2024 (2) TMI 1533 - AAR - Customs

PVC raincoats for export classified under HSN 6201 as readymade garments, not plastic articles under 392690

The Customs Authority for Advance Rulings Mumbai determined that PVC raincoats for export should be classified under HSN code 6201 rather than 392690. The ... Classification of 'PVC raincoats' for exports through the port of Nhava Sheva - to be classified under HSN code 392690 or HSN code 6201? - HELD THAT:- On plain reading of the provisions of Chapter Notes of Chapter 39 it is amply clear that the product in question i.e. PVC raincoats are not covered under any of the headings of the Chapter 39. The applicant has explained the manufacturing process of PVC raincoats whereby it is evident that the products to be exported by the applicant is raincoat which can be said readymade garment. The fact that raincoat is made of PVC does not render it to be considered as article of plastic. Thus, classifying PVC raincoat under Chapter 39 is not apropos to the provisions of Chapter Notes of Chapter 39. The applicant has submitted that to manufacture PVC raincoat the small PVC sheets are generally not stitched with a needle and thread. Since PVC is nonporous, a needle would leave a large hole that would allow water to enter, making for a very ineffective raincoat, and weakening the seam. Instead, PVC seams are generally 'welded' (sealed) with heat, or bonded by chemical means. Either way, the all pieces of materials are melt together, either thermally or chemically, and are permanently bound. Thus, it is a non-woven product. Chapter Note 1 of Chapter 61 states that 'This Chapter applies only to made up knitted or crocheted articles'. Therefore, by applying this chapter note 1 ibid it is amply clear that PVC raincoat can not be classified under heading 6101: Men's or boys' overcoats, car-coats, capes, cloaks, anoraks (including ski-jackets) wind-cheaters, wind-jackets and similar articles, knitted or crocheted, other than those of heading 61.03. Articles covered under heading 6103 are also knitted or crocheted. Heading 6201 covers Men's or boys' overcoats, car-coats, capes, cloaks, anoraks (including ski-jackets), wind-cheaters, wind-jackets and similar articles, other than those of heading62.03. Heading 6203 covers Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace overalls, breeches and shorts (other than swimwear). Plain reading of these two headings makes it clear that heading 6201 is the most suitable heading to cover raincoat, moreover, CTI 6201 4010 specifically covers--- Overcoats, raincoats, car-coats, capes, cloaks and similar articles (of man-made fibres). 'PVC raincoats' merit classification under CTH 6201 and more specifically under CTI 6201 4010 of the first schedule of the Customs Tariff Act, 1975. ISSUES PRESENTED and CONSIDEREDThe core legal question considered in this judgment is the correct classification of 'PVC raincoats' under the Customs Tariff Act, 1975. Specifically, the issue is whether these raincoats should be classified under HSN code 392690, which pertains to articles of plastics, or under HSN code 6201, which pertains to certain articles of apparel and clothing accessories not knitted or crocheted.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe classification of goods under the Customs Tariff Act is guided by the General Rules for the Interpretation of the Harmonized System (HSN) and the specific Chapter and Section Notes within the Act. The applicant relies heavily on Section XI and Chapter 62 of the Customs Tariff Act, which covers textiles and textile articles, as well as the relevant Explanatory Notes to the HSN.The applicant also refers to judicial precedents, including the Supreme Court's decision in Porritts & Spencer (Asia) Ltd., which emphasized the broad interpretation of 'textiles' to include woven fabrics regardless of the material or technique used.Court's Interpretation and ReasoningThe Court examined the manufacturing process of the PVC raincoats, which involves cutting PVC sheets into panels, heat sealing or chemically bonding the seams, and adding zippers and other accessories. The Court considered whether the raincoats, made from non-woven PVC material, could be classified as textile articles under Section XI.The Court noted that Chapter 39 of the Customs Tariff Act, which covers plastics, explicitly excludes materials regarded as textile materials of Section XI. The Court further noted that the PVC raincoat does not fall under Chapter 39 because it is not merely an article of plastic but a garment made from PVC material.Key Evidence and FindingsThe applicant provided detailed descriptions of the manufacturing process and the materials used in the PVC raincoats. The Court found that the raincoats are not woven or knitted but are nonetheless garments intended for wear, aligning with the description of articles under Chapter 62.Application of Law to FactsThe Court applied the relevant Chapter and Section Notes, particularly Note 14 to Section XI, which clarifies that textile garments are to be classified under their respective headings within Section XI. The Court also considered the Explanatory Notes to Chapter 62, which include raincoats among the articles covered.Treatment of Competing ArgumentsThe applicant argued that the PVC raincoats should be classified under Chapter 62 based on their characteristics as garments. The Court agreed, finding that the raincoats fit within the scope of Chapter 62 as articles of apparel, specifically under heading 6201, which includes raincoats made from man-made fibers.ConclusionsThe Court concluded that the PVC raincoats should be classified under CTH 6201, more specifically under CTI 6201 4010, as they are garments made from man-made fibers and fall within the scope of articles covered by Chapter 62.SIGNIFICANT HOLDINGSThe Court held that the PVC raincoats are not articles of plastic under Chapter 39 but are instead classified under Chapter 62 as garments. The Court emphasized the role of the Section and Chapter Notes in guiding the classification process, stating that these notes have an overriding force on the headings themselves. The Court's ruling aligns with the principle that specific headings prevail over general ones, as endorsed in prior judicial decisions.Core Principles EstablishedThe judgment reinforces the principle that the classification of goods under the Customs Tariff Act should be guided by the specific language of the Chapter and Section Notes, as well as the Explanatory Notes to the HSN. It underscores the importance of understanding the nature and characteristics of the goods in question, including their manufacturing process and intended use, to determine the appropriate classification.Final Determinations on Each IssueThe Court determined that the PVC raincoats merit classification under CTH 6201, specifically under CTI 6201 4010, as they are garments made from man-made fibers. This classification reflects the nature of the raincoats as articles of apparel rather than articles of plastic.