TaxTMI 
TaxTMI 
2018 (8) TMI 1650
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.... dtd. 02.04.2018. Brief Fact of the Case A) M/S National Plastics is a company engaged in the manufacture of floor mats / (floor coverings) made of (PVC textiles) PVC, known as PVC Carpet Mats or Floor coverings or Textile floor covering made up of PVC. B) Manufacturing of the same is undertaken in two stages. Stage 1 being PVC Monofilament production and carpet piling process and stage 2 being Web-lamination and backing process. The prime raw material being used for the aforesaid product is PVC (Poly Vinyl Chloride). The stages of manufacture are as follows: a) Under Stage 1, PVC monofilament yarn with decitex ranging from 1200 to 2800 and filament diameter range 0.38 to 0.75 mm is extruded through a perforated die plate using T-die extrusion. Extrusion is done through 3 to 4 parallel rows along the entire width of T-die and the vertically extruded yarn immediately falls on a water bed to form a non-woven carpet pile. Also, referred to as PVC web, non-woven carpet pile is taken up in a horizontal direction on a roller and wound up in rolls. Pile height of the carpet can be varied by changing the process parameters, usually in the range of 8 mm to 16 mm. b) Under Sta....
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....ther, Notification No. 1/2017-CGST specifically provide that: "Explanation - For the purposes of this Schedule, - (iii) "Tariff item", "sub-heading" "heading" and "Chapter" shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975, (iv) The rules for the interpretation of the First Schedule to the Custom Tariff Act, 1975, including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification." Thus, for the purpose of GST, Classification of goods under any tariff item/ subheading / heading/ chapter shall be done using the general rules of interpretation of the first Schedule of the Customs Tariff Act, 1975 including the Section and Chapter Notes and the General Explanatory Notes to the HSN of the First Schedule of the CTA, 1975. It is submitted that the above explanation is also part of the notification 01/2017-State Tax (Rate) and thus the above ratio will apply to notifications issued under State GST law also. 2) The impugned goods do not merit classification under Chapter 3918 as "Flo....
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....ct of the same is reproduced as follow: - This Chapter does not cover: (a)................ (b)................ ................ ................ (p) goods of Section Xl (textiles and textile articles); (q)............... Thus, on combined reading of note 1 and 2 of the chapter 39, the term plastic for the purpose of chapter 39 will not cover any material which is classified as textile material under section XI of the Tariff. Therefore, the classification can be finalized only after deciding the nature of the material of which the impugned product is made up of. c) The term 'textile' or 'textile material l is not defined in the GST Act. Therefore, reference can be taken from various Textile Dictionaries and Encyclopaedia to ascertain the meaning of this term. (i) "Encyclopaedia of Textiles, Fibres and Nonwoven Fabrics" edited by Martin Grayson and published by Wiley-Inter science Publication has defined the term 'textile material'. This encyclopaedia is another in the series of carefully selected reprints from the world-renowned Kirk Othmer Encyclopaedia of Chemical Technology, designed to pr....
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.... acrylic, based on polyacrylonitrile (also modacrylic) aramid, based on aromatic polyamides nylon, based on aliphatic polyamides olefin, based on polyolefins (polypropylene) polyester, based on polyester of an aromatic dicarboxylic and a dihydricalcohol spandex based on segmented polyurethane vinyon based on polyvinyl chloride based on inorganic substances glass metallic ceramic" (ii) Further, "Textile Terms and Definitions, Tenth Edition" published by the Textile Institute has also defined the term 'textile'. The Textile Institute is an international organisation governed by a Council representing members throughout the world. It is legally constituted by a Royal Charter, granted in Britain in 1925. The main central functions are the provision of an operational framework and the maintenance of quality, particularly in regard to professional qualifications and the spread of information to members and others. The term 'textile' as per this publication is defined as follows: "A textile was originally a woven fabric, but the terms textile and the plural textiles are now also applied to fibres, filaments and yarns, natural and ....
