2018 (8) TMI 1650 - AAAR - GST

Appellate Authority affirms PVC floor mat classification under Chapter 3918 with 18% GST rate.

The Appellate Authority affirmed the classification of the PVC floor mat under Chapter 3918 as 'Floor Coverings of PVC' and upheld the applicable GST rate ... Classification of goods - rate of GST - floor mats / (floor coverings) made of (PVC textiles) PVC, known as PVC Carpet Mats or Floor coverings or Textile floor covering made up of PVC - appellant had proposed the classification of the product under chapter 5705 and being covered under entry no 146 of schedule II of the notification no 1/2017-CT(rate) and 1/2017-ST (rate) and attracting tax at the rate of 12% in total - AAR classified the product under chapter heading 3918 and rejected the classification of the appellant under chapter 5705 - Challenge to Advance Ruling decision. Whether the goods in question are classifiable under Tariff Item 3918 as held by AAR, or 5705 as claimed by the Appellant? Held that:- On perusal of the sample produced, it is found that it is in the form of a plastic web on exposed surface and with a sheet-like backing of plastic. The manufacturing process, as submitted in writing by the appellant, reveals that the said product is manufactured in two stages. In Stage One, a web of PVC is formed in roll form. In Stage Two, this web is impregnated with a lamination of PVC. These facts are not disputed. There also no dispute that the product is made of 100% plastic. To avoid classification disputes under the GST regime, the Customs Tariff has been adopted for descriptive classification of goods under GST. Further, in case of any doubt, and for the exact classification of any goods, reference needs inevitably to be made to the Section and Chapter Notes provided therein, as has been done in this case by both the appellants and the Maharashtra AAR. It is seen that Chapter 57 of the HSN falls under Section Xl of the Customs Tariff. Section Note 1(h) of Section Xl, relied upon by the AAR, excludes interalia non-wovens impregnated/coated with plastics. In their written submissions the appellant has claimed the said goods to be 'Non-woven' and impregnated/coated (as per their manufacturing process). Thus in view of Note 1(h) of Section Xl, the said goods are apparently excluded outright from this section. If the said goods are excluded from the section Xl, their classification under any Chapter under the Section would also be ruled out - The exposed surface of the article does not contain fabric or fibres, filaments or yarns, but is a web of PVC made from a moulding process in which T-shaped monofilaments result in the intermediate process. It is not the case of the appellants that that they manufactured the non-woven product (PVC web) by use of monofilament yarns. There are no identifiable fibres, filaments or yarns in the exposed surface of their product and the web like structure made from 100% PVC therefore does not qualify for the textile materials as specified in Note 1 to Chapter 57. The appellant is already a manufacturer of the said goods and classifying the same under Chapter 39 in the pre-GST era. The appellant has not brought on record any change in the composition, nature or manufacturing process of the said goods from the pre-GST era to now which has compelled them to approach AAR for classification. The only change noticed and which was discussed during hearing also, is the higher rate of GST under HSN 3918 than under HSN 5705. But the rate of duty/tax cannot be a criterion for deciding the classification of any product. The PVC Mats manufactured by the appellant, a sample of which was produced before us, are specifically covered under HSN 3918 as Floor Coverings of PVC in terms of Rule 1 of the Rules of Interpretation of Customs Tariff read with Note 1(h) to Section Xl and Note 1 to Chapter 57. Ruling:- The PVC floor Mat would fall in the Customs Tariff heading 3918 and applicable rate of GST would be 18% (9% each of CGST and SGST) - the order of AAR upheld. Issues Involved:1. Classification of the product under the applicable tariff heading.2. Determination of the correct GST rate applicable to the product.Detailed Analysis:Issue 1: Classification of the ProductAppellant's Argument:- The appellant, engaged in manufacturing PVC carpet mats, argued that their product should be classified under Chapter 5705, which covers 'Other carpets and other textile floor coverings, whether or not made up.'- They contended that their product is a textile material because it is made from PVC fibres, which are considered man-made fibres.- They cited various definitions and sources, including the 'Encyclopaedia of Textiles, Fibres and Nonwoven Fabrics' and 'Textile Terms and Definitions,' to argue that PVC fibres qualify as textile materials.- They also referenced HSN explanatory notes and case laws to support their claim that PVC fibres are synthetic fibres and thus should be classified under Chapter 5705.Authority's Argument:- The Authority for Advance Ruling (AAR) classified the product under Chapter 3918, which pertains to 'Floor coverings of plastics, whether or not self-adhesive, in rolls or in form of tiles; wall or ceiling coverings of plastics.'- The AAR reasoned that the product is made entirely of PVC, a type of plastic, and thus falls under Chapter 3918.- They referred to Note 1(h) of Section XI, which excludes non-wovens impregnated/coated with plastics from being classified under textile chapters.Appellate Authority's Findings:- The Appellate Authority examined the definitions of 'floor coverings' and 'carpets' from sources like Encyclopaedia Britannica and Wikipedia, concluding that floor coverings include a wide range of materials, including plastics.- They noted that the product is a web of PVC with a plastic backing, manufactured in two stages involving the impregnation of PVC.- The Authority emphasized that the product is made of 100% plastic, and there are no identifiable fibres, filaments, or yarns in the exposed surface.- They concluded that the product does not qualify as a textile material under Chapter 57, given the absence of textile fibres or yarns in the exposed surface.- They also noted that the appellant had previously classified the product under Chapter 39 in the pre-GST era, indicating no change in the product's composition or manufacturing process.Conclusion:- The Appellate Authority upheld the AAR's classification of the product under Chapter 3918, stating that the product is specifically covered under this heading as 'Floor Coverings of PVC.'Issue 2: Determination of the Correct GST RateAppellant's Argument:- The appellant argued that their product should attract a GST rate of 12%, as applicable to goods classified under Chapter 5705.- They cited entry no. 146 of Schedule II of Notification No. 1/2017-CT (Rate), which covers 'Other carpets and other textile floor coverings.'Authority's Argument:- The AAR determined that the product falls under Chapter 3918, which attracts a GST rate of 18%.Appellate Authority's Findings:- The Appellate Authority agreed with the AAR's classification under Chapter 3918, which specifies an 18% GST rate (9% CGST and 9% SGST).- They noted that the appellant's argument regarding the semi-colon in entry no. 146 was irrelevant, as the product does not qualify as a textile floor covering.Conclusion:- The Appellate Authority confirmed the GST rate of 18% for the product, as it falls under Chapter 3918.Order:- The Appellate Authority upheld the AAR's order classifying the PVC floor mat under Chapter 3918, with an applicable GST rate of 18%. This order is specific to the types of PVC floor coverings/mats manufactured by the appellant as per the submitted manufacturing process and the sample produced.