Appellate Authority clarifies 'Kalava Raksha Sutra' classification, upholds HSN code assignment, and preserves GST exemption eligibility.

The Appellate Authority upheld the classification of the commodity 'Kalava Raksha Sutra' as braided textile yarns under specific HSN codes but expunged remarks affecting its eligibility for GST exemption. The decision emphasized that the product's classification did not hinder its potential exemption based on religious significance, ensuring fairness in the ruling.

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Issues Involved:
1. Classification of the commodity 'Kalava Raksha Sutra (Sacred Thread)'.
2. Eligibility for GST exemption under Notification No. 2/2017-C.T.(Rate) dated 28.06.2017.
3. Procedural compliance regarding the filing of the appeal.

Detailed Analysis:

1. Classification of the Commodity 'Kalava Raksha Sutra (Sacred Thread)':
The Appellant is engaged in manufacturing 'Kalava Raksha Sutra' and sought an advance ruling on its classification. The Original Authority for Advance Ruling classified the product as braided textile yarns under the following HSN codes:
- Made of polypropylene yarn: 56074900
- Made of other synthetic yarn: 56075090
- Made of cotton: 56079090

The Original Authority concluded that the product was not 'Kalava Raksha Sutra' sold directly to consumers but rather long lengths of thread sold in loose rolls, which required further cutting to individual sizes to make them 'Kalava Sutra'.

2. Eligibility for GST Exemption:
The Appellant contested the Original Authority's ruling, arguing that the product should fall under serial number 148 under item IX under the head 'Pooja Samagiri' in Notification No. 2/2017-C.T.(Rate), thereby exempt from GST. They emphasized the religious significance of 'Kalava Raksha Sutra', which is used in various religious practices and should be considered exempt from GST despite being sold in bulk and later cut to size by buyers.

3. Procedural Compliance:
The appeal was filed within the statutory period but initially lacked the full statutory fees, which were subsequently paid within the allowable extended period. The Appellate Authority condoned this procedural lapse and accepted the appeal on merits.

Personal Hearing and Further Submissions:
The Appellant was granted multiple opportunities for a personal hearing. During the hearings, they presented samples, tax invoices, and argued that the product's classification was not in dispute but rather its eligibility for exemption. They highlighted the traditional and religious usage of 'Kalava Sutra' and provided additional submissions emphasizing their long-standing family business of manufacturing these items for religious purposes.

Appellate Authority's Decision:
The Appellate Authority noted that the Original Authority's ruling focused on the classification of the product and did not explicitly address the exemption eligibility under Notification No. 2/2017-C.T.(Rate). The Appellate Authority found that the remarks of the Original Authority regarding the product not being 'Kalava Raksha Sutra' were not substantiated with material evidence and were not relevant to the classification issue.

Ruling:
The Appellate Authority decided to expunge the remarks made by the Original Authority in Para 4 of its Order No. 12/AAR/2019 dated 13.04.2019, which implied that the product was not 'Kalava Raksha Sutra'. The classification ruling by the Original Authority was maintained, but the remarks affecting the exemption eligibility were deleted to ensure justice.

Conclusion:
The Appellate Authority maintained the classification of the product as braided textile yarns under the specified HSN codes but expunged the remarks that could affect the product's eligibility for GST exemption under the relevant notification. This decision clarified that the product's classification did not preclude its consideration for exemption based on its religious significance and usage.

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