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TMI Blog2024 (6) TMI 896X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Supreme Court in Union of India v. Garware Nylons Ltd [ 1996 (9) TMI 123 - SUPREME COURT ], the burden of proof rests with the taxing authorities herein the respondent authorities to substantiate their claims regarding the taxable nature of a particular case or item. Mere assertions in this regard hold no weight. Thus, this Court has maintained that there must be tangible evidence to support the appropriate findings, which may be presented either orally or through documentation. The order of the appellate authority are quashed and set aside - application disposed off. - HON BLE JUSTICE RAJARSHI BHARADWAJ For the Petitioner : Mr. Vasudeva. A For the State : Mr. Anirban Ray, Md. T.M. Siddiqui, Mr. Tanmoy Chakraborty, Mr. Saptak Sanyal. RAJARSHI BHARADWAJ, J: 1. The present writ petition has been filled in relation to the order passed by the appellate authority wherein Spunbonded Polypropylene Bed Sheets have been classified under the heading 5603 instead of 6304 thereby partially denying the refund of accumulated Input Tax Credit on account of inverted duty structure of Rs. 39,61,030/- for such classification. 2. The facts in a nutshell are that the petitioner is a company du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the proceedings before the Hon'ble West Bengal Taxation Tribunal in the case of the Petitioner with Registration Number 1310/2017, the primary argument put forth by the revenue department was the purported distinction between bed sheets and PPSB Bed Sheet. Consequently, it was asserted that bed sheets crafted from polypropylene non-woven fabric would not qualify for the tax exemption stipulated in Serial 3B of Schedule A to the WBVAT Act, 2003. Nevertheless, the Hon ble Tribunal, in its order dated 30.11.2018, ruled that the PPSB Bed Sheet manufactured and traded by the Petitioner were exclusively utilized as bed sheets and thus were entitled to the exemption from tax payment pursuant to Serial No. 3B of Schedule A to the West Bengal Value Added Tax Act, 2003. 9. In the present matter, the GST rate applicable to the procurement of PP Granules, as classified under HSN 3901 or 3902, stands at 18%. Conversely, non-woven fabric supplies under HSN code 5603 incur a taxable rate of 12%, while supplies of PPSB Bed Sheet under HSN Code 6304 are taxed at 5%. This incongruous rate structure has led to the accumulation of credit on the part of the Petitioner. 10. Section 54(3) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behind the classification of their final products. 13. However, the respondent no. 5, without granting the Petitioner an opportunity for hearing and without duly considering the detailed submissions made by the Petitioner, passed orders dated May 4, 2019, to May 31, 2019, rejecting the refund due to the inverted duty structure. This rejection was primarily grounded on the assertion that the goods were manufactured using PP Granules, classifiable under Chapter 39. Consequently, the final products should also be classified under Chapter 39 and taxed at 18%, rather than under Chapter headings 5603 and 6304 as claimed by the Petitioner. 14. Discontented with the denial of the refund of accumulated Input Tax Credit due to the inverted duty structure, the Petitioner lodged an appeal under Section 107 of the WBSGST Act before the Senior Joint Commissioner of State Tax, herein referred to as the respondent no. 4 on July 2, 2019, using Form APL-01. Appeals against the Orders passed for subsequent periods were also filed before the respondent no. 4. 15. After reviewing the petitioner's arguments, respondent no. 4 revised the decision issued by respondent no. 5, determining that PPSB Bed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initial appellate authority/ assessment authority erred in its determination of classification due to a misinterpretation of the Customs Tariff Act, 1975, specifically under the heading 5603 concerning Non-Wovens, whether or not impregnated, coated, covered or laminated. The correct classification should have been under heading 6304, as the referenced 'non-woven fabrics' undergo further processing to become 'PPSB Bed Sheets,' constituting a subsequent stage in fabrication. These PPSB Bed Sheets are a derivative form of the aforementioned non-woven fabrics, undergoing shaping and finishing processes such as stitching to achieve the final product. Consequently, they rightfully merit classification under Chapter 6304, which pertains to other made up Textile Articles, Sets, worn clothing and worn Textile articles and rags of sale value exceeding Rs. 1000 per piece and thus, shall be liable to GST @5%. V. The contested decision delineating the classification of PPSB bed-sheets under tariff heading 5603, contrary to the petitioner s position, relies on the Customs Central Excise Tariff Act to assert that items originating from Chapters 56 to 62 do not fall within the