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TMI Blog2021 (1) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... d layer however, does not create an unbroken, uninterrupted or comprehensive plastic layer but only partially covers the fabrics with pulverized plastic having a 'dot matrix' design and does not make the material completely impervious as is the case of fabric where the plastic layer is installed as a skin and is whole and uninterrupted. 2. The applicant has submitted that under the erstwhile Central Excise regime, the fusible interlining fabrics were initially classified under various chapters from chapter 50 to 55 of the tariff depending upon the nature of the fabrics; that the said understanding was not only prevalent in the market but was also confirmed by virtue of clarification issued by the board; that by virtue of amendment to the Central excise Tariff made vide Finance Act, 1989, the classification of the said product was changed in a manner that the said goods were thereafter, classifiable under Chapter Heading 5903; that all the manufacturers of the said product, thereafter started clearing the said goods under Chapter Heading 5903 of the erstwhile Tariff; that on the basis of the clearance pattern adopted by other manufacturers, the applicant also started clearing the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scretely coated with plastic by dot printing process (heading no.59.03)" 4. The applicant further submitted that before introducing the said amendment, the Board had vide Circular dated 02.09.1988 earlier clarified that fusible interlining cloth, to merit classification as coated fabrics under CETH 5903, should meet the following requirements: (a) It should have a continuous and adherent film or layer of plastic on one side of the fabric surface. (b) The fabric should be impervious. (c) It should satisfy the conditions prescribed in Note 2 of Chapter 59. 5. The applicant has submitted that the said clarification was however, amended vide telex dated 30.09.1988 by virtue of which the requirement of plastic layer being "continous" was removed and another Circular No.5/89 dated 15.06.1989 was also issued by the Board around the same time, clarifying that new note was being introduced in Chapter 59 of the Tariff in order to include fusible interlining cloth made by discrete coating of plastic by dot matrix process in Chapter Heading 5903; that in the said circular, it was also clarified that prior to such amendment they were covered under Chapter 52 to 55 depending upon the tex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the Single Judge as regards the quashing of the circular in view of Section 37B of the Central Excise Act, however no opinion was rendered on the merit of the case and the assessing officer was directed to adjudicate the matter on its own merits; that upon adjudication of the case by the assessing authorities, the issue was held against M/s. Madura Coats pvt.ltd. which became a subject matter of appeal being Appeal No.E/31/2012-DB before the Appellate Tribunal, Chennai; that in the said appeal, the Appellate Tribunal vide order dated 19.06.2018, upheld the contention of M/s. Madura Coats and confirmed that classification of the goods could not be made under Chapter 59 of the Tariff after deletion of the Note 2(c) to Chapter 59; that while coming to the said conclusion, the Appellate Tribunal noted and observed that introduction of Note 2(c) was merely to widen the types of textile fabrics which could be brought under the fold of CETH 5903 and after deletion of Note 2(c), the classification under Chapter 59 would have to be done by keeping in view the existing Chapter Note 2(a) as also the Circular dated 02.09.1988 and 30.09.1988 issued by the Board in this regard; that upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is coated on one side only. 6. The product is covered with plastic polymer on one side and bears a design like a dot matrix design resulting from coating process. 7. The fabric is porous and pervious. The product is cotton fusible interlining. 9. The applicant has stated that on perusal of the test report, it can be seen though there is a coating on one side of the fabric but such coating is porous and pervious and does not completely restrict/prohibit passing of liquid/air through it; that it can be noted that such application of plastic is very thin and cannot be seen with naked eye as a film; that keeping the aforesaid facts in mind, the scope of Chapter 52 and 59 of the erstwhile Central Excise Tariff may be seen and noted; that Chapter 52 covers within its fold various cotton products in the form of yarns, fabrics etc. whereas Chapter 59 on the other hand covers goods in the nature of impregnated, coated, covered or laminated textile fabrics, textile articles of a kind suitable for industrial use; that Chapter Heading 5903 under the said Chapter covers "Textile fabrics, impregnated, coated, covered or laminated with plastics, other than those of heading 5902; that Note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 5903 and are observed to fall under Chapter 50 to 55, 58 or 60 and reference may be invited to Circular dated 02.09.1980 of the Board clarifying that fusible interlining cloth, to merit classification as coated fabrics under CETH 5903, should meet the following requirements: a) It should have a continuous and adherent film or layer of plastic on one side of the fabric surface. b) The fabric should be impervious. c) It should satisfy the conditions prescribed in Note 2 of Chapter 59. 