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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 ..... 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. 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 printing process became classifiable under Heading 5903. CBEC clarified that before that, such cloth had been covered under Chapter 52 to 55, depending upon the textile materials used. Chapter Note 2 (c) was omitted w.e.f. 16.03.1995. CBEC vide Circular No.433/66/98-CX.6 dated 27.11.1998 tried to clear the air about the classification of fusible interlining cloth in the context of removal of Chapter Note 2(c) from Chapter and drew attention to the Finance Act, 1995 that broadly aligned the Central Excise Tariff to the Tariff Act. The significance of the alignment was that the Explanatory Notes to the HSN code or the Chapter Notes to Chapter 59 of the Tariff Act had not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess, Shahwadi-Ranipur, Narol, Ahmedabad382405 are engaged in the manufacture of various textile material including the product under consideration i.e. Fusible interlining fabrics of cotton and has been in this business of manufacture of such product since 2011. The applicant has stated that the said product is generally used in the market by the tailors for stitching purpose and for preparing finished articles of clothing and as for the manufacture of the said product, the applicant as also other manufacturers of the said product, coat one side of the cotton fabric material with pulverised plastic powder by dot matrix printing process thereby creating a partial layer of such plastic on the fabric; that the said 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e; that the product Fusible Interlining Fabrics were initially classifiable under Chapter 50 to 55 of the erstwhile Central Excise Tariff depending upon the nature of fabrics; that Fusible Interlining Fabrics made out of cotton fabrics being a product of cotton fabrics was classified under Chapter 52 of the erstwhile Tariff; that the classification of the product underwent a change by virtue of amendment made vide Finance Act, 1989 vide which 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 and the said note read as under: Textile fabrics, partially or discretely 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ackground, issuance of Circular would be clearly against the statutory provisions; that the Hon ble Court also noted that the circular was also against the provision of Section 37B of the Central Excise Act as the Board could not shut down the quasi-judicial power of the authorities and in view of the aforesaid finding, the Circular issued by the Board was held to be invalid and illegal. 7. The applicant has submitted that the said order of the Single Judge of the Madras High Court was challenged by the Department before the Division Bench of the Madras High Court under W.A.No.507 of 2005 wherein vide order and judgement dated 05.01.2009, the Hon ble Division Bench of the Madras High Court dismissed the Writ Appeal and upheld the judgement 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at to understand and appreciate the characteristics of the product i.e. fusible interlining fabrics of cotton manufactured by the applicant, a test report dated 02.08.2018 issued by the Ahmedabad Textile Industry s Research Association (copy submitted) where upon examination of the product manufactured by the applicant, it is observed as under: 1. ----- 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssifiable as Cotton Fabrics under Chapter 52 of the Tariff; that in support of the said view, certain important characteristics of the product manufactured by the applicant which falls within the excluded category of the goods falling within the purview of Chapter 59 may be noted; that the product manufactured by the applicant is a fabric which is coated with pulverized plastic but such coating can neither be seen with naked eye nor can be said to be complete/comprehensive so as to completely cover the fabric, as would be the case in case of impregnation of a material similar to a film; that as can be seen in note 2 to the said Chapter, fabrics which are partially coated or covered bearing designs resulting from such treatments otherwise falling are excluded from the purview of Chapter Heading 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eading 5208 and 5212 and is amenable to the tariff structure of 2.5%; that the Central Government in the said notification has by way of explanation (iii) and (iv) further clarified that the phrases Tariff item , sub-heading , heading and Chapter used in the said notification shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 and that the rules for interpretation of the First Schedule to the Customs Tariff Act, 1975, including the Section and Chapter notes and the General Explanatory notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification; that therefore, reference to woven fabrics of cotton under Chapter Heading 5208 to 5212 in the schedule to the said notification is 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant during the course of personal hearing, we find that the issue to be decided is whether the product Fusible Interlining Fabrics of Cotton is correctly classifiable under Chapter 52 or Chapter 59. As per the submission of the applicant, the sequence of events that led the applicant to file the present application seeking Advance ruling on the above