2021 (3) TMI 548 - AAR - GST

Classification of goods - Geo Membrane for Water Proof Lining Fabrics - goods manufactured and supplied by the applicant (also referred to as Pond Liner) which is used for Water Proof Lining of Ponds, Canals and other Water storage places - liability of GST - HELD THAT - The HDPE fabrics manufactured by the applicant are made by weaving the HDPE tapes into a fabric. These HDPE tapes are manufactured from HDPE Granules which are mixed with additives and then extruded through sheet die to produce solid sheet which is further uniformly slitted into number of tapes. We find that the HDPE granules i.e. High Density Polyethelene(HDPE) granules or High Density Polyethelene (HDPE) tapes are actually nothing but plastics and are covered under Chapter 39 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). Further, Chapters 50 to 63 of the said schedule covers Textile and Textile articles only. So for the products manufactured by the applicant, to be included under the sub-headings 5903 or 5911, they need to be textile material. The product of the applicant namely Geo Membrane for Waterproof Lining fabrics (also referred to as Pond Liner) is classifiable under Sub-heading No.39269099 of Chapter 39 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975) since we do not find the specific mention of this product in any of the other sub-headings of Heading 3926. Classification of the product namely Geo Membrane for Waterproof Lining fabrics(also referred to as Pond Liner) manufactured and supplied by the applicant was covered under Entry No.45 of Schedule-IV of Notification No.01/2017-Central Tax(Rate) dated 28.06.2017 (upto 14.11.2017) which read as Other articles of plastics and articles of other materials of headings 3901 to 3914 other than bangles of plastic, PVC Belt Conveyor, plastic beads and plastic tarpaulins and during this period, the said product was liable to GST at 28%. However, Entry No.45 of Schedule-IV was omitted with effect from 15.11.2017 and Entry No.111 of Schedule-III of Notification No.01/2017-Central Tax(Rate) dated 28.06.2017 which read earlier as PVC Belt Conveyor, Plastic Tarpaulin was amended with effect from 15.11.2017 to read as Other articles of plastics and articles of other materials of headings 3901 to 3914 other than bangles of plastic, plastic beads and feeding bottles . Hence, it is concluded that the aforementioned product of the applicant would be covered under the Entry No.111 of Schedule-III of Notification No.01/2017-Central Tax(Rate) dated 28.06.2017(as amended) with effect from 15.11.2017 liable to GST at 18%.

Summary

Issues Involved:
1. Classification of the product "Geo Membrane for Waterproof Lining Fabrics" (Pond Liner).
2. Determination of the applicable GST rate for the product.

Issue-wise Detailed Analysis:

1. Classification of the Product:

The applicant, M/s. Ananta Synthetic Innovations, manufactures and supplies "Geo Membrane for Waterproof Lining Fabrics" (Pond Liners). The product is made from HDPE granules and is used for waterproof lining of ponds, canals, and other water storage places. The applicant sought classification under HSN 59039090 or HSN 59119090.

Upon examination, the Authority found that the HDPE fabrics are made by weaving HDPE tapes, which are derived from HDPE granules (a plastic material). The Authority referred to the judgment of the Hon’ble High Court of Madhya Pradesh in M/s. Raj Packwell Ltd. v. UOI [1990 (50) E.L.T. 201 (M.P.)], which concluded that HDPE woven sacks are articles of plastic and not textile material. Therefore, the HDPE fabrics manufactured by the applicant cannot be considered textile material and should be classified under Chapter 39 of the Customs Tariff Act, 1975, which covers plastic materials.

The Authority further referred to the case of THE RUBY MILLS LTD., where cotton fabrics coated with plastics were discussed. However, this case was found inapplicable as the applicant's product is made from plastic material (HDPE tapes) and not cotton.

Based on the manufacturing process and the materials used, the Authority concluded that the product "Geo Membrane for Waterproof Lining Fabrics" should be classified under Heading 3926 of Chapter 39, specifically under Sub-heading 39269099, as it is an article of plastic.

2. Determination of the Applicable GST Rate:

To determine the GST rate, the Authority referred to Notification No.01/2017-Central Tax (Rate) dated 28.06.2017, which lists the applicable GST rates for various goods. The relevant entries in the notification were:

- Entry No. 111 in Schedule-III (GST rate 18%): "Other articles of plastics and articles of other materials of headings 3901 to 3914 [other than bangles of plastic, plastic beads and feeding bottles]."
- Entry No. 45 in Schedule-IV (GST rate 28%): "Other articles of plastics and articles of other materials of headings 3901 to 3914 [other than bangles of plastic, PVC Belt Conveyor, plastic beads and plastic tarpaulins]."

The Authority noted that Entry No. 45 in Schedule-IV was omitted with effect from 15.11.2017, and Entry No. 111 in Schedule-III was amended to include "Other articles of plastics and articles of other materials of headings 3901 to 3914."

Therefore, the product "Geo Membrane for Waterproof Lining Fabrics" was liable to GST at 28% (14% SGST + 14% CGST) up to 14.11.2017. From 15.11.2017 onwards, the product is liable to GST at 18% (9% SGST + 9% CGST).

Ruling:

The classification and GST rate for the product "Geo Membrane for Waterproof Lining Fabrics" (Pond Liner) are as follows:

| Sr.No. | Name of the Product | Classification | Rate of Tax (GST) |
|--------|----------------------|----------------|-------------------|
| 01. | Geo Membrane for Waterproof Lining Fabrics (Pond Liner) | 39269099 | (i) 28% (14% SGST + 14% CGST) up to 14.11.2017. (ii) 18% (9% SGST + 9% CGST) from 15.11.2017 onwards. |

This ruling aligns with the decision in the case of M/s. Gujarat Raffia Industries, where a similar product was classified under Sub-heading 39269099.