In Re: M/s. National Plastic Industries Ltd.
GST
2018 (5) TMI 528 – AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA – 2018 (12) G. S. T. L. 445 (A. A. R. – GST), [2019] 60 G S.T.R. 451 (AAR)
AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA – AAR
Dated:- 2-4-2018
GST-ARA-17/2017-18/B-23
GST
B.V. BORHADE AND PANKAJ KUMAR (MEMBER)
PROCEEDINGS
(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by NATIONAL PLASTIC INDUSTRIES LIMITED, the applicant, seeking an advance ruling in respect of the following question :
To seek the classification of the PVC floor mat and the applicable rate of GST on the same.
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MG
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s follows:
a) Under Stage 1, PVC monofilament yarn with decitex ranging from 1200 to 2800 and filament diameter range 0.38 to 0.75 mm is extruded through a perforated dis plate using T-die extrusion. Extrusion is done through 3 to 4 parallel rows along the entire width of T-die and the vertically extruded yarn immediately falls on a water bed to form a non-woven carpet pile.
Also, referred to as PVC web, non-woven carpet pile is taken up in a horizontal direction on a roller and wound up in rolls. Pile height of the carpet can be varied by changing the process parameters, usually in the range of 8 mm to 16 mm.
b) Under Stage 2, the web formed in Stage I is impregnated with a lamination of clear coat of liquid PVC and is further made to fall over the liquid PVC layer on a conveyer belt. Then it passes through the heated conveyor oven to solidity the liquid PVC backing to the web.
3) The resultant product is a product of running length. It is then cut into size as given specified by
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hedule II of the respective notifications issued under both the Acts cover the chapter heading 5705, the same being reproduced below.
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
4) Notification No. 1/2017 – CGST specifically provide that-
“Explanation- For the purposes of this Schedule,-
(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
(iv) The rules for the 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.”
Thus, for the purpose of GST, Classification of goods under any tariff ite
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nbsp;
Durries :
57050021
–
Durries cotton
m2
57050022
–
Durries of man-made fibres
m2
57050023
–
Durries of wool
m2
57050024
–
Cotton Durries of handloom (including Chindi Durries, Cotton Chenille Durries, Rag Rug Durrie, Printed Durries, Druggets)
m2
57050029
–
Other
m2
Of jute :
57050031
–
Of blended jute
m2
57050032
–
Of coir jute
m2
57050039
–
Other
m2
Carpets, carpeting, rugs, mats and mattings:
57050041
–
knitted
m2
57050042
–
Mats and mattings including Bath Mats, where cotton predominates by weight, of Handloom, Cotton Rugs of Handloom
m2
57050049
–
Other
m2
57050090
Other
m2
6) Also, the relevant extract of HSN explanatory notes for chapter 5705 is reproduced below:
57.05-Other carpets and other textile floor coverings, whether or not made up.
Thus heading covers carpets and textile floor coverings, other than those covered by a more specific heading of this Chapter.
The
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the purposes of this Chapter, the term 'carpets and other textile floor coverings” means floor coverings in which textile materials serve as the exposed surface of the article when in use and Includes articles having the characteristics of textile floor covering but intended for use for other purposes.”
It can be seen from the chapter note that Chapter 57 covers those carpets and floor coverings in which textile material serves as the exposed surface of the article.
8) The term 'textile' or 'textile material' is not defined in the GST Act. Therefore, reference can be taken from various Textile Dictionaries and Encyclopedia to ascertain the meaning of this term.
a) “Encyclopedia of Textiles, Fibres and Nonwoven Fabrics” edited by Martin Grayson and published by Wiley-Interscience Publication has defined the term 'textile material' (Relevant extract attached as annexure B). This encyclopedia is another in the series of carefully selected reprints from the world-renowned Kirk-Othmer E
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s. In the case of woven and knitted fabrics the fibres and filaments are formed Into Intermediate continuous length structures known as yarns, which are then either interlaced by weaving or interloped by knitting Into planar flexible sheet like structures known as fabrics. Nonwoven fabrics are formed directly from fibres and filaments by chemically or physically bonding or Interlocking fibres that have been arranged a planar configuration (see Nonwoven textile fabrics, Tire cords).