11. The applicant has further stated that the said clarification was however, amended vide telex dated 30.09.1988 by virtue of which the requirement of plastic layer being 'continuous' was removed but the remaining portion of the clarification remained in force; that comprehensive reading of the tariff chapters as also the circular issued by the Board in this regard makes it amply clear that cotton fabric to be classifiable under Chapter Heading 5903 would have to satisfy the twin condition of being completely coated with plastic and of such coating making the fabric completely impervious; that in the case of the applicant, neither of the said conditions are satisfied inasmuch as the cotton fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the same as provided under Chapter Heading 5208 to 5212 of the Customs Tariff; that the structure of the tariff under the erstwhile Central Excise Tariff as also the Customs Tariff are both based on and aligned with the internationally accepted common classification system popularly referred to and known as 'Harmonized System of Nomenclature'; that a perusal of the Customs Tariff in respect of goods falling under Chapter 52 and 59 would show that the same is identical to Chapter 52 and 59 of the erstwhile Central Excise Tariff; that woven fabrics of cotton which were earlier classifiable under Chapter Heading 5208 to 5212 of the erstwhile Central Excise Tariff, are also covered under Chapter 5208 to 5212 of the Customs Tariff; that similarly the Note 2(c) which was the entire basis for changing the classification from Chapter 52 to 59 of the erstwhile Central Excise Tariff and which was subsequently deleted, also does not find any reference under the Customs Tariff Act; that keeping the aforesaid facts in mind, it is clear and evident that the scope and principle of classification as crystallised under the erstwhile Central Excise Tariff would be equally applicable to the classif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yer of plastic on one side of the fabric surface. (ii) The fabric should be impervious. (iii)It should satisfy the conditions prescribed in Note 2 of Chapter 59. c) By virtue of amendment to the Central excise Tariff made vide Finance Act, 1989, Note 2(c) came to be introduced in Chapter 59 of the tariff to provide that fusible interlining cloth made by discrete coating of plastic by dot matrix process would be classified under Chapter Heading 5903 with effect from 01.03.1989. Also, another Circular No.5/89 dated 15.06.1989 was also issued by the Board around the same time, clarifying that new note was being introduced in Chapter 59 of the Tariff in order to include fusible interlining cloth made by discrete coating of plastic by dot matrix process in Chapter Heading 5903. The said note read as under: "Textile fabrics, partially or discretely coated with plastic by dot printing process (heading no.59.03)" d) Thereafter, the said note was further modified w.e.f. 20.03.1990 to provide as under: "Textile fabrics, partially or discretely coated with plastic (heading no.59.03)" e) By virtue of amendment brought about w.e.f. 16.03.1995, the said note came to be deleted and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts pvt.ltd. vs. Commissioner of Central Excise in Appeal No.E/31/2012 had held that the product 'Fusible Interlining Fabrics of Cotton' were not classifiable under Chapter 5903 but was correctly classifiable under Chapter 52 of the erstwhile Tariff stating that the very basis for changing the classification i.e. Note 2(c), which was introduced in Chapter 59, has thereafter been deleted w.e.f. 16.03.1995 and therefore, the position as existed prior to introduction of the said note would be restored; k) With effect from introduction of Note 2(c), the applicant was classifying their said goods under Chapter Heading 5903 like all other manufacturers of the said product and the said classification was retained by the applicant when transition was made from the erstwhile Central Excise legislation to the present Goods and Service Tax regime. l) The product manufactured by M/s. Madura Coats pvt.ltd. is identical to the goods manufactured by the applicant as also other manufacturers throughout the Country. m) Subsequent to the pronouncement of the said decision, many of the other manufacturers including M/s. Madura Coats pvt.ltd. have revised their classification from Chapter 59 to C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Heading 5903 appears in Chapter 59 of the said Tariff which reads as "Impregnated, coated, covered or laminated textile fabrics; textile articles of a kind suitable for industrial use" and reads as under: 5903 TEXTILE FABRICS, IMPREGNATED, COATED, COVERED OR LAMINATED WITH PLASTICS, OTHER THAN