2021 (10) TMI 149 - AAAR - GST

Classification of goods - cotton grey fabrics having construction count of 20 s with read and peak 60x60/ Fusible Cotton interlining fabrics - classifiable under Chapter 52 or 59? - CBEC s Circular No.254/88/96-CX dated 18.10.1996 - HELD THAT - Ahmedabad Textile Industry s Research Association (commonly known as ATIRA) is an autonomous non-profit association for textile research located in Ahmedabad and is the largest association for textile research allied industries in India which was established on 13 December 1947 and was recognized by the Council of Scientific and Industrial Research under the Ministry of Science and Technology, Government of India - Since the Chapter Note 2(a) of Chapter 59 stipulates that fabrics/products as detailed/described under Column(2) below, corresponding to Sr.Nos.(1) to (5) of the said note under Column(1) below, will not be covered under Heading 59.03/will be excluded from Heading 59.03, it is found prudent to compare the same to the test results mentioned above in order to find out whether the said product is covered under Heading 5903 or otherwise. All the five criteria/condition required for the product of the appellant for being classified under the Heading 5903, have been fulfilled. It is therefore found that based on the test results of the sample product/fabric(obtained by the appellant from ATIRA, Ahmedabad), the said product Fusible interlining fabric of cotton is undoubtedly classifiable under Heading 5903 of the Customs Tariff Act, 1975(51 of 1975) - chapter note of Chapter 52 as well as the explanatory notes to HSN with respect of the headings 5208, 5209 and 5212, we find that it does not cover laminated fabrics or fabrics coated with plastics. Hence, it can be concluded that Fusible Interlining fabrics of cotton will not be covered under Chapter 52 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975). Irrespective of the fact as to whether the fabric of the appellant fulfills the criteria for classification under Heading 5903 or otherwise as per exclusion clauses (1) to (5) of Chapter Note 2(a) of Chapter 59, it would still be classified under Heading 5903 only, on account of the Explanatory notes to the HSN, which states that textile fabrics which are spattered by spraying with visible particles of thermoplastic material and are capable of providing a bond to other fabrics or materials on the application of heat and pressure are classifiable under heading 5903 read with the grounds mentioned in Circular No. 433/66/98-CX-6 dated 27/11/1998 - the product fusible interlining fabric of cotton of the appellant would undoubtedly be classifiable under Heading 5903 of the Customs Tariff Act, 1975 only.

Summary

Issues Involved:
1. Classification of Fusible Interlining Fabrics of Cotton under Chapter 52 or 59.
2. Interpretation of Chapter Note 2(a) of Chapter 59.
3. Applicability of CBEC Circular No. 433/66/98-CX-6 dated 27.11.1998.
4. Relevance of previous judgments and circulars in the classification of the product.

Detailed Analysis:

Classification of Fusible Interlining Fabrics of Cotton under Chapter 52 or 59:
The appellant argued that their product should be classified under Chapter 52 based on the manufacturing process and characteristics of the fabric. They contended that the fabric is not completely embedded in plastic, is polymer-coated on one side, and the coating cannot be seen with the naked eye. They cited the decision in the case of Madura Coats Pvt. Ltd. vs. Commissioner of Central Excise, where it was held that such fabrics are not classifiable under Heading 5903.

Interpretation of Chapter Note 2(a) of Chapter 59:
The appellant claimed that the Gujarat Authority for Advance Ruling (GAAR) misinterpreted Chapter Note 2(a) of Chapter 59, which excludes fabrics that meet certain criteria from being classified under Heading 5903. They provided a comparative analysis of the test results from ATIRA and the criteria listed in Chapter Note 2(a) to argue that their product does not meet the conditions for classification under Heading 5903.

Applicability of CBEC Circular No. 433/66/98-CX-6 dated 27.11.1998:
The appellant argued that the circular, which suggests classifying fusible interlining fabrics under Heading 5903, was struck down by the High Court of Madras. They contended that the GAAR's reliance on this circular was erroneous and that the circular should not influence the classification decision.

Relevance of Previous Judgments and Circulars:
The appellant cited several previous judgments, including the decision of the Appellate Tribunal in the case of Madura Coats Pvt. Ltd., which classified similar fabrics under Chapter 52. They argued that these judgments should be considered in their case for a consistent and legally sound classification.

Findings and Conclusion:

1. Classification under Chapter 52 or 59:
The appellate authority analyzed the test results from ATIRA and compared them with the criteria in Chapter Note 2(a) of Chapter 59. They found that the product met all the criteria for classification under Heading 5903. Specifically, the fabric is polymer-coated on one side, the coating is not visible to the naked eye, and the fabric is not completely embedded in plastic. Hence, the product is correctly classifiable under Heading 5903.

2. Interpretation of Chapter Note 2(a):
The authority concluded that the GAAR did not misinterpret Chapter Note 2(a). They noted that the criteria mentioned in the explanatory notes to HSN are similar to those in Chapter Note 2(a). The fabric met the conditions for classification under Heading 5903, as it did not fall under the exclusions listed in Chapter Note 2(a).

3. Applicability of CBEC Circular No. 433/66/98-CX-6:
The appellate authority acknowledged the appellant's argument regarding the circular being struck down by the High Court of Madras. However, they noted that the CBEC continued to defend the circular, and it still reflected the CBEC's view on the classification of fusible interlining fabrics. The authority found that the circular and the explanatory notes to the HSN supported the classification of the fabric under Heading 5903.

4. Relevance of Previous Judgments and Circulars:
The appellate authority considered the previous judgments cited by the appellant but found that the GAAR's reliance on more recent judgments, such as those from the West Bengal and Uttarakhand Advance Ruling Authorities, was appropriate. These judgments supported the classification of fusible interlining fabrics under Heading 5903.

Conclusion:
The appellate authority confirmed the GAAR's ruling that the product "Fusible Interlining Fabrics of Cotton" is correctly classifiable under Heading 5903 of Chapter 59 of the First Schedule to the Customs Tariff Act, 1975. The appeal filed by the appellant was rejected.