2022 (3) TMI 1086 - AAR - GST

Classification of goods - Geomembranes - Woven Tarpaulin - merits classification under Heading 5911, Sub Heading 59111000 or Sub Heading 59119090, as Textile products, coated, covered or laminated with plastic, used for technical purposes? - HELD THAT - The burden of Classification is on Revenue. However, Revenue without submitting any analysis/evidence before us, made its submission that 5911 Tariff is the most appropriate classification. Now, the Legislature has empowered competent authority vide Section 168 CGST Act, 2017 with the power to issue Instruction or directions as per the GST scheme of law. As per CGST Act and rules framed thereunder, it is not found Textile Ministry empowered under GST scheme of law to issue directions/ instructions for GST Classification - M/s Texel has cited Notification dated 24-9-21 issued by Ministry of Textiles to further their view to classify subject goods. Classification of Geomembrane - HELD THAT - Construing the wordings of Chapter Note 7(1)(a) to Chapter 59 that textile fabrics coated with other materials used for technical purposes are included in this Chapter, it is held that the goods Geomembrane, though coated with Plastic but used for technical purposes finds place in the Tariff 5911, for the dual reason that the phrase other materials used in this Tariff is vast to include plastics also; coupled with the technical use of Geomembrane - technical uses of Geomembrane, Geomembrane passing the test of Section note XI(1)(g) to Section XI, Geomembrane satisfying the test of Chapter 59 Note 7(1)(a) and by applying the Doctrine of Harmonious Construction, cleared the bar raised in Section note XI(1)(h) to Section XI; thus Geomembrane is a textile article. Classification of Tarpaulin - HELD THAT - Tarpaulin is used for protecting various things and materials and also covering motor vehicles and the like; for packing and protecting the goods in transportation. Also in general, Tarpaulins are used to cover construction materials and equipment, athletic fields, vehicles or other exposed objects, etc. - the uses of Tarpaulin are general in nature and thereby there are no merit to employ functional concept classification based on technicality in case of Tarpaulin. It is noted that there is also an entry of Tarpaulin at 6306. With our aforementioned findings, it is forthcoming that Tarpaulin is excluded from Textile articles as subject Tarpaulin is a plastic article, with general uses and further laminated with plastic - 6306 Tariff for subject plastic tarpaulin coated with plastic is rejected - thus, Tarpaulin is classified at HSN 3926, tariff item 39269099.

Summary

Issues Involved:
1. Classification of Geomembranes
2. Classification of Woven Tarpaulin

Issue-wise Detailed Analysis:

1. Classification of Geomembranes:

Brief Facts:
M/s Texel Industries Ltd. (Texel) is engaged in the manufacture and sale of textile products, including Geomembranes and Tarpaulins. Texel is licensed by the Bureau of Indian Standards (BIS) for manufacturing these products in accordance with IS 15351:2015, which pertains to "Agro-textiles – Limited HDPE woven Geomembranes for water proof lining."

Manufacturing Process:
The Geomembrane manufacturing process involves melting HDPE granules and master batch, extruding them into thin sheets, quenching, slitting into tapes/strips, weaving into fabrics, and coating/laminating the fabrics to produce waterproof Geomembranes.

Use of the Product:
Geomembranes are used in Biofloc ponds for aquaculture, providing benefits such as disease prevention, minimal water exchange, and cost advantages.

Arguments by Texel:
Texel argues that Geomembranes should be classified under Heading 5911, Sub Heading 59111000, as textile products coated or laminated with plastic used for technical purposes. They cite the Hon'ble Supreme Court's judgment in Porritts & Spencer (Asia) Ltd. and the Gujarat High Court's judgment in CTM Technical Textiles Ltd. to support their claim that woven fabrics of plastic materials are considered textile products.

Revenue's Submission:
Revenue agrees with Texel's classification under Heading 5911.

Findings:
The Authority for Advance Ruling (AAR) notes that the classification of goods under GST is based on the Harmonized System of Nomenclature (HSN) and the General Interpretative Rules. The AAR confirms that the strips made from HDPE granules, with a width of less than 5 mm, comply with Section Note 1(g) to Section XI (Textile and Textile Articles). The phrase "for technical use" is mentioned in the Chapter Notes to HSN 5911, and the technical uses of Geomembranes in Biofloc ponds are acknowledged.

Conclusion:
The AAR holds that Geomembranes are textile articles used for technical purposes and classifies them under HSN 5911, tariff item 59111000.

2. Classification of Woven Tarpaulin:

Brief Facts:
Texel also manufactures HDPE Poly-woven Tarpaulin, which involves a similar manufacturing process to Geomembranes, including weaving, coating/lamination, and finishing with hemming and eyelets.

Arguments by Texel:
Texel argues that Tarpaulins should also be classified under Heading 5911, Sub Heading 59111000, as textile products coated or laminated with plastic used for technical purposes.

Revenue's Submission:
Revenue agrees with Texel's classification under Heading 5911.

Findings:
The AAR notes that Tarpaulins are used for general purposes such as protecting materials and covering vehicles, and their uses are not specific to technical applications. The AAR finds that Tarpaulins are plastic articles coated/laminated with plastic and are excluded from textile articles by Section Note XI(1)(h). The AAR also considers the classification of Tarpaulins under HSN 3926 (Plastic Tarpaulin) and HSN 6306 (Tarpaulin as a textile article).

Conclusion:
The AAR holds that Texel's Tarpaulins are plastic articles and classifies them under HSN 3926, tariff item 39269099.

Ruling:
1. Geomembrane is classified under HSN 5911, tariff item 59111000.
2. Tarpaulin is classified under HSN 3926, tariff item 39269099.