THOSE OF HEADING 5902 5903 10 - With polyvinyl chloride : 5903 10 10 --- Imitation leather fabrics of cotton 5903 10 90 --- Other 5903 20 - With polyurethane : 5903 20 10 --- Imitation leather fabrics, of cotton 5903 20 90 --- Other 5903 90 - Other: 5903 90 10 --- Of cotton 5903 90 20 --- Polyethylene laminated jute fabrics 5903 90 90 --- Other 19. Chapter Notes to Chapter 59 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) reads as under: NOTES : 1. Except where the context otherwise requires, for the purposes of this Chapter, the expression "textile fabrics" applies only to the woven fabrics of Chapters 50 to 55 and headings 5803 and 5806, the braids and ornamental trimmings in the piece of heading 5808 and the knitted or crocheted fabrics of headings 6002 to 6006. 2. Heading 5903 applies to: (a) textile fabrics, impregnated, coated, covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tre. This heading does not, however, apply to plates, sheets or strip of cellular rubber combined with textile fabric, where the textile fabric is present merely for reinforcing purposes (Chapter 40), or textile products of heading 5811. 5. Heading 5907 does not apply to: (a) fabrics in which impregnation, coating or covering cannot be seen with the naked eye (usually Chapters 50 to 55, 58 or 60); for the purpose of this provision, no account should be taken of any resulting change of colour; (b) fabrics painted with designs (other than painted canvas being theatrical scenery, studio backcloths or the like); (c) fabrics partially covered with flock, dust, powdered cork or the like and bearing designs resulting from these treatments; however, imitation pile fabrics remain classified in this heading; (d) fabrics finished with normal dressings having a basis of amylaceous or similar substances; (e) wood veneered on a backing of textile fabrics (heading 4408); (f) natural or artificial abrasive powder or grain, on a backing of textile fabrics (heading 6805); (g) agglomerated or reconstituted mica, on a backing of textile fabrics (heading 6814); or (h) metal foil on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covering can be seen with the naked eye otherwise than by a resulting change in colour. Textile fabrics in which the impregnation, coating or covering cannot be seen with the naked eye or can be seen only by reason of a resulting change in colour usually fall in Chapters 50 to 55, 58 or 60. Examples of such fabrics are those impregnated with substances designed solely to render them crease-proof, mothproof, unshrinkable or waterproof (e.g., waterproof gabardines and poplins), Textile fabrics partially coated or partially covered with plastics and bearing designs resulting from these treatments are also classified in Chapter 50 to 55, 58 or 60. (2) That the products are not rigid, i.e. they can, without fracturing, be bent manually around a cylinder of a diameter of 7 mm, at a temperature between 15 degrees centigrade and 30 degrees centigrade. (3) That the textile fabric is not completely embedded in, nor coated or covered on both sides with, plastics. Products not meeting the requirements of sub-paragraph(2) or (3) above usually fall in Chapter 39. However, textile fabric coated or covered on both sides with plastics where the coating or covering cannot be seen with the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent authorities. In it's Circular No.24/Coated Fabric/88-CX.1 dated 02.09.1988, CBEC has referred to the production process. The finished woven fabric passed over preheated rolls having a high surface temperature and the heated substance was then pressed to a printing roll having fine dots engraved on it. High-density polyethylene powder was taken in a hopper that sat on the engraved printing roll, filling the dots. As a result, the pre-heated fabric got printed with plastic dots. The powder in between the engraved dots was scrapped by a doctor blade provided in the hopper. The dot printed cloth then passed through a heated chamber where the plastic melted and fused with the piece of cloth. CBEC concluded that the fusible interlining merited classification under Heading 5903 if the above printing process covered one side of the fabric with a continuous and adherent film or layer of plastic that made the fabric impervious. 21.1 In Circular No.5/89 dated 15.06.1989, CBEC discussed the significance of the insertion of Chapter 2(c) in Chapter 59 by the Finance Act, 1959. After the insertion of the said note, the fusible interlining cloth made by discrete coating with plastic by dot p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explicitly, the court held the interpretation of the law, as made in Circular No. 5/89 dated 15/06/1989, a binding legal provision, and the contrary view is illegal and ultra vires. (vi) Upon appeal, the division Bench of the Madras High Court, in its order dated 05/01/2009 in WA No. 507 of 2005, refrained from expressing any view on the legality of the said Circular so that the assessing officer could apply his judgment without any bias. The court however, set aside the impugned Circular that the assessing officer had quoted in a show cause notice