Textile fibres may be classified into two main categories and into a number of sub-categories, as indicated in Table-1. The generic names of man-made fibres are defined and controlled by the Federal Trade commission (1) With the exemption of glass and asbestos fibres and the specialty metallic and ceramic fibres, textile fibres are formed from organic polymers. Cellulose (gv) and proteins (gv) are the only important natural polymers in naturally occurring fibres (see Biopolymers).
Table 1. Classification
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he Textile Institute is an international organisation governed by a Council representing members throughout the world. It is legally constituted by a Royal Charter, granted in Britain in 1925. The main central functions are the provision of an operational framework and the maintenance of quality, particularly in regard to professional qualifications and the spread of information to members and others. The term 'textile' as per this publication is defined as follows:
“A textile was originally a woven fabric, but the terms textile and the plural textiles are now also applied to fibres, filaments and yarns, naturals and manufactured and most products for which these are a principal raw materials.
Note: This definition embraces, for example, fibre based products in the following categories threads, cords, ropes and braids; woven knitted and nonwoven fabrics, lace, nets and embroidery, hosiery, knitwear and made up apparel; household textile, soft furnishing and upholstery; carpets and ot
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ile Dictionaries and Encyclopedia to understand its meaning.
a) From the extract of “Encyclopedia of Textile Fibres and nonwoven fabrics” reproduced above, it is evident that textile fibres may be classified into two main categories i.e. naturally occurring fibres and manmade fibres as indicated in Table-1 of the extract. It can be seen that manmade fibres includes fibres which are based on polyvinyl chloride i.e. PVC.
b) Further, the “Textile Terms and Definitions Tenth Edition” published by the textile institute has an entire flow chart of classification of textile fibres given, copy of which is attached as annexure D. From the flow chart, it is evident that textile fibres can be classified mainly into natural or manmade fibres. Further, manmade fibres include fibres made from synthetic polymer which further includes polyvinyl derivatives. Further, polyvinyl derivatives include chloro-fibre which are manufactured from PVC. Therefore, textile fibres includes fibres of PVC.
c) Furth
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ution or chemical treatment of natural organic polymers, or chemical modification of natural organic polymers (artificial fibres).
(1) SYNTHETIC FIBRES
The basic material for the manufacture of these fibres are generally derived from coal or oil distillation products or from natural gas. The substances produced by polymerisation are either melted or dissolved in a suitable solvent and then extruded through spinnerets (jets) into air or Into a suitable coagulating bath where they solidify in cooling or evaporation of the solvent, or they may be precipitated from their solution in the from filaments.
The main synthetic fibres are:
(1) Acrylic:
(2) Modacrylic:
(3) Polypropylene:
(4) Nylon or other polyamidesa:
(5) Polyesters
(6) Polyethylene:
(7) Polyurethane:
Other synthetic fibres include: chlorofibre, fluorofibre, polycarbamaide, trivinyl and vinylal.
In the present Case, PVC is produced by polymerization of vinyl chloride monomer (VCM) which is an organic monomer a
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nd therefore will be covered under Chapter Heading 5705.
As per Notification NO. 1/2017-CT (Rate) the Chapter Heading 5705 is covered under the Schedule-II where the goods are taxable @ 6% CGST and 6% SGST or 12% IGST.”
Submission dt. 19.02.2018
In addition to the submissions made in the application for advance ruling, the applicant would like to submit the following countering the submissions made from departmental authority:
1) Use of semi-colon between two entries makes the two sentences separate and they have to be read disjunctively.
The departmental authorities have construed that entry number 146 in notification no. 1/2017-CT(Rates) applies only to product where cotton predominates by weight. Since the product for which classification is under dispute is not made up of cotton, it will not be classified under entry number 146.
The description of entry number 146 In notification no 1/2017-CT(Rate) is reproduced below:
Other carpets and other textile floor coverings, whether
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t apply.
2) Even if it is assumed that the semi-colon does not separate the entry and it is to be read conjunctively. still the impugned product will be classified under serial no 146 of the notification.
