2023 (11) TMI 666 - HC - GST

TRU clarification on polypropylene woven/non-woven bag GST classification powers challenged; circular quashed as ultra vires, classification left open

The dominant issue was whether the Tax Research Unit (TRU) had statutory authority under the CGST Act, including s.168, to issue a clarification on ... Power of Tax Research Unit (TRU) to issue clarification regarding Classification of Goods - Validity of Circular No. 80/54/2018-GST dated 31.12.2018 issued by the Tax Research Unit of the Respondent No. 1 - polypropylene woven and non-woven bags including those laminated with Biaxially Oriented Polypropylene (BOPP) - liable to be classified as falling under Chapter 39 or not. HELD THAT:- Ld. counsels for the Revenue could not draw our attention to any provision of the CGST Act, in terms of which the TRU could be said to have been clothed with the authority or jurisdiction to render a clarification with respect to classification of goods and articles. That power clearly appears to stand conferred upon the Board exclusively. We are thus of the considered opinion that no authority vested in the TRU to issue the clarification impugned before us. In the absence of a conferral of any power upon the TRU, or it being recognized as being statutorily enabled to issue any clarification or directive under Section 168 of the CGST Act, the circular is liable to be quashed and set aside on this ground alone. All that needs to be observed in this regard is that the conflict of opinion that may exist would have to be resolved by parties taking appropriate steps as contemplated under the CGST Act. It is noted that the impugned circular while purporting to convey a position with respect to the classification of non-woven polypropylene bags has rested its conclusions solely on the basis of the provisions contained in Chapter 39. It has neither alluded to Section XI of the First Schedule to the 1975 Act nor has it referred to Chapter 56 thereof. The contention of the petitioners that non-woven polypropylene is an article which would fall within Tariff Heading 5603 was neither questioned nor contested before us by the respondents. In any case, a reading of the impugned circular would establish that it fails to examine the issue on the anvil of the distinction which the 1975 Act appears to construct when it places plastics under Chapter 39 and textiles and articles thereof separately in Section XI, and more particularly, as was contended by the petitioners in Chapters 56 and 63 of the said enactment. The impugned circular also fails to advert to the Notes placed in Chapter 39, and which in unambiguous terms, exclude textiles from the ambit thereof. The failure of parties to address the question comprehensively constrains to desist from rendering a definitive opinion in that respect bearing in mind the industry wide ramifications that may ensue. Courts should avoid expressing an opinion on questions of classification unless they are directly raised and adequate and cogent material placed on the record. Bearing in mind the impact that such a ruling may have, findings in that respect, in any case, should not be founded on material which is tenuous and inadequate. Further, since the writ petition itself stood restricted to the validity of the circular, it would be imprudent to hand down a verdict imbued with attributes of finality - the issue of classification should be left open for the consideration of the competent authority in appropriate proceedings. The impugned circular dated 31 December 2018 is hereby quashed - petition allowed. Issues Involved:1. Validity of Circular No. 80/54/2018-GST dated 31.12.2018.2. Classification of polypropylene woven and non-woven bags under the Harmonized System of Nomenclature (HSN).3. Authority and jurisdiction of the Tax Research Unit (TRU) to issue clarifications.Summary:1. Validity of Circular No. 80/54/2018-GST dated 31.12.2018:The petitioners challenged the Circular dated 31 December 2018 issued by the Tax Research Unit (TRU) which classified polypropylene woven and non-woven bags, including those laminated with Biaxially Oriented Polypropylene (BOPP), under Chapter 39, specifically Tariff Heading 3923 of the Customs Tariff Act, 1975 (CTA). The petitioners argued that these bags should be classified under Chapter 56, Tariff Heading 5603, as they are made of textiles and not plastics.2. Classification of Polypropylene Woven and Non-Woven Bags:The petitioners contended that polypropylene non-woven fabric is a textile and should be classified under Tariff Heading 5603 in Chapter 56, which deals with 'Wadding, Felt and Nonwovens; Special Yarns; Twine, Cordage, Ropes and Cables and Articles Thereof.' They argued that the Circular incorrectly classified these bags under Chapter 39, which pertains to 'Plastics and Articles Thereof.' The court noted that the impugned Circular did not consider the distinction between plastics and textiles as outlined in the Customs Tariff Act, 1975.3. Authority and Jurisdiction of the TRU:The petitioners argued that the TRU did not have the authority to issue the clarification under the CGST Act, 2017, as such power is vested exclusively in the Central Board of Indirect Taxes and Customs (the Board) under Section 168 of the CGST Act. The court agreed, stating, 'no authority vested in the TRU to issue the clarification impugned before us.'Court's Conclusion:The court quashed the impugned Circular on the ground that the TRU lacked the authority to issue it. The court also noted that the Circular failed to consider the classification distinctions between plastics and textiles. The court refrained from making a definitive ruling on the classification issue due to the lack of comprehensive material and left the matter open for consideration by the competent authority in appropriate proceedings.Final Orders:The writ petition was allowed, and the impugned Circular dated 31 December 2018 was quashed. The petitioners were given the liberty to pursue appropriate legal measures regarding the classification issue.