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TMI Blog2021 (7) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... retation of tariff states that the titles of section, chapter and sub-chapter are provided for case of reference for legal purpose, classification shall be determined according to the terms of the heading or Notes do not otherwise require according to the provisions of Rule 2 and Rule 3. As per description HSN 5701 classifies Carpets and other textile floor covering, knotted whether or not mad up HSN 5702 covers woven bit non-tufted floor covering of felt not tufted or flocked; and HSN 5705 covers other carpets or mats or rugs mainly made of cotton on handloom etc. Hence it is evident from the tariff entries of chapter 57 as well as the entries of the notification that the classification and rate of tax is predominantly base upon the process of manufacture of the impugned products. Classification of the product, which is based upon the manufacturing process employed by the appellant in this case - HELD THAT:- From the process and the video presentation of the manufacturing process made during hearing it is revealed that the process of manufacturing of the impugned products can correctly be termed as tufting and the products gets covered under heading 5703 in terms of the HS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process of manufacture (embedding coir yarn in to vinyl (PVC) compound and curing by heating / cooling) is Tufting or a process other than those processes mentioned in Heading 5701 to 5704 of the Customs Tariff and HSN Explanatory Notes to Chapter 57? ii) Whether coir mats/ matting/ floor covering with vinyl (PVC) backing manufactured by the process of embedding coir yarn into vinyl (PVC) compound and curing by heating / cooling is rightly covered under the description coir mats matting and floor covering ? iii) Whether coir mats / matting / floor covering with vinyl (PVC) baking manufactured by the process of embedding coir yarn into vinyl (PVC) compound and curing by heating / cooling would merit classification under the heading 5705 (more specifically under CTH 5705 00 49) of Chapter 57 of the 1 st Schedule to the Customs Tariff? 3. The Authority for Advance Ruling Kerala issued Ruling vide order No. KER 84/2020 dated 20-05-2020 on the above issue in certain as follows:- i. Manufacture of PVC Tufted Coir Mats / Matting / Floor coverings by the process of embedding coir yarn into PVC cannot be considered as textile floor coverings of coir covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred vinyl in free flowing from (low viscosity) on the moving Teflon belt. Meanwhile, the ends of coir yarn from the creel stand are unwound and fed over rollers to a cutting head station. The cutting head station is positioned above the continuous Teflon belt that is moving with the vinyl layer as mentioned above. In the cutting head station, as set of guillotine blades that run across the entire width of the machine chop the coir yarns into predetermined length. These bits of coir yarn later from the pile of the mat. The chopped coir yarns are at horizontal orientation at the time of chopping and they are then directly fed down a chute that turns it around 90 degrees to vertical orientation by the time they reach the top surface of the PVC compound moving underneath on the continuous Teflon belt. At this point, there is a reciprocating compacter that vertically pushes the short length of Cut coir yarns into the PVC compound just enough so that their lower and gets embedded in the PVC layer. In this way, with constant, regulated feed of coir yarn through the cutting head and feeding of vinyl compound on to the moving continuous layer of uncured vinyl and a substantially continu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to see that there are no needles or hooks used in the manufacture of the impugned product and also the yarn is no tufted in to a pre existing backing of woven / Non woven fabric as described in the manufacturing process of tufted products falling under sub-heading 5703. Hence the impugned product can no way be classified under sub-heading 5703. 4.5 Attention is invited to Rule 1 of the General Rules of Interpretation of the 1 st Schedule Import Tariff of the Customs Tariff Act, 1975. As per Rule 1, for legal purpose, classification shall be determined according to the terms of the heading and any relative section or chapter notes. As per chapter Note 1 of the Chapter 57, the term carpets and other textile floor covering means floor covering in which textile materials serve as the exposed surface of the article when in use and includes article having the characteristics of textile floor covering but intended for use for other purposes. From the above note, it is amply clear that the basis of classification of goods falling under Chapter 57 is on the basis of the textile materials which serve as the exposed surface of that article when put to use. It is further submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. On testing the impugned product, the textile committee vide its report No. 339/2019-20 dtd. 30-10-2019 has categorically opined that the product is coir fibres embedded with poly vinyl chloride polymer glue and suggested to be classified as carpets and other textile floor covering which falls under HS heading No. 5705. The authority may be pleased to see that, though the test report was placed on record before the original authority at the time of hearing the same had not found a place in the impugned order. As all the above tests of classification such as essential character test, market / trade parlance test etc. and more so the definition in Chapter note 1 of Chapter 57, would suggest that the impugned goods are to be classified as coir mats/matting floor covering, the authority may be pleased to classify the impugned goods as coir mat/ matting/ floor covering. 