It is submitted that the entry intends to cover carpets and other textile floor coverings. The entry uses the term 'such as' and mentions specific products. It is submitted that it is a settled principle of interpretation that the items mentioned after the term 'such as' are only illustrative in nature and are not exhaustive.
a) Goodyear India Limited v. Collector of Customs, Bombay, 1997 (95) E.L.T. 450 (SC). = 1997 (9) TMI 100 – Supreme Court of India
b) T.T.K, PHARMA LTD. 1993 (63) E.L.T. 446 (Tribunal) = 1992 (8) TMI 183 – CEGAT, NEW DELHI
It is submitted that the mats and mattings with predomination of cotton is only an example. Also, there is one more product mentioned i.e. cotton rugs of handloom. Thus, cotton rugs is a separate item and the predomination of cotton does no
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lowing cases:
a) OSWAL AGRO MILLS LTD. 1993 (66) E.L.T. 37 (S.C.) = 1993 (4) TMI 73 – SUPREME COURT OF INDIA
b) Trimurti Weldmesh (P) Ltd. 1993 (64) ELT 419 (Tri-Del)= 1992 (11) TMI 171 – CEGAT, NEW DELHI approved by the Supreme Court in the Trimurti Weldmesh (P) Ltd. 1996 (82) E.L.T. A168 (S.C.) = 1995 (12) TMI 397 – SUPREME COURT
4) There is no res-judicata in taxation.
It has been contended in para 6 of the departmental submission made during the hearing that in the pre-GST period the applicant was classifying the product under chapter heading 39249090 and thus now why is the applicant classifying the product under Chapter heading 5705.
It is submitted that the applicant was under the impression that the product would be classifiable under chapter heading 3924. However, it was lately realised that the main ingredient in the product is PVC fibre which is a textile material. Detailed submission on the same has been made in the advance ruling application. Thus, the applicant now w
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rule of equity cannot prevail against law. If an excise duty is not paid due to incorrect interpretation, still the Central Excise authorities are empowered to recover the duty due and payable by an assessee by virtue of Section 11A. If an assessee has wrongly classified his goods, then it cannot be taken by an authority in respect of any assessment period will not be binding for subsequent periods.
In view of above discussion, we find no merit in the. Appeal is dismissed.
The above case has been upheld by the Supreme Court in the case of Micron Tips Pvt. Ltd. v. Collector- 1999 (106) ELT. A189 (S.C.) = 1998 (11) TMI 690 – SUPREME COURT
The applicant also relies on the case of PERFECT REFRACTORIES 2005 (185) E.L.T. 163 (Tri. – Del.) = 2005 (2) TMI 597 – CESTAT, NEW DELHI wherein the mere wrong classification of the goods in question by the respondents at one stage, did not operate as estoppel/res judicata against them for claiming the classification under the correct tariff
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turf by sister concern M/s. Rayzon Global LLP. The corresponding packing list and purchase invoice is attached as annexure 2 The bill of entry clearly mentions the item as artificial turf (made of plastic raw material). The product has been classified under chapter heading 57033090 which covers CARPETS AND OTHER TEXITLE FLOOR COVERINGS, TUFTED, WHETHER OR NOT MADE UP.
It is submitted that artificial turfs also made up of PVC fibres but is sewed on the backing fabric with the help of-specialized multi-needle sewing machines. This process is called tufting. Therefore, the product is classifiable under chapter heading 5703.
However, in the case of product under dispute in the present case, there is no tufting carried out. In the present case, the PVC fibres are extruded and the pile is then bonded on to the backing material with the help of adhesives, Thus, the product is classifiable under chapter heading 5705.”
03. CONTENTION – AS PER THE CONCERNED OFFICER
The submission, as reprod
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product intended to be supplied to the respondent to examine the facts and issue. No such samples have been provided to the respondent. The applicant also required to provide
iii) What is the weight of cotton/or cotton fabric material.
iv) Whether the above weight of cotton will be constant or change product to product or time to time ?
v) The applicant has claimed in Para 2 of Annexure-I of their application that the prime raw material is PVC for their products. However. the applicant has no where mentioned the quantity in terms of weight of PVC and cotton which is crucial to decide the classification.
vi) The applicant has mentioned their manufacturing process, however, it is not clear as to how the said process mentioned at Para 2 (a) and (b) of Annexure-1 is relevant to decide the classification.
