Polypropylene non-woven bags classified as plastic articles under Chapter 3923, not textiles under 5603 or 6305

The AAAR Gujarat classified polypropylene non-woven bags under Chapter Heading 3923 as plastic articles rather than under textile headings 5603 or 6305. The authority determined that since the bags are manufactured from polypropylene granules (a plastic material), they cannot be considered textiles despite being non-woven. The ruling distinguished the case from textile precedents, noting that polypropylene's plastic nature governs classification. The appellant's appeal was dismissed, confirming the bags' classification as plastic articles under the HSN/Customs Tariff Act.

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Issues Involved:
1. Classification of Non-Woven Bags: Heading No. 6305 vs. Heading 3923.
2. Eligibility for GST exemption under Notification No.01/2017-CT(Rate) and 01/2017-IT(Rate).

Issue-Wise Detailed Analysis:

1. Classification of Non-Woven Bags: Heading No. 6305 vs. Heading 3923
- Appellant's Argument: The appellant argued that their product, Non-Woven Bags manufactured from Non-Woven Fabrics, should be classified under Heading No. 6305.3300. They cited the general rules of interpretation and various judgments, including the Supreme Court's ruling in Porritts and Spencers (Asia) Ltd V/s State of Haryana, which stated that the term 'textile' includes fabrics made from any material.
- GAAR's Ruling: The GAAR classified the Non-Woven Bags under HS code 3923, based on the Madhya Pradesh High Court's judgment in the case of M/s Raj Packwell Ltd, which held that fibers manufactured from polypropylene granules cannot be considered textiles under the Textiles Committee Act, 1963. The GAAR also relied on CBIC (TRU) Circular No. 80/54/2018-GST, which classifies polypropylene woven and non-woven bags under Chapter Heading 3923.
- Appellate Authority's Findings: The authority upheld GAAR's classification under HS code 3923. They emphasized that the classification of goods under GST should align with the Customs Tariff Act, 1975, which is based on the Harmonized System of Nomenclature (HSN). The authority also noted that the TRU Circular dated 31.12.2018 clearly classifies Polypropylene Woven and Non-Woven Bags under HS code 3923, which is applicable to the appellant's product.

2. Eligibility for GST Exemption under Notification No.01/2017-CT(Rate) and 01/2017-IT(Rate)
- Appellant's Argument: The appellant argued that their product should be eligible for exemption under the specified notifications. They cited various rulings and judgments to support their claim, including the West Bengal Appellate Authority for Advance Ruling's decision, which classified polypropylene non-woven bags under Heading No. 6305.3300.
- GAAR's Ruling: The GAAR answered this question in the negative, stating that the product does not qualify for the exemption.
- Appellate Authority's Findings: The authority agreed with GAAR's decision, noting that the ruling of Advance Ruling Authorities is binding only on the applicant who sought it, as per Section 103 of the CGST Act, 2017. They dismissed the appellant's interpretation that the ruling should prevail over the TRU Circular.

Conclusion:
The Appellate Authority for Advance Ruling upheld the GAAR's decision, classifying the Non-Woven Bags under HS code 3923 and denying the eligibility for GST exemption under Notification No.01/2017-CT(Rate) and 01/2017-IT(Rate). The appeal filed by the appellant was rejected, affirming the Advance Ruling No. GUJ/GAAR/R/84/2020 dated 17.09.2020.

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