Polyester filament in cut lengths denied 12% IGST rate under Notification 35/2017 as not qualifying as yarn

CESTAT New Delhi dismissed the appeal regarding classification of imported polyester filament in cut lengths. The appellant sought to classify goods under CTH 54041990 to claim IGST at 12% under Notification No. 35/2017. The tribunal held that the reduced 12% IGST rate applies only to synthetic or artificial filament yarn, while other goods under CTH 5402-5406 attract 18% IGST. Since the imported polyester filament was in cut pieces for paint brush manufacturing, it did not qualify as yarn. The tribunal distinguished between filament and yarn based on structural composition and resistance properties, concluding the goods were long monofilaments in cut lengths, not yarn. The appellant was denied the benefit of the concessional rate notification.

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Issues:
Classification of imported goods under CTH 5404 for IGST payment at 12% vs. 18% under Notification No. 35/2017- Integrated Tax (Rate).
Applicability of IGST rate based on the nature of the imported goods as synthetic or artificial filament yarn.
Validity of the department's demand for differential IGST payment and the appellant's challenge against it.

Detailed Analysis:
The case involves M/s Sharad Brushes importing Polyester Filament in Cut Length for Paint Brushes and declaring them under CTH 54041990. The issue arose when the IGST tax rate paid by the importer changed from 18% to 12% as per different notifications. The department alleged that the goods should have been classified under entry No. 159 of Schedule III, attracting IGST at 18%. The department demanded the recovery of the short-paid IGST amount of Rs. 1206266, leading to the appeal by the appellant before the Tribunal.

The appellant argued that the goods should be classified under CTH 5404 as synthetic monofilament, suitable for paintbrushes, based on technical and trade parlance. They cited relevant HSN Explanatory Notes and a past case to support their classification. Additionally, they presented a comparison with similar goods imported by other parties under CTH 54049090, paying IGST at 12%. The appellant contended that the department's classification under CTH 5402, 5405, 5406 was incorrect, and the demand for differential IGST was unfounded.

The department countered that the imported goods were polyester filament in cut lengths for paintbrushes, not continuous strands or textile end products, justifying the classification under entry No. 159 of Schedule III. They urged the Tribunal to uphold the previous findings.

After considering the arguments, the Tribunal analyzed the relevant notifications and definitions of monofilament and yarn. They distinguished between filaments and yarn based on their composition and behavior under different conditions. The Tribunal concluded that the imported goods were not synthetic or artificial filament yarn but long monofilaments in cut length, thus wrongly declared under CTH 5404. Consequently, the appellant was denied the benefit of the lower IGST rate under the notification.

In light of the analysis, the Tribunal upheld the order in appeal and dismissed the appellant's challenge. The judgment was pronounced on 14-10-2024.

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