2024 (8) TMI 139 - HC - GST

Geo Membrane product classified under Chapter 59, GST rate reduced from 18% to 12%

Gujarat HC ruled that petitioner's Geo Membrane product should be classified under Chapter 59 rather than Chapter 39 of the Tariff, following precedent ... Classification of goods by description and character - textile vs plastic article distinction in tariff classification - ordinary meaning of 'textile' and method of weaving as determinative - binding effect of an Advance Ruling on the applicant - uniformity of central levy and discrimination under Article 14Classification of goods by description and character - textile vs plastic article distinction in tariff classification - ordinary meaning of 'textile' and method of weaving as determinative - Geo Membrane manufactured by the petitioner is classifiable under Chapter 59 (HSN Code 59111000) as a coated/laminated textile fabric and not under Chapter 39 as an article of plastic. - HELD THAT: - Adopting the reasoning of the Coordinate Bench in M/s. CTM Technical Textiles Ltd., the Court held that the determinative factor is the character and method of production of the commodity - woven/knitted fabric - and not the nature of the raw material. The ordinary meaning of 'textile', as explained by the Supreme Court in Porritts & Spencer (Asia) Ltd., embraces any woven fabric irrespective of the material used. The Gujarat Authority for Advance Ruling erred in relying on Raj Packwell Ltd. which related to HDPE tapes/sacks and did not deal with woven fabrics. Prima facie material on record demonstrates that Geo Membrane is produced by weaving tapes/strips into fabric and thereafter coated/laminated, bringing it within Chapter 59 as a coated textile for technical use. For these reasons the Advance Ruling's classification under Chapter 39 was set aside and the product reclassified under Chapter 59. [Paras 22, 23]Geo Membrane is classifiable under HSN Code 59111000 (Chapter 59) and not under Chapter 39.Binding effect of an Advance Ruling on the applicant - uniformity of central levy and discrimination under Article 14 - Petitioner entitled to apply discounted GST rate of 12% from 15.11.2017 and to refund of excess GST paid pursuant to the Advance Ruling; no interest on such refund. - HELD THAT: - Having held the product to be a textile falling under Chapter 59, the Court directed that the GST be applied at the discounted rate of 12% from 15.11.2017 onwards. The Court observed that similarly situated manufacturers elsewhere had been treated as textiles and emphasised the need for uniformity in central levy; discrimination in treatment would violate Article 14. Consequent recoveries based on the impugned Advance Ruling are therefore set aside insofar as they affect the petitioner. The petitioner is allowed to claim refund of the excess GST paid (the differential), but without any claim to interest thereon. The Court made the rule absolute to this extent. [Paras 23, 24]Apply GST at 12% (HSN 59111000) from 15.11.2017; petitioner entitled to refund of excess GST paid pursuant to the Advance Ruling, without interest; writ allowed to that extent.Final Conclusion: Writ petition allowed in part: Gujarat AAR's Advance Ruling classifying Geo Membrane under Chapter 39 is set aside. Geo Membrane is held to fall under Chapter 59 (HSN 59111000) and is chargeable to GST at 12% from 15.11.2017; petitioner entitled to refund of excess GST paid pursuant to the impugned ruling, without interest. Issues Involved:1. Classification of Geo Membrane under GST2. Applicability of previous court decisions on classification3. Discrimination in tax rates4. Maintainability of the writ petitionIssue-wise Detailed Analysis:1. Classification of Geo Membrane under GST:The primary issue was whether Geo Membrane should be classified under Chapter 59 or Chapter 39 of the GST Tariff. The petitioner argued that Geo Membrane, being a textile fabric, should be classified under HSN Code 59111000 and taxed at 12%, while the Department classified it under HSN Code 39269090 as a plastic article, attracting 18% GST.The court considered the manufacturing process of Geo Membrane, which involves weaving HDPE tapes into fabric and then laminating it. The court noted that the product is used for technical purposes like water-proof lining of ponds and canals, reinforcing the argument that it falls under Chapter 59, which covers impregnated, coated, covered, or laminated textile fabrics.2. Applicability of Previous Court Decisions on Classification:The court referred to its previous judgment in the case of M/s. CTM Technical Textiles Ltd., which held that similar products should be classified under Chapter 59 and not Chapter 39. The court emphasized that the decision of the Madhya Pradesh High Court in Raj Packwell Ltd. was not applicable as it dealt with HDPE tapes and sacks, not woven fabrics.The court reiterated the Supreme Court's interpretation in Porritts & Spencer (Asia) Ltd., which defined textiles as any woven fabric, regardless of the material used. This reinforced the petitioner's argument that Geo Membrane should be classified as a textile product.3. Discrimination in Tax Rates:The petitioner argued that other manufacturers of similar products were taxed at 12%, creating a discriminatory situation where the petitioner had to pay 18% GST. The court acknowledged this discrimination, citing the principle that central levies must be uniformly applied across the country. The court referenced its earlier decision in Ralli Engine Ltd., which held that such discriminatory treatment violates Article 14 of the Constitution.4. Maintainability of the Writ Petition:The respondent argued that the writ petition was not maintainable as the petitioner had an alternative remedy under Section 100 of the GST Act. However, the court decided to entertain the writ petition, given the broader implications of the issue and the need for uniform application of tax laws.Conclusion:The court concluded that Geo Membrane should be classified under Chapter 59 of the GST Tariff and taxed at 12%. The decision of the Gujarat Advance Ruling Authority classifying it under Chapter 39 and taxing it at 18% was set aside. The court directed the respondent authority to apply the 12% GST rate and allowed the petitioner to claim a refund for the excess GST paid, without interest.Final Order:The petition was allowed, and the rule was made absolute to the extent that the product Geo Membrane is classified under HSN Code 59111000 and taxed at 12%. The petitioner is entitled to a refund of the excess GST paid.