2. It is observed from the applicant's submission that the product is manufactured using predominantly polyvinyl chloride in the manufacturing process. The stages of manufacture giv
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specified by the customer.
However, it is not coming out from the above reasoning as to what is their product/product-range and how the same merits classification under chapter heading 5704.
3. As per the GST Tariff, the products which are classifiable under 5705 have been clearly mentioned as “other carpets and other textile floor covering, whether or not made up [such us mats, & mattings including bath Mats, where cotton predominates by weight, of handlooms, cotton rugs handlooms]”. From the Annexure-1 submitted by the applicant, it is observed that they have clearly mentioned that the prime raw material being used for PVC carpet mats PVC (Poly vinyl Chloride). However, the requirements of chapter 5705, are such that cotton should predominate by weight. In these circumstances, it is not clear as to how the product of Applicant can be classified under CH 5705.
4. The classification under Chapter Heading 3924 and Chapter heading 5705 are mutually exclusive as Chapter heading 3
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failed to provide complete information as to whether their product qualifies as tableware, kitchenware, Other household articles and hygienic or toilet articles of plastic. If their product qualify under CH. 5705 as to why they were earlier classifying the same under CH 39249090 which is mainly for household or hygienic articles of plastics.
7. Since the applicant has not made a full disclosure of relevant facts, as discussed above, it appears that the application deserves to be rejected under the provisions of Section 98 of the CGST, Act, 2017
8. The above submissions are made only as preliminary submissions about the admissibility of the application and detailed submissions would be filed at a later Mage.
PRAYERS
Since the applicant has not provided the vital information as discussed above, necessary to decide the issue, it is prayed that the application may be rejected at this stage only.
Additional Written Submissions or NIL date as received on dt. 05.03.2018
In addition to t
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able under CH 5703. However, they have further stated that in the subject case, to the product under dispute, tufting is not carried out, the PVC fibers are extruded and the pile is then bonded on to the backing material with the help of adhesives, hence the product is classifiable under CH 5705, so it is not understood why the applicant has submitted the said sample, which has no bearing with the instant case.
2]. Further, they were again emphasizing that their product namely PVC carpet should be classifiable under chapter 5705. However, chapter 5705 clearly states that “other carpets and other textile floor covering, whether or not made up; such as mats, & mattings including bath Mats, where cotton predominates by weight, of handlooms, cotton rugs handlooms”, which they themselves agreed that as already mentioned in point No. 2 of ANNEXURE-1 of their application, the prime raw material being used for their product is polyvinyl chloride. However, it is again mentioned by 'he applican
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njunctively. Which is not applying in the said case, so the above referred case laws are irrelevant in this case.
4] Further, they have also relied on certain following case laws for the word 'such as that this word is only illustrative in nature and is not exhaustive.
i] Goodyear India Limited v. Collector of Customs, Bombay, 1997 (95) ELT, 450 (S.C) = 1997 (9) TMI 100 – Supreme Court of India
ii] T.T.K. Pharma Ltd. 1993 (63) ELT 446 (Tribunal) = 1992 (8) TMI 183 – CEGAT, NEW DELHI
iii] Jalal Plastic industries 1981 (8) ELT 653(Guj) = 1980 (12) TMI 51 – HIGH COURT OF GUJARAT AT AHMEDABAD
iv] M/s. Varroc Engineering Pvt. Ltd. 2015 (10) TMI 54-CESTAT Mumbai
It is observed that the applicant's intention is that the mats and mattings with predomination of cotton is only an example. Also, there is one more product mentioned i.e. cotton rugs of handloom. Thus, cotton rug is a separate item and the predomination of cotton does not apply to such article. Therefore, it can be interpreted
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oducts of the appellant with that of the above said case laws. Further, it has also to be seen as to how the case law pronounced for Central Excise regime may be applicable under GST regime. The applicant has failed to provide any reasons as to how the said case law will be applicable under GST regime.