purv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar issue arose regarding the classification of PPSB Bedsheets under the West Bengal VAT Act. The Hon'ble WBTT employed the Common Parlance Test to conclude that the Petitioner's products are commonly known as 'bedsheets' in trade and thus classified under Schedule A of the West Bengal VAT Act. VII. It is a well-established legal principle that the onus of demonstrating the classification of a product under a specific tariff heading rests with the revenue authority. This obligation necessitates proving that the product is commonly understood as falling within that classification by consumers or in common parlance as held in the case of Puma Ayurvedic (supra). As the department has failed to meet this burden by demonstrating that the PPSB Bed Sheet manufactured by the Petitioner is not commonly recognized as a 'bed-sheet' but merely as fabric in common parlance, the contested order's assertion that the PPSB Bed Sheets fall under tariff heading 5603 rather than 6304 lacks legal merit. VIII. Section 56 of the CGST Act prescribes the entitlement to interest on delayed refund, stipulating that if a refund remains undisbursed beyond sixty days from the filin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence and the application per se were meticulously examined to ensure accuracy and completeness. Confirmation of this examination was provided through FORM GST RFD-02 on 09.03.2019, bearing acknowledgment number 1920170749030000. Upon thorough review of the records, it is apparent that the petitioner obtained PP granules under HSN:3901 or 3902, which are subject to a tax rate of 18%. However, the final products, Non-Woven Fabric under HSN:5603 and PPSB Bed Sheets under HSN:6304, resulting in an inverted duty structure, are taxed at 12% and 5%, respectively. It is undisputed that the refund request arises from the classification of the final product under either heading 5603 or 6304. Consequently, based on the manufacturing process and the documents provided by the petitioner, clarification was sought regarding why the final products should be classified under HSN:5603 6304. Owing to which the authorities duly served a show-cause notice to the petitioner on 18.04.2019. III. It is also submitted that pursuant to the provisions of the West Bengal Value Added Tax Act, 2003, the imposition of tax is predicated upon the nomenclature of the items delineated within the schedules append ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2017, neither has the classification adopted by the present petitioner attained finality through any order issued by an authority designated under the Act prior to the petitioner's submission of the refund application nor has said classification been endorsed through the rulings of any authority appointed under the Act. 19. Upon a thorough examination of the documents presented to the Court and taking into account the arguments put forth by the parties, this Court opines that respondent no. 4 inadequately considered various factual elements in its decision-making process. It is firmly established, as reiterated by the Supreme Court in Puma Ayurvedic (supra), that the onus of proving a product's classification under a specific tariff heading lies with the revenue authority, which must demonstrate that such classification aligns with the understanding of consumers or common parlance. However, the respondent authorities have failed to fulfil this burden of proving that the PPSB Bed Sheets, manufactured by the petitioner, fall under tariff heading 5603 rather than 6304. Furthermore, as established by the Supreme Court in Union of India v. Garware Nylons Ltd, reported in 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.K. Chopra reported in 1999 (1) SCC 759, the Supreme Court elucidated the principle of judicial review. It expounded that judicial review, distinct from an appellate process, entails an examination of the procedural propriety of a decision rather than its merits. The court underscored the significance of adhering to established legal principles and natural justice in arriving at decisions by tribunals. It emphasized that if due process and fair treatment were accorded to an individual in the adjudicative process, Writ Courts are constrained from substituting their judgment for that of the appellate authority. This pronouncement underscores the limited role of writ courts in matters which falls squarely within the sphere of jurisdiction of the appellate authority. 23. For the forgoing reasons, order of the appellate authority are quashed and set aside, the appellate authority is requested to reassess the aforementioned facts, nonetheless, such reassessment must be conducted de novo, devoid of any influence from the observations made by this Court, ensuring impartiality in the process. 24. All pending applications are accordingly disposed of. 25. There shall be no order as to costs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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