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....SN explanatory note to Chapter Heading 5603 are reproduced below: "A nonwoven is a sheet or web of predominately textile fibres oriented directionally or randomly and bonded. These fibres may be of natural or manmade origin. They may be staple fibres (natural or manmade) or man-made filaments or be formed in situ. Thus, textile fibres can be of natural or man-made origin. As per HSN explanatory notes to chapter 54, man-made fibres are defined as follows: The General Explanatory Note to Section Xl should be taken into account in reading the Explanatory Note to this Chapter. Under note 1 to chapter 54, the term": man-made fibres", when used in chapters 54 and 55 or elsewhere in the Nomenclature, means filaments or staple fibres composed of organic polymers produced by manufacturing processes, either by: (1) Polymerisation of organic monomers or chemical modification of the resulting polymers(see the General Explanatory Note to the Chapter 39) (synthetic fibres); or by (2) Dissolution or chemical treatment of natural organic polymers, or chemical modification of natural organic polymers (artificial fibres). (1) SYNTHETIC FIBRES The basic material fo....
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....ugned goods are made up of manmade textile, it will get covered under section Xl of the tariff and thus will be excluded from the scope of chapter 39. Therefore, in view of the above, it is evident that the material is a textile material and thus excluded from the scope of 3918 and thus the classification suggested by the authority is not correct. v) The appellant further relies on the judgment in the case of Atlantic Spinning and Weaving Mills Ltd 1999 (111) ELT 121 (T) = 1999 (2) TMI 189 - CEGAT, NEW DELHI wherein the tribunal has discussed the meaning of synthetic textile material. The relevant extract is as follows: 9. Sum and substance of the aforesaid explanation is that it provides definition of the following different terms:- (1) man-made fibres, (2) artificial fibre, (3) synthetic fibre, and (4) man-made textile material, (5) artificial textile material, (6) synthetic textile material. Man-made fibre by this definition includes both artificial fibre and synthetic fibre. Manmade textile material will include therefore, both synthetic material and artificial textile material. Synthetic fibre means staple fibres and filaments of organic polymers pro....
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....ding Bath Mats where cotton predominates by weight, of Hand loom, Cotton Rugs of handloom The relevant extract of customs tariff is as follows: Tariff Item Description of goods Unit (1) (2) (3) 5705 Other carpets and other textile floor coverings whether or not made up: m^2 5705 00 Other carpets and other textile floor coverings whether or not made up: m^2 ......Carpets 5705 00 11 ........ Of Silk m^2 5705 00 19 ......Other m^2 ......Durries: 5705 00 21 ......Durries Cotton m^2 5705 00 22 .......Durries of man-made fibres m^2 5705 00 23 .......Durries of wool m^2 5705 00 24 .......... Cotton Durries of handloom (including Chindi Durries, Cotton Chenille Durries, Rag Rug Durrie, Printed Durrries, Druggets) m^2 5705 00 29 ........... Others Of Jute: m^2 5705 00 31 ............Of blended Jute m^2 5705 00 32 .......... Of coir jute m^2 5705 00 39 ...........Other ..........Carpets, carpeting, rugs, mats and mattings: ....
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....r KMTCTA03067382 dated 26/10/2017 for import of artificial turf by sister concern M/S Rayzon Global LLP. The corresponding packing list and purchase invoice is attached as annexure 8. The bill of entry clearly mentions the item as artificial turf (made of plastic raw material). The product has been classified under chapter heading 57033090 which covers CARPETS AND OTHER TEXTILE FLOOR COVERINGS, TUFTED, WHETHER OR NOT MADE UP. As per HSN explanatory notes of chapter heading 5703, this heading covers the following: This heading covers tufted carpets and other tufted textile floor coverings produced on tufted machines which, by means of a system of needles and hooks insert textile yarn into a pre-existing backing (usually a woven fabric or a nonwoven) thus producing loops, or, if the needles and hooks are combined with a cutting device, tufts. The yarn forming the pile are then normally fixed by a coating of rubber or plastic. Usually before the coating is allowed to dry it is either covered by a secondary backing of loosely woven textile material, e.g., jute, or by foamed rubber. Chapter 5703 covers textile floor coverings but made with tufting technology. It is ....