issue are as under: a) fusible interlining fabrics were initially classified under various chapters from chapter 50 to 55 of the tariff depending upon the nature of the fabrics under the erstwhile Central Excise regime. b) The Board had vide Circular dated 02.09.1988 clarified that fusible interlining cloth, to merit classification as coated fabrics under CETH 5903, should meet the following requirements: (i) It should have a continuous and adherent film or layer 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adras High Court was challenged by the Department before the Division Bench of the Madras High Court under W.A.No.507 of 2005 wherein vide order and judgement dated 05.01.2009, the Hon ble Division Bench of the Madras High Court dismissed the Writ Appeal and upheld the judgement 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. i) 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. j) The Appellate Tribunal, Chennai, by Order No.41941/2018 dated 19.06.2018 in the case of M/s.Madura Coats 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), wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads as under: (iii) Tariff item , sub-heading heading and Chapter shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). (iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification . Further, the Tariff Act is aligned to the Harmonised System of Nomenclature and it is a settled position of law that the reference to the Explanatory Notes to the HSN code is admissible for answering any question of classification. 18. To begin with, we will be required to refer to the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) for referring to Heading 5903. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rolls, of a width of not less than 45 cm, suitable for wall or ceiling decoration, consisting of a textile surface which has been fixed on a backing or has been treated on the back (impregnated or coated to permit pasting). This heading does not, however, apply to wall coverings consisting of textile flock or dust fixed directly on a backing of paper (heading 4814) or on a textile backing (generally heading 5907). 4. For the purposes of heading 5906, the expression rubberised textile fabrics means: (a) textile fabrics impregnated, coated, covered or laminated with rubber: (i) weighing not more than 1,500 g/m2; or (ii) weighing more than 1,500 g/m2 and containing more than 50% by weight of textile material; (b) fabrics made from yarn, strip or the like, impregnated, coated, covered or sheathed with rubber, of heading 5604; and (c) fabrics composed of parallel textile yarns agglomerated with rubber, irrespective of their weight per square metre. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses; (v) textile fabrics reinforced with metal, of a kind used for technical purposes; (vi) cords, braids and the like, whether or not coated, impregnated or reinforced with metal,of a kind used in industry as packing or lubricating materials; (b) textile articles (other than those of headings 5908 to 5910) of a kind used for technical purposes [for example, textile fabrics and felts, endless or fitted with linking devices, of a kind used in paper making or similar machines (for example, for pulp or asbestos-cement), gaskets, washers, polishing discs and other machinery parts]. 20. Explanatory notes to HSN in respect of Heading 5903 reads as under: This heading covers textile fabrics which have been impregnated, coated, covered or laminated with plastics (e.g., poly(vinyl chloride)). Such products are classified here whatever their weight per m2 and whatever the nature of the plastic component(compact or cellular), provided: (1) That, in the case of impregnated, coated or covered fabrics, the impregnation, coating or covering can be seen with the naked eye otherwise than by a resulting change in colour. Textile fabrics in which the impregna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade from year, strip or the like, impregnated, coated, covered or sheathed with plastics, of heading 56.04. The fabrics of this heading are used for a variety of purposes including furnishing materials, the manufacture of handbags and travel goods, garments, slippers, toys etc., in book binding, as adhesive tapes, in the manufacture of electrical equipment etc. This heading also excludes: (a) Quilted textile products of heading 58.11 (b) Textile fabrics coated or covered with plastics for use as floor coverings (heading 59.04). (c) Textile fabrics, impregnated or coated, having the character of wall coverings(heading 59.05). (d) Textile fabrics, impregnated, coated, covered or laminated with plastics made up as described in Part(II) of the General Explanatory Note to Section XI. 21. We have thoroughly gone through the above and find that the dispute regarding classification of fusible interlining cloth, which is partially coated with plastic by the dot printing process i.e. whether it is covered under Chapter 52 to 55 or Chapter 59, has repeatedly come up before different authorities. In it s Circular No.24/Coated Fabric/88-CX.1 dated 02.09.1988, CBEC ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attered by spraying with visible particles of thermoplastic material and were capable of providing a bond to other fabrics or materials on the application of heat and pressure were classifiable under Heading 5903. According to Circular No.433/66/98-CX.6 dated 27.11.1998, such classification should be treated as an exception to Chapter Note 2(a)(4) to Chapter 59. 