Classification of 'Fusible Interlining Cloth' under Customs Tariff Act

The court ruled that the product 'Fusible Interlining cloth for cotton fabrics' is correctly classified under Heading 5903 of Chapter 59 of the First Schedule to the Customs Tariff Act, 1975. This decision was based on factors such as the manufacturing process involving partial coating with thermoplastic, alignment with the CBEC Circular No. 433/66/98-CX-6, and consistency with the Explanatory Notes to the HSN code.

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Issues Involved:
Classification of fusible interlining cloth for cotton fabrics under HSN code 5903 or Chapter 52/55.

Detailed Analysis:

Issue 1: Classification under HSN Code 5903 or Chapter 52/55

Brief Facts:
The applicant, M/s. Ashima Dyecot Pvt. Ltd., engaged in the manufacture and supply of fabrics and garments, sought to determine the classification of fusible interlining cloth for cotton fabrics. The applicant classified the product under HSN Code 5903, attracting a 12% tax rate, while competitors classified it under Chapter 52/55, attracting a 5% tax rate, resulting in business loss to the applicant.

Applicant's Submission:
1. Fusible interlining cloth is a layer of fabric inserted between the shell fabric and the lining of a garment for appearance and stability.
2. The product is mainly used in collars and cuffs.
3. Under the erstwhile Central Excise regime, the product was classified under HSN code 5903.
4. The applicant argued that the product does not have a continuous and adherent film or layer of plastic on one side and is partially coated with thermoplastic, thus should be classified under Chapter 52.

Discussion and Findings:
1. Historical Classification:
- Initially classified under various chapters from 50 to 55 under the Central Excise regime.
- Circular dated 02.09.1988 clarified requirements for classification under HSN code 5903.
- Introduction of Note 2(c) in Chapter 59 by Finance Act, 1989, included fusible interlining cloth under Heading 5903.
- Note 2(c) was deleted w.e.f. 16.03.1995, but CBEC maintained classification under Heading 5903.

2. Judicial Precedents:
- The Madras High Court held that without Note 2(c), fusible interlining would fall under Chapters 50 to 55.
- The Appellate Tribunal, Chennai, ruled that fusible interlining fabrics of cotton were not classifiable under Chapter 5903 but under Chapter 52.

3. GST Regime:
- The classification of goods under GST is based on the First Schedule to the Customs Tariff Act, 1975.
- The Explanatory Notes to the HSN code are admissible for classification purposes.

4. HSN Explanatory Notes:
- Heading 5903 covers textile fabrics impregnated, coated, covered, or laminated with plastics.
- Textile fabrics partially coated or partially covered with plastics and bearing designs are excluded from Heading 5903 and usually fall under Chapters 50 to 55, 58, or 60.

5. CBEC Circular No. 433/66/98-CX-6:
- This Circular, despite being challenged, continues to reflect CBEC's view on the classification of fusible interlining cloth.
- It treats fusible interlining cloth as textile fabric spattered with visible particles of thermoplastic material, classifiable under Heading 5903.

Conclusion:
The product 'Fusible Interlining cloth of cotton fabric' is classifiable under Heading 5903 of Chapter 59 of the First Schedule to the Customs Tariff Act, 1975, based on:
- The manufacturing process involving partial coating with thermoplastic.
- The CBEC Circular No. 433/66/98-CX-6, which remains relevant.
- The alignment with the Explanatory Notes to the HSN code.

Ruling:
The product 'Fusible Interlining cloth for cotton fabrics' manufactured by the applicant is correctly classifiable under Heading 5903 of Chapter 59 of the First Schedule to the Customs Tariff Act, 1975.

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