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....m to be described as artificial turf. No specifications of the goods have been mentioned nor any catalogue has been submitted, even though the importer was categorically asked to do so before the hearing as also during the hearing. The importer had in fact himself sought time for submitting their reply on the ground that they were asking their supplier to furnish details of composition and manufacturing process of the goods. Even the Proforma invoice dated 8-9-2000 as mentioned on the commercial invoice has not been submitted. Copy of the Bill of Lading submitted indicated overwriting/ correction in the description of the goods. Hence, importer was asked to submit original Bill of Lading but the same has not been submitted. No explanation as to what is the difference between the two types of goods priced at US $ 2.37 and 2.85 per sq. yard respectively has been submitted. No correspondence with the supplier indicating as to what they were looking for and what they have ordered has been submitted. No explanation regarding the end use of the goods has been submitted. The goods are stated to be for Tennis, hockey and other games. No purchase order, trade enquiry from intended customers....
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.... 95.06 inasmuch as there was no material with the Appellant to declare the same heading. However, we find that the redemption fine and penalty imposed are on the higher side in absence of any material to show the margin of profit etc. We, therefore, reduce the redemption fine to Rupees One lakh and Penalty to Rupees Fifty thousand only. In the above judgment, the product was manufactured out of fibre of 100% UV olefin. Olefin is also a synthetic man-made fibre as will be evident from the encyclopaedia reproduced above. Thus, as per the above judgment artificial turf made of olefin is a floor covering made up of textile material and thus covered under heading 5703. Since the product was a tufted product, the same was classified under chapter 5703. Therefore, applying the ratio of the above judgment, the impugned product is also classifiable under chapter 5705. d) The appellant had contended in the advance ruling application that the product is classifiable under chapter 5705 as the exposed surface is textile material. However, the authority has relied upon note I(h) to the Section Xl to state that the impugned product is impregnated, coated, covered or laminated with pla....
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....of serial No. 10 of the Notification No. 52/86 is very clear that once glass fabrics is treated either by impregnation or by coating or by covering or by lamination; it would not be eligible for exemption. The appellants, on the other hand, have contended that the Department has not appreciated the distinction between the 'bonding' end the term 'impregnation According to Fair Child's Dictionary of Textiles, Bonding is a "process of adhering fibres or layers of fabrics together by a bonding agent" whereas "impregnated fabrics" is "a fabric in which the interstices between the yarn are completely filled with an impregnating compound throughout the thickness of the material, as distinguished from sized or coated materials where the material is applied to the surface and these interstices are not completely filled". The Id. Sr. Counsel has referred to a technical book "Fibre Glass" by J. Gilbert Mohr and William P. Rowe, published by Van Nostrand Reinhold Company, according to which "Raw Glass Fibre in any form, blown bulk or continuous, is harsh and easily fragmentized. This is because self abrasion induced by any kind of molten or rubbering action causes surface....
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....fit of Sr. No. 10 of Notification No. 52/84-C. E. was extended. This order was confirmed by the Tribunal vide Final Order No. E/962/97-D, dated 5-11-1997. Accordingly, we are of the view that the Revenue has not succeeded in proving that the impugned product is impregnated, coated, covered or laminated with plastics or varnishes and therefore, we find no reason to interfere with the impugned order. The appeal filed by the Revenue is thus, rejected. It is evident from the above judgment that the process of bonding using an adhesive does an that the product has been impregnated, coated, covered or laminated. Therefore, the contention of the authority to exclude the impugned product from chapter heading 5705 by way of note 1(h) is completely erroneous. 4) Without prejudice to the above if the product equally merits classification under 2 different chapter headings, as per the interpretative rules, the chapter occurring later will apply. It is an accepted fact that the impugned product is made up of PVC. PVC is classifiable under chapter 3904. If the argument of the authority is accepted, PVC will be covered under the definition of plastic as provided by chapter notes of HSN e....
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....it is evident that the exposed surface in the PVC floor mat is a textile material and therefore will be covered under Chapter Heading 5705.As per Notification No. 1/2017-CT (Rate) the Chapter Heading 5705 is covered under the Schedule-II where the goods are taxable @ 6% CGST and 6% SGST or 12% IGST. Personal Hearing 6). A personal hearing was fixed in the matter which was attended by Sh. S.S. Gupta, Chartered Accountant, Karan Awatani, C.A on behalf of the Appellant and Sh. Clint D'silva, Assistant Commissioner and Smt. Anagha Jakhadi, Range-IV, Division-VI, CGST Mumbai East as jurisdictional officers. 7). The Appellant reiterated their written submission and vehemently argued that their product is different from PVC Flooring, mentioned under HSN 3918, and thus the order of AAR classifying the same under 3918 should be set aside. They pleaded that their arguments were not covered in the findings of the AAR so they have come before the Appellate authority with same grounds and arguments. They further submitted that they had no dispute about classification of PVC flooring under HSN 3918 but their product being different from PVC flooring should not be classified under HS....
