2021 (10) TMI 150 - AAAR - GST

Classification of goods - rate of GST - Plastic Mechanical Liquid Dispensers - classified under HSN 3926 or under HSN 8424 and 9616 - HELD THAT - The product Plastic mechanical liquid dispenser of the appellant is made of plastic and intended to be screwed/fitted on to the bottle/containers which are solely used for pumping/dispensing liquid or lotion from a bottle and serves for the depletion of the contents, viz. liquid, gel, cream etc. From the functions of the product, we find that they act as a cap, lid or closure of the bottle or container into which they are fitted, besides performing the function of pumping/dispensing liquid or lotion from a bottle and serving for the depletion of the contents contained therein i.e. liquid, gel, cream etc. Further, the appellant themselves have stated that the aforementioned product which they import from China are classified under the Tariff Heading 3923 only (caps and closures) - an imported item/product classified under Tariff Heading 3923 cannot have a distinct or different heading/classification when sold in the domestic market, especially when we are referring to the First Schedule to the Customs Tariff Act, 1975(51 of 1975) for arriving at the classification of the products in the GST regime. The goods are parts of general use as they can be fitted/screwed into bottles/containers of any make i.e. of plastic, glass, metal etc. Also, nowhere is it contended by the appellant, that their product (which are parts) can be used only in bottles of a particular make or type. Hence, it can be construed that these items/products of the appellant can be considered as parts of general use i.e. parts which can be used in any type/make of bottles or containers. It, therefore, becomes apparently clear that items/products made of plastic of the appellant, which are parts of general use , will not be covered under any heading of Chapter 84. Therefore, in view of clause(g) of Note 1 of Section XVI of the Customs Tariff Act, 1975, it can be concluded that the product Plastic mechanical liquid dispenser of the appellant would not be covered under Heading 8424 of the Customs Tariff Act, 1975(51 of 1975). Rate of GST - HELD THAT - The product Plastic mechanical liquid dispenser of the appellant would be rightly classifiable under Heading 3923.50 of the Customs Tariff Act, 1975(51 of 1975) and would be liable to GST at the rate of 18%.

Summary

Issues Involved:
1. Proper classification of the product 'Plastic Mechanical Liquid Dispenser'.
2. Appropriate GST rate applicable to the product.

Detailed Analysis:

Issue 1: Proper Classification of the Product 'Plastic Mechanical Liquid Dispenser'

The appellant, engaged in importing various types of plastic devices intended to be screwed/fitted on bottles/containers, sought an advance ruling for the classification and GST liability of their product 'Plastic Mechanical Liquid Dispenser'. Initially, the GAAR classified the product under HSN 3926.90 (Other articles of plastics) with a GST rate of 28% till 14.11.2017 and 18% thereafter. The appellant argued that their products should be classified under Heading 8424 (Mechanical appliances for projecting, dispersing, or spraying liquids or powders).

Upon review, the appellate authority noted that the classification of goods under the GST regime must align with the Customs Tariff Act, 1975, which is based on the Harmonised System of Nomenclature (HSN). The appellant contended that their products are mechanical appliances and should fall under HS Code 8424.89. However, the authority emphasized that Note 1 of Section XVI of the Customs Tariff Act excludes parts of general use made of plastics (Chapter 39) from being classified under Chapter 84.

The authority found that the appellant's products, primarily made of plastic and used as parts of bottles/containers, serve as caps, lids, or closures. Therefore, they should be classified under Chapter 39, specifically under Heading 3923 (Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps, and other closures, of plastics).

Issue 2: Appropriate GST Rate Applicable to the Product

Having determined the classification under Heading 3923.50, the authority examined the applicable GST rate. According to Notification No.1/2017-Central Tax (Rate) dated 28.06.2017, the product falls under Schedule III, attracting an 18% GST rate (9% CGST + 9% SGST). This classification was further supported by the amendments in Notification No.14/2019-Central Tax (Rate) dated 30.09.2019.

Conclusion:

The appellate authority modified the GAAR's ruling, concluding that the 'Plastic Mechanical Liquid Dispenser' should be classified under Chapter sub-heading 3923.50 of the Customs Tariff Act, 1975, and is liable to GST at the rate of 18% (9% CGST + 9% SGST).