in violation of the provisions of Section 37B of the CEA'44. Such setting aside of the impugned Circular restored the SCN. The Division Bench however, categorically stated that it was not done on the ground that the circular is ultra vires. (vii) It therefore, appears that reference to the Single Bench judgment in the above mentioned case does not help in deciding the classification of the applicant's. The fact that CBEC appealed against the Single Bench judgment in 2005 also indicates that it continues defending Circular No. 433/66/98-CX-6 dated 27/11/1998 and has not made any further course correction. Circular No. 433/66/98-CX-6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as submitted a copy of the test report dated 02.08.2018. As per data available online, we find 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. In view of the above, we are of the opinion that we can rely upon the test results issued by ATIRA vide their report dated 02.08.2018. The test results are as follows: 1. The product contains 85% and more cotton. 2. The product is polymer coated on one side. Coating cannot be seen with the naked eye. Coating is non-continuous. This coating is different than film coating. Film coating is visible with naked eye. 3. The product can be bent without fracturing around a cylinder of a diameter 7m or more at temperature between 15C to 30C. 4. The fabric is not completely embedded in plastic. 5. Product is coated on one side only. 6. The product is covered with plastic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c is not completely embedded in plastic but is covered with plastic polymer on one side and bears a design like a dot matrix design resulting from coating process. In view of the above, since all the 3 conditions as specified in the explanatory notes to HSN in respect of Heading 5903 have been fulfilled as per the above test results submitted by the applicant, we can safely conclude that the 'fusible interlining of fabric' manufactured and supplied by the applicant is rightly classifiable under Heading 5903 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975). 24. Although we have decided the classification of fusible interlining fabrics of cotton manufactured by the applicant, we feel the need to refer to the relevant headings of Chapter 52 of the First Schedule of the Customs Tariff Act, 1975(51 of 1975) also, since, the applicant is of the view that the subject goods should be classifiable under Chapter 52 of the said Tariff Act. Since headings 5201 to 5207 of the said Chapter covers cotton yarns, we will be referring to Headings 5208 to 5212 of the said Chapter which covers fabrics. The same reads as under: 5208 WOVEN FABRICS OF COTTON, CONTAINING 85% OR MORE B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -- Other fabrics : - Printed : 5210 51 -- Plain weave : 5210 59 -- Other fabrics : 5211 WOVEN FABRICS OF COTTON, CONTAINING LESS THAN 85% BY WEIGHT OF COTTON, MIXED MAINLY OR SOLELY WITH MAN-MADE FIBRES, WEIGHING MORE THAN 200 G/M2 - Unbleached : 5211 11 -- Plain weave : 5211 12 -- 3-thread or 4-thread twill, including cross twill : 5211 19 00 -- Other fabrics m2 5211 20 -- Bleached : - Dyed: 5211 31 -- Plain weave : 5211 32 -- 3-thread or 4-thread twill, including cross twill : 5211 39 -- Other fabrics : - Of yarns of different colours : 5211 41 -- Plain weave : 5211 42 00 -- Denim m2 10% or Rs. 18 per sq. m. -whichever is higher 5211 43 -- Other fabrics of 3-thread or 4-thread twill, including cross twill : 5211 49 -- Other fabrics : - Printed : 5211 51 -- Plain weave : 5211 52 -- 3-thread or 4-thread twill, including cross twill : 5211 59 -- Other fabrics : 5212 OTHER WOVEN FABRICS OF COTTON - Weighing not more than 200 g/m2 : 5212 11 00 -- Unbleached 5212 12 00 -- Bleached 5212 13 00 -- Dyed 5212 14 00 -- Of yarns of different colours 5212 15 00 -- Printed - Weighing more than 200 g/m2 : 5212 21 00 -- Unbleached m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, medicated or put up for retail sale, are excluded (heading 30.05). 24.5 On going through the aforementioned headings, chapter note of Chapter 52 as well as the explanatory notes to HSN with respect of the headings 5208 to 5212, we find that it does not cover laminated fabrics or fabrics coated with plastics. Hence, it can be safely 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). 25. Having decided the classification of the product 'Fusible interlining fabrics of cotton' of the applicant, we would also like to rely on a few judgements which support our view. The same are mentioned hereunder: (1) Order No. 33/WBAAR/2019-20 dated 11.11.2019 issued by the West Bengal Advance Ruling Authority in respect of M/s. Sadguru Seva Paridhan Pvt Ltd. wherein it was held that fusible interlining fabric of cotton is classifiable under Heading 5903 in Chapter 59 of the First Schedule to the Customs Tariff Act, 1975. (2) Order No.11/2019-20 dated 12.03.2020 issued by the Uttarakhand State Advance Ruling Authority in respect of M/s. The Ruby Mills ltd. wherein it was held that fusib ..... X X X X Extracts X X X X X X X X Extracts X X X X
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