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....These facts are not disputed. There also no dispute that the product is made of 100% plastic. We now proceed to examine the classification of the product. 11. Let us look at the description of goods for the two competing entries in the relevant GST Rate Schedules issued vide Notification 1/2017-Central Tax (Rate), dated 28th July 2017, as amended from time to time: (i) 3918: "Floor coverings of plastics, whether or not self-adhesive, in rolls or in form of tiles; wall or ceiling coverings of plastics". (ii) The entries relating to carpets and other textile coverings, progressively leading up to the entry 5705 which has been argued by the appellant in their favour, are as follows: 5701: "Carpets and other textile floor coverings, knotted, whether or not made up" 5702: Carpets and other textile floor coverings, woven, not tufted or flocked, whether or not made up, including "Kelem", 'Schumacks", "Karamanie" and similar hand-woven rugs; 5703: Carpets and other textile floor coverings, tufted, whether or not made up; 5704: Carpets and other textile floor coverings, of felt, not tufted or flocked, whether or not made ....
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....ngeably but floor covering refers more to loose-laid materials. Materials almost always classified as flooring include carpet, laminate, tile and vinyl. Carpeting Carpet is a soft floor covering made of bound carpet fibers or stapled fibers. Carpeting refers to wall-to-wall coverage, whereas a rug is simply used to cover a space. This type of flooring is typically used indoors and can be used in both high and low traffic areas A carpet is a textile floor covering typically consisting of an upper layer of pile attached to a backing. The pile was traditionally made from wool, but, since the 20th century, synthetic fibers such as polypropylene, nylon or polyester are often used, as these fibers are less expensive than wool. The pile usually consists of twisted tufts which are typically heat-treated to maintain their structure. The term "carpet" is often used interchangeably with the term "rug", although the term "carpet" can be applied to a floor covering that covers an entire house, whereas a "rug" is generally no bigger than a single room, and traditionally does not even span from one wall to another, and is typically not even attached as part of the floor. ....
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.... their claim is that their product falls in the category of 'other textile floor coverings . 13.4 We shall therefore need to turn our attention to understanding what constitutes textiles and textile materials. The definition of 'Textile' cited by the appellant is as follows: "A textile was originally a woven fabric, but the terms textile and the plura/ textiles are now also applied to fibres, filaments and yarns, natural and manufactured and most products for which these are a principal raw material" We also find that the definition of 'Textile' and 'Textile material' as available in The Fairchild Books Dictionary of Textiles is as under: Textile- Derived from the Latin term textilis, which is based on the verb texere, to weave. 1. A broad classification of materials that can be utilised in constructing fabrics, including textile fibres and yarns. 2. Designates the constructed fabric including woven, knitted and non-woven structures as well as lace and crochet goods.3. Descriptive of processes, organisations, personnel associated with the manufacture of products from fibres or yarns. Textile Material-- An inclusive term f....
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....rought on record any change in the composition, nature or manufacturing process of the said goods from the pre-GST era to now which has compelled them to approach AAR for classification. The only change noticed and which was discussed during hearing also, is the higher rate of GST under HSN 3918 than under HSN 5705. But the rate of duty/tax cannot be a criterion for deciding the classification of any product. The classification has to be decided as the terms of headings, subheadings and tariff items and the relevant section/ chapter notes/sub notes in terms of the interpretative rules to the Customs Tariff. 16. As regards the entry no. 146 of Schedule II of the CGST rate notification 01/2017, the appellant has claimed that the semi colon has divided the entry in two parts and they are covered under the first part i.e. 'Other carpets and other textile floor coverings.' They have cited two judgments of Tribunal in their support that use of semi colon between two entries makes the sentences separate and they have to be read disjunctively. We have observed in above paras that the goods in question are neither carpets nor textile floor coverings but are PVC floor coverings an....