LDPE sheets/film and, therefore, as per Section Note 1(h) of Section XI (Textile and Textile Articles) it cannot fall under Chapter 63 and cannot be classified under HSN Code 6306 of the GST Tariff.  This was ruled by Authority for Advance Ruling (AAR) in re East Hooghly Polyplast (P) Ltd. 2018 (8) TMI 874 - AUTHORITY FOR ADVANCE RULINGS WEST BENGAL.

The said ruling also came up in appeal before Appellate Authority for Advance Ruling (AAAR) which affirmed the AAR ruling and dismissed the appeal [Refer  IN RE: EAST HOOGHLY POLYPLAST PVT. LTD.- 2018 (12) TMI 710 - APPELLATE AUTHORITY FOR ADVANCE RULING, WEST BENGAL ].

Facts and Advance Ruling

In the instant case, the applicant, M/s East Hooghly Polyplast (P) Ltd. was a manufacturer of Tarpaulins made from High Density Polyethylene (HDPE), a woven fabric and sought a ruling on whether 'HDPE Woven Tarpaulin' was classifiable under HSN 6306 of the GST Tariff.  

It was submitted that tarpaulins made from HDPE woven fabric were different from plastic tarpaulins. The former was derived by weaving method using power looms after textile processing and the latter was derived from plain plastic sheets by cutting into shapes and stitching thereafter. The applicant submitted that HDPE Woven Tarpaulins, though made from HDPE, were articles of textile, and, therefore, should be classified under HSN 6306 of the GST Tariff.

It was ruled that Tarpaulins made of ‘HDPE woven fabrics’ are, therefore, laminate of two materials – HDPE tapes woven into fabrics and LDPE sheets/film, and therefore, as per Section Note 1(h) of Section XI (Textile and Textile Articles) cannot fall under Chapter 63. ‘Tarpaulins made of HDPE woven fabrics’ will not be classified under HSN 6306 of the GST Tariff.

Appellate Ruling

Being aggrieved, company preferred an appeal before Appellate Authority for Advance Ruling (AAAR) on the following grounds: 

1. Tarpaulin made from EIDPE woven fabrics is covered under clause 1 (g) of Section XI of the Tariff Act, that is made up of monofilaments. The Tarpaulin, as specified vide IS 7903:2017, is manufactured from mono-axially oriented HDPE tapes classifiable under Chapter of textiles by the Bureau of Indian Standards (BIS).

2. It manufactured the said product in terms of IS 7903:2017 standard. The said BIS standard provides that the tapes used should be as per specifications under BIS 6192:994.

3. The tapes used for weaving were produced from organic monomers and hence the final product, that is, tarpaulins made from HDPE woven fabric did not fall under the definition of plastics provided in Chapter 39.

4. Plastic tarpaulin contained in different IS Standards are classifiable under the technical division for Plastics whereas IS 7903:2017 (for goods in question) are classified under the technical division for Textiles.

5. The issue before AAR was the classification of Tarpaulin, simpliciter, and not of laminated HDPE Fabrics.

6. Chapter 63 provided the most specific description to the products ill question. So, it is a settled law that if there are two competing entries under which a product may be classifiable, then the entry which covers the product more specifically should be preferred over the entry which is general in nature.

The AAAR observed that as per Note 1(h) to Section XI of the GST Tariff Act, Section of Textile and Textile Articles covering Chapters 50 to 63 does not include, Woven, knitted or crocheted fabrics, felt or nonwovens. impregnated, coated, covered or laminated with plastics or articles thereof, of Chapter 39.

Since water proofing is the principal characteristic of a tarpaulin it goes without saying that HDPE woven fabric can be used as tarpaulin only when such fabric is laminated. Thus the Appellant's contention that the issue was related to Tarpaulin, simpliciter, and not of laminated HDPE fabrics, is not the correct representation of facts. The process of lamination can neither be ignored nor treated in seclusion, as it is an integral and vital process for HDPE fabrics being put to use as tarpaulin.

It concluded that in view of the Note 1(h) to Section XI of the GST Tariff Act mentioned above, the tarpaulins of IIDPE woven fabrics, laminated as per specification of IS 7903:2017, being expressly excluded, do not merit classification under Chapter 63.

It thus, affirmed the ruling pronounced by AAR as correct and justified the same in its entirely.