7] Further, from the enquiries made with the trade, it is learnt that the PVC carpet is classified under Custom CHSH 3918 which reads as under “Floor coverings of plastics, whether or not self-adhesive, in rolls or in the forms of tiles; wall or ceiling coverings of plastics”
The explanatory notes provided under each HSN is as following: –
3918: The said HSN covers “Floor coverings” of “polymers of vinyl chloride in rolls or forms of tiles.
In the present case, primary raw material used in the manufacturing the goods in consideration is “PVC”, hence a view can be formed that the goods are specifically classified in the said entry.
It appears that Chapter heading 5705 covers carpets
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S
We have gone through the facts of the case. The product before us is claimed to be a floor mat. Though at the cost of repetition, for immediate reference we go through the manufacturing process once again –
a) Under Stage 1, PVC monofilament yarn with decitex ranging from 1200 to 2800 and filament diameter range 0.38 to 0.75 mm is extruded through a perforated dis plate using T-die extrusion. Extrusion is done through 3 to 4 parallel rows along the entire width of T-die and the vertically extruded yarn immediately falls on a water bed to form a non-woven carpet pile. Also, referred to as PVC web, non-woven carpet pile is taken up in a horizontal direction on a roller and wound up in rolls. Pile height of the carpet can be varied by changing the process parameters, usually in the range of 8 mm to 16 mm.
b) Under Stage 2, the web formed in Stage 1 is impregnated with a lamination of clear coat of liquid PVC and is further made to fall over the liquid PVC layer on a conveyer belt, Th
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t of polymerisation or at some subsequent stage, of being formed under external influence (usually heat and pressure, if necessary with a solvent or plasticiser) by moulding, easting, extruding, rolling or other process into Shapes which are retained on the removal of the external influence.
Throughout the Nomenclature any reference to “plastics” also includes vulcanised flbre. The expression, however. does not apply to materials regarded as textile materials of Section XI.
The applicant has laid claim to the Customs Tariff Heading (CTH) 5705 as being applicable to the impugned product. Chapter 57 falls in Section Xl of the scheme of the Customs Tariff, Section Xl is about “TEXTILES AND TEXTILE ARTICLES” and Chapter 57 is about “Carpets and other textile floor coverings”. With the understanding that the impugned product is composed only of PVC monofilament yarn and liquid PVC, we look at the HSN Notes to Section XI which say thus
Notes,
1.- This Section does not cover :
(h) Woven,
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PVC only and there should be no doubt whatsoever that the same would fall in Chapter 39 which covers PVC, a polymer and articles thereof.
Having seen thus, there arises no occasion for us to discuss the Heading 5705 which is claimed as being applicable. The case laws being buttressed in respect of the applicability of the Heading 5705 also need no discussion as to their applicability or otherwise. However, we would like to observe herein that we are not at all disagreeable to the point that there are man-made textiles but the same are not required to be referred to here in view of the impugned product being clearly classifiable under Chapter 39 as per discussions held hereinabove.
Now as can be seen that the applicant's query is in respect of the classification of the PVC floor mat and the applicable rate of GST on the same, we would now move on to decide the rate on the impugned product. There is no specific entry in the Schedule for goods exempted from GST as found in the Notifica
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eading 39.26, the HSN General Notes say that it is a residual heading which covers articles, not elsewhere specified or included, of plastics or of other materials of headings 39.01 to 39.14. However, we find that Heading 39.18 covers the following products as under –
3918
FLOOR COVERINGS OF PLASTICS, WHETHER OR NOT SELF-ADHESIVE, IN ROLLS OR IN THE FORM OF TILES; WALL OR CEILING COVERINGS OF PLASTICS, AS DEFINED IN NOTE 9 TO THIS CHAPTER
3918 10
–
Of polymers of vinyl chloride:
3918 10 10
Wall or ceiling coverings combined with kg. 10% – knitted or woven fabrics, nonwovens or felts
3918 10 90
Other
3918 90
–
Of other plastics :
3918 90 10
Floor coverings of linoxyn
3918 90 20
Wall or ceiling coverings combined with kg. 10% – knitted or woven fabrics, non wovens or felts
3918 90 90
Other
Note 9. For the purposes of heading 3918, the expression “wall or ceiling coverings of plastics” applie
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