2022 (1) TMI 745 - AAR - GST

Classification of goods - Fusible Interlining Fabrics of Cotton (FIFC) - to be classified under HSN Code 5903 or under Chapter 52(heading depending upon weightage of cotton in the fabrics)? - HELD THAT - The applicant purchases Fusible Inter-lining Fabrics of cotton (FIFC) from various manufactures like Madura Coats Limited, Ruby Mills Lts, TALCO, etc. The said products are purchased under a Tax Invoice from the manufacturers, i.e., the goods stands assessed at the initial stage. However, the applicant has sought classification of the already assessed products stating that all these products are similar but is classified by the manufacturers under Chapter 52 or CTH 5903. Their concern is though at the manufacturer end, the products are classified differently, when they are dealing with such goods, they intend to know the correct classification applicable to the said products - On observing the samples furnished, it is found that the dot printing is visible. Also it is seen the printing is available in one side of the fabric and follows a set pattern. Thus, the products supplied by the applicant have similar properties and purpose and therefore we proceed to find the appropriate classification. Whether the fabrics in hand satisfies the exclusions prescribed in chapter Note 2(a) of Chapter 59 and therefore is not classifiable under CTH 5903 or otherwise? - HELD THAT - As per the Explanatory notes to CTH 5903, 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 covered under CTH 5903. The applicant during the personal hearing held on 11.02.2020 has stated that their product provides a stiffness; when the garment manufacturers use this, they pass through rollers which fuses to any other cloth placed beneath, i.e., these are capable of providing a bond to other fabric on the application of heat and pressure, which as per the explanatory notes is squarely covered under CTH 5903. Therefore, there are no hesitation to hold that the products in hand merits classification under CTH 5903 only. Thus, the Fusible Interlining Fabrics of Cotton (FIFC) fall under CTH 5903 for the reasons that they are not covered under the exclusions stated at Chapter Note 2(a) of Chapter 59 of the Customs Tariff made applicable to GST.

Issues Involved:
1. Classification of Fusible Interlining Fabrics of Cotton (FIFC) under HSN Code 5903 or Chapter 52.
2. Applicability of the exclusions under Chapter Note 2(a) of Chapter 59.
3. Relevance of historical amendments and circulars to the classification.
4. Consideration of previous rulings and judgments on similar classifications.

Detailed Analysis:

1. Classification of Fusible Interlining Fabrics of Cotton (FIFC):
The applicant sought to determine whether FIFC should be classified under HSN Code 5903 or Chapter 52. The product in question is a cotton fabric subjected to a "powder dot coating process" where HDPE powder is printed onto the fabric, creating a pattern visible to the naked eye.

2. Applicability of the Exclusions under Chapter Note 2(a) of Chapter 59:
The applicant argued that the exclusions in Chapter Note 2(a) should be considered individually. Specifically, they claimed that the fabrics should fall under Chapters 50 to 55, 58, or 60 as per Chapter Note 2(a)(4), which excludes fabrics partially coated or covered with plastics and bearing designs resulting from these treatments from classification under HSN Code 5903.

3. Relevance of Historical Amendments and Circulars to the Classification:
The applicant referenced the historical amendments to Chapter Note 2(c) of Chapter 59, which was introduced in 1989, modified in 1990, and deleted in 1995. They cited the CESTAT Chennai ruling in the case of Madura Coats Private Limited, which held that "fusible interlining cloth" would not be classified under CETH 5903 after the deletion of Chapter Note 2(c). The applicant also mentioned various CBEC circulars issued over time, which provided differing interpretations of the classification of interlining fabrics.

4. Consideration of Previous Rulings and Judgments on Similar Classifications:
The applicant highlighted previous rulings by the Advance Ruling Authority of Uttarakhand and the CESTAT, which supported their position that FIFC should be classified under Chapters 50 to 55, 58, or 60. They also referenced the quashing of a CBEC circular by the Hon'ble High Court of Madras, which had sought to classify fusible interlining cloth under HSN Code 5903.

Judgment:

1. Examination of Technical and Physical Evidence:
The Authority examined the technical reports and physical samples provided by the applicant. The lab reports confirmed that the dot printing on the fabrics was visible to the naked eye. The samples showed that the fabric was coated with HDPE powder on one side, forming a pattern.

2. Analysis of Chapter Note 2(a) of Chapter 59:
The Authority analyzed the relevant Chapter Note 2(a) and the Explanatory Notes to the HSN. It was determined that the fabrics did not meet the exclusions under Chapter Note 2(a)(1) and 2(a)(4). The fabrics were impregnated with HDPE powder in a manner visible to the naked eye, and the coating was uniform on one side, not partial.

3. Consideration of Explanatory Notes to CTH 5903:
The Explanatory Notes to CTH 5903 state that textile fabrics spattered by spraying with visible particles of thermoplastic material, capable of bonding with other fabrics upon application of heat and pressure, fall under CTH 5903. The applicant's product met these criteria as it provided stiffness and could bond with other fabrics when passed through rollers.

4. Conclusion Based on Historical Amendments and Circulars:
The Authority noted that the omission of Chapter Note 2(c) in 1995 and subsequent CBEC circulars did not change the classification of fusible interlining cloth under CTH 5903. The Explanatory Notes to HSN, which guide the classification, take precedence over CBEC circulars.

5. Persuasive Value of Previous Rulings:
The Authority considered previous rulings by various Advance Ruling Authorities and the CESTAT, which classified similar products under CTH 5903. Although these rulings are not binding, they hold persuasive value due to the similarity in facts.

Final Ruling:
The Fusible Interlining Fabrics of Cotton (FIFC) is classifiable under CTH 5903 of the Customs Tariff. The product does not meet the exclusions under Chapter Note 2(a) of Chapter 59 and aligns with the criteria set forth in the Explanatory Notes to CTH 5903.

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