2023 (8) TMI 927 - AAR - GST

Foam cup pads for brassieres classified under HSN 39262091 as polyurethane apparel accessories attracting 18% GST

AAR UP ruled on HSN classification of foam cup pads supplied to brassiere manufacturers. The authority held that foam cup pads made of polyurethane foam ... Classification of goods under the Harmonized System - General Rules for the Interpretation of the Harmonized System - application of Chapter and Section Notes in tariff classification - classification under Chapter 39 (Plastics and articles thereof) versus Chapter 62 (Articles of apparel and clothing accessories) - essential character/description of goods for tariff classificationClassification of goods under the Harmonized System - application of Chapter and Section Notes in tariff classification - classification under Chapter 39 (Plastics and articles thereof) versus Chapter 62 (Articles of apparel and clothing accessories) - essential character/description of goods for tariff classification - Classification of 'Foam cup pads' supplied as finished products for use in manufacture of brassieres among the HSN codes 39269079, 62129090 and 39262091. - HELD THAT: - The Authority applied the General Rules for interpretation of the Harmonized System and the Chapter/Section Notes. Polyurethane is a plastic within the meaning of Note 1 to Chapter 39 and the foam cup pads manufactured from polyurethane, glue and fabric are therefore articles of plastics or of materials of headings 3901 to 3914. Section XI (Chapter 62) does not cover articles of Chapter 39 by virtue of the Section Note excluding fabrics or textile materials impregnated, coated or covered with plastics; accordingly the product is not classifiable under Chapter 62 (HSN 62129090). The description for 39269079 (insulating liner of nylon etc.) does not fit because the product is not an insulating liner of nylon but a polyurethane foam article. Heading 3926 (Other articles of plastics) is therefore applicable; within that heading 39262091 expressly covers articles of apparel and clothing accessories of polyurethane foam. On the facts and character of the product as polyurethane foam pads used in brassieres, the product falls under 39262091. The Authority concluded that this classification attracts GST at the rate applicable to that heading. [Paras 14, 15, 16]Foam cup pads made of polyurethane, glue and fabric are classifiable under HSN 39262091 and are liable to GST at the rate applicable to that heading.Final Conclusion: Advance Ruling: Foam cup pads manufactured from polyurethane, glue and fabric and supplied for use in brassiere manufacture are classifiable under HSN 39262091 (not under 62129090 or 39269079) and attract GST at the rate applicable to that heading; ruling valid within the jurisdiction of the Authority for Advance Ruling Uttar Pradesh. ISSUES PRESENTED AND CONSIDERED 1. Whether foam cup pads manufactured of polyurethane, glue and fabric and supplied to manufacturers of brassieres are classifiable under HSN 39262091, 39269079 or 62129090 for purposes of GST. 2. Whether the product in question is properly treated as an article of plastics within Chapter 39 (heading 3926) or as an article of apparel/clothing accessories within Chapter 62. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Classification: Whether foam cup pads fall under HSN 39262091, 39269079 or 62129090 Legal framework: - Classification governed by the General Rules for interpretation of the Harmonized System: headings and Chapter/Section Notes, and the Chapter/Section titles only for reference. - Note 1 to Chapter 39 defining 'plastics' as materials of headings 3901-3914 and treatment of such materials as plastics for the Chapter. - Section XI and Section Note 1(h) excluding fabrics or textile materials impregnated/coated/covered/laminated with plastics from Chapter XI where applicable. Precedent treatment: - No judicial or administrative precedents were cited in the ruling; the Authority relied on tariff text, Chapter and Section Notes and the product's essential character. (No precedents followed, distinguished or overruled.) Interpretation and reasoning: - The product's composition (polyurethane foam as principal material, with glue and fabric) and the applicant's description that the product 'by character' is an insulating liner made of polyurethane foam were accepted as factual premises for classification. - Note 1 of Chapter 39 was applied to conclude that polyurethane (polyutherane) is a 'plastic' within headings 3901-3914; therefore articles made principally of such material fall within Chapter 39 unless excluded by specific notes. - Heading 3926 ('Other articles of plastics and articles of other materials of headings 3901 to 3914') is the residual heading for articles of plastics where no more specific heading exists; the Authority found no specific entry for 'foam cup pads' elsewhere in the tariff. - Chapter 62 (articles of apparel and clothing accessories) falls in Section XI (Textiles). Section Note 1(h) excludes textile materials impregnated, coated or covered or laminated with plastics or articles thereof of Chapter 39 from Section XI; the Authority applied this to exclude classification under Chapter 62 because the product's essential character is that of an insulating polyurethane foam article rather than a textile article. - Heading 39269079's examples include insulating liners of nylon; the Authority distinguished that entry because the foam cup pads are insulating liners of polyurethane foam (a plastic of Chapter 39) and not insulating liners of nylon; thus 39269079's specific wording did not fit the product. - Heading 39262091 covers 'Articles of apparel and clothing accessories (including gloves, mittens & mitts) of polyurethane foam'. The Authority reasoned that while the product is supplied for use in brassieres, its material composition and essential character make it an article of plastics falling within Chapter 39; however, because heading 39262091 expressly covers articles of apparel and clothing accessories of polyurethane foam, the product, being a foam article used in apparel components, falls within 39262091 on merit. Ratio vs. Obiter: - Ratio: The Authority's applied rule is that a foam article made principally of polyurethane used as a component in apparel but possessing the character of a polyurethane foam article is classifiable under the heading that specifically covers articles of apparel and clothing accessories of polyurethane foam (39262091), rather than as a general 'other article of plastics' (39269079) or as an article of Chapter 62 solely on textile-based reasoning. - Obiter: Observations distinguishing insulating liners of nylon in 39269079 and reiteration of Chapter/Section Notes operate as interpretative guidance supporting the ratio rather than independent binding propositions. Conclusion: - Foam cup pads made of polyurethane, glue and fabric, supplied for use in manufacture of brassieres, are classifiable under HSN 39262091 and attract GST @ 18% (CGST 9% + SGST 9%). Issue 2 - Application of Section and Chapter Notes (textile exclusion) and essential character test Legal framework: - Section XI Note 1(h) and Chapter 39 Note 1 govern whether an item is treated as a textile article or a plastics article; the 'essential character' and specific heading descriptions control classification. Precedent treatment: - No external authorities cited; the Authority applied tariff notes and the essential character principle from the General Rules for interpretation of the Harmonized System. Interpretation and reasoning: - The Authority applied Section Note 1(h) to exclude classification under Chapter 62 because the product is not a textile material but an article principally composed of a Chapter 39 plastic (polyurethane). - The essential character test was used to determine that despite being used in apparel manufacture, the product's nature as a polyurethane foam article governs classification and may lead to placement under either a specific apparel-related polyurethane foam heading (39262091) or a general plastics article heading (39269079); where a more specific heading (39262091) encompasses apparel components of polyurethane foam, that specific heading prevails. Ratio vs. Obiter: - Ratio: Section and Chapter Notes excluding textile materials impregnated/coated with plastics operate to remove such items from Section XI, and the specific heading covering polyurethane foam apparel components (39262091) governs classification by essential character. - Obiter: The comparative discussion of insulating liners in 39269079 serves as explanatory distinction rather than an independent rule applicable beyond the facts. Conclusion: - Section XI exclusions and Chapter 39 definitions require treating the foam cup pads as articles of plastics; within Chapter 39, the presence of a specific heading (39262091) for polyurethane foam articles used in apparel controls classification over the more general 39269079 entry. Final Disposition - The Authority unanimously ruled that the correct HSN classification for the foam cup pads is 39262091 and that the product is taxable at GST rate 18% (CGST 9% + SGST 9%) within the Authority's jurisdiction, subject to statutory provisions governing the validity of advance rulings.