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TMI Blog2021 (1) TMI 599X X X X Extracts X X X X X X X X Extracts X X X X ..... arment to give clothing a suitable appearance and stability; that based on the application method, there are two kinds of interlinings: Sewn interlining and fusible interlining; that the interlining which could be fixed with the garments components by sewing is called sewn interlining and for the preparation of sewn interlining a piece of fabric is treated with starch and allowed to dry and finally sewn with the main fabric; that in addition, the fusible interlining which could be fixed with the garments components by applying heat and pressure for a certain time is called fusible interlining. The applicant has stated that these fusible materials provide with several properties which can enhance the appearance of finished garment by influencing the following characteristics:- a. Handle and bulk. b. Shape retention. c. Shrinkage control. d. Crease recovery. e. Appearance after washing or dry cleaning. f. Durability. 3. The applicant has stated that the interlining fabrics is mainly used in the collars, cuffs, etc. part of the garments and samples of the interlining fabrics will be produced at the time of hearing; that under the erstwhile Central Excise regime, the Appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscretely coated with plastic (Heading No.59.03) 04. Note 2(c) was deleted w.e.f. 16.03.1995. Hence, the Chapter Notes as per the Original CETA was reinstated. 5. The applicant has submitted that Central Board of Excise and Customs(CBEC) has issued circulars from time to time for clarifying the classification of the interlining fabrics; that prior to the introduction of Note 2(c) in the Chapter 59, CBEC had issued a Circular No.24/Coated Fabrics?88CX.1 dated 02.09.1988, wherein the relevant para is reproduced hereunder: "7. From the above definition of the term 'coated fabrics' it is obvious that in the case of plastic coated fabric (i) the polymer is coated to give a continuous and adherent film or layer on the fabric and (ii) the fabric has an impervious surface. 6. The applicant has further submitted that in the HSN at Page 816 under the Heading 59.03 (same as in Central Excise Tariff) it is stated that in many of the textile fabrics classified under this heading, the plastic material forms a surface layer; that according to Chapter Note 2(a)(1) of Chapter 59, fabrics in which the impregnation, coating or covering cannot be seen with the naked eye (usually C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59.03 of the Central Excise Tariff. Relevant para is reproduced hereunder: "3. In the 1985 budget the Central Excise Tariff was broadly aligned with the Customs Tariff (based on HSN) and as such Chapter Note 2(c) of Chapter 59 of the Central Excise Tariff was omitted. The omission of Chapter Note 2(c) was neither intended to and nor resulted in changing the classification of fusible interlining cloth under Heading 59.03 of the Central Excise Tariff. This is so because as per the HSN Explanatory Notes(1996), end edition, page 894, 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 up the application of heat and pressure are covered under Chapter Heading 59.03 may thus be considered as an exception to Chapter Note 2(a)(4) of Chapter 59 according to which fabrics partially coated or partially covered with plastics and bearing designs resulting from those treatments are excluded from the scope of Chapter Heading 59.03.4. Board is of the view that fusible interlining cloth would be appropriately classified under Chapter Heading 59.03 of the Central Excise Tariff." 9. The ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 02.09.1988 had clarified that to merit classification as coated fabrics under HSN code 5903, it should meet the following requirements: (a) It should have a continuous and adherent film or layer of plastics 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. (iii) The interlining fabrics manufactured by the applicants do not have continuous and adherent film or layer of plastic on one side of fabrics surface. The fabric is partially coated with thermoplastic. Therefore the product would not fall under the HSN code 5903. (iv) The coating done is not impervious because the design created due to interlining can be easily penetrated. Therefore, relying on the Circular No. 24/Coated Fabrics/88-CX.1 dated 02.09.1988, the product under dispute cannot be classified under the HSN code 5903 and will be classified in the Chapter 52. (v) As per Chapter Note 2(a)(4) of the Chapter 59 fabrics which are partially coated or partially covered with plastics and bearing designs resulting from these treatments are not covered under the HSN code 5903. The fusible interlining manufactured by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of IGST i.e. 12% (CGST 6% + SGST 6%). The goods classified under the Chapter 52 attract IGST rate of 5% (CGST 2.5% + SGST 2.5%). Since, there is huge difference in the taxable rates, it is essential for the Applicant to classify the product at correct rate as it will have higher tax burden on the end consumer. It is also submitted that some competitors of the applicant are classifying the said product under the Chapter 52(depending upon the weight of the cotton in the fabrics) attracting rate of 5%(CGST 2.5% + SGST 2.5%) which has resulted in substantial business loss to the applicant. The applicant further submits that if the reduced rate of duty is not applied to the fabrics manufactured by the applicant, they may have to close the manufacturing operations due to competitive pricing resulting in losses to the company and loss of employments to huge labour force. Hence also the applicants application may be heard on priority basis and ruling as per the trade practice is required to be issued. (xi) The applicant further craves liberty to rely upon following judicial decision/Advance Ruling, wherein the said product is classified under the Chapter 52-55 depending upon the primar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 reads 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 was removed from Chapter 59 of the Tariff. (f) The Board vide Circular dated 27.11.1998 expressed that the omission of the note was neither intended to nor resulted in changing the classification of fusible interlining cloth under Heading 5903. (g) Not being agreeable with the stand of the Department as conveyed vide the aforesaid circular, M/s. Madura Coats preferred a writ petition in the High Court of Madras being WP No.354 of 1999 wherein vide order and judgement dated 30.09.2003, the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red; (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. as well as the competitors of the applicant have revised their classification from Chapter 59 to Chapter 52 of the present Tariff. However, the applicant has continued to classify the product under Chapter 59 which has led to Business loss. 14. We have gone through the aforementioned order issued by the Appellate Tribunal, Chennai. It is found that the order dated 19.06.2018 is with regard to an appeal filed by M/s. Madura Coats pvt.ltd. against Order-in-Appeal No.330/2011 dated 17.10.2011 passed by the Commissioner of Central Excise(Appeals), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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. 16. 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 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 17. Chapter Notes to Chapter 59 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "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 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olishing discs and other machinery parts]. 18. 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aracter 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. 19. 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 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 cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33/66/98-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 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 Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product 'fusible interlining cloth of cotton fabric' would undoubtedly be classifiable under Heading 5903 only. We, therefore, conclude that the product 'fusible interlining cloth of cotton fabric' of the applicant is classifiable under Heading 5903 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). 21. Although we have decided the classification of fusible interlining of cotton fabrics 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 BY WEIGHT OF COTTON, WEIGHING NOT MORE THAN 200 G/M2 - Unbleached : 5208 11 -- Plain weave, weighing not more than 100 g/m2 : 5208 12 -- Plain weave, weighing more than 100 g/m2: 5208 13 -- 3-thread or 4-thread twill, including cross twill : 5208 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 m2 5212 22 00 -- Bleached m2 5212 23 00 -- Dyed 5212 24 00 -- Of yarns of different colours 5212 25 00 -- Printed 21.1 Chapter notes of Chapter 52 read as under: SUB-HEADING NOTE: For the purposes of sub-headings 5209 42 and 5211 42, the expressio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er laminated fabrics or fabrics coated with plastics. Hence, it can be safely concluded that 'Fusible Interlining cloth for cotton fabrics' will not be covered under Chapter 52 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975). 22. Having decided the classification of the product 'Fusible interlining cloth for cotton fabrics' 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 fusible interlining fabric of cotton is classifiable under Heading 5903 of the GST Tariff Act, 2017. (3) Order dated 19.03.2020 of the Appellate Authority for Advance Ruling, West Bengal in the case of Appeal Case No. 15/WBAAAR/APPEAL/2019 filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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