4.8 As per Explanatory note 1 to the General Rules for interpretation of Customs tariff. Wherein Column (2) of the schedule the description of an article or group of article under the heading is prescribed by - the said article or group of articles shall be taken to be a sub-classification of the articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racting levy of a GST @ 5% only. DISCUSSION FINDINGS 6. We have carefully gone through the facts of the case, the relevant Advance Ruling passed by the Advance Ruling authority of Kerala state, the appeal memorandum and the grounds of appeal filed by the appellant before this authority and those including video presentation made/submitted during the course of personal hearing, and other evidence on record. The issue for determination before this authority is listed as follows:- a. Whether the process of manufacture (embedding coir yarn into vinyl (PVC) compound and curing by heating / cooling) id Tufting or a process other than those processes mentioned in heading 5701 to 5704 Customs Tariff and the HSN Explanatory Notes to Chapter 57? b. Whether coir mats / matting /floor covering with Vinyl (PVC) backing manufactured by the process of embedding coir yarn into vinyl (PVC) compound and curing by heating / cooling is rightly covered under the description coir mats, matting and floor covering ? c. Whether coir mats / matting / floor covering with vinyl (PVC) backing manufactured by the process of embedding coir yarn into vinyl (PVC) compound and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57031010 --- Carpets m2 57031020 --- Mats and matting m2 57031090 --- Other m2 570320 - Of nylon or other polyamides : 57032010 --- Carpets, carpeting and rugs m2 57032020 --- 100% polyamide tufted velour, or cut pile loop pile carpet mats with jute, rubber latex metre, whichever is higher or PU foam backing m2 57032090 --- Other m2 570330 - Of other man -made textile materials : 57033010 --- Carpets, carpeting and rugs m2 57033020 --- 100% polypropylene carpet mats with jute, rubber, latex or PU foam backing m2 57033090 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dominates by weight, of Handloom, Cotton Rugs of Handloom m2 57050049 ---- Other m2 57050090 --- Other m2 10. The appellant has claimed that their products are covered under Sl.No. 219 1 st Schedule to Notification No. 1/2017-CT (Rate) dated 28/06/2017 which covers Coir mats, mattings, floor covering and handloom durries falling under heading 5702,5703,5705, leviable to GST@ 5%. Whereas, the Advance Ruling Authority has held that the impugned products are covered under Sl.No. 144 of the IInd Schedule to Notification No. 1/2017-CT(Rate) dated 28/06/2017 which covers carpet and other textile floor covering, tufted, whether or not made up . Falling under heading 5703, leviable to GST @12%. 11. Having reproduced the rival entries of Tariff and the entries of the applicable notification prescribing rate of GST, we shall now examine the claim of the appellant for classification of goods under HSN 5705, it is established that to avoid any classification disputes under GST, the Customs Tariff along with harmonized sy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Carpets and other textile floor coverings, of felt, not tufted or flocked, whether or not made up 146. 5705 Other carpets and other textile floor coverings, whether or not made up; such as Mats and mattings including Bath Mats, where cotton predominates by weight, of Handloom, Cotton Rugs of handloom except the items covered in 219 in Schedule I Sl.No. 2019 of Schedule I of the said notification covers coir mats, matting floor covering and handloom durries falling under heading 5702, 5703 or 5705. 13. Accordingly, as per above description HSN 5701 classifies Carpets and other textile floor covering, knotted whether or not mad up HSN 5702 covers woven bit non-tufted floor covering of felt not tufted or flocked; and HSN 5705 covers other carpets or mats or rugs mainly made of cotton on handloom etc as detailed above. Hence it is evident from the tariff entries of chapter 57 as well as the entries of the notification that the classification and rate of tax is predominantly base upon the process of manufacture of the impugned products. For example, if it is manufactured by knotting process, it gets c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by formed rubber. It is further explained that the heading also covers tufted carpets and floor covering made using a tufting gun or made by hand. 17. The appellant has contended that there are no needles or hooks used in the manufacture of the impugned products and also the yarn is not tufted into a pre-existing backing of woven / non-woven fabric as described in the manufacturing process of tufted products falling under sub heading 5703. Hence, the impugned products can no way be classified under sub-heading 5703. We find that the appellant is ignoring other contents of the said explanatory nots viz. the said products could be manufactured by using tufting gun or made by hand also, and it is nor necessary that needles and hooks must be use for forming loop. Further, the tuft can be achieved with the help of a cutting device to provided the yarn forming the pile are fixed by coating or backing by OVC or rubber. On close examination of the manufacturing process employed by the appellant, it is observes that Coir yarn desired runnage and ply is wound as spools. Such spools are loaded on a creel stand and coir yarn from these spools is fed into the tufting machine. The machinery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. it is noticed the Lab test report of the Textile committee only specifies about the identification of fibre as Pile of coir and backing with Rubber based polymer. The Lab has not considered the process of manufacture while giving their option and therefore its of no help to the appellant. Furter, the Coir Board certificate submitted by the appellant is relating to some other manufacturer. Moreover, it does not help the case of he appellant on as much as it does not give any clarification on classification with reference to Customs tariff or GST Tariff. As per the details available in the official website of the coir board, Coir mats can be made on handlooms, power looms or frames with or without brushes. Coir mats are made up of 100% natural fibres. The manufacturing of PVC tufted coir mats/ matting /floor coverings is done using technology advanced machine. The raw materials uses for the manufacture of the impugned products are Coir yarn, Vinyl PVC compound which is prepared by mixing PVC resin, plasticizer, along with stabilizer, fillee, desiccant, dye, etc. The coir as well as PVC, chemicals fillers etc. have equal importance. Hence PVC tufted coir mats/ matting/ floor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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