21.2 The Appellate Authority for Advance Ruling, West Bengal in order dated 19.03.2020 in the case of Appeal Case No. 15/WBAAAR/APPEAL/2019 dated 26/09/2019 filed by M/s. Sadguru Seva Paridhan pvt.ltd. stated as under in respect of Circular No.433/66/98-CX.6 dated 27.11.1998 in Para-3(v) to (vii) of the said order: (v) While striking down the above mentioned Circular No. 433/66/98-CX-6 dated 27/11/1998 as ultra vires and contrary to Section 37B of the Central Excise Act, 1944, the Ld. Single Bench of Madras High Court in the case of Madura coats reported in 2004(163) ELT 164(Mad.), took no notice of the applicability of the Explanatory Notes to the HSN Code in deciding a classification issue under the Excise Tariff. Although not stated explicitly, the court held the interpretation of the law, as made in Circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral submissions, taken the view that Circular No.433/66/98-CX-6 dated 27/11/1998 has erred in treating fusible interlining cloth as a category of textile fabric that is spattered by spraying with visible particles of thermoplastic material and is capable of providing a bond to other fabrics or materials on the application of heat and pressure. In the absence of any such submission, it is reasonable to agree with the views expressed by CBEC in Circular No. 433/66/98-CX-6 dated 27/11/1998 that fusible interlining cloth is classifiable under Heading 5903. In view of the above, we find that the product fusible interlining fabric of cotton of the applicant would be classifiable under Heading 5903 only. 22. Further, we would also like to draw attention to the explanatory notes to HSN (with respect to Heading 59.03) (as narrated in para-14 above) that products fulfilling the conditions (1) to (3) mentioned therein would be covered under the Heading 59.03. In this context, the applicant has got a sample of fabric of Fusible interlining Cotton tested from Ahmedabad Textile Industry s Research Association (ATIRA) and has submitted a copy of the test report dated 02.08.2018. As per dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucts 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. The product can be bent without fracturing around a cylinder of a diameter 7m or more at temperature between 15C to 30C. 03. The textile fabric is not completely embedded in, nor coated or covered on both sides with, plastics. The fabric is not completely embedded in plastic. It is covered with plastic polymer on one side and bears a design like a dot matrix design resulting from coating process. Condition 1: states that impregnation, coating or covering must be seen with the naked eye. As per the test results, polymer coating cannot be seen with the naked eye but film coating is visible with the naked eye. We find that film coating also involves coating with natural or synthetic polymeric substance (plastic). Even otherwise, the condition only stipulates that coating must be visible with the naked eye but does not mention polymer coating or film coating, hence this condition is fulfill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5208 49 -- Other fabrics : - Printed : 5208 51 -- Plain weave, weighing not more than 100 g/m2 : 5208 52 -- Plain weave, weighing more than 100 g/m2 : 5208 59 -- Other fabrics : 5209 WOVEN FABRICS OF COTTON, CONTAINING 85%OR MORE BY WEIGHT OF COTTON, WEIGHING MORE THAN 200 G/M2 - Unbleached : 5209 11 -- Plain weave : 5209 12 -- 3-thread or 4-thread twill, including cross twill : 5209 19 00 -- Other fabrics - Bleached : 5209 21 -- Plain weave : 5209 22 -- 3-thread or 4-thread twill, including cross twill : 5209 29 -- Other fabrics : 5209 31 -- Plain weave : 5209 32 -- 3-thread or 4-thread twill, including cross twill : 5209 39 -- Other fabrics : 5209 41 -- Plain weave : 5209 42 00 -- Denim 5209 43 -- Other fabrics of 3-thread or 4-thread twill, including cross twill : 5209 49 -- Other fabrics : 5209 51 -- Plain weave Lungis 5209 52 -- 3-thread or 4-thread twill, including cross twill : 5209 59 -- Other fabrics : 5210 WOVEN FABRICS OF COTTON, CONTAINING LESS THAN 85% BY WEIGHT OF COTTON, MIXED MAINLY OR SOLELY WITH MAN-MADE FIBRES, WEIGHING NOT MORE THAN 200 G/M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fabrics are produced in great variety and are used, according to their characteristics, for making clothing, household linen, bedspreads, curtains, other furnishing articles etc. The heading does not include: (a) Bandages, medicated or put up for retail sale (heading 30.05) (b) Fabrics of heading 58.01. (c) Terry toweling and similar terry fabrics(heading 58.02). (d) Gauze(heading 58.03). (e) Woven fabrics for technical uses of heading 59.11. 24.3 Explanatory notes to HSN with respect to Headings 5210 and 5211 read as under: This heading covers woven fabrics as defined in Part(I)(C)of the General Explanatory Note to Section XI. It covers these fabrics provided they are classified as cotton fabrics by the application of Note 2 to Section XI (see also Part (I)(A) of the General Explanatory Notes to Section XI) and provided they meet the following specification: (a) Contain less than 85% by weight of cotton. (b) Are mixed mainly or solely with man-made fabrics. (c) Weigh not more than 200 g/m2. The heading does not include: (a) Bandages, medicated or put up for retail sale (heading 30.05) (b) Fabrics of heading 58.01. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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