2019 (10) TMI 314 - AAR - GST

Classification and GST Rate Determination for Laminated HDPE Geomembrane under HSN Code

The product 'Laminated High Density Poly Ethylene HDPE Woven Geomembrane for Water Proof Lining Type-II, IS:15351:2015' was classified under HSN Code 5911 ... Classification of laminated HDPE woven geomembranes as textile products for technical uses - Exclusion of textile materials from 'plastics' under Chapter Note 1 to Chapter 39 - Preference for the most specific heading under Rule 3(a) of General Rules for the Interpretation of the Schedule - Chapter and Section Notes having overriding effect in tariff classification - Determination of essential character of composite or laminated articlesClassification of laminated HDPE woven geomembranes as textile products for technical uses - Preference for the most specific heading under Rule 3(a) of General Rules for the Interpretation of the Schedule - Exclusion of textile materials from 'plastics' under Chapter Note 1 to Chapter 39 - Chapter and Section Notes having overriding effect in tariff classification - Laminated High Density Poly Ethylene (HDPE) Woven Geomembrane for water proof lining (Type-II, IS:15351:2015) is classifiable under HSN 5911 10 00 and not under HSN 3926 90 99 - HELD THAT: - The Authority examined the manufacturing process in stages - extrusion of HDPE tapes/strips (width 2.1-3.7 mm), weaving into HDPE woven fabrics, extrusion of liner film, sandwich lamination with LDPE/LLDPE and final heat sealing - and concluded the principal product around which the process revolves is HDPE woven fabric. Strips under 5 mm fall within the scope of Heading 5404 and woven fabrics obtained from such strips fall under Heading 5407. After lamination the resultant article is a textile fabric coated/laminated for technical purposes. Chapter Note 1 to Chapter 39 excludes materials regarded as textile material of Section XI from the scope of 'plastics', thereby precluding classification under Chapter 39 (including Heading 3926). Chapter and Section Notes govern and may expand or restrict headings and thus have overriding effect. Applying Rule 3(a), the Authority preferred the specific description applicable to technical textile fabrics (Heading 5911) over the more generic residual entry for articles of plastics. The product's identity, construction and technical end-use (pond/canal liners - a geotech technical textile) support classification as laminated textile products of a kind used for technical purposes. [Paras 5, 7, 8, 9]The laminated HDPE woven geomembrane pond-lining products are 'Laminated Textile Products' classifiable under HSN 5911 10 00; they are not classifiable under HSN 3926 90 99.Final Conclusion: Advance Ruling: the technical laminated HDPE woven geomembrane products (pond liners) are classifiable as textile products for technical uses under HSN 5911 10 00; they do not fall under the residual plastics entry HSN 3926 90 99. Issues Involved:1. Classification of 'Laminated High Density Poly Ethylene HDPE Woven Geomembrane for Water Proof Lining Type-II, IS:15351:2015' under HSN Code 5911 10 00 or HSN Code 3926 90 99.2. Determination of the correct GST rate applicable to the product.Issue-Wise Detailed Analysis:1. Classification of the Product:Applicant's Submission:The applicant, M/s. Emmbi Industries Ltd., contended that their product, 'Laminated High Density Poly Ethylene HDPE Woven Geomembrane for Water Proof Lining Type-II, IS:15351:2015,' should be classified under HSN Code 5911 10 00 as 'Textile Fabrics Coated, Covered or Laminated with Plastics, of a Kind Used for Technical Purposes' with IGST @ 12% [CGST @ 6% + UGST @ 6%]. They argued that the product is known in the market as agro textiles and is used for water-proof lining in ponds, canals, and other water bodies, primarily for agricultural purposes.Manufacturing Process:The manufacturing process involves several stages:- Tape/Strip Extrusion: HDPE granules are extruded, slitted, and stretched to produce tapes/strips of width 2.1 mm to 3.7 mm.- Fabric Weaving: The tapes/strips are woven into HDPE woven fabrics on circular looms.- Liner Film Extrusion: Polyethylene granules are extruded to produce a film.- Lamination Coating: The HDPE woven fabric is laminated on both sides with LDPE.- Sealing: The laminated fabrics are joined/sealed together by a heat air blower sealing process.Classification Flow:- HDPE Tapes/Strips: Classified under HSN 5404 90 20.- Woven Fabrics: Classified under HSN 5407 20.- Laminated Coated Fabrics: Classified under HSN 5911 10 00.Applicant's Justification:The applicant referred to various notifications and publications to substantiate their claim:- Notification No. 54/2015-2020: Issued by the Directorate General of Foreign Trade, recognizing the product as Technical Textiles.- Publication by Ministry of Textiles: Recognizing 'Geomembranes' as part of the Technical Textile Segment.Authority's Discussion:The Authority examined the manufacturing process and the classification flow provided by the applicant. They noted that the product is made from HDPE tapes/strips of less than 5 mm, which are woven into fabrics and then laminated. The product is used for technical purposes, specifically for water-proof lining.HSN Code 3926:The Authority considered HSN Code 3926 90 99, which refers to 'Other Articles of Plastics.' However, they noted that Chapter Note 1 to Chapter 39 excludes textile materials of Section XI from the scope of plastics.Conclusion:The Authority concluded that the product 'Laminated High Density Poly Ethylene HDPE Woven Geomembrane for Water Proof Lining Type-II, IS:15351:2015' is correctly classifiable under HSN Code 5911 10 00 as 'Textile Fabrics Coated, Covered or Laminated with Plastics, of a Kind Used for Technical Purposes.'2. Determination of the Correct GST Rate:The classification under HSN Code 5911 10 00 implies that the product attracts IGST @ 12% [CGST @ 6% + UGST @ 6%].Advance Ruling:The Authority for Advance Ruling pronounced that the 'Technical Laminated Fabrics woven out of strips below 5 mm fit for use as Pond liner are 'Laminated Textiles Products' and are covered under HSN Code 5911.'